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A Study on status of FMCG Startup in India

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 A Study on status of FMCG Startup in India

Hetal Kherala
Assistant Professor
R.C. College of Commerce
Ahmedabad
Abstract

As per the chairman of NASSCOM and CEO & MD Quatro Global Services Raman Roy “India is one
of the fastest growing startup landscapes in the world and every major accelerator, investor, angel group,
is participating in becoming a part of this growth journey. Today, Indian ecosystem is flooded with
innovative ideas and needs of the right channel and guidance in terms of acceleration, scaling up and
funding”. All different kind of government initiatives like ‘Make in India’, ‘Skill India’, and ‘Digital
India’ are complementing the ‘Startup India’ initiative which has direct or indirect impact on the Indian
economy. It empowers the youth, creates opportunities for skilled unemployed youth, provides quality
of services in different sector of economy. FMCG is the fourth largest sector of the Indian economy. At
one side of the coin there is an increasing government support, technological revolution is attracting
global investors for pouring in big money in Indian startups and on the next side of coin domestic
players are leveraging advanced technologies such as Internet of Things, Artificial Intelligence and
Machine Learning for development of innovative product and sustaining the business. In this paper the
author had attempted to find out the status of Indian FMCG startups. The author had used secondary
data for this purpose like website of startups, newspaper.

Key words: FMCG, Startups,

Introduction: “The Indian FMCG sector is not recession-free but recession-resistant” by Inc42.

Indian economy is fastest growing economy in the world by securing fifth rank in the overall economy
overtaking France and United Kingdom. The main components of growth are increasing in Household
consumption, Government Initiatives, increasing in investment in fixed capital and inventories, better
condition of exports and imports of goods and services. As the economy is growing the Indian market
condition is also getting strengthened day by day. The share of Indian FMCG sector is very important
contributor to India’s GDP growth. The IBEF report of (October 2019) India’s contribution to global
consumption is expected to get doubles to 5.8 % by 2020 due to various support of Governments’ policy
and increasing investment. The FMCG sector includes Household care, Personal care and Food and
Beverages. The investment in this sector is increasingly day by day. Many new firms and retailers are
entering in this sector with an expectation of higher return on investment. As per the report of the
Nielsen the growth rate of the FMCG industry in the Q3 was 80%. The main source of the growth is
quick sales through different modes of sales channels in India like social media, digital media and
powerful regional, small and MNCs players. Now a day’s many new budding consumer startups have
entered in FMCG because the analyst and industry had observed falling in consumer spending to not just
low incomes but also there is a lack of brand innovation and failure to understand niche consumer needs
at least in tier-1 and tier-2 markets. The renewed interest displayed by traditional firms in startup-led
consumer brands, is mostly steered by the fact that these brands virtually saw no impact of the economic
slowdown. FMCG is the fourth largest sector in the Indian Economy with 50% FMCG sales in India. As per live
mint “Wipro Consumer recently launched a venture fund to invest in startups in the consumer brand space. The
company will look to invest about Rs. 10-30 crore in early to mid-stage startups. We will be looking at those
startups where we can add value as well learn from them”. Like this Lulu Group, Burman Family Holdings the
Dabur India, are also taking a financial risk in consumer brand startups to strengthen the economy. The Nielsen
Report has forecasted the growth for the year 2020 at 9 to 10 percent. The success of FMCG market is
linked up with the prosperity of public wealth and livelihoods.

Indian startups Growing or Matured: The growth of startups in India is a remarkable one due
to two main reasons; increasing awareness and interest of consumer i.e. consumerism and digital
revolution. The no. of smart phone users in the year 2015 was 199.08 million which is gradually
increase in the year 2020 401.74 million, forecasted for the year 2022 is 442.5 million by Statista. The
other factors which has fueled the growth of the FMCG startups are skilled tech professional, boom of
the IT product, government policy for startups and increasing investment in startups. As per the report of
the KPMG Invest India –Venture Gurukool report titled ‘Startup ecosystem in India-Growing or
Matured? -2018’ has reported that Bengaluru is a hub for the startups, while Delhi stood second in this
list. Bengaluru has received INR 479 billion in funding in 2017. The growth has been observed in tier 2
& 3 cities too. India has attracted many other countries for the investment in startups. There has been a
positive flow of INR 2,254 billion in 2014 and 2018 with almost half those funds following into the
country between 2017 and the first half of 2018. The investor has shown their interest for matured stage
companies. There has been increasing number of startups in India which caters the need of niche
consumer. For specific challenges there are over 325 startups in the different area like healthcare,
education, inclusion, financial inclusion, clean energy, agriculture etc., due to the following reasons for
the growth of Indian startup like;

• Demand side: increasing Smartphone penetration, increasing users of internet

 • Supply side: Techno-savvy youth, changing in mindset of people,
• Availability of adequate human resource coupled with changing views of the traditional
mercantile community towards business as a career
• Liberal government policy and amended investment norms which provides conducive
environment to the other countries to invest in India.

Major Key Sector of Indian Startup;

E-
Commer 1). E-Commerce in India has witnessed a rocket speed growth.
TravelT ce HealthTe According to eMarketer, the retail e-commerce sector in India
ech ch
is expected to register a y-o-y growth of 31% in 2018, to reach
KEY
SECTOR an estimated value of INR 2,372 billion. This is has very
Logisti S OF Enterpris
biggest startups such as Flipkart, Snapdeal, Shop clues, Paytm
cs INDIAN etech
STARTU etc.
P
EdTech Fintech Here author is focusing on FMCG startup that is why other
Deepte sector explanation is not given.
ch

Source: KPMG Startup ecosystem in India

Present and Future prospect:

The FMCG sector in India is considered as the fourth largest sector in the Indian economy. India’s
household and personal care is the most leading segment which is accounted for 5o percent of the
overall market, healthcare 31percent and food & beverages 19percent comes in next terms of market
share. The IBEF had projected that the online FMCG market is forecasted to reach US$ 45 billion in
2020 which is an important indicator to assess consumer expenditure in an economy. FMCG market
reached US$ 52.75 billion in FY18 and expected to reach US$ 103.70 billion by this year. Even there is
a growth in Indian rural FMCG market which will reach to US$ 220 billion by 2025. This is the
significant sign of the increasing consumer demand in the Indian economy where the increasing
household income of the people shifting from saving centric to expenditure centric.

Mint reported on 14 September 2019 that Halidram’s one of the oldest names in packaged foods space
in India, is in discussion with multiple startups in the consumer brands space including Bengaluru-based
Frozen Bottle, a quick-service restaurant chain that sells milkshakes and desserts. Dabur, Hindustan
Unilever, ITC Ltd. And Britannia Industries have acknowledged that the slowdown has hit their
revenue, especially among premium portfolio brands. The level playing field offered by digital media
and affordability factor can help increase the penetration of FMCG 2.0 products in the rural and semi-
urban regions in order to match the reach of traditional giants.

FMCG 2.0: Which means FMCG Companies are data oriented, which has a digitally enabled
distribution network that is demand of India’s next generation and young customer. As mentioned above
due high penetration of digital media, affordability and transition from traditional media to digital has
change the game of Indian FMCG sector. During the period of 2014 to first of 2018 there are more than
$433 Mn was added as an investment in Indian FMCG startups- the average and medium size has
crossed million dollars $989k. The report of KPMG has revealed that China-based e-commerce
company Alibaba in 2018 had invested INR14,5 billion in Zomato, an online food ordering application.
RP-Sanjiv Goenka Group has invested a capital fund of US$14.74mn in FMCG startups. Supa Star
Foods Pvt. Ltd a packaged food and beverage maker has received its second investment from Roots
Ventures which will help the company grow its distribution network and add more products in FMCG.
The top five highest-funded FMCG startups include all together they accounted for more than 50% of
the total funding of $433mn. The list is given by Inc42.com.

• Bira 91
• Drum Foods
• Hector Beverages (in talks to be acquired by Tata Global Beverages)
• Chai Point
• RAW Pressery

The funded FMCG startup includes dairy startups, popular beverages and breweries. A big prominent
investor are targeting niche segments such as women’s hygiene, ready to consume caffeine-based or
fruit based products are attracting higher investor. This sector is transitioning from budding to growth
stage which indicates that chances of higher cash inflow in this area.
 1) Status of BIRA 91

Founder: Ankur Jain

Status: Active

• Initially started importing a few beers to get a hold in the sector without experience.
• It is four active breweries with a production capacity of 400,000 cases per month with a $100
million in revenue last year 2019
• Market share close to two and half percent of the overall beer market and 10percent of the
premium segment
• In 2019 Bira 91 growing at 100% y-o-y and doubling up the volumes
• Bira 91 where 91 stands for India’s country code, which is currently available across 15 cities
with the focus of to open branches in 8 more cities.
• By 2014 he realized that resonated with the young urban
population of India with key focus area being taste, flavor and
quality
• Dominator of this market is Kingfisher Strong,
Haywards, AB Inbev’s and Carlsberg
• Officially launched in February 2015 as alternative to the
international brews imported to India with quirky and
contemporary packaging.
• It became instant hit because alcoholic drinks are taxed
by volume in India, where Bira91 was made available for Rs.90
for 330ml bottle.
• Bira 91 is one of the first low calorie beers to be
introduced in the Indian market.
Source:www.entrepreneur.co
m • Production houses at Mysore, Kovur (AP),
Nagpur&Indore
• This is first strong beer based on wheat.
• Bira 91 is now looking to measure sales of Rs.150 crore in the year 2017-18. Bira 91 is finalizing
a $25 million i.e. Rs.160 crore fund raises led by private equity major TPG growth. This is the
craft beer brand’s third financing round.
 • The company has raised $22 million so far from venture capital fund Sequoia Capital and a set of
angels.
• B9 beverages earned huge loss around 101 crores in the year 2018.
• Sales at B9 beverages climbed to Rs.161 crore from Rs.32 crore in FY17, in which the company
had reported a net loss of Rs.55crore (Research platform Veratech, corporate office at Haryana)
• B9 sells in a dozen top cities and Bengaluru and Delhi are its best-selling markets.
• The company has launched in the US and Singapore.
• Sales at B9 Beverages rose 15% to Rs.183 crore from Rs.158 in FY19, while net loss increased
to Rs.202 crore compared to Rs.1o1 crore in FY18 as per the Registrar of Companies

Reason for losses:

• Improper time management (Onetime expenses related to bankers’ fees for a fund raise it did in FY18)
• Sponsorship Deal
• Partnership deal (Partnered with International Cricket Council)
• Not updating product
• Competition (Simba, White Rhino & Anheuser-Busch Inbev)

2) Status of Drum Food:

Founder: Rohan Mirchandani

Status: Active

• The FMCG Company’s first product was Hokey Pokey an ice cream brand
• It is the parent of Epigamia
• Drums Food International Private Limited is a private company, incorporated on 6th November
2007.
• Classified as Non-govt company and registered at Registrar of Companies, Mumbai.
• Authorized share capital is Rs.300, 000,000 and paid up capital is Rs. 254,629,392
• Production of processing and preservation of meat, fish, fruit vegetables, oils and fats.
• Its registration number is 175738. It has completed 12 years,2 month, 20 days
• It has raised Rs.4.2 crore in an internal round of funding from its investors
 • The money has been raised from investors includes Shripad Nadkarni, Fireside Ventures &
Apurva Salarpuria about Rs. 20 croce.
• Last AGM was held on 31st December 2018 as per records from Ministry of Corporate Affairs
• Its balance sheet was last filed on 31st March 2018.
• Started selling on hyperlocal delivery companies Grofers and Scootsy through foodtech
platforms Faasos and Tinyowl in a few cities.

3) Hector Beverages:

Founder: Neeraj Kakkar founded in 2009

Status: Active

• It is the maker of the Paper Boat brand of ethic beverages

• 60% jump in revenue for the financial year ended March 2019 as per the Business Intelligence
Platform Tofler
• Revenue earned from operations at the maker of packaged drinks and foods jumped 62% to
189.56 crore up from Rs.116.94.
• Loss for the year 2018-19 reported 59.88 crore
• The company further reported a net loss Rs.60 crore during the same fiscal.
• Currently present in five states in India and major part of its sales from states of Maharashtra,
Karnataka and Andra Pradesh.
• Added lower priced variants of its beverages brand priced under Rs.30
• Competing with large food and beverage companies such PepsiCo, Coca-cola and ITC
• Mint had reported that Hector Beverage backed by Sequoia Capital Belgian investor Sofina and
Hillhouse Capital was in talks to raise $30 million led by venture capital firm A91 Partners.
• Mint had also reported that Belgian investor Sofina, one of the company’s existing investor, was
also expected to participate in the round, with Hector seeking a valuation of about $200 million.

4) Chai Point:

Founder: Amuleek Singh Bijral

Status: Active

• Indian Tea Company and a cafe chain, selling 3, 00,000 cups every day.
 • From October-2017 the company started selling tea on Amazon.in
• Major product is tea, begin first pilot store in Bangalore in April-2010
• Present in eight Indian cities with presence across at airports and
business parks.
• Chain has a delivery service branded as ‘Chai-on-call’ and a
vending kiosk-based solution called ‘boxc.in’
• Raised a total of Rs.71.2 crore ($10 million) in first round in the
month of September 2015.
• Key investor is in the month of April 19, 2018 tea retailer had
raised Rs.132 crore ($20 million)
• Eight Road Ventures (Lead investor, formerly Growth Partners
India), DSG Investor, Saama Capital, Paragon Partners
Source:www.chaipoint.com

5) RAW Pressery:

Founder: Anuj Rakyan, 2013, Mumbai

Status: Active

• Work with farmers directly to get the best fruits, vegetables and nuts from all around the world
• Tag line is ALL GOOD. NO BAD.
• Selling cold-pressed juice, not containing any preservative, added sugar or water by using high-
pressure processing technology
• It had managed to get funding of over $7million which was raised in by $4.5 million by Sequoia
Capital, Saama Capital and DSG Consumer Partners in the year February 2014

Conclusion: Don’t drop your single idea, do some innovation and be your own boss. All the above
mentioned Indian FMCG startups have a worked hard, struggled and all are successfully growing y-o-y.
As we know it won’t be quite a bowl of cherries, all these tell us that in today’s era it’s time to think out
of box instead of seeking for the job. Till what time all these FMCG startups will survive that’s the time
to watch. Government is also emphasizing startups by promoting Ease of Doing Business, offering good
loans and relaxing norms for the business. This could be one of the solutions of India’s biggest problem
unemployment.
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