Fmcgfirmstap consumer startups to boost growth
Startup brands virtually saw no impact of the slowdown
BENGALURU: Leading fast-moving consumer goods (FMCG) firms and retailers including Haldiram’s, Wipro Consumer Care and Lighting Ltd, Lulu Group and Burman Family Holdings, the family office of Dabur India, are scouting for investments in consumer brand startups to boost growth in a weak economy, multiple investors and industry executives said.
Consumer spending across the FMCG and consumer packaged goods (CPG) segment has fallen sharply in the last couple of quarters. Wipro Consumer recently launched a venture fund to invest in startups in the consumer brands space. A Wipro spokesperson said the company will look to invest about ₹10-30 crore in early to mid-stage startups. “We will be looking at those startups where we can add value as well learn from them. Financial returns would be an important objective of the fund as well as adding strategic value, but all as a minority investor,” the spokesperson added.
Dabur Group’s family office Burman Family Holdings’ has been evaluating startups in the branded consumer goods space, according to a person aware of the group’s investment strategy. Gaurav Burman, director of Dabur International and investor in Burman Family Holdings, said his family fund’s investments will be stage-agnostic with a longterm investment view. “We have no minimum limit on ticket size, although we will look to deploy at least ₹70 crore per investment through the life of the opportunity,” Burman said in an email.
Lulu Group, an Indian multinational company that operates
FMCG FIRMS’ REVENUES HAVE BEEN DECLINING CONSISTENTLY FOR
THE PAST COUPLE OF QUARTERS DUE TO THE ECONOMIC SLOWDOWN
hypermarkets and retail chains has also been eyeing Indian startups in consumer goods, a consultant aware of the development said. Lulu Group did not respond to an email seeking comments until press time.
Haldiram’s, one of the oldest names in packaged foods space in India, is in discussions with multiple startups in the consumer brands space including Bengaluru-based Frozen Bottle, a quickservice restaurant chain that sells milkshakes and desserts, Mint reported on September 14.
While FMCG and CPG majors turn to consumer brands led by startups, their overall revenues have also been declining consistently in the past couple of quarters, amid an economic slowdown. Dabur, Hindustan Unilever, ITC Ltd and Britannia Industries have acknowledged that the slowdown has hit their revenue, especially among premium portfolio brands.
A Credit Suisse report this month said the FMCG segment revenue is likely to decline by around 5% in the second and third quarters of 2019-20. FMCG revenue growth had earlier declined from 11% in the third quarter of 2018-19 to around 7% in the first quarter of the current fiscal, the worst revenue growth in the last 15 years.
Analysts and industry observers attribute falling consumer spending to not just low incomes, but also a lack of brand innovation, and failure to understand niche consumer needs, at least in Tier-1 and Tier-2 markets. The renewed interest displayed by traditional firms in startup-led consumer brands, is mostly steered by the fact that these brands virtually saw no impact of the economic slowdown.
“When you are the market leader with a 30% market share, slowdowns are scary. (But) when you are an insurgent brand with less than 1% market share and have a strong product and brand narrative, you should continue growing,” said Deepak Shahdadpuri, founder and managing director, DSG Consumer Partner. According to him, CPG startups are least impacted by the cyclical slowdown because they are doing between ₹50 lakh to ₹5 crore of net revenue per month. Between May to August from the DSGCP portfolio, companies like Veeba, Sleepy Owl, Arata, The Moms Co., Chai Point, Suzette Kitchen Garden, and Goa Brewing, did not see any slowdown, added Shahdadpuri.