Ace Ventura For A Finicky Buyer

Varun Alagh remembers how he and his wife, as new parents, would scrutinise labels on every baby product they purchased, and being unimpressed with what they saw. That was four years ago. They run their own baby care brand now, Mamaearth, selling about 50 different products certified as toxin-free바카라�lotions, washes, shampoos, diaper rash creams바카라� to a new breed of Indian consumer with a big appetite for choice, finicky even, and with a willingness to spend.

Their bestselling products currently are mosquito repellents, a fluoride-free natural toothpaste for kids aged 10 and below, and a tummy roll-on for babies which uses the old Indian remedy for colic바카라�coconut oil. 바카라�There is a large section of market which is clearly looking for healthier, more natural options and those people need to be reached out to with the ass­ortment that we have,바카라� says Varun, 35, who worked with various FMCG companies after graduating from a business school. 바카라�Of course, it was a big move for us.바카라�

Mamaearth바카라�s story reflects the changing landscape ushered in by organised retail and e-commerce, where young, sharply-focussed brands are fighting for space amid deep-pocketed FMCG giants. For private equity funds, they바카라�ve always been a hot space to invest in. But now, venture capitalists too are willing to look beyond tech-firms and write them cheques.

Of course, the ecosystem ten years ago wouldn바카라�t allow for such fast-paced companies, says Varun, whose start-up would have been, in the old formula, just a local brand in Gurgaon. 바카라�All of that has completely changed...sitting out of Gurgaon we are able to service 150 plus cities in India,바카라� he says. Last week, Mamaearth raised fresh funding of $4 million from a clutch of investors which included a true-blue technology fund such as Stellaris Venture Partners.

바카라�I think the next decade or two is going to be very interesting in the context of how India will become the hotbed of very exciting brands,바카라� says investor Kanwaljit Singh, who has placed a personal bet on Paperboat, Epigamia, Licicous, Yoga Bar and Mamaearth in the last three years. 바카라�I realised that the market was changing, almost like Brands 2.0, if I can call it that. That바카라�s when I decided to move away and raise an early stage fund which was focussed on this space,바카라� says Singh, who started Fireside Ventures in 2015 with a fund of Rs 340 crore and has invested in a dozen consumer brands so far. 바카라�There are really not enough brands in the market. I mean, you go to a supermarket shelf in Singapore or Thailand or Indonesia...and of course, Europe and the US...you will find a proliferation of brands which India is not even close to at this point of time,바카라� says Singh.

Take Raw Pressery, which has been selling cold-pressed fruit and vegetable juices since 2013, and doubling revenue every year. The brand is present in about 2,000 points of sale across 14 cities in India, besides Doha and Abu Dhabi. 바카라�There바카라�s still plenty more of modern trade,바카라� says founder Anuj Rakyan, referring to the organised retail segment of specialist stores such as Godrej Nature바카라�s Basket, hypermarkets and value formats such as Reliance Fresh and premium standalone stores. The top 12-15 cities in India are driving the Mumbai-based company바카라�s growth currently, and their primary consumer target is the age group of 18-40. 바카라�First, it was about calories and fat and sugar. Now it바카라�s a lot to do with what is organic or free from preservatives or additives or sugar. So, the consumer is saying: can you match what I make at home? And, as clean and healthy and nutritious as what I make at home? These are the big changes we have seen over the last 4-5 years,바카라� says Rakyan. Raw Pressery is now looking at almond milk and wants to get into dairy products, particularly probiotic drinkable yoghurt.

바카라�More venture capitals are becoming open and receptive to investing in consumer brands,바카라� says Navin Honagudi, managing director of Kae Capital, which has invested in popcorn maker Popicorn and sanitary napkin brand Nua Woman among others. Over the last two years, Kae Capital has been inv­-

esting in about two consumer brands per year. 바카라�We expect to continue at a similar pace,바카라� he says. The point, he says, is there are companies being built which are suited entirely for modern trade and generally priced slightly higher price than regular kirana stores. 바카라�Today, it is possible to build a large enough brand focussing only on modern trade and convenience stores. This was not true 10 years back.바카라�

Typically, his firm writes out a first cheque of Rs 3-4 crore to an investee, says Honagudi. Over time, the amount could go upto Rs 18-20 crore. Kae capital is currently investing from a fund of $53 million.

Ash Lilani, co-founder of Saama Capital, one of the early investors to back consumer brands such as winemaker Sula and designer Satya Paul, says he바카라�s clear about maintaining discipline when it comes to investments. 바카라�We are not chasing just because people think it바카라�s hot,바카라� he says. Saama, which has put money into Raw Pressery, Goa Brewing Company, natural toxin-free baby products firm The Moms Co., sauce maker Veeba and Chai Point among others, raised a $100 million fund this year. 바카라�It바카라�s not that we are going to invest in more companies or ideas, we바카라�ll still invest in the same number of companies as we did the last fund. The only difference is that we have learnt that when you do consumer investing, in the first three years of the fund you will identify the 2-3 companies that are scaling very fast and have the potential to be big winners. So, in those kinds of companies we will double down,바카라� says Lilani.

This year so far, venture capitals have invested $152 million in the Indian FMCG space over 34 rounds, according to Tracxn, a firm that tracks start-ups. In 2017, venture capitals wrote cheques for around $240 million.

With large FMCG companies around, there바카라�s always the promise of an exit on these bets. Market watchers point to Marico바카라�s stake purchase in Beardo, a men바카라�s grooming brand, or the Prataap Snacks public listing바카라�both took place last year바카라�as possible routes for profitable exits. 바카라�Most of the large corporates, instead of starting from scratch are looking for some kind of minimum size and scale of company to acquire and they will build that into the next phase with their muscle,바카라� says Kanwaljit Singh. 바카라�As an investor, I know that I have the ability to exit my companies at a certain size and within a certain time frame.바카라� The examples overseas, where the consumer brand explosion has been playing out for the last 7-8 years, are plenty. 바카라�Investors clearly have seen large exits in developed markets. That is what has given them confidence,바카라� says Mamaearth바카라�s Varun Alagh.

However, Alagh has plenty of work at the moment. 바카라�We are already present in 500 stores and we intend to be in 5,000 in the next one year,바카라� he says. Families have fewer children now and the growing incomes suggest they are spending more바카라�both time and money바카라�per child. 바카라�That has happened not just in the upper income strata but also in the lower strata of society. So they want to make better choices for their children,바카라� he says. But that sort of consumer behaviour is happening across sectors. Even beer. A week or so ago, Suraj Shenai바카라�s Goa Brewing Company released its first batch of bottled craft beer, an India Pale Ale called Eight Finger Eddy to supermarkets in Goa, and it sold out in five days. 바카라�We were not really expecting that huge a response,바카라� says Shenai.

Over time, he expects to sell in other big cities in the country. 바카라�Our focus right now is making sure we make better-quality beers with every brew that we do.바카라�

Says Anuj Rakyan of Raw Pressery: 바카라�People are moving up, value is creeping in into price understanding.바카라� Entrepreneurs will argue that the price conscious Indian consumer can also be value conscious바카라�a bit of both at different times. The good part is, investors reckon, it바카라�s just the start of the story.

By Ajay Sukumaran in Bangalore