What makes you so bullish on the consumer brand market in India?
Despite focusing on investing in India since 2004, I only moved to India and lived there for the first time in 2007. I struggled to find products that I was used to consuming in London and would only find them in select stores and the grey market, and that too at ridiculous prices. There was a demand but it wasn’t being served by Indian products – which is a shame. In 2012, I set up DSGCP to find and back founders who would build the new consumer products that Indians were demanding across multiple categories, including food, beverage, personal care and mother and baby care.
In some cases we’ve backed existing brands and in others, we’ve identified the category first, and then gone out and then found people to create a brand in that category.
Is the market for these products in India big enough?
It’s a growing market and that’s what matters to us.The ceiling is constantly moving and there is no doubt in my mind that each of these categories or segments which seem new now, have the potential to be massive opportunities. Numbers that looked impossible five years ago are now commonplace for brands.
Having said that, brands need to be patient and in many new categories, educate the consumer. For example, when Sleepy Owl launched cold brew coffee, not enough people understood that cold brew is a process and cold brew coffee can also be drunk hot.
Epigamia was constantly asked why a pack of ‘curd’ cost Rs. 35? They had to educate the market about Greek yogurt and the fact that it was a snack, and not an accompaniment to their meals.
The other important factor is that the technology at the back-end is constantly improving. So in food processing for example, processes to keep food fresh and maintain the profile of ingredients are getting more efficient and this will allow more brands to enter the market.
If so many of these are new categories, how do you even test a hypothesis?
A good way to do it is through controlled product launches. Traditional research techniques serve different objectives, but only actual sales to customers will give you real data and insights.
Epigamia for instance, develops and manufactures new products at its development centre in Andheri. They then test the new product in select stores in that area for 2-3 months. It is critical to see how our channel partners and the consumer actually behaves. What is the rate of sale? What are the repeat rates? What are the cohorts showing? It is only when there is real market validation, that Epigamia will do a larger launch. What consumers say in a focus group is often very different from what they actually do when they see a product on shelf.
What are the big shifts you have seen in the Indian consumer?
We are dealing with consumers who don’t have the baggage of wanting ‘imported products’. On the contrary, they actively seek ‘Made in India’ products and are proud to be associated with them. For example, a generation of Indians has grown up drinking Indian wine and that’s the taste and terroir that’s familiar to them. Sula did the hard work of educating the market over 20 years.
Today’s consumers are willing to experiment a lot more and try new brands. If they find something that adds value to their lives, they will pay a premium for it.
They are far more conscious of their well-being and wary of large, mass-market FMCG brands. The latter shift is happening quite rapidly around the world. In parallel, millennials and GenZs want to support the local entrepreneurs and brands. This switch from large MNC brands to smaller local brands may take somewhat longer to happen in India
What are the categories you are betting on? Where do you see white spaces today?
Our current playbook has these 10 themes that have been carefully chosen after studying macro and micro trends. The brands we partner with must focus on multiple themes if they want to build a successful and scalable business.
2. Aspiration & luxury
3. Healthy living
4. Looking and feeling good
5. Millenials & Gen Z
6. Plant-based consumerism
7. The digital consumer
8. Evolution of the family unit (which for us includes our furry pets)
9. Eating on-the-go
10. Blurring of home and office
How do you think big FMCG companies are reacting to this D2C wave?
I think they are watching very closely and each of them has their own strategy when it comes to acquisition or partnership with younger brands. For example, many of them have realised that even after a business acquisition it is smarter to keep cultures separate. Big FMCG are also accelerating innovation and launching ‘independent’ brands to cater to demand from consumers.
We will see a lot of action over the next decade as big FMCG and insurgent brands compete for share of mind and share of wallet.
What’s a common mistake that D2C brands or founders make?
I don’t know if I would call it a mistake but people need to remember that brands are not built in a couple of years. It takes 10 to 15 years to build an enduring brand. Sula has been around for more than two decades. Especially if you are creating a new category, or even a new segment in an existing category, it takes time, patience and resilience.