Niche consumer brands see growing investor interest
the funding boom in the e-commerce and fintech space in 2014 and 2015, investor interest in niche consumer brands, which was a no-go zone for several international funds, has revived.
In the past couple of years, many consumer product startups, including yogurt maker Epigamia, organic juice brand Raw Pressery, and condiments and sauce maker Veeba, have attracted investors by the hordes with their niche product offerings aimed at the millennials.
Venture capital (VC) and private equity (PE) investors have, in fact, pumped in tens of millions of dollars in these young firms, given their unique product strategy, innovation and marketing initiatives, which have even challenged FMCG giants such as Marico and Unilever.
Since 2015, PE and VC investors have put in $613 million in food and beverage consumer brand firms, show data from Venture Intelligence, which tracks deal activity. According to investors, increasing demand for differentiated brands and improved access to consumers, have created the opportunity for new consumer brands to flourish.
“Because of growing population and increasing demand for different brands, the consumer space is opening up with new brands and new entrepreneurs are seen. Fundamentals are all in favour of this becoming a separate class of investment thesis. There are special funds focused on the consumer space only,” said Kanwaljit Singh, managing partner, Fireside Ventures.
According to Singh, there was a legacy that large MNCs or corporate houses were coming up with new brands, but now access to consumer has become more democratized and is cutting through the mass market. “This is a fundamental shift in how consumers are consuming the brands.”
Fireside Ventures is an early-stage venture capital fund with a corpus of ₹340 crore, focused on consumer brands. The fund has invested in Yoga Bar, Samosa Singh, Goodness Beverages, Design Café, Bombay Shaving Co., Mama Earth, Vahdam Teas, Kwik 24, Magic Crate and Frog Bikes.
“Strategic investors are ready to explore opportunities in this space. The PEs have always been active. Such companies are highly valued in public market. Exit for an investor is a real possibility,” said Singh.
However, while the macros might indicate an opportunity in the consumer space, the sector presents its own unique challenges to investors and entrepreneurs. Achieving scale, cracking the distribution model and tackling changing consumer preferences and tastes, are challenges that investors have to deal with.