The split has occurred because Reliance has realised that there is money to be made, may be more, in simple commodity trading, especially with food prices likely to go through the roof next year.
As a result of this restructuring, Reliance Retail is setting up shop in mandis to sell fruits, vegetables and staples. It would thus be able to profit from commodity trading without worrying about the steep overheads and discounts that tied its hands in its avatar as Reliance Fresh. It would also allow the company to sell to a wide range of customers, including wholesalers, other traders, and retailers. A source said the company has already signed up with Spencer retail chains to supply cut fruits and vegetables. Till now, the Reliance supply chain was dedicated to meeting the needs of Reliance Fresh shops.
The new initiative is likely to be christened either Apni Dukaan or Apni Mandi. RRL is test-piloting shops in Vashi (Maharashtra) and Hilol (Gujarat). Other places that the company has identified for this business are Vadodara, Valsad, Surat, Ahmedabad and Pardi in Gujarat; Sangli, Sholapur and Kohlapur in Maharashtra; and Chindwara, Bhopal, Hoshanabad, Indore in Madhya Pradesh.
“The agri division, like other Reliance Retail verticals, has been turned into a profit centre. So, the agri division will procure fresh produce and staples and sell in the open market. The idea is to get the best possible price,” according to a source familiar with the developments.
An insider said when Mukesh Ambani talked...