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FMCG giants picking up stakes in start-ups

Main reasons behind big-ticket investments in the sector are innovation, technology-driven, better marketing understanding and a passion for market disruption.

Published: 16th July 2019 08:16 AM  |   Last Updated: 16th July 2019 08:16 AM   |  A+A-

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For representational purposes ( File Photo | EPS)

Express News Service

The start-up space has been a hunting ground for established consumer goods companies for some time now. ITC chairman Sanjiv Puri on Friday revealed that the company is engaging with the startup ecosystem to harness its invaluable resources to innovate, develop products and expand the business.

ITC is keen on acquiring companies in the Fast-Moving Consumer Goods (FMCG) sector, he said, adding that the newer business might generate Rs 1 lakh crore sales by 2030.

“To accelerate growth, the endeavour is not only to fortify the existing categories towards delivering industry-leading performance, but also to foray into newer categories and sub-segments. This would be supported by multi-dimensional investments as well as strategic opportunities for acquisitions,” Puri, told shareholders, in his maiden address at the company’s 108th Annual General Meeting.

FMCG majors Unilever and Marico also have dedicated arms to invest in emerging companies. Unilever Ventures is the venture capital and private equity arm of Unilever, while Marico Innovation Foundation invests in startups through a scale-up programme. Britannia is also planning to set-up a separate entity over the next few months to invest in startups and emerging companies across categories and platforms.

One of the main reasons behind big-ticket investments in the sector is innovation. Driven by technology, better marketing understanding and a passion for market disruption, several new age tech ventures are now creating ripples in the FMCG sector, attracting serious investor attention and securing heavy funding.

For instance, in a land where the venerated curd has been a dietary staple for millenia, the entry of Greek yoghurt was able to stoke a David versus Goliath slugfest last year. Mumbai-based start-up Drums Food International, the parent company of flavoured and greek yoghurt brand, Epigamia, was also able to rope in actress Deepika Padukone as an investor in the company. 

On the other side of the spectrum, oral care giant Colgate Palmolive Asia Pacific invested in men’s grooming products maker — the Bombay Shaving Company — in the middle of last year, while Parachute hair oil maker Marico acquired a stake in another men’s grooming brand — Beardo — in 2017. Emami too has picked up stakes in BrillareScience, an Ahmedabad-based startup that makes hair and skin care products and sells them to professional salons. According to analytics and technology firm Tracxn, funding for FMCG startups stood at Rs 240 crore in 2017, fuelled by a large number of people shopping online and higher disposable incomes.

“I have a philosophy that no company has everything today to make a successful business. While we are very good at what we do, if we have to step out of our comfort zones then partnerships will be important, and if it’s necessary, then we will get into that model as well,” Varun Berry, MD, Britannia said, adding that the market has started to see small fish eating the big fish with the arrival of the start-ups. 

Men’s grooming start-ups in high demand 

While oral care giant Colgate Palmolive Asia Pacific has invested in men’s grooming products maker Bombay Shaving Company in the middle of last year, Parachute hair oil maker Marico acquired a stake in men’s grooming brand Beardo in 2017. 

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