ITC will make its 1st investment in a D2C brand after buying 16% stake in the firm for ₹20 crore
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NEW DELHI :
ITC Ltd will make its first investment in a direct-to-consumer (D2C) brand as the cigarette-to-chocolate conglomerate raises its bets on the fast-growing online retail market.
ITC will buy a 16% stake in online-first mother and baby care Mother Sparsh brand for ₹20 crore, the company said in a regulatory filing on Friday. The acquisition is in line with the ITC Next strategy that will see the company develop more digital-first fast moving consumer goods (FMCG) brands, it said.
“The said acquisition will, inter alia, enable access to the fast growing direct to consumer space in the personal care category, which has been identified by the company as an area of interest," ITC said.
Mother Sparsh is a premium ayurveda and personal care brand with products such as baby wipes, hair oils, and skin creams for mothers and babies. It was launched in 2016 by Himanshu Gandhi and Rishu Gandhi.
Several large packaged goods makers such as Marico Ltd and Kolkata-based Emami have also invested in new-age online brands.
Mint reported earlier that Hindustan Unilever Ltd, India’s largest maker of packaged goods, is set to scale up the online reach of several premium brands through standalone sites and its multi-brand shopping platform UShop.
ITC’s investment underlines the clout D2C brands have steadily built in India’s $110 billion FMCG market. Such brands fill the vacuum between more mass market brands that homegrown packaged goods companies have spent years building and premium goods.
The investment offers an exciting opportunity to align the company’s aspiration to have a significant play in the naturals and ayurveda segment and the D2C channel, said Sameer Satpathy, chief executive, personal care products business, ITC.
The conglomerate has a portfolio of 25 packaged consumer goods brands. These represent an annual consumer spend of more than ₹22,000 crore, ITC said in its FY21 annual report.
“Recognising the significant potential of naturals and ayurveda, ITC has taken this strategic step forward to invest in this segment. Over the last few years, ITC has been engaging with the startup ecosystem while also exploring innovative distribution channels," the company said.
Ayurveda products will continue to gain market share, helping the company expand its market share and product line in the segment, said Abneesh Roy, executive vice president, Edelweiss Securities. “It’s the right strategy by ITC…. It’s a premium brand and in the ayurveda space. Being premium, it will allow the company to do ad spends to scale up," he said.
The partnership will provide Mother Sparsh a unique synergy of strengths to build the brand further, said Himanshu (who goes by one name), the company’s chief executive officer.
D2C brands could be looking at a $100 billion addressable consumer opportunity in India by 2025, Avendus Capital, the investment banking arm of financial services firm Avendus Group, said in a report last year.
According to Shankar Prasad, CEO and founder of beauty and personal care D2C brand Plum, partnering upcoming brands is a good way for bigger firms to grab a slice of the action, and also keep up with what’s happening in the D2C space
“There are consumers, there are novel concepts, there are great products, and some really interesting brands getting built in the D2C space. And a lot of this is happening almost mutually exclusively from the traditional spaces that the larger companies play in," he said.
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