Tag Archives: fmcg

Best of the Web 105

I am currently quite intrigued by the Montessori schooling. Both Google & Amazon founders are Montessori kids and can’t rave about it enough. Acquaint yourself in ‘Montessori and 10 famous graduates from her schools‘. 

“D-Mart managed to grow when the industry was collapsing, unscathed by the first wave of e-commerce. Now, as online players eye India’s brick and mortar space and partner with domestic players, what’s D-Mart up to?” Read more here #paywall

The Ultimate Learning Guide via Shane Parrish: A nice curation of some of the best learnings from Farnam Street blog. Find them here

Indian FMCG space is seeing a lot of startup action. It’s not just that the consumer preferences are changing, traditional FMCG companies have also started picking stakes in snazzy upstarts. I’ve shared some thoughts here

The Broken Window Theory In Product Design. Read here

Rewind (Best of newsletter #71)
‘A mile wide, an inch deep’ by Evan Williams. Read here

‘The days are long but the decades are short’ by Sam Altman. Read here

Lessons learned from scaling a product team from Intercom. Read here

Podcast Episode of the Week: When India’s Cash Disappeared, Part One & Two (Planet Money)
A deep dive into how India’s Demonetisation came to be. The background story of Anil Bokil, who originally came up with the idea and convinced PM Modi to make this happen. Also, has the original Arthkranti PPT. 

Listen here & here

Startup Trivia of the Week: PolicyBazaar 
In 2008, Yashish Dahiya pitched to Sanjeev Bikhchandani with a powerpoint and a prototype of PolicyBazaar. During the demo, he proved to Sanjeev that he was paying around 60% more for his Car Insurance than what he should be. That demo convinced Sanjeev and team, upon which they invested 20Cr in their Series A for a whopping 49% stake. Ten Years later, Info Edge is still participating in all their funding rounds and PolicyBazaar is currently valued at around $1Bn and Info Edge owns around 13% stake. 

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Indian FMCG Startups Are Coming

Over the past 5 years or so, consumer product startups have been slowly but steadily picking pace in India. While their scale might be significantly low in comparison with e-commerce, ride-sharing or food delivery startups, their seems to be a lot of action in the space.

India’s FMCG market is pegged to be around $185Bn. Traditionally, the large players in FMCG/CPG space have operated by owning a massive distribution pipe (Wholesalers, Distributors & Retailer), doing massively expensive marketing campaigns and selling commoditised products. All of this is starting to change.

That smaller startups are trying to disrupt incumbents extended to FMCG category is a natural after effect of the internet penetration and the subsequent second-order effects. Also, as shown below, the CPG brands globally are infamous for their lack of innovation.

R&D Spending in Consumer Goods Cos as compared to Tech Cos


Factors that favour growth of FMCG startups
: Include changes in status quo for:

  1. Innovation
  2. Production 
  3. Marketing
  4. Distribution

Given the rising discretionary spends and ability for internet to help micro target, upstart startups can now decide to make products not for a mass segment but for niche consumers subset. For ex: Instead of making Real or Tropicana Juices aimed at all and sundry, there can now be Raw Pressery or Paper Boat aimed at premium/niche segment of the market.

Since the target segment is a smaller niche, it fundamentally changes how companies approach Production, Marketing and Distribution. 

  1. Innovation (Loved by a few vs liked by a lot): Given a niche customer segment, a startup can focus on making a great product that their customers will really love over a good/slightly better than average product that a lot of people will be fine using. 
  2. Production (Lower Upfront Fixed Cost Requirements): Unlike earlier times, a startup can now think of starting small and launching few niche products with a reasonable manufacturing setup and invest in production as they grow.
  3. Marketing (Lower Variable Costs): A startup these days can get the wheels of marketing rolling but starting with ads on Google, Facebook, Instagram and others with a much smaller budget. Another aspect of marketing is the solid brand proposition that most niche CPG startups are able to drive due to their innovative offering.
  4. Distribution (Lower Upfront Fixed, and Variable Costs): Compared to earlier times of building a comprehensive retail supply chain across the state/country to store and deliver goods, a startup can get started with minimal inventory and deliver products directly to consumer (D2C) through their website/3rd party marketplaces and scale distribution spends as their traction grows.

Source: Dollar Shave Club/ Kantar Futures

VC activity in the space has been on rise with some focussed funds like DSG actively investing in startups. DSG has around a dozen investments in India including Chai Point and Raw Pressery. Consumer Goods startups have raised over $152 mn in 2018 (so far).

via Bloomberg Quint

via Economic Times

via Economic Times

The Bigger brands have also started making their moves in Indian Consumer Goods Startups. 

Bombay Shaving Company, Beardo got funded by Palmolive & Marico respectively 

Some other players that attracted investments from bigger players Happily Unmarried’s Ustra (Wipro Consumer Care) and Forest Essentials (Estée Lauder). The biggest player in the D2C category (not FMCG really) that has done exceedingly well in Lenskart.

With increasing GDP per capita, better penetration of high-speed internet, increasing transition towards e-commerce fuelled by significant VC funding and some M&A activity, the FMCG space is bound to grow and thrive. It’d be interesting to observe how various startups evolve and make great businesses.

On closing note, here’s the great introductory video by DollarShaveClub that set the ball rolling.