In Search of Con­sumer Con­nect

NEW CON­SUMER PROD­UCT COM­PA­NIES GET CRACK­ING.

Business Today - - LEAD ESSAY - By Goutam Das

THE PACK­AG­ING ISN’T sub­tle. One of them bor­ders on comic art with ‘Ear­gasm in the box’ printed. The prod­ucts them­selves can be loud with a de­fin­i­tive bass bias. That’s when EDM or elec­tronic dance mu­sic gets heady. The 20-year-olds love that. Three-year-old boAt sells ear­phones, head­phones, speak­ers, travel charg­ers and ca­bles. Yet, the start-up loathes to be called an elec­tron­ics com­pany; it prefers the tag of a ‘life­style brand’, a cool one that makes fash­ion­able stuff such as ca­bles in cam­ou­flage or denim colours for Ap­ple prod­ucts, portable speak­ers that are stone-shaped and not the usual egg-shaped, and Blue­tooth head­sets de­signed to com­ple­ment those with a sense of “style, fash­ion, and crazi­ness”. Aman Gupta, boAt’s co-founder, who calls him­self ‘Cap­tain’, iden­ti­fied the com­pany’s po­si­tion­ing early. Some com­pa­nies were play­ing on price, while a few played on per­cep­tion — top-end au­dio com­pa­nies that mar­ket qual­ity of sound. “We are some­where in between,” says Gupta, who started boAt with Sameer Me­hta. “Prod­ucts for 18 to 24-

year olds… that was the whitespace.” He im­plies that no one was re­ally tar­get­ing this de­mo­graphic.

If you sur­vey the re­cent start-up land­scape in In­dia, you will dis­cover many trends, and sub-trends. Foodtech has made a re­vival, so has gro­cery. Busi­ness-to-busi­ness com­pa­nies are go­ing strong, as are com­pa­nies that are Ar­ti­fi­cial In­tel­li­gence (AI) - driven and those in fin­tech. There is a whole bunch of real es­tate start-ups, in the form of co-work­ing spaces. Nonethe­less, there is some­thing about con­sumer prod­uct brands and their fast-paced growth. They are cool, in­no­va­tive, have well tar­geted prod­ucts, and are ready to dis­rupt mar­kets dom­i­nated by the es­tab­lished, in many cases multi­na­tional, com­pa­nies. Many of them cater to a new con­sumer, the one Gupta talks about.

The con­sumer prod­uct sec­tor was also well rep­re­sented in Busi­ness To­day’s Coolest Start-up edi­tion 2018 – the jury picked 14 win­ners of which five are con­sumer brands or in­tend to be­come one soon — FableStreet (work wear), Wak­e­fit (or­thopaedic mat­tress), Smartiv­ity (toys), Clen­sta ( bathing with­out wa­ter), and Swa­jal (wa­ter bot­tles and wa­ter ATMs).

Putting a fin­ger on the ex­act num­ber of con­sumer

“PROD­UCTS FOR 18 TO 24-YEAR OLDS… THAT WAS THE WHITESPACE” AMAN GUPTA Co- founder, boAt

fac­ing prod­uct start-ups is dif­fi­cult, but one proxy could be Ama­zon Launch­pad, which show­cases prod­ucts from such start-ups. Most In­dian start-ups are In­ter­net-first com­pa­nies. Ama­zon says that Launch­pad has over 350 start-ups host­ing over 40,000 prod­ucts across 30 prod­uct cat­e­gories. In the past three years, con­sumer fac­ing start-ups have spanned from fast-mov­ing con­sumer goods (FMCG) sec­tors to fash­ion, elec­tron­ics, and al­co­holic and non-al­co­holic bev­er­ages among oth­ers.

Yet an­other way to fig­ure out the growth of con­sumer brands is the in­ter­est from In­dian in­vestors. Fire­side Ven­tures, a spe­cialised fund that in­vests in con­sumer brands, raised a cor­pus of

` 340 crore from a long list of mar­quee in­vestors, which in­clude Premji In­vest, West­bridge Cap­i­tal, Mari­wala Fam­ily Of­fice, Unilever Ven­tures, Emami Ltd, RP- San­jiv Goenka Fam­ily Of­fice, Su­nil Mun­jal’s Hero En­ter­prise In­vest­ment Of­fice and ITC Ltd. Over the past 18 months, Fire­side has eval­u­ated 800 con­sumer prod­uct brands.

In­vestors are hop­ing that two mega trends will aid their suc­cess in the years ahead. One is what boAt talks about, the new con­sumer. Fash­ion­able, aware, wants to live healthy, is will­ing to try new things, and also pay a slight pre­mium for a bet­ter prod­uct. The sec­ond trend is the growth of new in­fra­struc­ture such as e- com­merce plat­forms, of course, but also en­gage­ment plat­forms on the web and su­per mar­kets. All this re­duces the time and cost to mar­ket.

The New Con­sumer

In Au­gust 2017, Anir­ban Das Blah, Founder of tal­ent man­age­ment com­pany Kwan En­ter­tain­ment, and Jiggy Ge­orge, Founder of brand li­cens­ing agency Dream The­atre, en­tered a joint ven­ture agree­ment to create a new com­pany, Mo­jostar, which part­ners with celebrities to co-create fash­ion

brands. Ear­lier this year, it launched Just F by Jac­que­line Fer­nan­dez and PROWL by Tiger Shroff. A footwear brand by Ran­bir Kapoor is in the off­ing.

What are the brands ey­ing? Some­thing sim­i­lar to boAt, a whitespace that hasn’t be­ing ad­dressed by es­tab­lished brands. For ex­am­ple, ac­tive wear for women is usu­ally drab rather than be­ing fun and fash­ion­able. “The idea of an In­dian fit­ness brand that is only about women and about fash­ion you can wear out­side of a gym too didn’t ex­ist. That was a con­sumer whitespace,” Blah says. Just F, a “fem­i­nine ac­tive wear” brand was thus born. Sim­i­larly, PROWL is an ac­tive wear brand for young men. “Ex­ist­ing ac­tive wear brands made no dis­tinc­tion between the 15-20-year-olds and the 35- 40-yearolds. The young want their stuff to be af­ford­able, but also make them look good. For them, work­ing out is not about health; it is about van­ity,” Blah says.

Beauty prod­ucts can be about van­ity, too. They can also cater to mod­ern day fads of be­ing or­ganic, us­ing less chem­i­cals or be­ing ve­gan. There is grow­ing de­mand for such prod­ucts, pri­mar­ily be­cause of greater aware­ness.

“Con­sumer be­hav­iour is chang­ing rapidly. They are flooded on so­cial me­dia with ideas and know a lot. This was not the case seven years back. Now they know what a sin­gle-in­gre­di­ent prod­uct is and want that,” says Man­ish Chowd­hary, Co­founder of Fit & Glow Health­care Pvt. Ltd. One

SLEEPY OWL SPECIF­I­CALLY WANTED TO TAR­GET THE COLD BREW (COF­FEE) MAR­KET BE­CAUSE IN­DIA HAS MOSTLY WARM WEATHER. ALSO, IT IS LESS ACIDIC AND ONE CAN CON­SUME MORE

of the com­pany’s brands is WOW that started with an ide­ol­ogy of us­ing less harsh chem­i­cals in for­mu­la­tions such as sham­poos. Chowd­hary says one of the com­pany’s top sell­ers is an ap­ple cider vine­gar sham­poo, a sin­gle in­gre­di­ent prod­uct.

Sim­i­larly, there is skin- care and hair- care brand Plum, which started with the “phi­los­o­phy of good­ness”. “We don’t make fair­ness creams ( be­cause you are who you are); we use glass and re­cy­clable pack­ag­ing; our prod­ucts are ve­gan, which means there is no an­i­mal- de­rived fra­grance, or no an­i­mal is in­volved in the whole pro­duc­tion process,” says founder Shankar Prasad.

Prasad, a chem­i­cal en­gi­neer, had worked with Hin­dus­tan Unilever, McKin­sey, and Ever­stone Cap­i­tal. He no­ticed that the FMCG mar­ket has both ex­panded and be­come com­plex over time. While a decade back, there were just three cat­e­gories — mass, pre­mium and niche — now, the mar­ket is seg­mented into at least five. “There is

mass (` 100-200), mid-pre­mium (`300-800), pre­mium (`800-1,200), sub-pres­tige (` 1,200-2,000) and pres­tige ( be­yond ` 4,000),” he says. “We like to tar­get the 25-32 years olds who are fa­mil­iar with mod­ern con­cepts such as ve­gan. But, older con­sumers end up us­ing the prod­ucts as well,” he adds.

Then there are start-ups that are tar­get­ing con­ve­nience. The busy con­sumer, or the lazy one. Sleepy Owl Cof­fee’s three founders, Ajai Thandi, Ar­man Sood and Ash­wa­jeet Singh, saw that in­home cof­fee con­sump­tion in In­dia is dom­i­nated by in­stant cof­fee. Peo­ple don’t want to or don’t know how to brew. In 2016, they came up with brew box and brew packs, tar­get­ing the cold brew mar­ket. The brew box is a card­board box with a tap one can buy off-the-shelf in Delhi-NCR. The cof­fee is al­ready brewed and all it needs is dis­pens­ing. The brew packs re­quire some amount of work but isn’t dif­fi­cult. One brew pack can be added to 500 ml of wa­ter and left overnight. The cof­fee is ready in 12 hours, to be served over ice.

Thandi says that they specif­i­cally wanted to tar­get the cold brew mar­ket be­cause In­dia mostly has warm weather. Also, cold brew cof­fee is less acidic and one can con­sume more. The pric­ing is pre­mium. A 1.5 litre-box comes for ` 600; and five brew packs cost ` 500.

The New In­fra­struc­ture

About 79 per cent of the cus­tomers who bought Sleepy Owl’s Orig­i­nal brew pack on Ama­zon gave it a 5- star rat­ing. About 45 per cent of boAt’s Rock­erz 400 On- ear Blue­tooth Head­phones gave it a 5- star rat­ing and an­other 27 per cent gave it four stars. This is what ex­cites start-up founders about e- com­merce. In­stant feed­back helps in prod­uct it­er­a­tions or even de­cid­ing on pulling out prod­ucts that aren’t do­ing well quickly enough. The feed­back loop in the tra­di­tional world takes months, and is ex­pen­sive.

Nearly all con­sumer brand start-ups to­day have an e- com­merce-first ap­proach for strate­gic rea­sons. It forms part of what Kan­wal Singh of Fire­side Ven­tures calls the “new in­fra­struc­ture” — one that helps build brands with lesser cap­i­tal.

“There are also in­ter­est­ing devel­op­ments in dis­tri­bu­tion and go-to-mar­ket strate­gies. And new ways of build­ing brands,” he says.

“The cost of cus­tomer ac­qui­si­tion is get­ting more fo­cussed. Around 10-15 years back, you would have to do more mass ad­ver­tis­ing on tele­vi­sion and print, and you would have the dis­tri­bu­tion com­plex­ity of go­ing to smaller ki­rana stores. That com­bi­na­tion of mass ad­ver­tis­ing and high fleet on street re­quire­ment would re­quire a sig­nif­i­cant amount of cap­i­tal,” Singh adds.

Apart from e- com­merce, new in­fra­struc­ture in­cludes for­mats such as su­per­mar­kets. An FMCG start-up to­day can create more fo­cused dis­tri­bu­tion with only su­per­mar­kets. So, in­stead of go­ing to 20,000 smaller shops in a city, it can do with a few hun­dreds. Dig­i­tal av­enues of en­gag­ing with cus­tomers are also re­duc­ing the cost of brand­ing. Singh cites con­sumer en­gage­ment plat­forms on the Web. His port­fo­lio com­pany Ma­maearth, which sells toxin-free baby care prod­ucts, uses mom blog­gers to in­flu­ence.

Ex­actly how much cheaper is this? Singh cal­cu­lates that for FMCG brands, it could be pos­si­ble to build a ` 100 crore-com­pany with an in­vest­ment of

` 30-35 crore. A decade back, build­ing a sim­i­lar sized com­pany would have re­quired ` 60-70 crore or more. While to­day you could get to ` 100 crore in four years, it would have taken dou­ble the time a decade back.

WOW started in 2014 and ex­pects to close 2018/19 with rev­enues of over ` 100 crore from sales in In­dia and the US. Last year, it raked in

` 30 crore. boAt, which started in 2015, had rev­enues of ` 27 crore in 2016/17. Last fis­cal, rev­enues shot up to ` 106 crore.

All this makes the con­sumer prod­uct start-up sec­tor a real cool one — a new sun­rise space for both founders and their in­vestors.

PHO­TO­GRAPHS BY REUBEN SINGH

Sleepy Owl Cof­fee Founders: Ajai Thandi, Ar­man Sood and Ash­wa­jeet Singh

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