They’re quick to establish relationships with buyers looking for niche brands, and are slowly cutting into FMCG majors’ market share
NEW DELHI: When Rohan Mirchandani was a student at Wharton in 2011, he attended a talk by former Coca-Cola marketing head Shripad Nadkarni, who said the next decade would herald the rise of young independent FMCG brands that would take on the handful of multinationals in India.
It was an insight that changed Mirchandani’s life. The next year, after he graduated, he co-founded Drums Food, which makes Epigamia Greek yogurt and Hokey Pokey ice cream. Epigamia, launched a year ago, sells 25 lakh units every month and competes with Grekyo from Swiss food company Nestle and similar products from French dairy giant Danone. The multinationals took a cue from Epigamia’s success, Mirchandani said.
The Indian fast-moving consumer goods (FMCG) space, traditionally dominated by multinationals, has spawned 1,300 startups in a very short span of time, revealed data from Tracxn. In the year ending September 2017, investors pumped in around
Rs 1,400 crore through 34 deals.
Rohan Mirchandani, Epigamia
“There is a growing upper middle-class population in India with discretionary income,” said Arvind Singhal, founder of retail consultancy Technopak. “These consumers have global exposure and want more than just their basic needs fulfilled. Therefore, going forward, the market will provide more opportunities for niche brands. But the numbers are still minuscule. So only time will tell whether multinationals are really worried about them.”
However, some startups such as Bira and White Rhino beer, Raw Pressery juices and Paperboat beverages have met with reasonable success. The men’s grooming space too has seen the emergence of sprightly companies such as Beardo, The Man Company, Bombay Shaving Company and Ustraa. FMCG company Marico acquired a 40% stake in Beardo last year.
In the beer category, Sequoia-backed Bira, has created quite a splash too. The brand’s founder, Ankur Jain said, in three years, Bira has become the number one premium beer brand in the Capital and will achieve a similar feat in Bengaluru too, home to the country’s largest liquor companies and birthplace of Kingfisher.
Bira’s parent company B9 Beverages plans to sell two to three million cases this year. Although the numbers appear small compared to market leader Kingfisher’s yearly sales of 150 million cases, Jain has managed to take his brand to the US and is currently planning an ambitious foray into UK, Singapore and UAE.
“I started by importing branded beer for restaurants and hotels,” he said. “But when I looked at the beer market in India, I couldn’t find a single brand that played on good taste at a decent price. The popular brands marketed strong run-of-the-mill lager that young consumers had got tired of.”
Another homegrown beer brewing company, White Rhino, started by an economics graduate from Pennsylvania University, Ishan Puri, has grown its business 10 times in the eight months since its launch. Puri is banking on young well-heeled consumers who don’t mind coughing up Rs 160 for a pint of craft beer.
Ankur Jain, B9 Beverages
“We operate in Delhi and Gurgaon and will expand to other cities soon,” Puri said. “But we don’t want to rush things and burn money to gain market share. We operate in small batches, since beer — no matter what others would have you believe — has a very short shelf life. It starts disintegrating after three months.”
Globally, large established players are snapping up young startups due to the trendiness of their products, but in India, it’s still early days. An example is the US’ Dollar Shave Club being acquired by Unilever for $1 billion because the online merchant built a strong brand in four years betting on selling low-priced alternatives to Gillette to male customers.
Closer home, when Marico acquired a stake in Beardo last year, the company defined the acquisition as an opportunity to learn from an online brand. “The male grooming market, growing in double digits, is at the cusp of growth in India and constitutes a strategic category for Marico,” said Marico CFO Vivek Karve. “We believe the acquisition of a controlling stake in Beardo will fast-forward our journey towards nurturing a future-ready male grooming portfolio and brand in the online and salon space.”
But taking on consumer giants comes at a cost. Many startups TOI spoke to said building a strong brand is just one challenge — distribution is the main one. For instance, Bira faced a massive consumer backlash when it ran out of stocks. Mirchandani of Drums Food had trouble sustaining a seasonal ice cream business and setting up a cold chain for distribution. Since then, he has focused more on Epigamia than Hokey Pokey.
Neeraj Biyani and Neeraj Kakkar, Paperboat
“Distribution is very hard for us, compared to established players,” said co-founder of Hector Beverages’ Paperboat Neeraj Kakkar. “You can create a product that is better than the competition and you can create a brand with more meaning. But reaching the same scale and building a strong geographical distribution network requires a lot of patience. In the beverage industry, the large players enjoy the availability of chillers in outlets, which is a strong entry point. It gives large players a monopoly over distribution.”
But for budding entrepreneurs who want to take on the Goliaths of the industry, Kakkar has some sound advice: “The key is to listen to consumers. That is the only place where you have a strong, sustainable, competitive advantage over the large players,” he said. “You can gain insights that are difficult to ascertain at a large scale. There are niches that the large players are not interested in because of lack of scale, and those niches are what aspiring entrepreneurs should look to evaluate.”