Ash Lilani, the founder of venture capital firm Saama Capital, prowls the aisles of the Whole Foods outlet near his residence in California quite often, smartphone in tow. Every time he sees an interesting product or aisle display, he takes photos of them to send them back to India. To his investee companies.
Malika Sadani, the founder of The Moms Co., a body care brand focused on moms and babies, meets with pregnant women at hospitals. To convince them early on about her own products.
Giving a strong competition
Baba Ramdev, the yoga guru who finessed his yoga skills into Patanjali, a multi-billion consumer products empire spanning muesli to shampoos to health drinks, is giving sleepless nights to giants like Unilever and P&G.
Kanwal Singh, the former co-founder of venture capital firm Helion, recently started his own fund focused on the consumer products space. Fireside Ventures, his new fund, says it received more than 350 applications for funding in just the first four months, of which it has met over 100.
Each of these four people and their stories joins dozens of other similar ones, entwining to form the clearest opportunity for entrepreneurs and investors in 2018—consumer products.
E-commerce, the originally promised opportunity, didn’t quite end up as expected. Despite its size and untapped potential, India has ended up a vassal to larger players from the US or China. Even in other tech-driven sectors like, say, ridesharing, online travel, food delivery, etc., the final winners seem destined to be foreign players with deeper pockets and stronger cash flows.
One fundamental reason could be that the Indian e-commerce or digital market never turned out to be as big as expected. For a population of 1.2 billion and a middle class of anywhere between 250-500 million, the base of e-commerce shoppers purchasing products regularly is closer to just 50 million.
Market rising rapidly
But with the consumer products space, things are different.
According to a survey released in March 2017 by Bain & Co., “India is at the cusp of the FMCG S-curve, and there is significant room to grow over the next five to 10 years. A nominal GDP growth rate of roughly 12% over the next three years could signal an FMCG growth rate ranging from a low of 9% to a high of 17%, depending on player action.”
Unlike e-commerce, when it comes to consumer goods, India is a massive market. And a massive market poised at what Bain & Co. correctly calls “the cusp of an S-curve”.
As consumer segments ranging from “merely” millions to tens and hundreds of millions across India become richer, more aware, more aspirational and more demanding, opportunities are opening up for newer players to capture.
At the mass end, you see Patanjali rapidly growing to become the second-largest consumer goods maker in the country.
Meanwhile, dozens of younger, smaller and even nimbler startups are finding and growing market segments that initially appear small to their larger counterparts, but could grow at much faster rates in just a few years. In most cases, these brands are targeting consumers wary and tired of big brands, mass advertising, and deceptive packaging.
“Unlike mature countries where newer players have to buy market share from others, India doesn’t have all that many brands in consumer [goods]. So, you are building white spaces and not fighting each other,” says Kanwal Singh of Fireside Ventures.
“We’re India’s leading clean labeled brand,” says Anuj Rakyan, the founder of Raw Pressery, a maker of cold-pressed juices that are now diversifying into soups and non-dairy milk.
Sorry, what? “Clean labeled”?
Clean labeling is a trend, or perhaps even, a movement, that promotes natural and chemical-free products. While adjectives like “natural” and “healthy” have long hoodwinked consumers on product packages, clean labels go into specifics. For instance, “organic”, “no allergens”, “no chemicals” or “gluten-free”. Claims that are harder to fake.