After having lived through the hottest February on record, and with the meteorological department predicting worsening heat in the coming weeks, Indians are all set for a searing summer season. Not many would look forward to such a time, except those who can possibly gain increased sales in their businesses. The beverage industry is one such space that is set to make a lot of sales amid soaring temperatures and it gets all the more exciting as one of India’s biggest conglomerates has now announced their arrival in this segment.
Earlier this month, Reliance Consumer Products, under Mukesh Ambani’s Reliance Industries Limited (RIL), announced the re-launch of the iconic beverage brand Campa. By pricing the Campa products significantly lower than the offerings from market leaders Pepsi and Coca Cola, Mukesh Ambani’s entry into the beverage industry has already signalled a price war.
Ambani is no stranger to aggressive price wars as was seen when Reliance Jio made its foray into the telecom space back in 2016. Now, when one looks at some of the key decisions made by RIL-backed companies recently, it would seem that Mukesh Ambani is indeed resolute about making many of his big competitors feel the heat in the coming months.
Bouncing Out Opponents
Since 2008, the arrival of Indian summer also brings with it the most anticipated sporting event in the country. The Indian Premier League (IPL) has turned itself into a decacorn venture worth $10.9 billion in just 16 years and has established itself as the most eye-catching Indian spectacle. After the end of last year’s season, Viacom18, a joint venture between Ambani’s Reliance and Paramount Global, shelled out Rs 20,500 crore to claim the digital rights to stream IPL matches for five years.
Notably, it was the first time that the streaming rights for IPL were divided into distinct television and digital categories, and acquired by two different buyers. When this year’s IPL begins, it will be available on Walt Disney Company’s Star TV network and on Viacom18’s JioCinema app. Mukesh Ambani’s trump card to take on Disney’s televison broadcast is that people can watch IPL on JioCinema for free without paying any subscription fees. Clearly, by deciding to let go of subscription revenue, JioCinema has its eyes set on advertisement revenue and this has got the Star TV network in a state of worry.
The Mukesh Ambani-backed digital streaming platform even took a direct dig at its competitor’s TV broadcast in its newly released advertisement. With lyrics like “bhulja channel wannel ka tantrum” (Forget the tantrums of TV channels), JioCinema is taking a no-holds-barred approach towards Star network’s TV streaming of IPL. However, it is not just TV that JioCinema is going after with its free sports broadcasting. It is also challenging the digital dominance so far enjoyed by Disney+Hotstar and SonyLIV among Indian sports viewers. After Disney+Hotstar lost IPL streaming rights, it is being reported that the platform has started losing paid subscribers at a quick pace.
Other big targets of Viacom18’s aggressive strategy include social media behemoths YouTube and Facebook who lead the digital video advertising market in India. According to a report by brokerage firm Elara Capital, JioCinema’s move to acquire a large audience base from free streaming will help the platform compete with Facebook, Instagram and YouTube, which have 80 per cent share in India’s video advertising segment. In effect, JioCinema’s strategy is aimed at taking down TV broadcasters, other digital services that offer sports streaming and the video advertising market in a single throw.
Taking On Global Duopoly
Disney, Youtube and Facebook are not the only global players whose market in India will be challenged by Reliance’s aggressive tactics. In fact, these are rather new names in India when one looks at the other international companies that Mukesh Ambani’s conglomerate wants to take on.
Coca-Cola and Pepsi have enjoyed a duopoly in India’s aerated beverage market since the country underwent a liberalisation process in the 90s. Now, one of the homegrown brands that they took out—Campa—is coming back to challenge them, albeit, in a new avatar. One of the reasons that Campa went out of fizz in the first place was that it could not compete with Coca Cola and Pepsi in terms of branding and marketing. Mukesh Ambani’s deep pockets will likely offer a way out for Campa now.
India’s soft drink sector can soon become a three-player market with Reliance’s entry, brokerage firm Nuvama Institutional Equities recently noted. As we head into a long summer season with inflationary headwinds, Ambani’s natural choice of weapon to take down Coca Cola and Pepsi will be low pricing. “The introductory price for a 200ml unit of Campa Cola is Rs 10, compared to Rs 20 for a 250ml unit of Coca-Cola. Penetration pricing can boost Campa’s traction among the price-sensitive Indian masses, especially in the rural markets,” said Bobby Verghese, consumer analyst at GlobalData.
Another move at Ambani’s disposal will be his proximity to IPL, as a team owner as well as having the streaming rights via JioCinema. Reliance Consumer has already announced plans to carry out a strong marketing campaign at the upcoming IPL. Regarding this, GlobalData India business development manager Francis Gabriel said, “Reliance’s branding activity during the event (IPL) will thereby amplify Campa’s mass-market awareness in the cricket-loving nation. Moreover, as the official sponsor of the popular ‘Mumbai Indians’ IPL team, Reliance Group can rope in popular cricketers as brand ambassadors.”
Coca Cola has so far denied reports of engaging in a price war with Campa. The global beverage major said in a statement that increased competition will ultimately aid competition and bring more benefits to the end consumer. But, if one were to remember Reliance Jio’s cut-throat pricing strategy that eliminated most of its competition in the telecom sector 7 years ago, it is likely that Coca Cola and Pepsi cannot maintain their cool about Campa’s competitiveness for too long.
The 5G War
After having forced all its competitors into a corner when it rolled out dirt-cheap 4G technology in 2016-17, Jio is now occupied in a 5G war with its main rival Bharti Airtel. In terms of postpaid family plans and individual plans with unlimited 5G data, Airtel and Jio are moving neck to neck by announcing identical plans within just days of each other. Although Airtel has made its 5G services available in 500 cities presently, Jio is somewhat behind, providing 5G network in 406 cities.
But when it comes to speed, which is what 5G is all about, Jio is ahead of Airtel for now. According to a recent report by Ookla, a leading network intelligence and insights firm, Jio's 5G median speed is 506 Mbps (megabytes per second) while Airtel’s is at 268 Mbps. This might become an important factor when it comes to acquiring postpaid customers from Vi—India’s third telecom player, that is yet to roll out 5G services.
In the telecom space, postpaid users are more valuable as they contribute more in terms of average revenue per user (ARPU). While 6 per cent of Airtel’s users avail postpaid service, it is only 5 per cent for Jio, as per industry estimates. Vi has a much higher share of postpaid users at 9-10 per cent and this segment of users is expected to switch to other networks given Vi’s lack of 5G services. The result of the 5G war will largely depend on who among the two—Jio or Airtel—can attract most postpaid customers from Vi.
Airtel’s chief executive officer Gopal Vittal had said last year that tariff hikes will be the company’s primary mode of 5G monetisation. However, by keeping pace with Jio’s 5G plans at the moment, Airtel is delaying this. The question now remains: how long can Airtel afford to delay its monetisation in order to outpace Jio’s 5G subscription drive?
Mukesh Ambani’s conglomerate made it clear a while back that it won’t limit itself to refining and petrochemicals, it wants to make its presence felt all over the average Indian consumer’s life. To this end, Reliance has developed aggressive strategies for sectors ranging from telecom to retail to over-the-top streaming.
As Indians gear up for a hot and long summer, Mukesh Ambani’s vision of an ideal consumer will be that of someone using Jio’s 5G network; streaming IPL matches on the JioCinema app, some of them featuring the team he owns; watching various advertisements on the platform, many of which will be Reliance’s consumer goods; all the while sipping on a cold Campa beverage.