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-free바카라lotions, 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 colic바카라coconut oil. 바카라There 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. 바카라Of course, it was a big move for us.바카라
Mamaearth바카라s 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, they바카라ve 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 wouldn바카라t allow for such fast-paced companies, says Varun, whose start-up would have been, in the old formula, just a local brand in Gurgaon. 바카라All 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.
바카라I 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. 바카라I realised that the market was changing, almost like Brands 2.0, if I can call it that. That바카라s 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. 바카라There 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. 바카라There바카라s still plenty more of modern trade,바카라 says founder Anuj Rakyan, referring to the organised retail segment of specialist stores such as Godrej Nature바카라s 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 company바카라s growth currently, and their primary consumer target is the age group of 18-40. 바카라First, it was about calories and fat and sugar. Now it바카라s 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.
Varun and Ghazal Alagh with a range of their products
바카라More 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. 바카라We 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. 바카라Today, 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 he바카라s clear about maintaining discipline when it comes to investments. 바카라We are not chasing just because people think it바카라s 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. 바카라It바카라s not that we are going to invest in more companies or ideas, we바카라ll 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.
Anuj Rakyan of Raw Pressery, which sells cold-pressed juices
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, there바카라s always the promise of an exit on these bets. Market watchers point to Marico바카라s stake purchase in Beardo, a men바카라s grooming brand, or the Prataap Snacks public listing바카라both took place last year바카라as possible routes for profitable exits. 바카라Most 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. 바카라As 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. 바카라Investors clearly have seen large exits in developed markets. That is what has given them confidence,바카라 says Mamaearth바카라s Varun Alagh.
However, Alagh has plenty of work at the moment. 바카라We 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 more바카라both time and money바카라per child. 바카라That 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 Shenai바카라s 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. 바카라We were not really expecting that huge a response,바카라 says Shenai.
Over time, he expects to sell in other big cities in the country. 바카라Our focus right now is making sure we make better-quality beers with every brew that we do.바카라
Says Anuj Rakyan of Raw Pressery: 바카라People are moving up, value is creeping in into price understanding.바카라 Entrepreneurs will argue that the price conscious Indian consumer can also be value conscious바카라a bit of both at different times. The good part is, investors reckon, it바카라s just the start of the story.
By Ajay Sukumaran in Bangalore
