FMCG’s old guard turns to D2C as consumer tastes shift
By backing new-age consumer brands, large FMCG companies are hoping to be in tune with evolving consumer trends. The ultimate goal is to capture premium and niche markets and mitigate slowing growth in their core portfolio. But will the strategy pay off?
New Delhi: For decades, they ruled the shelves of kirana shops and supermarkets. But since the advent of direct-to-consumer (D2C) brands, which sell directly to consumers through their own sites as well as through e-commerce and quick commerce apps, often creating categories that did not exist before, large fast-moving consumer goods (FMCG) firms have found themselves on the back foot. Their sales and revenue have taken a hit, and they have found themselves scrambling to create and launch products in many emerging categories, including wellness, premium beauty and pet care, which sit outside core mass and value segments but are growing faster.
In an effort to catch up, in recent times, legacy companies have taken the “if you can’t beat ’em, then join ’em" approach. And so, they have stepped up investments in these upstart D2C brands, leveraging their balance sheets and distribution capabilities to buy them outright or get a foot in the door. Simply put, the legacy companies want skin in the game and to gain market share in emerging categories.
Early last year, for instance, Hindustan Unilever Ltd (HUL) acquired D2C skincare brand Minimalist for nearly ₹3,000 crore, giving it a presence in the actives-led science-based category. A few months later, Marico Ltd moved to 100% ownership of breakfast and snacks brand True Elements.
Parachute oil maker Marico Ltd has invested in companies such as male grooming brand Beardo, skin and hair care brand Just Herbs, and D2C supplement brand Plix in a bid to diversify beyond its core oils business. In 2024, homegrown FMCG company Emami Ltd fully acquired Helios Lifestyle Pvt. Ltd, which operates The Man Company, an outfit that sells men’s grooming products.
“Legacy FMCG firms see D2C acquisitions as a way to accelerate entry into premium, niche and fast-growing categories where consumer preferences are evolving faster than traditional portfolios," said Naveen Malpani, partner, and consumer and retail industry leader, Grant Thornton Bharat.
It’s not hard to see why the old guard has gone into overdrive to get with it. Over the next eight years, India is expected to add 400 million upper-middle and high-income consumers, taking the total to 557 million. Meanwhile, total consumption expenditure is projected to rise from $2.1 trillion in 2022 to $5.7 trillion by 2030, according to estimates by Bain & Co.
These consumers aren’t buying goods as the previous generation did. Instead, they are eyeing a diverse set of brands across categories such as shaving creams, deodorants, lip colours, packaged foods and home care.
While legacy firms have long enjoyed the benefits of deep distribution and mass marketing, new-age brands are far more capable of capitalizing on these shifts, albeit on a smaller scale.
As of fiscal year 2024 (FY24), the combined revenue of new-age consumer brands across categories crossed $5 billion, or about ₹40,000 crore, a figure that continues to scale rapidly, per estimates by venture capital (VC) firm Elevation Capital.
Taking the venture route
Rather than going in for outright acquisitions, many companies from the old guard have launched venture arms to invest in startups and become part of their journey. This has allowed them to take minority stakes and participate in emerging consumer trends without committing to full ownership up front.
Last October, for instance, the venerable FMCG company Dabur Ltd, all of 140 years old, announced the launch of Dabur Ventures, an investment platform with a capital allocation of up to ₹500 crore. The platform will focus on acquiring stakes in high-potential, digital-first businesses.
Dabur Ventures will make minority investments of ₹25-75 crore in startups that align with its Ayurveda- and naturals-led strategy, said Abhinav Dhall, group head of corporate strategy and executive director at Dabur India. “In large organizations, innovation happens, but it takes longer. That’s why we need exposure to newer ideas through a portfolio of bets—so we can identify innovation and participate early. If we find companies that are promising and if we are able to support them meaningfully, acquisitions could follow eventually," said Dhall.
ITC Ltd, too, has a startup fund, earmarked from its corporate treasury corpus, to invest in startups and has made multiple such investments over the years. Supratim Dutta, executive director and chief financial officer at ITC, said the intent is clear. “The first driver is building a future-ready portfolio with focus on enhancing market standing and driving growth in line with our broader ITC Next strategy," he said in an interview with Mint. “The second driver relates to emerging consumer trends and opportunities in high-growth, future-facing categories. This is where new-age brands and operating models that are rapidly gaining traction become relevant. The third driver as part of our strategy is capability-led acquisitions."
Wipro Consumer Care Ventures, the VC arm of Wipro Consumer Care & Lighting, recently raised its second fund of ₹250 crore and plans to make three to four investments annually in new-age businesses. Explaining why large FMCG companies are increasingly backing startups through venture investments, Vineet Agrawal, chief executive officer (CEO) of Wipro Consumer Care & Lighting and managing director of Wipro Enterprises, said there are three primary reasons behind the strategy. “First, the intent is to make money. Second, to learn. Many startups are able to identify opportunities much faster and execute better than we can, and we want to learn from them. Third, their capabilities in e-commerce and social media are far stronger," said Agrawal.
“We are not looking to acquire these venture-backed businesses, as they are already well run, and acquiring them could actually slow them down. I am not sure we have the capability to operate businesses the way startups do—the speed and agility with which they function is phenomenal, and that is something we want to learn from," Agrawal added.
It’s not investments alone—the company follows a twin-pronged strategy: aside from investments via the VC arm, Wipro also acquires regional brands as part of its core business.
What changed?
FMCG firms are no strangers to inorganic growth. For years, they have been active acquirers, building businesses through deals in India and overseas. Dabur, for instance, has been an active acquirer over the years and has earmarked ₹6,500 crore for mergers and acquisitions for its core FMCG business.
But this is different. Most companies see these investments as a step into the world of new-age brands—particularly those born online—that are tapping into shifting consumer habits.
The investments give the legacy companies, which primarily operate offline, a ringside view of how digital-first businesses scale online, sell through e-commerce platforms, and use digital media to expand consumer reach. The investments also give them insights into emerging consumer trends at a time when growth in their core portfolios remains choppy.
The shift has come at a time when the broader market has been challenging, with volume growth faltering, especially in urban markets. Overall, FMCG volumes grew 4.2% pan-India in FY25, down from 6.6% in FY24. Growth was driven by a 4.4% rise in urban India and 4% growth in rural India.
The NIFTY FMCG Index delivered marginally negative returns in 2025, declining 0.6% on a year-to-date basis as of 30 December. This compares with a 9.4% total return from the broader NIFTY 100. Over a three-year period, the NIFTY FMCG Index has gained 14.7% in total returns, while the NIFTY 100 has risen 22.4% over the same timeframe. The index comprises several leading fast-moving consumer goods companies, including HUL, Marico, ITC and Dabur.
Myriad investments
Some of Wipro Consumer Care Ventures’ VC arm’s initial bets include male grooming startups such as Ustraa and LetsShave. It has since exited two startups, including the now-defunct Good Glamm Group. Over the years, the fund has invested in an average of three companies a year, gradually expanding into sectors such as wellness, packaged foods and pet care.
In the nutrition and health foods space, ITC initially invested in Yogabar (Sproutlife Foods Pvt. Ltd) back in 2023; as of FY25, total investment in the company stands at ₹255 crore, with ITC holding a 47.50% stake. ITC plans to acquire 100% stake in the company in the coming years. Separately, in 2025, it invested ₹131 crore to acquire a 43.8% stake in frozen food brand Prasuma, with an additional ₹56 crore earmarked to increase its holding to 62.5%.
ITC began investing in startups in 2018. Over the past seven to eight years, it has also invested in multiple VC funds, including Fireside Ventures and Chiratae Ventures, gaining access to a wide variety of companies and enabling it to engage with the startup ecosystem in a structured manner. Based on disclosures in ITC’s balance sheet, its investments in VC funds stood at around ₹135 crore, as of 31 March 2025.
Consumer goods major HUL is betting on Indian consumers increasingly seeking advanced formulations and convenient formats, as outlined in its 2030 strategy released late last year.
Marico, with both acquisitions and in-house labels, sees itself as a house of digital brands. Laying out the company’s priorities for its digital-first portfolio, Saugata Gupta, managing director and CEO, said, “Our first priority is to grow these businesses sustainably while improving profitability. Over the next two to three years, we want them to move into double-digit Ebitda margins. We remain open to inorganic opportunities."
Ebitda is short for earnings before interest, taxes, depreciation and amortization.
Marico’s own brands launched in the online-first category include bath and skin care products under the PureSense brand and cold-pressed coconut oils under Coco Soul. In a September quarter update, the company said its digital-first portfolio (in-house and acquired) had crossed the ₹1,000 crore annual recurring revenue mark.
Explaining Emami’s approach to investing in new-age brands, Harsha Vardhan Agarwal, vice-chairman and managing director of Emami, said the company “saw the potential early on, driven largely by the growth of e-commerce and digital marketing."
That said, these investments are not without challenges. Integrating new-age brands into traditional FMCG distribution networks, which span the length and breadth of the country, can be difficult. Most digital-first brands are heavily focused on online sales, making offline expansion harder.
Emami’s Agarwal agreed that integration is a gradual process. “Integration takes time and is a learning experience for both sides. Integration typically happens in phases and does not yield immediate results," he added.
Legacy companies also tend to rely more on conventional marketing models, while digital-first brands are built on social- and performance-led channels. Most acquired companies are also loss-making, making it difficult for legacy firms to improve profitability while scaling them up across kirana and mom-and-pop stores.
For now, though, the trend of large FMCG companies backing new-age D2C companies looks set to continue. Most legacy firms Mint spoke to said they will continue to back these brands through minority stakes and partnerships.
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