FMCG - HDFC Sec

Sector Thematic
FMCG
D2C - changing landscape not fully factored in
SECTOR THEMATIC
FMCG
In comparison to other sectors, the FMCG sector has historically been more resilient to
external challenges, leading to strong earnings (12.5% CAGR) and valuation rerating (2x) in the
last two decades. Earnings traction was steady, driven by (1) share gains from regional/small
players, (2) distribution expansion (particularly in rural areas), (3) consistent success with
brand extensions, (4) high brand recall to drive premiumisation, and (5) outsourcing to help
deploy funds to increase competitiveness. Top-tier mainstream companies have had a smooth
ride, boosting investor confidence in earnings visibility. However, in the evolving competitive
landscape, we remain sceptical about sustaining these drivers/assumptions. D2C/New age
consumer brands are far more disruptive/ agile than traditional/regional competition.
Established incumbents are no longer protected by entry barriers (distribution and brand),
resulting in a level playing field and category fragmentation - a structural trend. While these
new age companies presently account for only 3% of total revenue, given targeted white
spaces their share could reach 8-10% in the next few years, which can potentially slice off 100-
200bps of growth for incumbents. For new age brands with critical scale in terms of income
levels, ease of distribution, and funding, a flywheel effect is in motion. While the majority of
these individual brands will likely not scale beyond a certain point, a long tail of brands will
emerge.
Varun Lohchab Naveen Trivedi Saras Singh

varun.lohchab@hdfcsec.com naveen.trivedi@hdfcsec.com saras.singh@hdfcsec.com
+91-22-6171-7334 +91-22-6171-7324 +91-22-6171-7336
10 March 2022 FMCG Thematic
FMCG
D2C – changing landscape not fully factored in
In comparison to other sectors, the FMCG sector has historically been more Company CMP (INR) Reco.
resilient to external challenges, leading to strong earnings (12.5% CAGR) and HUL 1,998 REDUCE
valuation rerating (2x) in the last two decades. Earnings traction was steady, ITC 229 BUY
driven by (1) share gains from regional/small players, (2) distribution expansion Nestle 17,146 REDUCE
(particularly in rural areas), (3) consistent success with brand extensions, (4) high Britannia 3,124 REDUCE
brand recall to drive premiumisation, and (5) outsourcing to help deploy funds to Dabur 528 ADD
increase competitiveness. Top-tier mainstream companies have had a smooth ride,
GCPL 702 ADD
boosting investor confidence in earnings visibility. However, in the evolving
Marico 493 ADD
competitive landscape, we remain sceptical about sustaining these
Colgate 1,449 ADD
drivers/assumptions. D2C/New age consumer brands are far more disruptive/
Emami 471 REDUCE
agile than traditional/regional competition. Established incumbents are no longer
protected by entry barriers (distribution and brand), resulting in a level playing
field and category fragmentation - a structural trend. While these new age FMCG Universe: Earnings vs. Valuation
companies presently account for only 3% of total revenue, given targeted white (Ex-ITC)
spaces their share could reach 8-10% in the next few years, which can potentially
slice off 100-200bps of growth for incumbents. For new age brands with critical
scale in terms of income levels, ease of distribution, and funding, a flywheel
effect is in motion. While the majority of these individual brands will likely not
scale beyond a certain point, a long tail of brands will emerge.
We have seen how the market punishes when long term growth assumptions
change. ITC, Emami, Colgate, Bajaj Consumer, Jyothy Laboratories were
penalised (>30% derating) in last few years. It reflects the fact that valuation
multiples are quite dynamic, and one must stay ahead of the curve to predict these Sector (Ex-ITC) P/E (12-month rolling
shifts. We have been underweight on the sector since early 2020; the sector has forward)
underperformed in the last two years, with mild de-rating in progress.
Despite the correction, we do not see room for any valuation upsides; rather, we
expect more valuation risks in the next few years. We cut our multiples for
companies under our coverage (link) and maintain REDUCE for HUL, NESTLE,
BRITANNIA and EMAMI. We rate ITC as a BUY and maintain ADD on DABUR,
MARICO, GCPL, and COLGATE.
 D2C – disruption or opportunity? We interacted with various D2C companies,
investors, and listed established players along with pricing/product analysis to
understand the change in the competitive landscape and future trends. Some D2C
players are disrupting categories (particularly BPC), but at an aggregate level, they
are expanding the market (particularly in F&R). We believe D2C companies have the
right-to-win in BPC, and established incumbents need to step up their game to
sustain market shares.
 Our long-term thesis (1) We continue to believe that category leaders will be unable
to sustain high market shares, which will be impacted by competition from niche
offline/D2C players. Category leaders in India hold a high market share (in some Varun Lohchab
cases, >50%), in contrast to developed countries, where competition is more level varun.lohchab@hdfcsec.com
playing. (2) Relevant product, pricing, and communication will continue support +91-22-6171-7334
D2C/new age brands for customer acquisition. (3) Alternate channels (MT+ ecomm)
will continue to gain share, despite a significant increase in the last two years. India’s Naveen Trivedi
share could be larger than that of developed countries, given the vast differences in naveen.trivedi@hdfcsec.com
consumer buying experiences between GT and alternate channels. (4) Margin +91-22-6171-7324
expansion for most companies will be muted, as many have already hit the wall. A
large part of cost control has already been captured. Companies must prioritise Saras Singh
growth above margins. (5) Over the last five years, many consumer discretionary saras.singh@hdfcsec.com
companies have expanded/gone public, providing a variety of options to investors in +91-22-6171-7326
the consumption space. In comparison to history, changing assumptions will cause
the valuation metric to shift relatively quickly.
HSIE Research is also available on Bloomberg ERH HDF <GO> & Thomson Reuters
FMCG: D2C Disruption
Focus Charts
Exhibit 1: India retail market Exhibit 2: India e-retail market penetration
($bn)
150 E-retail market ($ bn) 30%
1,375 1,250 130
8-9% Penetration (%)
CAGR Penetration (%) - Ex Groccery 25%
1,100
815 850 100 20%
780 810
825 690
15%
550
50 38 10%
30
275 23 5%
- 0 0%
FY26 (P)
FY19
FY20
FY21
FY26 (P)
FY17
FY18
FY19
FY20
FY21
Source: Bain and Company report, HSIE Research Source: Bain and Company report, HSIE Research
Exhibit 3: India internet penetration Exhibit 4: US vs. India category leader market share
US India
70%
60%
60%
50%
50% 47%
40% 37%
32%
30% 26%
23%
18%
20% 15%
13%
10%
8%
Toothpaste
10% 4% 4% 5%
Toothbrush
Cleansing
Pizza
Laundry
Hair Care
Noodles
Instant
Skin
0%
FY07
FY08
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY18
FY19
FY20
FY21
FY17
Source: TRAI, Industry, HSIE Research Source: HSIE Research
Exhibit 5: Share of D2C revenue is small in the total pie Exhibit 6: D2C potential impact (%) on domestic
but has huge potential to grow revenue
38%
34%
30% 30%
27%
21% 21%
15%
D2C, 3% 10%
Incumbents
, 97%
DABUR
COLGATE
BRITANNIA
EMAMI
GCPL
NESTLE
MARICO
ITC (FMCG)
HUL
Source: HSIE Research Source: HSIE Research
Page | 2
Content
Is D2C temporary or structural? .........................................................................................4
- E-retail penetration to further improve
- “Jio effect”
- D2C and e-retail are global trends, fired in pandemic
- India was always short of consumer brands, D2C adding options for
consumers
- Success of naturals/ayurvedic products was the first real indicator of change
- Institutional funding aiding wings to fly long
- Inspiring background of D2C companies’ founders
D2C: Key success factors ...................................................................................................12
- Unique product proposition
- Support from rapid development of the ecosystem
- A new age of customer interactions
D2C: Disruption or opportunity .....................................................................................14
- Feedback - mainstream, D2C companies and investors
- Potential impact (%) on domestic revenue of mainstream companies
What is correct valuation premium, as assumptions alter? .........................................16
- Will changing business assumption impact valuation premium?
- Valuation Summary
- Change in Estimate, Target Multiple, TP and Rating
Competitive landscape change in BPC and F&R .........................................................21
- Cosmetics
- Skin Care
- Hair Oil
- Shampoo
- Personal Wash
- Feminine Hygiene
- Men's Grooming
- Coffee
- Milk & Milk Products
- Nutrition – Supplements
- Food/Staple
- Tea
- Meat & Meat Substitute
D2C companies profile ......................................................................................................36
- Mamaearth
- SUGAR Cosmetics
- The Good Glamm Group
- WOW
- Bombay Shaving Company
- Pee Safe
- Licious
- Country Delight
- Vahdam Teas
- OZiva
- True Elements
- Sleepy Owl
Page | 3
Is D2C temporary or structural?

Consumption patterns for many consumer categories have changed as a result of
the pandemic, and certain trends seem to be more lasting. During this time, many
consumers have discovered the ease of shopping online. It has not only added new
active consumers in the space but also increased the frequency of transactions.
Many consumption trends that emerged during the pandemic were unable to
sustain their momentum once the lockdown was lifted. It happened for a variety of
reasons, and it was expected as well. During COVID-19’s initial wave, demand for
packaged food, healthcare, and hygiene products was unprecedented. The trend
eventually petered out, and most categories witnessed mean reversion. Hence, the
question arises: is D2C also temporary? In our opinion, the trend has many
structural drivers; therefore, the speed of success may taper down compared to
FY21/FY22, but it will remain strong in the long run.
E-retail penetration to further improve

The Indian retail market is estimated to be worth over USD 800bn, making it the
fourth largest in the world. Still, it is expected to grow at an 8-9% CAGR over the next
five years. India has the second-largest number of internet users (~700-800mn), while
e-commerce users account for only 140-150mn, or ~20% of all internet users (most
developed countries have ~70%). Over the next five years, the e-retail market is
expected to gain penetration and grow at >25% CAGR. E-retail penetration has
improved from 3% FY19 to 5% in FY21, but it is predicted to reach 10% in the next
five years.
Exhibit 7: India retail market Exhibit 8: India e-retail market Exhibit 9: E-retail shines in FY21
penetration
($bn) E-retail market ($ bn) 130
1,250 150 30% 30%
1,375 8-9% 25%
Penetration (%)
CAGR 25%
Penetration (%) - Ex Groccery
1,100
850 100 20% 20%
780 815
810
825 690 15%
550 38 10%
50 10%
30 5%
23
275
0%
0 0%
- -5%
FY26 (P)
FY19
FY20
FY21
FY17
FY18
FY19
FY20
FY21
FY26 (P)
-10% -5%
Retail Market Gr. (%) E-retail Market Gr (%)
Source: Bain and Company report, HSIE Research
Page | 4
“Jio Effect”
India’s digital ecosystem is becoming favorable for D2C brands. Rising affluence
towards e-retail business was already in favour, as internet users started seeing a
massive jump after 2016, dubbed the “Jio Effect”. Since 2015 (when JIO was
introduced), data tariffs have been lowered dramatically, and India is now the
world's cheapest data country. It was especially beneficial in underpenetrated
countries like India, where penetration has increased dramatically.
Exhibit 10: Internet users in India – Exhibit 11: India internet Exhibit 12: India average data tariff
The Jio Effect penetration fall
(mn) 1,186 70% (INR/GB)
1,200 60% 300
60%
50%
845
50% 47% 250
900 749
637
40% 37% 200
32%
600 422
494
26%
342
30% 23% 150
286 18%
239 20% 15%
300 13% 100
100 137 10%
42 81 10% 4% 4% 5%
8%
50
-
0%
0
FY19
FY21
FY07
FY09
FY10
FY12
FY13
FY14
FY16
FY17
FY18
FY20
FY26 (P)
FY09
FY11
FY13
FY15
FY17
FY19
FY07
FY08
FY10
FY12
FY14
FY16
FY18
FY20
FY21
2018
2021
2014
2015
2016
2017
2019
2020
Source: TRAI, Industry
Exhibit 13: Digital ecosystems

Growth (%) User base (mn)
India Digital Funnel
FY21 FY21 FY26
Internet users 5% 625-675 850-900
Chatting and social media 15% 400-450 725-775
Video content 25% 350-400 600-650
Service transactors 18% 200-250 500-550
Product transactors 32% 140 350-400
Source: Bain and Company report
D2C and e-retail are global trends, fired in pandemic

E-retail penetration expansion and the success of D2C are two global trends that
exploded during the pandemic. Despite a robust show in the last two years, the
Indian e-retail market and D2C are still in their infancy. With a large number of
internet users, rising affluence, and the increasing ease of using buying platforms,
India will continue to boost e-retail and D2C brands.
Exhibit 14: E-retail to outgrow MT in Exhibit 15: Number of D2C Brands in Exhibit 16: Global E-retail
India India penetration - % of retail
($bn) MT e-Retail 2018 2020
35%
140 30%
200-250K 30% 28%
27%
120
25% 22%
100 20%
20%
80 15%
15% 12%
60 70-80K
10% 7%
40 5%
30-40K 5% 3%
20
0%
0
US
India
South-
Australia
China
Korea
FY26P
2025 (P)
2018
2020
FY17
FY20
FY21
Page | 5
Exhibit 17: Nominal GDP ($ tn) Exhibit 18: Number of Internet users Exhibit 19: Number of e-retail
(mn) shoppers (mn)
24.0 1000 E-retail shoppers % of Internet Users
800 80%
800
18.0
600
600 60%
12.0
400 400 40%
6.0 200
200 20%
0
-
Brazil
India
US
Indonesia
China
0 0%
Japan
India
US
Germany
China
UK
Brazil
US
India
Japan
China
India was always short of consumer brands, D2C adding options for consumers
In India, most consumer categories are dominated by a few brands, with the top five
companies in many categories accounting for majority of the market (anywhere from
60-80%). Many consumer brands hold >50% market share in various categories,
despite the fact that categories are quite matured and sizeable. Most developed
countries’ market shares are quite evenly distributed among various players, for a
large part of consumer categories, owing to low entry barriers.
Over the last two decades, most of India’s top traditional companies have enjoyed a
successful journey by (1) gaining market share from weak regional players, (2)
investing heavily in marketing campaigns for customer acquisition, (3) diversifying
top brands into other categories, given faster success in newer categories, (4)
expanding distribution reach, and (5) outsourcing manufacturing to free up funds
funding for more relevant projects.
There were many entry barriers that the top traditional brands enjoyed as well, like:
(1) large networks of trade partners; (2) logistic capabilities for backend and frontend;
(3) funds to consistently drive brand recall and remain on top of consumer mind; (4)
ready third-party suppliers networks for outsourcing; and (5) R&D capabilities.
However, in the last a few years, many of these entry barriers are disappearing. With
funds becoming widely available, many educated/experienced people are venturing
out and becoming successful. The infrastructure to drive businesses has also become
more accessible with various third-party options coming to the fore. From
manufacturing to logistics to customer reach, everything is easily available at
effective costs. This allows new entrants/D2C to focus more on core drivers like
product innovation, customer acquisition, and customer frequency.
We believe many companies will eventually lose market shares, particularly in the
relevant and sizeable categories. Business environment is becoming more
conducive and providing a level-playing field to everyone. Many consumer
categories over the next decade will see a large number of new entrants.
Page | 6
Exhibit 20: US vs. India category leader market share

US India
Toothpaste
Toothbrush
Pizza
Laundry
Cleansing
Hair Care
Noodles
Instant
Skin
Source: Unilever, Industry, HSIE Research
Success of naturals/ayurvedic products was the first real indicator of change

We believe consumers buying naturals/ayurvedic products instead of dominant
mainstream brands has been one of the most unexpected consumer trends of the last
decade. The success of naturals/ayurvedic products was initially assumed to be
temporary and many mainstream brands avoided entering the space. But, later, after
seeing a consistent shift in demand for these products, most mainstream brands
entered/and accelerated production in the naturals/ayurvedic space.
Consumer’s shifting preferences to naturals/ayurvedic products is an indicator that

they are ready to experiment with new products, going beyond the top established
brands. The success of this trend has been primarily witnessed in oral care, hair care,
and healthy supplements categories.
We believe this D2C trend will disrupt the wide consumer basket, both for consumer
non-discretionary and consumer discretionary categories. Within FMCG, BPC and
F&R both are seeing entry of various new brands. The ayurvedic/natural trend was
largely started by Patanjali and Dabur, but this D2C trend is no longer limited to any
category or players. A variety of brands is gaining momentum in this and, at an
aggregate level, is proving to give competition to mainstream brands.
Page | 7
Institutional funding aiding wings to fly long

D2C companies are well-backed by various types of institutional funding, which are
helping them grow tremendously. This institutional funding has a certain type of
framework and it is proving essential comfort in the initial phases of success.
We have seen various promoters/businesses invest in such proposals to indirectly
participate in India’s large consumer market. We believe such investments will
continue to grow as most D2C companies are driven by qualified professionals.
Exhibit 21: M&A history for consumer companies in India since 2015
Acquirer/ Valuation %
Brand Acquired Key rationale/details Year
investor (Mn $) Acquired
Acquisition of traditional brands/co

ITC Savlon, Shower to Shower 100.0 Acquired the assets from J&J to enter the antiseptic soap and talc space 2015
Emami Kesh King 259 100.0 Acquired a high margin business to enhance its hair care portfolio 2015
Marico Bellezimo Professionale 3.4 45.0 A 10cr strategic investment to enter the fast growing salon space, the
2015
Products company exited the investment in 2018 for $246,000
HUL Indulekha, Vayodha 49.4 100.0 Premium brand with strong credentials around Ayurveda to complement
2015
its existing portfolio and strengthen its presence in the Hair Care category
ITC Charmis The acquisition was positioned to help scale ITC's presence in BPC
Raymond Kamasutra 6.0 50.0 Raymond bought out its JV partner's stake in order to scale up its
2017
Consumer Care consumer products business and take its key brand Kamasutra globally
Lotte Havmor Ice Cream 150.4 100.0 Lotte’s entry into the India ice-cream market 2017
HUL Aditya Milk 100.0 The acquisition will complement HUL's existing portfolio in the ice cream
2018
and frozen dessert
Emami Brillare Science 34.7 This investment gives Emami presence in the professional personal care
2018
segment such as high-end salons
Haldiram CBTL, Gelato 100.0 2019
Emami Crème 21 100.0 The acquisition to boost and complement Emami’s international business
2019
& portfolio particularly in MENA, SAARC and Russian markets
HUL Vwash 100.0 The acquisition of VWash gives HUL an entry into the underpenetrated
2020
and rapidly growing female intimate hygiene segment
Zydus Wellness Complan, Glucon D, 635.1 100.0 The acquisition fit in terms of brands in the fast growing categories of food,
2018
Nycil and Sampriti Ghee nutrition and skin care as well as complementary distribution capabilities.
HUL Horlicks 415.3 100.0 This gives HUL a strong portfolio in the nutrition business. This was a part
2020
of the Unilever and GSK global deal
ITC Sunrise Foods 285.1 100.0 This acquisition helps ITC scale up its Spices business and expand its
2020
footprint across the country
KKR Fogg 648.0 2021
Acquisition of D2C brands/co
Marico Beardo 45.0 The acquisition gives Marico presence in the men’s grooming segment 2017
The Man Co provides a complete product portfolio for men by offering
Emami The Man Company 33.1 head-to-toe range of grooming products. Emami wanted to be present in 2017
this space
The investment gives BSC synergies for expanding offline distribution and
Colgate Bombay Shaving Co 2018
the experience from Colgate
The acquisition gives Marico an opportunity to have a meaningful play in
Marico Just Herbs 16.7 60.0 2021
Ayurveda-led beauty categories
Reckitt Benckiser Bombay Shaving Co RB led the INR 450mn fundraise 2021
Marico Beardo 55.0 The company acquired the remaining 55% stake in 2020 2020
The acquisition will help TATA Consumer expand its product portfolio
Tata Consumer Soulfull 21.3 100.0 into the fast-growing ‘on-the-table’ and ‘on-the-go’ categories and to 2021
participate in newer consumption occasions
Emami The Man Company 12.9 Added 12.87% for INR 500mn which takes the total holding to 45.96% 2021
Good Glamm The acquisition will help Moms Co expands its offline presence and
The Moms Co 67.2 100.0 2021
Group integrate data and other offerings by the groups
Good Glamm
Organic Harvest 33.3 51.0 This acquisition will improve the group's presence in the organic BPC 2021
Group
The acquisition is in line the company's ITC Next strategy to build a future-
ITC Mother Sparsh 8.7 2021
ready organisation with a digital first culture
With the acquisition, BBLUNT's hair care and styling products business
Mamaearth BBLUNT 17.7 100.0 2022
will be completely owned and managed by Honasa Consumer
Page | 8
Exhibit 22: Institution profile and investments

Name Investor Profile Location Fund Size Indian D2C Companies
A91 Partners Invest in consumer, pharmaceutical, healthcare, financial service Mumbai $901M Sugar Cosmetics
and technology sectors.
Amazon Amazon's venture capital fund. Seattle, U.S. MyGlamm, Molekule, Tonal and
Scout.
Amicus India It is backed by marquee investors including global institutions, Bangalore $79 million mCaffeine and Wonderchef
Capital large family offices, entrepreneurs and business leaders.
Ascent Capital Ascent Capital has provided growth capital to more than 100 Bangalore over $1 billion BigBasket, MyGlamm and Fresh to
outstanding entrepreneurs building game-changing companies home
across multiple sectors
Bessemer It's known for its investments in LinkedIn, Blue Apron and many California, U.S, $9 Billion BigBasket, Swiggy, Urban
Venture others, with a current portfolio that includes PagerDuty, Shippo, Company, Pharm Easy and
Electric and DocuSign. MyGlamm.
Brand Capital Brand Capital, the strategic investment arm of The Times Group, California, U.S, $4 Billion Country Delight, The Right Moo
leverages brand-led growth and value creation via unique and and Nik Baker's
pioneering investment models and programs.
Burman Family Promoters of Dabur India. New Delhi Invested > US Taco Bell, Mulino and Stur.
Holdings $500mn
Chiratae IDG Ventures India, is a technology venture capital firm focused on Bangalore $950 million Myntra, Lenskart and FirstCry
Ventures growth-stage startups in the Indian market.
ChrysCapital ChrysCapital has been pioneers in the investment arena – early New Delhi $4 billion WOW and First Cry
trend spotters in BPOs (Spectramind) and NBFCs (Shriram
Transport); founding investors in a bank (Yes Bank).
DSG Consumer They partner with early-stage founders from idea to concept to help Singapore $200 million Sleepy Owl, IndiaLends,
Partners build the next generation of world-class consumer brands in India & SaladStop, Goa Brewing Company
Southeast Asia. and The Mom's Co.
Faering Capital The firm was founded in 2009 by Aditya Parekh and Sameer Shroff. Mumbai $350 million Nykaa, Plum and Prataap Snacks.
Falcon Edge Alpha Wave was founded and is led by Rick Gerson, Navroz New York $15 billion Lenskart, Swiggy, Dream11,
Udwadia and Ryan Khoury, originally named Falcon Edge Capital. Policybazaar and Cred
It is supported by a team of experienced investment professionals.
India Quotient India Quotient is a new type of early stage investor. They fund Bangalore $184.7M Sugar Cosmetics, GIVA, Frsh,
Fund companies building disruptive businesses aimed at Indian Giva and Coolberg.
consumers
Lightbox The firm is focused on early-stage consumer technology businesses. Mumbai $398.4M Bombay Shirt Company, Melorra,
Ventures Rebel Foods and Parabo.
Matrix Partners The firm invests in seed and early-stage companies in the United USA $4 billion &ME, Chumbak, Country Delight,
States and India, particularly in the software, communications, DaMENSCH, Mosaic Wellness,
semiconductors, data storage, Internet or wireless sectors. Oziva, Open Secret and The
Whole Truth.
RP-Sanjiv Established in 2018, RPSG Capital Ventures is an early-stage Gurugram Glowfit, Born Good, Bartisans,
Goenka VC consumer VC fund focused on investing in the D2C ecosystem, Curry it, SkinKraft, Vedix and
including food & beverage, personal care, and lifestyle goods. Glowfit.
Sequoia Capital The firm mainly focuses on the technology industry. Sequoia USA $38 billion Cafe Coffee Day, Awfis and Paras.
manages investment funds, including funds specific to India and
southeast Asia, Israel, and China, in addition to the US.
Sharrp Ventures In the unlisted space, they invest in early stage and growth stage Mumbai HealthKart, mamaearth, Nykaa, m
companies. Their preference is for companies that have already caffine and Smytten.
demonstrated some level of business traction.
Sixth Sense Sixth Sense Ventures is India’s first domestic consumer-centric Mumbai $85.3 Million Bombay Shaving Company,
Ventures venture fund, founded by Nikhil Vora (Ex-Managing Director of fitternity, Vahdam Teas and
IDFC Securities). Veeba.
Stellaris Venture Stellaris Venture Partners is an early-stage venture capital firm. It Bangalore $225 million Mamaearth, Whatfix, mFine,
invests in tech and tech-enabled consumer and enterprise startups Slintel, Propelld, Loadshare and
in India. Signzy.
Stride Ventures Stride Ventures provides comprehensive credit solutions to new-age New Delhi $222.4 M Sugar Cosmetics, Homelane and
businesses in India. MyGlamm.
Page | 9
Name Investor Profile Location Fund Size Indian D2C Companies

Titan Capital Their portfolio includes 150+ companies in India and the US across Gurugram $10 Billion Razorpay, Mamaearth and
consumer internet, D2C brands, SaaS, AI and Computer Vision. UrbanClap.
TPG TPG Capital, previously known as Texas Pacific Group, is an California $109 billion Firstcry, Lenskart, Campus and
American investment company. The private equity firm is focused Dodla Dairy.
on leveraged buyouts and growth capital.
Trifecta Capital Venture debt is a form of specialty debt financing provided to Gurugram $100 M Box8, PaperBoat, FabAlley, Plum
Advisors LLP companies that are not serviced by traditional lenders like Banks. and Zivame.
The financing is usually structured as a combination of a loan along
with limited equity investment rights (warrants).
Unilever Unilever Ventures invests in entrepreneurs who think big and build London $863.4M Beauty Bakerie, Plum, Blow Ltd,
Ventures companies that will change the way we live and work. They look for Bybi, Curlsmith, Frank body,
tomorrow’s world-beaters in Consumer and Enterprise Technology. gallinee, Kopari and LXMI
WestBridge WestBridge Capital is an experienced investment firm focusing Mumbai $5.6 billion Cafe Coffee Day, Relaxo and
Capital primarily on investments in India. Kajaria
Wipro Wipro Ventures bridges the gap between emerging startups and Bangalore $250 million MyGlamm, Happily Unmarried
enterprise customers. Established in 2015 as the strategic
investment arm of Wipro Limited.
Inspiring background of D2C companies’ founders

The founders of D2C companies are well-educated with work experience in reputed
companies. Apart from the benefits in funding, the availability of resources (supply
chain, outsourcing, third party distribution, etc.) and the strong background of
founders are also important in the success of D2C companies. The strategic thinking
to deal with established mainstream companies is essential, vis-à-vis the historical
competition from family-led old generation system. Most founders are capable
CEO candidates for mainstream companies; thereby, these D2C companies are
ahead of many mainstream companies on various counts.
Exhibit 23: Background of D2C companies founders

Name Position Education Past Work-Ex Bio/Details
mamaearth
Varun Alagh CEO & Co- B.E - Electrical., PGDBM HUL, Diageo, Coca-Cola Mr. Alagh has held various brand manager roles across major
founder (XLRI Jamshedpur) MNC companies prior to starting mamaearth
Ghazal Alagh Co-founder BCA NIIT, dietexpert.com Besides mamaearth, Mrs. Alagh has also found dietexpert.in
to provide diet plans online
SUGAR
Vineeta Singh CEO & Co- MBA IIM Ahmedabad, Quetzal Online, FAB BAG Prior to starting SUGAR, Mrs. Singh started FAB BAG, a
founder B.Tech IIT Madras beauty/grooming subscription company
Kaushik COO & Co- MBA IIM Ahmedabad, Oracle, BigSlick, McKinsey, Mr. Mukherjee has worked with McKinsey prior to starting
Mukherjee founder B.E. Pillani FAB BAG SUGAR. He has also founded companies like FAB BAG and
BigSlick Infotech
MYGLAMM
Darpan Sanghvi CEO & B.E. (MIT), MBA Baazee.com, Celanese Mr. Sanghvi started his career at Baazee.com, and had
Founder (ESADE Business worked across companies like Celanese Chemicals and was
School) the MD at Sanghvi Brands, for which he is a promoter
WOW Skin Science
Manish B. Co-founder
Chowdhary
Karan Chowdhary Co-founder BBM Marketing Digital marketers The founders were all digital marketers prior to starting Wow
Ashwin Sokke Co-founder
Arvind Sokke Co-founder
Page | 10
Name Position Education Past Work-Ex Bio/Details

Bombay Shaving Company
Shantanu CEO & Co-founder MBA (IIM Lucknow) McKinsey & Co Mr. Deshpande has worked with McKinsey prior to finding
Deshpande BSC. He acts as an external advisor to McKinsey along with
his role as CEO at BSC
Rohit Jaiswal Head of products B.Tech, MBA (IIM Crompton Greaves, UAE Prior to starting BSC, Mr. Jaiswal held marketing and sales
and Co-founder Udaipur) Exchange, Emel Group and distribution roles at companies lie Crompton Greaves
(consumer products) and Emel Group
Deepu Panicker Co-founder M.Tech (IIT Bombay) McKinsey & Co, Mr. Munot has left Bombay Shaving Co and is now into
FREECULTR, Times Internet product development at Times Internet
Raunak Munot Co-founder B.Tech, MS Audi of America, Group M, Mr. Munot has left Bombay Shaving Co and founder Trove
Trove Experiences
PEE SAFE
Vikas Bagaria CEO & Co-founder B.E., MCA Electronics V R Forklift Marketing, Besides finding PeeSafe Mr. and Mrs. Bagaria have worked
SafetyKart.com, SRV Damage across multiple companies including SRV Damage
Prevention protection, which is focused on reducing transit damage
Srijana Bagaria Co-founder Bachelors Political SRV Damage Prevention caused to any goods during storage, handling & shipping.
Science
Licious
Vivek Gupta Co-founder CA Tavent Technologies, Helion Mr. Gupta has over 11 years of experience working in finance
ventures, MobiCom America at Tavant Technologies and Helion Ventures. He has also
served on the board of MobiCom America as a non executive
director
Abhay Hanjura Co-founder B.Sc Infosys, Google, Bajaj Allianz Mt Hanjura has worked in the insurance sector for about 7
years prior to finding Licious
Country Delight
Chakradhar Co-founder CFA, FRM, PGDM (IIM Infosys, Indxx Capital Mgmt An alumni of IIM Indore, Mr.Gade had worked with Infosys
Gade Indore) and Indxx Capital management prior to starting country
delight
Nitin Kaushal Co-founder PGDM (IIM Indore) HSBC Mt Kaushal has worked at HSBC prior to finding Country
delight
Vahdam Teas
Bala Sarda CEO & Co-founder BBS b10 media, Youth 360 Mr. Sarda had founded multiple companies prior to starting
Vahdam. He is also an angel investor with investments in
companies like GIVA, Flatheads etc.
OZIVA
Aarti Gill CEO & Co-founder B.Tech (IIT Rourkee), Capital One, FitCircle Prior to finding Oziva, Mrs. Gill had founded FitCircle a chat
MBA (Insead) based health and fitness platform
Mihir Gadani Co-founder B.Sc., M.Tech Molecule, FitCircle Besides finding Oziva, Mr. Gadani is also the co-Founder of
FitCircle. He holds M.Tech. in Bioinformatics
True Elements
Puru Gupta CEO & Co-founder B.E., MBA (FMS) Cognizant, ITC, CII, P&G, Mr. Gupta has worked in various industries in different
Healthy World and Kartnowa capacities, including as a product manager at P&G. He has
Technologies also co-founded Healthy world.in
Sreejith COO & Co- LLB, MLL & LW, MBA Tata Motors, Cognizant, Mr. Moolayil had worked across multiple companies in HR
Moolayil founder Healthy World and Fitard before co-founding Healthy World and True Elements
SLEEPY OWL
Ajai Singh Co-founder Bachelors – Economics J.P Morgan Mr. Thandi had worked at J.P Morgan in the investment
Thandi (USE & LSE) banking team before co-founding Sleepy Owl.
Arman Sood Co-founder BA.LLB Embibe Mr. Sood started an ecommerce start up, eShack, after which
he was working as a marketing and communications
evangelist.
Ashwajeet Co-founder LL.B
Singh
Source: Linked-in, Industry, HSIE Research
Page | 11
D2C: Key success factors

While the above macro drivers and ecosystem were the seeds of D2C channel’s
growth, the channel’s growth was further facilitated and accelerated by various
effective D2C companies’ initiatives. These companies disrupted the traditional
business model, and their out-of-the-box approach gave them the x-factor in
customer acquisition in categories that were heavily backed by well-established
brands. Although there will be a variety of success factors, we believe the
following aspects are the most pertinent (also highlighted by D2C founders).
Unique product proposition

Filling in the white gaps with relevant product innovation
 D2C brands provide a sheer variety of products across BPC and F&R space. This
benefits the customers with the increase in choice.
 D2C brands in the F&R space are more inclined to the naturals-based health food
space, where established brands have a limited presence, thus giving rise to a
new space.
 In categories like coffee, D2C brands have given rise to the more premium coffee
space with drip coffee and whole bean coffee offerings.
 While F&R is not limited to the creation of new sub-categories, BPC categories
like feminine hygiene and men’s grooming are being popularized by D2C
brands.
Going the natural way

 The brands in the BPC space have introduced innovative products in categories
like cosmetics, hair care, personal wash, and cream space. These products are
more focused on naturals and are plant based, with many having accreditations
from global and Indian standard bodies.
 Ingredient-based products by D2C brands (onion hair care) have seen large
consumer adoption.
 Some D2C brands are investing heavily in R&D to develop innovative products
with high saliency.
 Categories like packaged food products, beverages, tea, etc., are seeing a rise of
health-oriented products. Priced at a premium, the products are made of natural
ingredients and are focused on either promoting healthy living, or solving health
problems.
Individualisation and customisation

 D2C brands have been collecting and using customer data to develop new
products for a more targeted audience.
 According to industrial participants, given the ease and desirable speed of
launches, D2C brands are able to conduct test launches conveniently with a more
effective consumer feedback loop.
 Brands like True Elements offer hyper customisation where individual customers
can curate their snacks/muesli.
Page | 12
Support from rapid development of the ecosystem

Streamlined logistics supports D2C
 The boom of D2C brands was supported by development of logistic partners
enabling the industry to deliver 100mn parcels (across sectors) in FY21. Industry
participants expect this to reach 600mn by FY26.
 Logistics partners continue to invest in technology and high quality
infrastructure to meet demand.
 Logistic partners not only help D2C brands to deliver products at a speedy rate
pan India, but also aid in better inventory management.
 A speedy delivery is a key customer satisfaction metric for D2C brands.
Trust in online payment, a key enabler

 Adoption of online payment has been a key enabler for the growth of D2C
brands.
 Online ecommerce transactions were historically heavily dependent on cash on
delivery (COD), rather than online payments.
 Cash on delivery (COD) transactions have reduced from 60-70% five years back
to less than 30% currently.
 The rise in adoption of online payments has been enabled by seamless and secure
transactions by customers through trusted payment gateways.
Changes in shopping habits a key positive

 Return to origin (RTO) is 13-14x higher for COD vs. online payments.
 RTOs impact D2C brands’ margins and lead to inventory overheads.
 With consumers gaining trust in the payment systems, COD transactions are
gradually reducing.
A new age of customer interactions

Using new-age media for reaching customers
 D2C brands are adopting social media to enhance their presence.
 Regional strategy is old, consumer segmentation is the future.
 Brands like SUGAR Cosmetics have leveraged the social media platforms to
educate women on makeup, which has helped it build its community.
 Influencer marketing and social media help in generation hype towards a brand.
 Nykaa has been one of the first brands in India to leverage this space and grow.
New platforms being developed to support reach

 The influx of social media marketing gave rise to an Indian social commerce
platform, Trell. The platform targets the mass audience with consumer content in
vernacular languages.
 Trell helps brands excel in tier-2 cities and beyond.
Tech enabled social media presence

 D2C brands are using platforms like GupShup that facilitate WhatsApp
commerce.
 The platform helps brands acquire new customers and leads, communicate
offers, enter transactions and make payments, improve website/app conversions,
and facilitate customer care and order updates.
Page | 13
D2C: Disruption or opportunity

The rise of the new age brands has helped develop categories of the future. Further, it
also casts doubts on key assumptions held by mainstream companies, like continued
market share gains by market leaders. Over the past few years, D2C brands have not
only eliminated entry barriers like distribution but have also created a loyal customer
base that continues to grow.
D2C brands in BPC are focused on providing a wide variety of products, filling gaps
in existing offerings. This poses a risk to mainstream brands, which have been slow
to innovate and launch new products. With some traditional companies seeing
potential in D2C brands, there have been a few acquisitions and strategic investments
in this space. Some brands, however, see the valuation for new brands elevated.
Besides acquisitions, there are opportunities for mainstream brands, which are
especially evident in the F&R space. The new-age brands have focused offerings
on health and natural-based products platforms. This has led to creation of new
sub-categories, in which established brands can enter organically. Following the
success of the D2C brands, companies like Dabur have entered the seeds and dried
fruits space (Dabur has done so through its Real brand).
Exhibit 24: Feedback - mainstream, D2C companies and investors

D2C Companies Investors into D2C Mainstream Companies
Scalability - Scalability after a threshold size - The timeline for a company to - Despite initial success by some
will require an offline presence; reach a revenue threshold of D2C companies, at an
hence, companies are investing INR 1bn has shrunk aggregate level many
in the offline channel. significantly. companies/brands will
- Brands are entering new - The ways forward is to look at disappear
categories to increase their offline presence. - Some companies are seeing it
addressable market sizes. - Many D2C companies will as an inorganic opportunity
become sizeable over the next (like Marico, ITC, etc) while
five years. some companies believe to
operate at their own level (like
HUL)
Channel - Omnichannel is what most D2C - Omnichannel will be prevalent - GT will continue to be a
companies are looking at. for D2C brands. dominant channel in India.
- Some brands expect 60% of its - Brands in their initial stages will - Pure play ecommerce has been
revenues from offline channels, be present in the online space driven by the ongoing
from 40% currently. only. disruption, so omnichannel is
more sustainable.
Exit strategy - Single brand D2C players may - With recent IPOs in the - A few large mainstream
look at being acquired. startups, the ecosystem is players have already invested
- Brands that have expanded into developing. in D2C brands.
a house of brands, have good - At high valuations, the
scope for going public. acquisition targets are not
attractive.
The way - Brands are investing heavily in - Investors will continue to invest - Companies are working
forward developing new products in innovative D2C companies, towards premiumising the
(R&D) and expanding offline. targeting untapped categories highly-penetrated categories
- D2C brands with me-too and developing new
products are not attractive. categories.
Page | 14
Exhibit 25: Potential impact (%) on domestic revenue of mainstream companies

Companies BPC F&R Others Total
Health Supplement/OTC
Biscuits & Bakery
Color Cosmetics
Wheat Flour
Home Care
Ice Creams
Deodorant
Edible Oil
Chocolate
Skin Care
Oral Care
Shampoo
Laundry
Noodles
Hair Oil
Snacks
Others
Coffee
Juices
Sauce
Dairy
Soup
Soap
HFD
Jam
Tea
HUL 4 9 3 1 5 1 0 0 0 0 1 1 1 0 4 0 0 0 0 0 0 0 1 2 0 0 34
ITC (FMCG) 2 1 0 0 3 1 0 0 0 0 1 0 0 0 0 3 1 2 0 0 1 0 0 0 0 1 15
NESTLE 0 0 0 0 0 0 0 0 1 0 13 0 3 0 0 0 0 0 2 1 0 0 0 0 0 1 21
DABUR 0 5 0 5 2 0 4 0 0 0 0 0 0 0 0 0 0 0 0 0 4 0 0 2 9 0 30
BRITANNIA 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 0 0 0 0 0 0 0 0 0 0 10
GCPL 8 1 10 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 11 0 1 30
MARICO 0 0 0 0 0 0 14 0 0 0 0 0 0 0 5 0 0 0 0 0 0 3 0 0 0 1 21
COLGATE 0 1 0 24 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 27
EMAMI 0 16 2 0 1 1 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 0 38
Source: HSIE Research
Exhibit 26: D2C potential impact (%) on domestic revenue

38%
34%
30% 30%
27%
21% 21%
15%
10%
DABUR
COLGATE
BRITANNIA
EMAMI
NESTLE
GCPL
MARICO
ITC (FMCG)
HUL
Exhibit 27: While D2C only makes ~3% of the FMCG pie, it has huge potential to
grow
Page | 15
What is correct valuation premium, as assumptions alter?

FMCG companies have undergone substantial valuation rerating in the last 10-15
years, owing to sustained growth outperformance (compared to GDP/other sectors)
and the belief that outperformance would sustain. These companies have also
established growth visibility by consistently gaining market share and creating entry
barriers for new players. Customer stickiness and consistent upgradation provided
several levers to drive operating margin. Most companies have seen EBITDA margins
expand at around >500bps over the last decade.
However, the question is that, after seeing changes in those assumptions that drove
valuations, how much valuation premium is justified. The following key assumptions
are now undergoing changes.
Assumption 1: Market leaders will continue to gain market share

 Top mainstream top brands have gained massive market shares, largely from
regional brands in the last two decades.
 Regional players focused on being present in the mass segment only.
 Consumers were upgrading, so buying top brands was natural.
 D2C competition is up-down, unlike regional brands.
 D2C is well-funded and well-managed.
 Market share gain assumption will remain in check over the next decade.
Assumption 2: Distribution and supply chain provide a competitive edge

 Supply chain capabilities and network of trade partners were the key entry
barriers for new entrants.
 Now, supply chain is easily available for a new entrant.
 Alternative distribution channels are proving to be level-playing fields.
 Distribution, which was once a competitive edge for mainstream brands (and an
entry barrier for others) is gradually becoming less relevant with an increase in
alternative sales channels.
Assumption 3: Consumers will not experiment in BPC

 Top brands were positioned like the best-in-class for product quality.
 BPC was under-penetrated, with consumers trusting top brands only.
 D2C launched out-of-the-box products with global packaging.
 Now BPC seems to be the most exposed category from D2C brands.
Assumption 4: Food is a safe haven for top brands

 Quality product with consistency was the right-to-win for most mainstream
brands.
 Trust was the key driver.
 D2C companies are focusing on product differentiation through health benefits.
 D2C companies are creating new F&R categories.
Assumption 5: Premiumisation only for market leaders

 Mainstream brands have seen huge benefits of premiumisation, as all of
consumer upgradation benefits have been accrued by top available brands.
 D2C brands are at a premium to market leaders for most categories.
 Now competition for mainstream brands is coming from up-down.
Page | 16
Assumption 6: Margin trajectory will sustain

 Most mainstream companies have seen massive margin expansion over the last
decade.
 With changing competitive landscape, sustaining margins at such high levels will
not be easy for mainstream listed companies.
Assumption 7: FMCG will continue to see GDP multiplier >1x
 Most FMCG companies have seen a GDP multiplier over the last many years.
 Income growth, affordability, and aspirational drive resulted in sustained
multiplier benefits for top companies.
 While now many leading companies are falling gradually to 1x of real-GDP
growth, large/sizable companies/categories (like HUL) are already at <1x.
Assumption 8: terminal growth +5
 Most FMCG companies enjoyed the assumption of >5 terminal growth.
 A few companies are already growing at a rate that is close to the terminal
growth rate assumption.
 Mainstream companies are at the peak margin and have the best working capital
profile; further FCF growth will be limited and will be closer to revenue growth.
Exhibit 28: FMCG Universe : Revenue performance Exhibit 29: FMCG Universe : EBITDA performance
(INR bn) Net Revenue YoY Growth (%) (INR bn) EBITDA YoY Growth (%)
24% 600 30%
2,125
25%
1,700 18% 450
20%
1,275 15%
12% 300
10%
850
5%
6% 150
425 0%
- 0% - -5%
FY22E
FY08
FY09
FY10
FY11
FY13
FY14
FY15
FY18
FY19
FY20
FY12
FY16
FY17
FY21
FY22E
FY08
FY09
FY10
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY11
FY12
FY13
Source: Companies, HSIE Research Source: Companies, HSIE Research
Exhibit 30: FMCG Universe : Gross and EBITDA margin Exhibit 31: FMCG Universe : PAT performance
(INR bn) PAT YoY Growth (%) Avg (%)
Gross Margin (%) EBITDA Margin (%) - RHS
58% 28% 400 25%
20%
26% 320
56%
15%
24% 240
54% 10%
22% 160
5%
52%
20% 80
0%
50% 18%
- -5%
FY22E
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY08
FY09
FY11
FY12
FY13
FY14
FY16
FY17
FY18
FY19
FY20
FY21
FY10
FY15
Source: Companies, HSIE Research Source: Companies, HSIE Research
Page | 17
Will changing business assumption impact valuation premium?

Over the past many years, the FMCG sector has enjoyed consistent rerating, driven
by sustained earnings outperformance when compared to other sectors. The sector
has underperformed (>30% underperformance to NIFTY-50) over the last three years
(particularly after COVID) because valuations were at their peak and other sectors
have showed more resilient earnings.
The question is whether FMCG companies’ valuation will rebound (after

underperforming last year) or whether such valuations will remain stable in the
coming years as business assumptions change. We believe that the rising new-age
competition, along with being at peak margin will continue to keep valuations in
check for the major FMCG basket. Companies’ own initiatives to boost earnings will
continue to be monitored for valuation purposes. The agility to deal with a new
competitive landscape and the adaptability to change the traditional framework will
determine the winners in the category. We remain underweight on the sector and
prefer selective picks.
Exhibit 32: Valuation impact on change in assumptions

Change in 1yr fwd
Implied Assumptions on Target P/E
P/E (x) New Target P/E
FCF growth rate in COE in first Terminal COE in terminal Old Target P/E (x) - FY24
RoE Scenario I Scenario II
first 10 years 10 years growth rate period (x) - FY24
HUL 13.0% 9.5% 6.0% 9.0% 85% 55 51 44 45
ITC 10.0% 10.5% 3.0% 10.0% 30% 19 18 18 19
Nestle 12.5% 9.5% 6.0% 9.0% 150% 55 51 44 52
Dabur 14.5% 9.5% 6.0% 9.0% 28% 50 46 40 42
Britannia 10.0% 9.5% 6.0% 9.0% 45% 40 37 32 35
GCPL 14.5% 9.5% 6.0% 9.0% 20% 42 39 34 35
Marico 11.5% 9.5% 6.0% 9.0% 45% 45 42 36 42
Colgate 9.0% 9.5% 6.0% 9.0% 90% 40 37 32 35
Emami 9.0% 10.0% 5.0% 9.5% 35% 25 24 22 25
Scenario I: 100bps lower gowth in our 10 yr growth assumption
Scenario II: 100bps lower gowth in our terminal growth assumption
Exhibit 33: Sector P/E (12-month rolling forward) Exhibit 34: Sector (Ex-ITC) P/E (12-month rolling
forward)
FMCG Sector P/E (x) 10 Years' Avg P/E (x) FMCG Sector P/E (x) 10 Years' Avg P/E (x)
5 Years' Avg P/E (x) 3 Years' Avg P/E (x) 5 Years' Avg P/E (x) 3 Years' Avg P/E (x)
50
70
45 Current P/E: Current
36x 60 P/E: 48x
40
50
35
40
30
25 30
20 20
Mar-12 Mar-14 Mar-16 Mar-18 Mar-20 Mar-22 Mar-12 Mar-14 Mar-16 Mar-18 Mar-20 Mar-22
Source: Companies, Bloomberg, HSIE Research Source: Companies, Bloomberg, HSIE Research
Page | 18
Exhibit 35: FMCG Universe: earnings vs. valuation Exhibit 36: FMCG Universe: earnings vs. valuation
(Ex-ITC)
30 EPS Gr (%) P/E (x) 65x EPS Gr (%) P/E (x)

28 65x
25 52x
52x
21
20
39x 39x
15 14
26x 26x
10
7
13x
13x
5
0 0x
0 0x
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22E
FY22E
FY09
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
Exhibit 37: FMCG Universe: profit mix Exhibit 38: FMCG Universe: market cap mix
JYL, 0% BAJAJ CON, JYL, 0% BAJAJ CON,
RDCK, 1%
RDCK, 1% 1% 0%
JUBI, 3%
JUBI, 1% HMN, 1%
HMN, 2%
CLGT, 3%
CLGT, 3% ITC, 20%
MRCO, 3% MRCO, 5%
UNSP, 3%
UNSP, 4%
BRIT, 4%
GCPL, 5% ITC, 42% BRIT, 5%
GCPL, 5%
DABUR, 5%
DABUR, 7%
NEST, 6%
HUVR, 34%
HUVR, 24% NEST, 12%
Exhibit 39: Stock return

Companies 1W (%) 1M (%) 3M (%) 6M (%) 12M (%) 3Yr (%) 5Yr (%)
HUL (7.0) (11.5) (14.6) (28.9) (9.1) 17.4 128.3
ITC 6.5 (0.4) (2.6) 7.8 10.3 (21.5) (13.0)
Nestle (3.9) (5.1) (11.1) (16.2) 1.4 69.8 179.6
Dabur (6.6) (6.8) (8.9) (17.3) 0.4 22.2 93.2
Britannia (7.9) (9.4) (13.8) (23.3) (8.8) 1.7 100.1
GCPL (6.7) (21.1) (24.3) (36.7) 3.2 (0.8) 30.4
UNSP (7.5) (4.5) (12.1) 8.2 47.1 46.3 84.8
Marico (3.9) (3.7) (7.0) (14.3) 22.8 47.2 76.0
Colgate 0.1 0.8 0.4 (16.5) (11.4) 15.8 53.2
Emami (4.7) (5.5) (11.0) (21.0) (1.5) 22.8 (5.6)
Jubilant (5.7) (15.1) (29.6) (34.2) (9.9) 101.2 402.0
Radico (0.4) (8.9) (22.8) (5.0) 50.4 121.0 591.2
Jyothy 3.0 0.1 (6.2) (20.8) (5.1) (25.1) (25.1)
Bajaj Corp (0.5) (9.1) (13.6) (36.0) (39.0) (53.6) (55.8)
Tata Consumer (1.7) (0.8) (10.1) (20.2) 14.3 261.9 410.0
NSE FMCG (2.5) (6.2) (9.7) (15.0) 3.8 15.2 54.4
Nifty 50 (1.6) (5.0) (6.7) (5.9) 8.3 48.1 82.9
Page | 19
Exhibit 40: FMCG Universe: valuation trend

1 Yr Fwd P/E (x) P/E Re-rating/De-rating
P/E (x)
10 Yr 5 Yr 3 Yr Current 10 Yr 5 Yr 3 Yr
Bajaj Cons 20 21 17 12 -41% -45% -29%
Emami 34 34 25 26 -23% -24% 3%
Jyothy 36 34 31 22 -39% -37% -30%
ITC 25 22 18 17 -32% -24% -10%
UNSP 129 63 63 51 -60% -18% -19%
Radico 21 24 25 32 48% 35% 28%
Marico 38 44 43 44 15% 0% 2%
GCPL 39 45 42 32 -18% -29% -23%
Britannia 38 49 48 39 3% -20% -18%
Colgate 39 40 39 36 -8% -10% -8%
Dabur 40 47 49 45 13% -4% -9%
HUL 46 56 59 47 2% -15% -20%
Nestle 55 61 69 60 10% -1% -12%
Jubilant 71 64 77 64 -11% 0% -17%
FMCG 36 39 39 36 -5% -12% -12%
FMCG (Ex-ITC) 45 52 53 48 3% -10% -13%
Nifty-50 19 21 21 18 -5% -13% -10%
Exhibit 41: Valuation summary
MCap EPS (INR) P/E (x) EV/EBITDA (x) Core RoCE (%)
CMP TP
Companies (INR Reco.
(INR) (INR) FY22E/ FY23E/ FY24E/ FY22E/ FY23E/ FY24E/ FY22E/ FY23E/ FY24E/ FY22E/ FY23E/ FY24E/
bn)
CY21 CY22E CY23E CY21 CY22E CY23E CY21 CY22E CY23E CY21 CY22E CY23E
HUL 4,626 1,998 REDUCE 2,100 38.7 42.4 46.7 51.7 47.1 42.8 36.1 33.0 30.0 19.5 21.5 23.9
ITC 2,819 229 BUY 285 12.7 13.9 14.9 18.1 16.5 15.4 12.2 11.2 10.4 44.6 46.9 49.8
Nestle 1,653 17,146 REDUCE 17,250 241.4 287.7 323.1 71.0 59.6 53.1 45.2 40.2 35.7 61.5 57.2 61.1
Britannia 753 3,124 REDUCE 3,200 65.4 80.4 91.4 47.7 38.8 34.2 33.0 27.8 24.4 54.8 63.0 67.0
Dabur 933 528 ADD 560 10.9 11.7 13.3 48.4 44.9 39.8 37.2 33.9 29.5 55.2 59.4 66.9
GCPL 718 702 ADD 880 18.5 22.0 25.0 37.9 31.9 28.0 29.5 26.4 22.8 23.4 26.2 30.0
Marico 636 493 ADD 550 9.5 11.3 13.1 51.8 43.8 37.7 37.8 32.2 28.0 63.0 67.9 76.0
Colgate 394 1,449 ADD 1,500 38.1 40.5 42.9 38.0 35.8 33.8 25.0 23.5 22.1 181.9 161.1 195.4
Emami 209 471 REDUCE 500 17.3 18.1 20.5 27.2 26.1 22.9 20.4 18.8 16.5 50.1 59.9 65.6
Exhibit 42: Change in estimate, target multiple, TP and rating

Rating TP (INR) Target P/E (x) Old EPS (INR) New EPS (INR) Est Chg (%)
Company CMP
Old New Old New Old New FY22E FY23E FY24E FY22E FY23E FY24E FY22E FY23E FY24E
HUL 1,998 REDUCE REDUCE 2,542 2,100 55 45 38.7 43.1 47.4 38.7 42.4 46.7 - (1.5) (1.5)
ITC 229 BUY BUY 285 285 19 19 12.7 13.9 14.9 12.7 13.9 14.9 - - -
Nestle 17,146 REDUCE REDUCE 17,991 17,250 55 52 241.4 291.9 327.0 241.4 287.7 323.1 - (1.4) (1.2)
Britannia 3,124 REDUCE REDUCE 3,600 3,200 40 35 65.7 82.9 93.1 65.4 80.4 91.4 (0.5) (2.9) (1.9)
Dabur 528 ADD ADD 650 560 50 42 10.9 12.0 13.6 10.9 11.7 13.3 (0.3) (2.2) (2.1)
GCPL 702 ADD ADD 1,025 880 42 35 18.7 22.6 25.4 18.5 22.0 25.0 (1.0) (2.4) (1.4)
Marico 493 ADD ADD 580 550 45 42 9.6 11.6 13.4 9.5 11.3 13.1 (0.7) (2.6) (2.1)
Colgate 1,449 ADD ADD 1,700 1,500 40 35 38.1 40.5 42.9 38.1 40.5 42.9 - - -
Emami 471 REDUCE REDUCE 500 500 25 25 17.3 18.4 21.0 17.3 18.1 20.5 (0.0) (1.8) (2.1)
Page | 20
Competitive landscape change in BPC

Exhibit 43: Comparing D2C BPC companies to traditional BPC companies
Impact on top traditional
Product Product Pricing Right to win for DC2
brands
Cosmetics To differentiate their product In the cosmetics market, pan- Right-to-win for D2C is high in Various D2C players are
offering, D2C brands have India brands are mostly in the this category. Consumers on entering this category at an
concentrated on naturals with mid-premium range. Most D2C this platform are ready to aggregate level and that poses
vegan, ethical sources. D2C brands (Sugar, Nykaa, and experiment with products, a risk for the top traditional
brands have received positive MyGlamm) are targeting that given the effective product brands
feedback (>4 stars out of 5). segment. The pricing of D2C offerings by D2C brands and
They compete with brands is at a slight premium brand fatigue they experience
conventional brands due to to traditional brands, but with the top traditional brands.
their diverse product line. product differentiation along
with effective marketing is
providing them an edge to gain
customer attention.
Skin Care In comparison to traditional Glow & Lovely (earlier F&L), Right-to-win for D2C is high in Various D2C players are
brands, D2C brands are more Pond’s, Lakme, Nivea, Dove, this category. Consumers on entering this category, and at
focused on launching and Lotus have been the top this platform are ready to an aggregate level, it poses a
organic/natural products and trusted brands in the skin care experiment with products, risk to the top traditional
are less concerned with market. These top traditional given the effective product brands
fairness and anti-aging. brands are in the mid-premium offerings by D2C brands and
range, while most D2C brands brand fatigue they experiences
are in the premium range. with the top traditional brands.
Hair Oil Focused on naturals with D2C are priced at a premium Right-to-win for D2C is low for Hair oil is one of the most
vegan offerings, ethical of 1.5x to top traditional this category. Distribution is prominent categories among
sourcing. Focusing on brands. one of the big entry barriers in the traditional categories. Most
differentiated product offering. this category, considering the domestic FMCG companies
high category penetration. For have high dependence on hair
D2C players, it is a challenging oil business. Most leading hair
category for success as oil companies have also been
consumer demand is highly focusing on diversifying their
dependent on GT. hair oil basket by keep entering
into other hair oil sub-segment
Shampoo Focused on naturals with HUL, P&G, and L’Oreal Right-to-win for D2C is high in Various D2C players are
plant-based ingredients and command the market in the this category. Differentiated entering this category, and at
vegan offerings. Focusing on mid-premium range and have product offering, effective an aggregate level, it poses a
differentiated product offering. enjoyed the entire consumer social media marketing, and risk to top traditional brands.
upgradation in the past 10 direct connect to consumers
years. Many would give right-to-win for
ayurvedic/naturals and D2C brands.
problem solving shampoos are
in the premium range. D2C are
priced at a premium >50 to top
traditional brands.
Personal Wash Focusing on differentiated Priced at a premium to Right-to-win high for liquid Various D2C players are
product offerings. More traditional brands. body wash, while for soaps, GT entering this category and
innovation in liquid body will remain critical entry trying to capitalise the brand’s
wash. barrier. success in personal wash. Top
soaps players are too strong to
be impacted by D2C.
Feminine Hygiene New variety of products are Priced at a premium to Various OTC and pharma Potential acquisition
introduced, which is helping traditional brands. brands have right-to-win; D2C opportunity for top traditional
the category develop. success will not be easy companies.
Men's Grooming New varieties of products are Priced at a premium to top Alternate channels (MT + Potential acquisition
introduced, which is helping traditional brands. ecomm) are gaining traction for opportunity for top traditional
the category develop. this category; D2C players can companies.
capitalise by correct product
offering and fix the white
spaces.
Source: Company, HSIE Research
Page | 21
Color Cosmetics
Top traditional brands
 The Indian color cosmetics industry has been dominated by Lakmé, HUL’s
flagship beauty brand. It is in the mid-premium segment of cosmetics, which has
seen most uptrend benefits in the past decade.
 Maybelline is a competitor brand of Lakme’s, having similarities with it in terms
of product, pricing, and marketing.
 L’Oreal is in the premium segment, which still pertains to value-buying
proposition due to its product quality.
 Brands like M.A.C. and Bobbi Brown are in the super-premium segment,
attracting a celebrity following.
D2C brands
 In recent years, D2C brands like MyGlamm, Sugar, and Nykaa have risen to
prominence in this space. Most of these brands are in the mid-premium segment
and are enjoying the uptrend story that Lakme has captured successfully for
many years.
 While D2C brands have their own websites, the rise of ecommerce platforms like
Nykaa has further fueled this sector’s growth. Lakmé too launched its own
website in late 2018.
 Following their success in online, these D2C companies have started expanding
into the offline channel, with the help of new rounds of funding.
 D2C brands, on a comparable basis, are priced at a premium (>50) to top
traditional brands.
 On Nykaa, D2C brands have also received good star rating (with high number of
ratings). Some D2C brands like Sugar, MyGlamm, Kay, and Nykaa have similar
star ratings to Lakme and other traditional brands.
Our view
 Within BPC, cosmetics is one of those categories where D2C has a strong right-to-
win through product differentiation, price filling, and effective marketing.
Women are ready to experiment with new brands, provided they have a
compelling proposition.
Exhibit 44: Lips - brand pricing (price/5gms) Exhibit 45: Lips - most rated products across brands
3,500 No of ratings Star Rating (RHS)
3,000
90,000 4.6
2,500 80,000
4.5
70,000
2,000 60,000 4.4
1,500 50,000
4.3
40,000
1,000 30,000 4.2
20,000
500 4.1
10,000
- 0 4
Sugar
M.A.C
Lakme
MyGlamm
Nykaa
L'Oreal
Revlon
Maybelline
Kay
Bobbi Brown
Elle 18
Sugar
Lakme
M.A.C
MyGlamm
L'Oreal
Nykaa
Revlon
Maybelline
Kay
Bobbi Brown
Elle 18
Source: Nykaa, HSIE Research Source: Nykaa, HSIE Research
Page | 22
Exhibit 46: Face - brand pricing (price/10gms) Exhibit 47: Face - most rated products across brands
2,000 60,000 4.6

50,000 4.5
1,500
40,000 4.4
1,000 30,000 4.3
20,000 4.2
500
10,000 4.1
- 0 4
Sugar
M.A.C
Lakme
MyGlamm
Nykaa
L'Oreal
Revlon
Maybelline
Kay
Bobbi Brown
Sugar
Lakme
M.A.C
MyGlamm
L'Oreal
Nykaa
Revlon
Maybelline
Kay
Bobbi Brown
Skin care
 Glow & Lovely (earlier F&L), Pond’s, Lakme, Nivea, Dove, and Lotus have been
the top trusted brands in the skin care market. These top brands have dominated
the market for the past many years. Also, after seeing success in skin creams,
some of the brands have extended into other BPC categories.
 Marketing and distribution were the key tools for success of these brands. These
were the entry barriers for any new brand (limited success), as well as these
brands historically gained share from other regional brands.
 After seeing success of D2C brands, HUL has launched its own digital brand
Simple, to compete with the new age businesses. Marico has acquired Just Herbs ,
a D2C brand, to be more competitive in this space.
D2C brands
 There has been a rise of D2C brands in the skin care space over the last 3-5 years
and brands like SUGAR, MyGlamm, WOW and mamaearth have seen initial
success.
 D2C brands are focusing on launching organic/natural products and are not just
focused on fairness and anti aging as compared to traditional brands.
 New age brands have created a large variety of options for customers. They help
customers buy products for family consumption and individual consumption.
 D2C are priced at a premium of 40-50 to top traditional brands.
Our view
 Skin care is also one of those BPC categories in which D2C brands have seen
good initial success. D2C brands also have a high right-to-win, given their global
packaging, effective marketing, pricing strategy (fill the white spaces), and
unique product proposition. Consumers are ready to experiment for such brands,
given the premium positioning of these brands and brand fatigue with traditional
brands.
Page | 23
Exhibit 48: Cream - brand pricing (price/100gms) Exhibit 49: Cream - most rated products across brands
2,000 10,000 4.6

8,000 4.5
1,500
4.4
6,000
1,000 4.3
4,000
4.2
500 2,000 4.1
- 0 4
Mamaearth
mCaffeine
Sugar
Nykaa SKINRX
Himalaya
Just Herbs
MyGlamm
Lakme
Ponds
Olay
The Derma Co
Glow & Lovely
Mamaearth
mCaffeine
Sugar
Nykaa SKINRX
Himalaya
Just Herbs
MyGlamm
Lakme
Ponds
Olay
The Derma Co
Glow & Lovely
Hair oil
 Hair oil is one of the most prominent categories in traditional brands. Most
domestic FMCG companies have a high dependence on hair oil business (Marico,
Emami, Dabur, and Bajaj Consumer). Brands like Parachute, ADHO, Dabur
Amla, Navratna, Kesh King, Patanjali, Nihar, and Indulekha are the top brands in
the hair oil market.
 Non-sticky hair oils have seen success over the past 10 years and increased their
mix in the overall hair oil category. Still sticky hair oils (coconut, amla, sarson)
have the maximum mix in the hair oil business.
D2C brands
 D2C brands that have seen success in other BPC categories have also entered the
hair oil business.
 Hair oil category is flooded with various brands and is one of the most
fragmented categories among traditional categories.
 D2C brands are offering a differentiated product basket, compared to traditional
brands.
 Innovations are being driven by D2C brands, which the well-established brands
are following.
 Established brands like Marico have acquired D2C brands in this category for not
just competing but also to gain access to latest trends for extension into their
brands.
 D2C brands are priced at a premium of 1.5x to top traditional brands.
Our view
 Most leading hair oil companies have also been focusing on diversifying their
hair oil baskets by entering into other hair oil sub-segments. Distribution is one of
the big entry barriers in this category, considering the high category penetration.
Hair oil market has seen several trends in the last 10 years, i.e., sticky to non-
sticky, rising trust towards ayurvedic products. For D2C players, it is a
challenging category to succeed in as consumer demand depends greatly on GT.
Page | 24
Exhibit 50: Brand pricing (price/100ml) Exhibit 51: Most rated products across brands
800 No of ratings Star Rating (RHS)
700
600 10,000 4.6
500 4.5
8,000
400 4.4
300 6,000
4.3
200 4,000
4.2
100
2,000 4.1
-
0 4
Mamaearth
Bajaj Almond drop
Nykaa Naturals
MCaffeine
Dabur
Navratna
MyGlamm
Just Herbs
Keshking
WOW Skin
WOW Skin…
Juicy Chem
Indulekha
Bajaj Almond…
Parachute
Mamaearth
Nykaa Naturals
MCaffeine
Dabur
Just Herbs
Navratna
MyGlamm
Keshking
Juicy Chem
Indulekha
Parachute
Shampoo
 Shampoo is also traditionally a large category with many players (although much
lower than in the hair oil market).
 HUL, P&G, and L’Oreal command the market in the mid-premium range, having
enjoyed the entire consumer upgradation over the last 10 years.
 Many ayurvedic/naturals and problem-solving shampoos are in the premium
range.
 The category penetration has increased massively through sachet launches in the
rural market.
D2C brands
 D2C brands that have seen success in the other BPC categories have also entered
the shampoo business.
 Most D2C brands are in the premium segment through offerings of natural
ingredients-based products.
 D2C brands are priced at a premium of >50 to top traditional brands.
Our view
 Most leading shampoo brands are driven by MNCs companies,
ayurvedic/naturals shampoos by domestic companies. D2C companies are
coming out with offerings like plant-based ingredients, vegan products, etc.
Consumer acceptance of some D2C brands in such a competitive category is
good. Distribution has been one of the big entry barriers in this category,
considering the high category penetration. Differentiated product offerings,
effective social media marketing, and direct connect to consumers would give
right-to-win to D2C brands.
Page | 25
300
12,000 5.0
250 10,000 4.8
200 8,000
4.6
6,000
150 4.4
4,000
100 2,000 4.2
50 0 4.0
Nykaa Naturals
Mamaearth
Mcaffeine
L'Oreal
Sunsilk
Dove
H&S
Panteen
Clinic Plus
WOW skin
Beardo
Just Herbs
Vatika
MyGlamm
The Man Co
Kesh King
Godrej
-
Mamaearth
Panteen
WOW skin
Beardo
Vatika
MyGlamm
Mcaffeine
Just Herbs
Nykaa
Dove
Sunsilk
L'Oreal
Kesh King
Godrej
H&S
Clinic Plus
Source: Nykaa, HSIE Research The Man Co Source: Nykaa, HSIE Research
Personal wash
 HUL, Reckitt, GCPL, and Wipro are top players in personal wash.
 The category has consistently been benefited by premiumisation. The market is
gradually shifting from soaps to liquid bodywashes.
 Deep distribution in such highly-penetrated categories is the key right-to-win for
top traditional brands.
D2C brands
 D2C brands offer more variety in soaps compared to traditional brands.
 MyGlamm, mamaearth, and Bombay Shaving are among the top D2C brands in
this space.
 Price strategy is the same and remains at the premium end.
Our view
 The category is dominated by the top 4-5 players, with distribution being a big
strength for these players. We believe D2C brands have more right-to-win in
liquid bodywash category than it has in soaps. GT will remain the dominating
channel for soaps. Liquid bodywash is stronger in alternate channels; D2C
companies can win here through differentiated product offerings and leveraging
BPC brand positioning for this category.
Exhibit 54: Soaps - brand pricing (price/100gms) Exhibit 55: Soaps - most rated products across brands
600
500 6,000 4.6
5,000 4.5
400
4,000 4.4
300 3,000 4.3
200 2,000 4.2
100 1,000 4.1
- 0 4
Mamaearth
Detol
Bombay Shaving
Lifebuoy
MyGlamm
Pears
Nykaa
Dove
Mcaffeine
Godrej
Cinthol
Lux
Juicy Chem
The Man Co
Mamaearth
Detol
Bombay Shaving
Lifebuoy
MyGlamm
Pears
Nykaa
Dove
Mcaffeine
Godrej
Cinthol
Lux
Juicy Chem
The Man Co
Page | 26
Exhibit 56: Body wash - brand pricing (price/100ml) Exhibit 57: Body wash - most rated products across
brands
No of ratings Star Rating (RHS)
450
400
350 20,000 4.6
300 4.5
15,000
250 4.4
200 10,000 4.3
150 4.2
5,000
100 4.1
50 0 4
Mamaearth
mCaffeine
Palmolive
myglamm
WOW skin
Beardo
Bombay Shaving
Just Herbs
Pears
Fiama
Nykaa
Pee Safe
Dove
Cinthol
Nivea
-
Bombay Shaving…
Mamaearth
mCaffeine
Palmolive
myglamm
Beardo
Just Herbs
WoW Skin
Pears
Fiama
Nykaa
Pee Safe
Dove
Cinthol
Nivea
Feminine hygiene
 Rise of D2C players in the feminine hygiene category is helping the category
develop new innovative products. New age players are investing in R&D which
would help the category grow.
 The variety of products available has significantly increased.
 Various OTC and pharma brands have right-to-win, and we believe D2C success
will not be easy.
 D2C brands are priced at a premium of 11 to traditional brands.
200 8,000 4.6

190 7,000
4.5
6,000
180 4.4
5,000
170 4,000 4.3
3,000
160 4.2
2,000
150 4.1
1,000
0 4
140
Vwash Nykaa Pee Safe Sanfe
Vwash Sanfe Pee Safe Nykaa
Naturals
Naturals
Page | 27
Men's grooming
 With the introduction of D2C brands, new products are being introduced
compared to very few (limited to shaving kits) earlier.
 New innovative grooming products such as beard oil and wax are being
introduced.
 Established companies such as Colgate, Marico and Emami have acquired D2C
brands such as Bombay Shaving Company, Beardo, and The Man Company.
3,000
2,500 600 5
500 4
2,000
400
1,500 3
300
1,000 2
200
500 100 1
- 0 0
Beardo
Juicy Chemistry
Wow Skin
Ustraa
Bombay Shaving
Pee Safe
The Man Co.

Beardo
Juicy Chemistry
Ustraa
Bombay Shaving
The Man Co.
Page | 28
Competitive landscape change in BPC F&R

Comparing D2C F&R companies to traditional F&R companies
Impact on top traditional
Product Product Pricing Right to win for DC2
brands
Coffee D2C brands are focused on The cost per serving for the Right-to-win for D2C is Traditional brands have the
whole bean and drip brew coffee sold by D2C brands is high in this category as opportunity to tap into the
coffee markets rather than significantly higher than the these players have new growing market. While
instant or filter coffee ones. cost for instant coffee sold by developed a new subset of crowded, this space is
traditional brands. The pricing the category in India. witnessing decent growth.
of whole bean coffee by ITC
also remains at a discount to
that by D2C.
Milk & Milk D2C offers fresh and high The pricing of D2C brands is at D2C brands have a right- While negative in a few cities,
Products quality milk and other dairy a premium to offerings by to-win, given the the limited scalability of D2C
products. traditional brands. Some integration of the supply brands at the moment has
brands have started chain. However, pan-India limited impact on top
subscriptions, which reduces scalability remains a traditional brands.
the pricing to almost the same challenge.
level as traditional peers
Food/Staple D2C brands focus on healthy Products are priced at a Right-to-win for D2C is Traditional brands have the
products. The brands have premium, but being healthy high in this category as opportunity to tap the new
entered spaces like nuts and justifies a part of the premium. these players have growing health-focused
dried fruits, which has mainly developed a new subset of market. Brands like Marico are
been unorganised. the category in India. capitalising on this trend.
Meat & Meat In the meat space, D2C players Meat sold by D2C brands is at D2C brands have a right- Traditional brands like ITC
Substitute are focused on selling high a significant premium to the to-win, given the supply could benefit from entering
quality meat. The variety of wet market with which the chain integration. this space.
meat substitute products is brands compete.
wide.
Nutrition - D2C brands offer specific The D2C offerings for both the Right-to-win for D2C in The D2C products pose a risk
Supplements problem-solving products in drinks and vitamins space this category is the to traditional brands in the
the nutrition space. The command a premium, given constant R&D focused vitamins space due to their
products here are natural and their specific problem-solving products, which are focused problem-solving
at time even vegan. propositions. positioned to solve specific propositions.
issues.
Tea D2C brands offer a wide range D2C brands price their Right-to-win for D2C in Traditional brands have the
of products at different price products at a premium, this category is the wide opportunity to enter the
points. The products have a offering health benefits. range of products on health-focused tea space, a fast
health proposition. offering that have health growing market compared to
benefits. CTC.
Source: Company, HSIE Research
Page | 29
Coffee
 India has predominantly been an instant coffee or filter coffee drinking nation.
Filter coffee is more popular in South India.
 To cater to these needs, brands like Nescafe and Bru have offerings like Nescafe
Classic and Bru Green Label.
 The instant space has not seen much disruption from the D2C brands, but
innovative products like the beaten coffee (ITC's Sunbean) are being introduced
here, with many brands participating in this innovative journey.
 Nestle has launched its own whole bean coffee products to take part in the
developing category.
D2C brands
 The rise of D2C brands is causing the whole bean coffee category to develop in
India.
 To brew whole bean coffee, equipment is required. The D2C brands are
expanding into brewing equipment space as well.
 While ease and cost of preparing instant coffee is more desirable, the rising coffee
enthusiasts continue to shift to the whole bean space.
 Whole bean coffee costs higher per serving due to lower coffee extraction.
 Besides the whole bean coffee, D2C brands also offer ground coffee within drip
bags, which eliminates the need for brewing equipment. The cost/serving of this
coffee is the highest compared to instant and whole bean coffees.
Our view
 The whole bean coffee is still in nascent stages, which is an opportunity for
brands like Nestle and Bru to expand. However, with the growing number of
D2C coffee brands, the competition in this space is high. Listed companies like
ITC are further creating categories like the beaten coffee, which has not been
adopted by other brands like Bru.
Exhibit 62: Brand pricing (price/100gms) Exhibit 63: Instant vs. whole bean coffee costing
Min Max Avg Instant Whole Bean Drip Bag
MRP for 100gms (INR)* 285 160 240
500
Coffee/ 200 ml serving (gms) 1.8 12 12.5
400
Cost/serving (INR) 5.13 19.2 30
300 Source: Nykaa, HSIE Research
200
100
0
Nescafe
Sunbeam
Bru
Sleepy Owl
Source: Nykaa, HSIE Research
Page | 30
Dairy and dairy products

 India has traditionally been an unorganised dairy country. Within this, the
traditional brands sell packaged milk.
 The companies also offer other dairy products like ghee, paneer, and curd.
D2C brands
 D2C brands’ offerings include fresh, high quality and ethical sourced milk, with
its premium products having superior packaging (glass bottles).
 Dairy products such as ghee and curd are seeing an upmarket trend, driven by
D2C players.
 Listed companies too have been present in this space with Pride of Cow, a part of
Parag Milk Foods, becoming an early entrant in 2012.
 Milk and milk products by D2C brands (Country Delight and Pride of Cows) are
at a significant premium to traditional brands.
 The brands are focusing on subscription-based models to increase customer
stickiness.
 D2C brands are offering different types of subscriptions with discounts (>25).
Post such discounts, the pricing of the products are at par or below traditional
brands.
Our view
 D2C brands do pose a risk to traditional brands, especially with the discounting
models. Given the fresh milk propositions, the widespread expansion of these
brands should be limited. With limited presence and tough scope for pan-India
scalability, the risks to traditional brands are limited to concentrated geographies.
Exhibit 64: Milk pricing (price/ltr) Exhibit 65: Ghee pricing (price/ltr)
Min Max Avg Min Max Avg
140 1,600
120
1,200
100
80 800
60
40 400
20
- -
Amul
Nestle Everyday
Britannia
Country Delight
Pride of Cows
Aashirvaad
Amul
Country Delight
Nestle A+
Pride of Cows
Source: Company Data, Amazon, HSIE Research Source: Company Data, Amazon, HSIE Research
Page | 31
Exhibit 66: Curd pricing (price/ltr) Exhibit 67: Evolution of milk delivery/packaging
Min Max Avg
300
250
200
150
100
50
-
Amul
ID Foods
Epigamia
Britannia
Country Delight
Nestle A+
Pride of Cows
Nutrition - supplements
 Within the nutrition drink space, Horlicks and Nestle are the dominant players.
 The MNC brands are able to leverage the parent products to offer a large variety
or products across all consumer sections.
 The vitamins (OTC) supplements space has been dominated by players such as
Patanjali, Himalaya, and Dabur.
D2C brands
 Within the nutrition drink space, the D2C brands have a limited presence, but
they offer a natural proposition. Compared to traditional brands, the pricing of
D2C brands comes at a premium.
 D2C companies in the supplements space provide a focused problem-solving
approach.
 Unlike the product formats of traditional brands (pills/capsule), D2C products
are in different types of formats like pills, gummies, and shots.
Our view
 D2C products pose a higher risk to traditional brands in the vitamins space due
to their focused problem-solving propositions.
Page | 32
Exhibit 68: Brand pricing (price/100gms) Exhibit 69: Nutrition product offerings across brands
Min Max Avg
2,500
2,000
1,500
1,000
500
0
Oziva (Powder)
Dabur
Oziva (Vitamins)
Nestle
Akiva Superfoods
Horlicks
Food
 Well-established brands have a presence in packaged foods such as RTC/RTE,
biscuits, instant noodles, snacks, etc.
 ITC has a basket of 14 brands through which it is present across a variety of
products at different price points.
D2C brands
 D2C brands are focused on healthy foods with the possibility of hyper
customisation.
 RTE/RTM is a segment that has intense competition, with brands such as ID
Foods.
 New categories that were earlier fragmented, i.e., dried fruits and nuts, are being
targeted by D2C companies.
Our view
 The health-oriented food space has seen traction with the rise of D2C brands.
Traditional brands do have an opportunity to tap into this vast space. Companies
like Marico and ITC are adopting industry trends by increasing their product
baskets. With a growing health-conscious population, the nutrition health space
is here to stay.
True
Britannia ITC Marico Nestle HUL Dabur ID Foods Soulfull Happilo Yoga bar
Elements
Beverages
Biscuits & Bakery
Breakfast
Chocolate
Frozen Food
Masala
RTC/RTE
Sauce & Jams
Seeds/Dry Fruits
Snacks
Page | 33
Tea
 Established tea brands in India have limited product offerings, focused on CTC
tea and green tea.
 With rising premiumisation trends, HUL, under its Taj Mahal brand, has
launched premium, single estate tea products.
D2C brands
 Within tea, D2C brands offer a wide range of products across different price
points, with a focus on health proposition.
 Pricing for D2C is much higher, aimed to make tea a lifestyle choice.
Our view
 Traditional tea brands have dominated the traditional tea market, but lack
presence in the health-oriented tea market. Traditional bands are present in the
healthy tea space with limited offerings like green tea. With a wide variety of
solution-driven products, D2C players have an edge over traditional brands.
Traditional brands could scale up their offerings to compete in this fast-growing
space.
Exhibit 70: Brand pricing (price/100gms) Exhibit 71: Types of tea offerings
Min Max Avg
60
50
40
30
20
10
-
Taj Mahal
Lipton
Taaza
Red Label
Teabox
Vahdam Teas
The Good Life

Company
Meat and meat substitutes

Top traditional market
 The Indian meat industry is worth $45bn, with 72 of the population being non-
vegetarians. The industry is highly (95) unbranded, or a wet market.
 Traditional brands like ITC have a presence, but are limited to the frozen meat
and packaged food space.
D2C brands
 The key for D2C in the meat industry is managing logistics and reducing
wastage.
 Within the meat industry, the normal dumpage is 5; however, some D2C brands
claim to have achieved lower dumpage.
 While the products are priced at a significant premium to the wet market, the
product quality is superior with a control over the supply chain.
Page | 34
 India is also seeing a rise in popularity of plant-based meat products along with a
rise in D2C brands in this space. Brands in this space are targeting non-
vegetarians seeking animal-meat replacement.
 Our view
 D2C brands compete with the wet meat industry rather than established brands.
Given the large untapped market, traditional brands like ITC could benefit from
entering this space. The meat-substitute space is seeing good traction in the
western countries and to capitalise on the trend, ITC has launched its plant-based
meat products.
Exhibit 72: D2C meat delivery priced at a steep premium to the unorganised sellers
(INR/KG) Licious Freshtohome Pescafresh CambayTiger Local (1) Local (2)
Chicken breast 633 618 598 489 460 490
Chicken curry cut 335 378 366 360 320 280
Pomfret (Black Steak) 1897 2258 1626 1210 1000 750
Sea Prawns 1956 1663 1790 2000 1500 NA
Mutton curry cut 1376 1200 1096 940 900 850
Source: Companies, HSIE Research
Page | 35
mamaearth
Company brief: mamaearth is a natural-focused baby and mother personal care D2C
brand launched by the company Honasa Consumer Pvt. Ltd. The company currently has
a portfolio of around 140 products under mamaearth, and over 40 products under The
FOUNDED: 2016
Derma Co. It had also said that it has a vision of becoming a 'house of brands’. Its online
LOCATION: Gurgaon
channel contributes 70 to sales.
Key success factors: PROMOTER
▪ mamaearth is Asia's first company to receive the MadeSafe certification for its toxin- Varun Alagh, CEO and Co-founder
B.E., PGDBM (XLRI Jamshedpur)
free products, thanks to its toxin-free and natural ingredient proposition, which is
Experience: HUL, Diageo, Coca-Cola
driving trust.
▪ The move from baby care to personal care was built on mothers' faith in the brand. Ghazal Alagh, Co-founder
The company could leverage that trust to benefit in other women's personal care BCA
Experience: NIIT, dietexpert.com
goods that it launched.
▪ The disruptive innovations, rapid execution pace, and a focus on customer INVESTORS
satisfaction have enabled customer acquisition and higher per customer transactions. Fireside Ventures Titan Capital
▪ India’s rising online ecosystem has also benefited the company, which had early Sequoia Capital Evolvence
mover advantage in the space. Stellaris Ventures
▪ Social media and personalised marketing, as well as the availability of vast amounts Sharrp Ventures
Sofina Sa
of customer data, are also assisting the company in customer acquisition.
▪
VCC Edge
Premiumisation is also aided by product packaging that meets global standards.
Pricing strategy and competition: FUND RAISING
▪ While still above the average MRP of most traditional brands, mamaearth is Latest Valuation $1.2bn
relatively more affordable than the other D2C brands. Fund raised $52mn
▪ The brand is well rated on Nykaa with an average rating of 4.5 (out of 5) in the Date Jan 2022
VCC Edge
categories of cream, hair oil, shampoo, body wash, and soaps.
Future trends: Honasa Consumer Brands:
▪ The company expects distribution costs to reduce over time, which will increase the Mamaearth
value proposition for customers. The Derma Co
▪ Subscription model is a key future trigger, but the current RBI regulations are Aqualogica
creating friction for customers to shift to this model. Ayuga
▪ The next phase of growth will come from going beyond tier-3 cities where the
BBLUNT
company has seen significant traction. These customers have already built trust
using ecommerce aggregators.
▪ Product individualisation is needed, which has a huge scope in India, given the
dense population.
▪ Trust is the underlying emotion that will propel D2C to move forward.
▪ Return to origin (RTO) for ‘cash on delivery’ vs. ‘online payments’ is 13-14 times
greater, which is a significant cost. COD transactions are gradually reducing, with
consumers gaining trust in payment systems.
▪ India is a value-conscious market, and D2C brands will benefit from proper
branding, product development, and product quality.
Potential threats/opportunities for listed companies:
mamaearth started with baby products and gradually expanded into other personal care
products. With rising consumer confidence in the brand and platform, the company
should be able to further expand its footprint in personal care categories. The acquisition
of BBLUNT further strengthens its personal care portfolio. We believe it has the potential
to impact listed personal care companies like HUL, Dabur, GCPL, Emami, and Marico.
Product basket
Category Products
Baby Shampoo, oral care, oil, skin care and bath products
Beauty Face, hair and body products
Hair Shampoo, conditioner, hair oil, mask and serum
Face Face wash, mask, cream, serum, scrub, toner, gel and sheet mask
Body Body butter, soap, lotion, scrub and hand cream
Source: Company website
Page | 36
SUGAR Cosmetics
Company brief: SUGAR Cosmetics (Vellvette Lifestyle) is an Indian cosmetic brand
that creates mid-priced products in colours that match the skin tones of Indian women.
The company was founded in 2015 by Vineeta Singh and Kaushik Mukherjee, with a
focus on millennials. SUGAR Cosmetics operates on a hybrid model, with a presence FOUNDED: 2015
both online and offline. The brand has >10,000 retail touch points and a strong digital LOCATION: Mumbai
presence.
PROMOTER
Key success factors: Vineeta Singh, CEO & Co-founder
▪ Women personal care is a very large market and the company gained success by
MBA IIM Ahmedabad, B.Tech IIT Madras
Experience: Quetzal Online, FAB BAG
filling the white spaces in pricing (gaps between mass and premium).
▪ The company has focused on niche (specific/target oriented) products, in contrast to Kaushik Mukherjee, COO & Co-
the me-too brands in the market. founder
▪ The brand is targeting bold, independent women who refuse to be stereotyped into
MBA IIM Ahmedabad, B.E. Pillani
Experience: Oracle, BigSlick, McKinsey, FAB
roles. SUGAR has a differentiated product offering for consumers who want to BAG
experiment but are tired of (suffering from brand fatigue with) traditional products.
▪ Focus on R&D, effective marketing, and global packaging are helping the company INVESTORS
with customer acquisition. India Quotient Fund Stride Ventures

A91 Emerging Fund Elevation Capital
Pricing strategy and competition:
▪ While still above the average MRP of most traditional brands, SUGAR is relatively
Texport Industries
India Quotient Fund
Nitin Agarwal
more affordable to the other new age brands. RB Investments

▪ The brand is well rated on Nykaa, with an average rating of 4.3 (out of 5) in lipsticks, VCC Edge
lip liners, and lip balms.
Future trends: FUND RAISING
▪ Consumers, especially when it comes to health and wellness, are not searching for
Latest Valuation NA
Fund raised $21mn
deep discounts and are willing to often pay a small premium for superior quality or
Date Feb 2021
a differentiated product. VCC Edge
▪ Women’s personal care is a huge business, and the uptrend is expected to continue.
Many new companies are joining this market, but they must focus on production Vellvette Lifestyle Brands:
innovation and marketing strategies that are relevant. Sugar Cosmetics
▪ Online accounts for 7-8 of the BPC market in India, and there is immense scope for ENN Beauty
improvement. Offline has more operating leverage and lower CAC (customer
acquisition cost). As a result, both offline and online channels are important.
▪ Funding is available for D2C companies but the best capital comes from customers At a time when it has become very
(through business), as it is more sustainable. crowded to get any kind of mindshare
▪ The BPC industry is expected to reach $28 billion by 2025, growing 12 percent per of the consumer, Sugar is still able to
annum, from $16 billion in 2020, according to a RedSeer report. get more than 350 million impressions
every month. In addition to that, it is
Potential threats/opportunities for listed companies: also getting 10 times more views on
SUGAR has been able to create a brand in one of the most competitive categories. their YouTube channel than any other
Vellvette has also acquired a majority stake in ENN Beauty (founded in 2011) that sells lip brands
balms, scrubs, undereye creams, and hair care products. With rising trust around brand
and platform, the company will be able to further expand its footprint in other personal
care categories. It has the potential to impact listed personal care companies like HUL,
Dabur, Emami, and Marico.
Product basket
Category Sub-Category Products
Makeup Lips Lipstick, Liner, Lip care
Face Primers, Foundation, BB Cream, Highlighters
Eyes Eyeliner, Kajal, Eye shadow
Brushes Face Brushes and Eye Brushes
Skin Care Moisturisers, Masks, Setting mists
Page | 37
The Good Glamm Group

Company brief: Sanghvi Beauty and Technologies is committed to inclusive beauty
and cruelty-free, vegan, and environmentally friendly clean products. Its content-to-
commerce approach is democratising access to beauty products and advice. Its product
offerings include make-up, skincare, haircare, personal care and soon-to-be-launched FOUNDED: 2015
baby-care items. The firm claims that its products are made with formulations that are LOCATION: Mumbai
best suited to solve the beauty and personal care needs of millions of consumers.
PROMOTER
Key success factors: Darpan Narendra Shangvi, CEO and
▪ It sells products through its own website, app, and >30,000 retail touch points. Founder
▪ Its content offering, coupled with an army of over 220,000 influencers, helps
B.E. (MIT), MBA (ESADE Business School)
customers spot new products and spur engagement. INVESTORS

▪ Own platform provides direct communication to consumers, unlike other companies Trifecta Venture Trifecta Capital
that depend on third-party marketplaces. Loccitane International Kalaari Capital
▪ The company could build a master brand and leverage it by extending it into various Tano India Chiratae Ventures
BPC sub-categories. Consistent expansion in SKUs (>800SKUS) has added many Mankekar Family Office Amazon.com
Bessemer Venture Wipro Consumer
active customers. While the company has benefitted from the digital route, the
VCC Edge
progress of the online ecosystem has enabled growth.
▪ Consumers will continue to try other products, but it is the job of the company to FUND RAISING
reinforce its brands and provide innovative products to retain customers. Latest Valuation $1.2bn
Fund raised $150mn
▪
Date Nov 2021
Pricing position is quite different in various sub-categories of BPC. The target is to be VCC Edge
available for the vast BPC basket to address large consumer pool.
▪ The brand has a limited number of reviews on Nykaa, with an average rating of close Sanghvi Beauty and Technologies
to 4 (out of 5) across products. Brands:
MYGLAMM
Future trends: Organic Harvest
▪ With a strong portfolio of D2C brands and proprietary content assets, the group is The moms co
well-positioned to scale rapidly and create a large digital-first business in the beauty Baby chakra
and personal care space. St.Botanica
▪ In the offline space, the company has >30,000 retail points of sale. It plans to reach to SIRONA
POPXO
100,000 points of sale in the near term.
Scoop Whoop
The Good Glamm group has been able to create a brand in one of the most competitive
categories. It has been able to continuously expand its product basket and customer base.
The acquisition of Organic Harvest (launched in 2013, current revenue run-rate of ~INR
750mn) also provides entry in the organic BPC category. With rising trust around the
brand and digital platform, the company is continuously expanding its footprint in other
personal care categories. It has the potential to impact listed personal care companies like
HUL, Dabur, Emami, and Marico.
Product basket
Category Sub-Category Products
Makeup Lips Lipstick, Metallic Lipstick, Lip Gloss, Lip Balm, Liner, Lip care
Face Fixing Powder, Primer, Foundation, Compact Powder, Highlighter
Eyes Eyeliner, Kajal, Eye shadow
Hair Care Shampoo, Conditioner, Hair Oil, Serum, Hair Mask
Skin Care Cleanser, Toner, Moisturiser, Serum, Body lotion
Source: company website
Page | 38
WOW
Company brief: WOW Skin Science (company Body Cupid) is an Indian company of
Health, Wellness, and Fitness. WOW Skin Science combines time-tested ingredients from
nature with innovative formulations backed by science to deliver 100 vegan beauty. From
being a digital-first brand, the company’s eyeing on becoming the number one brand in FOUNDED: 2016
the toxin-free space within the FMCG sector. LOCATION: Bengaluru
▪ WOW Skin Science combines time-tested ingredients from nature (apple cider
Manish B. Chowdhary, Co-founder
vinegar, onion, vitamin C) with innovative formulations backed by science to deliver Karan Chowdhary, Co-founder
100 vegan beauty.
▪ Quality product at affordable price point is a right-to-win for the brand. It perfectly Ashwin Sokke, Co-founder
fits in with the fast-growing millennial population.
▪ It sells products on ecommerce platforms, its own website, as well as in brick-and-
Arvind Sokke, Co-founder
mortar stores.
▪
INVESTORS
WOW is aiming to maintain its growth momentum by capitalising on its loyal ChrysCapital Investment
customer base, expanding penetration across channels, and further developing its VCC Edge
portfolio of brands and products.
▪ While the company has benefitted through the digital route, the progress of the FUND RAISING
Latest Valuation NA
online ecosystem has enabled growth.
▪
Fund raised $50mn
Consumers will continue to try other products but it is the job of the company to
Date April 2021
reinforce its brands and provide innovative products to retain customers. VCC Edge
▪ The targeted audience is not price sensitive, but it is value conscious. A company can
achieve this through correct branding, product development, and product quality. Body Cupid Brands:
WOW
▪ While still above the average MRP of most traditional brands, Wow is relatively
more affordable to the other D2C brands.
▪ The brand is well-rated on Nykaa with an average rating above 4 (out of 5) across
most personal care products.
Future trends:
▪ The company is working at increasing its online penetration, driving pan-India
offline expansion and launching new brands in adjacent categories.
▪ It is working towards positioning itself as India's largest brand in the toxin-free space
within FMCG.
▪ It is focusing on stronger content to play on our brand’s strengths.

WOW has been able to create a brand in one of the most competitive BPC categories. The
product recall and rating are good, and the company keeps diversifying its product
portfolio to other BPC categories. It can give potential threat to other personal care
companies like HUL. Marico, and Emami.
Product basket
Category Products
Skin Face Wash, Scrub, Serum, Cream, Mask, Moisturiser
Hair Shampoo, conditioner, hair oil, mask and serum
Bath & Body Hand Cream, Hand wash, Body Wash, Body Scrub, Body Lotion
Mother & Child Massage Oil, Stretch Care, Kids body lotion, Kids Sunscreen
Wellness Hair Vanish, Essential Oil, Women Hygiene
Nutrition & Health Omega Fatty Acids, Immunity Care, Multivitamins, Detox, Antioxidants
Page | 39

Company brief: Bombay Shaving Co. is by the company Visage Lines Personal Care.
The company caters to men’s grooming needs with shaving rituals. It has also expanded
to other personal care products like face wash, masks, face scrubs, etc. It has also started
to cater to women’s products. FOUNDED: 2015
LOCATION: New Delhi, Delhi
Key success factors:
▪ Personal care products including grooming have predominantly been purchased PROMOTER
Shantanu Deshpande, CEO and Co-
offline, but COVID led to a shift in buying patterns, driving D2C brands.
▪ Men moving towards more male-specific products have given opportunities for D2C
founder
MBA (IIM Lucknow)
brands in this space. Experience: McKinsey & Co
▪ The company ventured into women’s hair removal category during COVID, which
has now become a sizable (20 of revenue) business. Rohit Jaiswal, Head of products and
Co-founder
Pricing strategy and competition: B.Tech, MBA (IIM Udaipur)
▪ With a large variety of products, the company has products at different price points Experience: Crompton Greaves, UAE
Exchange, Emel Group
catering to different needs.
▪ Compared to other D2C brands, Bombay Shaving Company is one of the more Deepu Panicker, Co-founder
affordable brands. M.Tech (IIT Bombay)
Experience: McKinsey & Co, FREECULTR,
Future trends: Times Internet
▪ The company is working at expanding its offline presence. It will leverage its
strategic investors (Reckitt Benckiser and Colgate) in doing so. Raunak Munot, Co-founder
▪ It aims to generate 60 of revenue from offline channels in the next two years,
B.Tech, MS
Experience: Audi of America, Group M,
compared to 40 currently. Trove
▪ It plans to expand to the United States, Europe, West Asia, and Australia.

Besides competing with other D2C brands, the Bombay Shaving Co is also up against INVESTORS
traditional players such as Gillette. Leveraging the strengths of its strategic investors, the Fireside Ventures Singularity AMC
Malabar Investment Patni Wealth
brand can improve its offline presence and challenge traditional brands. Having
Sixth Sense Ventures Gulf Islamic Invest.
expanded into more of a men’s personal care brand (opposed to only shaving), the brand
Reckitt Benckiser Group
also poses competition to the likes of Emami and HUL. Colgate-Palmolive India
VCC Edge
Product basket
Category Products FUND RAISING
Grooming Razors, shaving foams, pre shave, post shave, beard trimmer, beard care kit, beard Latest Valuation NA
growth kit, beard straightener kit Fund raised $28mn
Hair Care Hair oil, growth booster kit, hair masks
Date Jan 2022
Skin Care Facial kit, face serum, moisturizer
VCC Edge
Bath Care Bath soaps
Hair Removal Women’s hair removal kit Visage Lines Personal Care
Brands:
BSC women
Page | 40
Pee Safe
Company brief: PeeSafe is a brand by Redcliffe Hygiene that has a product portfolio
focused on women’s hygiene. The brand started off selling toilet seat sanitizers and has
expanded into female and male hygiene products. The company is a house of brands,
including brands like Peesafe, Raho Safe, FURR, and Domina. FOUNDED: 2013
LOCATION: Gurgaon, Haryana
▪ Pee Safe has introduced a variety of products in the feminine hygiene space, a
PROMOTER
Vikas Bagaria, CEO and Co-founder
category highly concentrated on sanitary pads. B.E., MCA Electronics
▪ The company has not only introduced new products, but also continuously develops Experience: V R Forklift Marketing,
new ones, investing in R&D for category growth. SafetyKart.com, SRV Damage Prevention
▪ It has created awareness about its products through advertisements, a step much-
Srijana Bagaria, Co-founder
needed, given the limited availability and education. Bachelors Political Science
Experience: SRV Damage Prevention
▪ The products are priced at a premium to competitors but most of them are new to INVESTORS
India so pricing can’t be compared. Venture Catalysts Safetykart Retail
Alfa Capital Redcliffe Capital
Future trends:
▪
Green Shoots Capital Merrill Estates
The brand is working towards expanding its retail presence. It is looking to add Real Time Ventures
around 50 brand exclusive stores across India by CY22. Alkemi Venture
▪ The company is currently available in Germany with plans to expand into Central VCC Edge
and Western Europe in the future. It has a production unit for sanitizers in Europe.
▪ It will also consider the Middle East, North Africa and South East Asia for further FUND RAISING
Latest Valuation NA
expansion.
▪
Fund raised $3.43mn
For the brand, R&D is the key to introduce new products. Date June 2021
Potential threats/opportunities for listed companies: VCC Edge
The company is competing with not just the sanitary pad companies, but also with the
Redcliffe Hygiene Brands:
likes of V-Wash, with its feminine hygiene products. Attractive packaging and customer
Pee Safe
education are helping the company establish its brand. Raho Safe
FURR
Product basket
Domina
Category Products
Feminine Hygiene Sanitary pads, intimate wash, intimate wipes, menstrual cups, panty liners, etc.
BPC Face serum, stretch mark oil, hair removal, body wash, shaving foam
Sexual Wellness Sexual wellness products like condoms, oils oriented towards women
Safety oriented Face mask and guard, sanitizer, hand wash, surface sanitizer and toilet seat santizer
Page | 41
Licious
Company brief: Licious is a meat delivery D2C brand by the company Delightful
Gourmet. It has a presence in raw meat and seafood, marinades, and packaged foods. It
operates in over 20 Indian cities, with more than 2 million unique customers until date.
FOUNDED: 2015
Key success factors: LOCATION: Bengaluru, Karnataka
▪ The brand has built trust amongst its customers, a key right to win in this space. PROMOTER
▪ Meat delivery was an untouched space with a lack of infrastructure like packaging, Vivek Gupta, Co-founder
sourcing cold storage. CA
▪ India consumption is towards fresh meat rather than frozen foods, a trend seen in the
Experience: Tavent Technologies, Helion
ventures, MobiCom America
west. The brand, hence, recognised the need to deliver fresh meat to its customers.
▪ It has a strong backend sourcing base, working with farmers to produce high quality Abhay Hanjura, Co-founder
meat under defined processing standards. The butchers are a part of the company's BSc
Experience: Infosys, Google, Bajaj Allianz
employee base and ecosystem.
▪ Licious is one of the main drivers that has organised the meat industry by setting INVESTORS
standards, building manufacturing capabilities, cold storage units, etc. to enable Mayfield India UCLA Investment
smooth functioning. Sistema Asia Multiples
▪ Pandemic had accelerated the tier-2 expansion, led by the reverse migration in the Fireside Ventures Temasek
country. Indo Nippon Foods IIFL
▪ Branding is the key, especially carried out through word of mouth, which has helped
3one4 Capital MacRitchie
VCC Edge
the company grow.
Pricing strategy and competition: FUND RAISING
▪ The products are priced at a premium (>50 average) to unbranded products.

Latest Valuation $1bn
▪
Fund raised $52mn
The products are well packaged with a premium and secure feel factor.
Date Oct 2021
Future trends: VCC Edge
▪ By FY22 end, the company is planning to expand its operations to 30 cities and
Delightful Gourmet Brands:
further up to 60 cities by CY22 end.
▪
Licious
Tier-2 cities have delivered superior metrics for growth.
▪ Given the unavailability of superior products in tier-2 regions, there is more demand
for products by the D2C brands. This is visible in other D2C categories as well.
▪ The company has leveraged its existing customer base to enter into future growth
drivers such as the spread business.
▪ D2C winners will be the brands that build core capabilities rather than just
repackaging.
▪ Customers are looking at better quality products, creating solutions to problems
intrinsic to India.

Licious competes with the wet meat industry rather than established brands. It is a
completely unorganised market and there is huge scope for scaling up. While brands like
ITC have its frozen meat and packaged food products, we believe that considering the
availability of a large untapped market, the exposure is not too high.
Product basket
Category Products
Raw meat Raw chicken, mutton, fish and sea food
Ready to cook RTC marinated chicken mutton, fish and sea food products
Spreads Meat based spreads
Page | 42
Country Delight
Company brief: Country Delight, a brand by the company, Beejapuri Dairy, is an app-
based milk delivery service. With proposition of selling unadulterated milk, the brand
sells in 14 Indian cities. It operates under a daily subscription model, delivering cow and
buffalo milk, dahi, ghee, paneer, and fresh bread and eggs. FOUNDED: 2013
LOCATION: Gurgaon, Haryana
▪ Similar to the meat industry, Country Delight also enjoys a large unorganised dairy PROMOTER
Chakradhar Gade, Co-founder
market. It thrives on delivering fresh and unadulterated milk to its customers.
▪
CFA, FRM, PGDM (IIM Indore)
The brand has also provided test kits to its new customers to check the quality of Experience: Infosys, Indxx Capital Mgmt
milk, a trust building activity.
▪ The company has full control over its supply chain that has helped it function Nitin Kaushal, Co-founder
PGDM (IIM Indore)
smoothly, even during the COVID-led lockdowns.
▪
Experience: HSBC
Besides dairy and dairy products, the company has built a supply chain network in
north and west India which gives it access to very high-quality raw materials for INVESTORS
other categories like bread and eggs. IIFL India PE Elevation Capital
▪ With its IoT integration, the company is able to secure and maintain quality of the Indo Nippon Foods Orios Venture
Matrix Partners
products.
▪ The company started off with its subscription model, which would maintain
Alteria Capital
SAIF Partners
customer stickiness. VCC Edge
▪ Milk and milk products by Country Delight are at a significant premium to the
FUND RAISING
Latest Valuation NA
traditional brands. Fund raised $25mn
▪ While at a premium, the brand has launched a VIP membership where the subscriber Date Oct 2020
receives a 30 flat discount on all products, which makes the product pricing more VCC Edge
affordable or at par with package milk by traditional brands.
Beejapuri Dairy Brands:
Future trends: Country Delight
▪ The company is working closely on customer feedback to launch new products or
enter new categories.
▪ The brand captures around 20-30 of the fresh product basket, which the company
looks to expand, adding a restricted set of products that are margin accretive.

With its robust supply chain and quality product, Country Delight poses a risk to the
packaged milk players. Besides the fresh availability of milk, another key advantage of
milk delivery is convenience. With the current discounting, the products by the brand are
at a better value proposition as well.
Product basket
Category Products
Milk Cow milk, low fat cow milk, A2 cow milk and buffalo milk,
Other Dairy Products Ghee, Paneer, Curd
Other F&B Products Multigrain bread, brown bread, white bread, coconut water
Page | 43
Vahdam Teas
Company brief: Vahdam Teas is a health-focused tea brand selling Indian tea overseas.
With recognition from notable personalities like Oprah Winfrey, Mariah Carey, and
Martha Stewart, the brand has a strong mainstream customer base in the US and Europe.
FOUNDED: 2015
It has now been working towards replicating its global success in the Indian markets.
LOCATION: Noida, Uttar Pradesh
PROMOTER
▪ Vahdam tea sells health-focused Indian tea to the west (US and Europe) and for the Bala Sarda, CEO and founder
past two years, the company has been replicating its success in India as well. BBS
▪ The brand in India is still in nascent stages, with INR 250mn annual revenue run rate Experience: b10 media, Youth 360
(of total INR 1.6bn in FY21).

▪
INVESTORS
Vahdam is expanding in the country using digital first strategies in marketing as well Fireside Ventures IIFL AMC
as distribution. White Whale Ventures
▪ The brand is present in the wellness category of tea, a market sized at INR 15-20bn, Sixth Sense Ventures
which is growing much faster than the total tea industry. Singapore Angel Network
▪ The company has also been launching wellness tea products to solve specific Mumbai Angels Network
VCC Edge
problems.
▪ Within F&R D2C, innovation is critical as compared to BPC. New product FUND RAISING
experiment in India is relatively low. Latest Valuation NA
Fund raised $24mn
▪ Vahdam tea is priced at a premium to the traditional as well as other D2C brands
Date
VCC Edge
Sep 2021
such as Tea Box and The Good Life Co.

▪ Vahdam offers a vast variety of products within the health-focused tea. Further, the Vahdam Teas Brands:
company has also launched teas catering to solve specific problems in the domain of VAHDAM
sleep, detox, and immunity.
Future trends:
▪ According to the brand, digital distribution is the best route for new brands (with
less than INR 1bn revenue) to grow.
▪ In the US, the brand expanded its offline presence, post achieving a revenue and
customer base threshold.
▪ The house of brands are more scalable as opposed to a single category brand.
▪ Every year, the cost of building a brand is rising.
▪ For its overseas markets, the company will look at selling other products such as
spices and coffee under its brands, given the large customer base (3mn).

Traditional tea brands, including HUL’s and Tata’s basket of brands, have dominated the
INR 100-120bn traditional tea market. The new age D2C brands compete in the INR 15-
20bn health-oriented tea market, which is a fast growing segment. Traditional brands
have made an appearance in the healthy tea market, but only with restricted options such
as green tea. With a wide variety of products and focus on solutions, the D2C players
have an edge over traditional brands.
Product basket
Category Products
Tea Black, green, chai, herbal, turmeric, oolong, white and iced teas
Super foods Matcha, instant premixes, turmeric latte, elixir
Drink ware Tea makers, infuser, tumblers, cups, bottle, pitcher
Page | 44
OZiva
Company brief: OZiva is a plant-based nutraceuticals D2C brand launched by Zywie
Ventures. Its products range across categories such as women’s health, skin, hair, men’s
health, and general wellness. It also offers personalised diet and fitness consultations and
FOUNDED: 2016
nutritional and fitness content.
LOCATION: Mumbai, Maharashtra
▪ Oziva operates in a niche category of the FMCG healthcare industry, where it has Aarti Gill, CEO and Co-founder
successfully built a brand by launching plant-based innovative products. B.Tech (IIT Rourkee), MBA (Insead)
▪ The company considers R&D as the cornerstone for its success, with huge Experience: Capital One, FitCircle
investments in product development.

Mihir Gadani, Co-founder
▪ A major driver for the company’s growth (2.4x YoY in FY21) has been the rise of the B.Sc., M.Tech
wellness centric population, post the pandemic. Experience: Molecule, FitCircle
▪ The brand’s product line is primarily comprised of problem solving or targeted
INVESTORS
solutions.
▪
LogX Ventures
Given the company’s products are health-oriented, it produces a lot of content to
Matrix Partners
acquire new customers and retain existing ones. With retention, the brand has the F Prime Inc.
opportunity to cross-sell its large portfolio. Eight Roads Ventures
Titan Capital
▪
VCC Edge
Within the nutraceuticals industry, OZiva offers problem solving products targeted
for men, women, and children in the form of capsules or even gummies. FUND RAISING
▪ The products sell at a premium to products by traditional brands such as Dabur, but Latest Valuation NA
its products are not direct substitutes/competition. Fund raised $12mn
▪ OZiva’s powdered health drink products are priced at a premium to its peers. Date Feb 2021
▪ The brand has also ventured into personal care products, with a focus on problem
VCC Edge
solving such as aging, hair fall acne, etc. Zywie Ventures Brands:
Future trends: OZiva
▪ With traction in the OZiva brand, the company is looking at cross-selling as a major
FitCircle
aspect for growth.

▪ This space is highly underpenetrated, with huge scope for the company to grow.
▪ It also has a women’s nutrition product portfolio under a sub-brand Her Balance,
which itself has the potential to scale up into a large brand.
▪ The company is developing ingredients that are now being sold as B2B products.

OZiva competes with the likes of Himalaya and Dabur in the vitamins space. The brand,
however, differs from its competition as the products are more focused on solving
problems rather than their supplement aspect. The company also offers powdered health
supplements (shakes), competing with Horlicks, Amway, etc. It has also extended its
brand into the BPC space. Growing 2.4x YoY in FY21 (on a small base) poses a threat to
established brands in the long term.
Product basket
Category Products
Nutraceuticals Different blends of vitamins
Health Drinks Protein supplements, detox drinks, immunity boosters
BPC Face wash, face serum, hair mask, hair serum, hair oil, shampoo
Page | 45
True Elements
Company brief: True Elements is a brand by HW Wellness. It is focused on selling
breakfast cereals, grains & raw seeds, roasted snacks, and other healthy items. The
products are natural and made of whole grains. The brand is now certified 'Clean Label'
FOUNDED: 2015
by the Clean Label Project, US.
LOCATION: Pune, Maharashtra
PROMOTER
▪ The company’s health driven offerings have helped it gain traction among India’s Puru Gupta, CEO and Co-founder
growing health-conscious population. B.E., MBA (FMS)
▪ The brand showcases its product transparency by providing batch-by-batch Experience: Cognizant, ITC, CII, P&G,
Healthy World and Kartnowa Technologies
information to customers on its website.
▪ Further, the Clean Label certification increases customers’ confidence in the brand. Sreejith Moolayil, COO and Co-
▪ The company allows customers to customise cereal boxes based on their preferences. founder
LLB, MLL & LW, MBA
Pricing strategy and competition: Experience: Tata Motors, Cognizant,
▪ Since the brand picots on “healthy” proposition, it commands a premium over the Healthy World and Fitard
other snacks and cereal products.
▪ Customisation option provides the company a competitive advantage.
INVESTORS
Maharashtra State Social Venture
Future trends: RPG Enterprises
▪ The company has overseas presence in Nepal, Singapore, the US, Mauritius, and VCC Edge
Dubai. It is looking to expand its global footprint in 20 more countries in Europe,
FUND RAISING
South Asia, Australia, Canada, and West Asia.
▪
Latest Valuation NA
It also plans to raise capital for brand expansion in Indian and overseas markets. Fund raised $1.4mn
▪ It is also looking to increase the physical availability of products. Offline sales Date Jan 2021
generate around 20 of its revenue. VCC Edge
Potential threat/opportunity for listed companies: HW Wellness Brands:

The health-oriented food space has gained traction, with the rise of D2C brands. True Elements
Traditional brands now have the opportunity to tap into this vast space as well. While
True Elements' hyper customization is more sustainable for a D2C brand, health-oriented
products can be rolled into the breakfast space. We believe this presents an inorganic
opportunity to various listed F&B players who are trying to tap the breakfast market.
Product basket
Category Products
Cereals Granola, muesli, jowar flakes, wheat flakes, bajara flakes and oats
Breakfast Mixes Dosa mix, pancake mix, oat meal, upma, dalia,
Halim seed, chia seed, sunflower, flax seed, watermelon seed, pumpkin seed, basil
Seeds
seed available in both raw and roasted
Snacks Flavoured seeds, nuts, pulses, oat balls,
Sweets Berry and berry mixes, honey, chocolate products
Page | 46
Sleepy Owl
Company brief: Sleepy Owl is a homegrown Indian D2C coffee brand. The brand had
entered the coffee space with its innovative cold brew offering in India and has, since
then, expanded into selling a large range of coffees like instant, whole bean, ready-to-
FOUNDED: 2016
drink, along with merchandise.
LOCATION: New Delhi, Delhi
PROMOTER
▪ Within the coffee D2C space, Sleepy Owl has created the cold brew and drip coffee Ajai Singh Thandi, Co-founder
bag sub-categories, which has helped it gain traction. Bachelors – Economics (USE & LSE)
▪ In an effort to develop the category, the brand has focused on educating customers Experience: J.P Morgan
about the benefits of freshly-brewed coffee. It endeavors to convert the large tea
Arman Sood, Co-founder
drinking population into coffee drinkers as well. BA.LLB
▪ Its differentiated and unique product offerings have helped it gain market share. Experience: Embibe
▪ The brand has expanded from cold brew to hot brew, ready-to-drink, and flavoured
Ashwajeet Singh, Co-founder
ground coffee formats, in order to tap a larger and evolving consumer base.
LL.B
▪ The company’s coffee is priced at a premium to other D2C brands and traditional
INVESTORS
DSG Consumer Partners
brands in the instant and whole bean categories.
▪
Rukam Capital
Given that it is a category developer, its cold brew is priced at a significant premium, AngelList
with per serving cost of INR 33, vs. instant coffee’s INR 9 and whole bean’s INR 22. VCC Edge
Future trends:
▪
FUND RAISING
Taking the omnichannel approach to sales would be wise. Latest Valuation NA
▪ The company has collaborated with Greater Than gin, with more collaborations in Fund raised $6.5mn
the pipeline. Date Nov 2021
▪ D2C will continue to grow, but for brands to survive, omnichannel is the key. Sleepy VCC Edge
Owl is working towards this end.

▪ The company is looking at the subscription model for its next growth phase as coffee
Sleepy Owl Brands:
Sleepy Owl
is a part of the daily routine amongst coffee drinkers.
▪ It also sees potential in exporting its coffee to markets like the Middle East and South
East Asia.

D2C brands are mainly present in the whole bean coffee or innovative formats like Sleepy
Owl’s cold brew and drip coffee. This is a space where traditional brands like Nescafe
and Bru were not always present. However, with rising customer acceptance of whole
bean/grounded coffee, well-established players like ITC and Nestle have launched new
products in this space, albeit the range is limited. As Nestle is a prominent player in the
instant coffee market, we believe it has the ability to enter into the new coffee domains
with innovative launches.
Product basket
Category Products
Instant Coffee Flavoured and unflavoured instant coffee
Whole Bean Flavoured and unflavoured whole bean/grounded coffee
Brew Packs Cold and hot brew packs
Ready To Drink Flavoured and unflavoured brewed coffee with milk and sugar
Merchandise Brewing equipment, tumblers, pitchers and cups
Page | 47
Thematic reports by HSIE
Cement: WHRS – A key cog Autos: Where are we on “S” FMCG: Defensive Autos: A changed landscape Banks: Double whammy for India Equity Strategy: Atma Indian IT: Demand recovery
in the flywheel curve? businesses but not some Nirbhar Bharat in sight
valuations
Life Insurance: Recovery Retail: Whole flywheel is Appliances: Looing beyond Pharma: Chronic therapy – Indian Gas: Looking India Equity Strategy: Real Estate: Ripe for
may be swift with broken? near-term disruption A portfolio prescription beyond the pandemic Quarterly flipbook consumption
protection driving margins
Indian IT: expanding centre Indian Chemical: Evolution Life Insurance: ULIP vs. MF Infrastructure: On the road Cement: Spotting the sweet Pharma: Cardiac: the Life Insurance: Comparative
of gravity to revolution! to rerating spot heartbeat of domestic annual report analysis
market
Indian microfinance: India Equity Strategy: Autos: Divergent trends in India Internet: the stage is FMCG: Opportunity in Logistics: Indian Railways - Industrials: Triggering a
Should you look micro as Quarterly flipbook PVs and 2Ws set adversity - A comparative getting aggressive new cycle
macros disappoint? scorecard
Indian IT: raising the bar India Equity Strategy: FinTech Playbook: P2M India Hospitals: capital Autos: Will EVs impact the Cement: Riding High Power: Reforms essential
Quarterly flipbook Payments | Surging pool, discipline improving, ‘EV’? for rennaissance
dwindling yields sustenance is key
Fashion & Lifestyle: From a India Equity Strategy: Indian Gas Sector: Consumer Durables: Fans - Quarterly flipbook: FinTech Playbook: Discount Footwear: No bargains here!
disruptor’s lens II Quarterly flipbook Resilience in the eye of the a compounding story but Q2FY22–Demand Brokers
storm underrated environment improves but
input cost inflation dents
profitability
Holdcos for portfolio Cement: A concrete road for FinTech Playbook: Buy Institutional Investors’ Real Estate: On a cyclical Fluorination: Fluorine
diversification net-zero emissions Now Pay Later | De- shareholding pattern - A high reacting fantastically!
mystifying the tablestakes key to spot potential gems
Page | 48
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on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
recommendation(s) or view(s) in this report.
Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative
or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding
the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material
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Sector Thematic

Varun Lohchab Naveen Trivedi Saras Singh

Source: TRAI, Industry, HSIE Research Source: HSIE Research

Source: HSIE Research Source: HSIE Research

Is D2C temporary or structural?

E-retail penetration to further improve

Source: Bain and Company report, HSIE Research

Exhibit 13: Digital ecosystems

D2C and e-retail are global trends, fired in pandemic

Source: Bain and Company report, HSIE Research

Exhibit 20: US vs. India category leader market share

Success of naturals/ayurvedic products was the first real indicator of change

Consumer’s shifting preferences to naturals/ayurvedic products is an indicator that

Institutional funding aiding wings to fly long

Acquisition of traditional brands/co

Exhibit 22: Institution profile and investments

Name Investor Profile Location Fund Size Indian D2C Companies

Inspiring background of D2C companies’ founders

Exhibit 23: Background of D2C companies founders

Name Position Education Past Work-Ex Bio/Details

D2C: Key success factors

Unique product proposition

Going the natural way

Individualisation and customisation

Support from rapid development of the ecosystem

Trust in online payment, a key enabler

Changes in shopping habits a key positive

A new age of customer interactions

New platforms being developed to support reach

Tech enabled social media presence

D2C: Disruption or opportunity

Exhibit 24: Feedback - mainstream, D2C companies and investors

Exhibit 25: Potential impact (%) on domestic revenue of mainstream companies

Exhibit 26: D2C potential impact (%) on domestic revenue

Source: HSIE Research

Source: HSIE Research

What is correct valuation premium, as assumptions alter?

Assumption 1: Market leaders will continue to gain market share

Assumption 2: Distribution and supply chain provide a competitive edge

Assumption 3: Consumers will not experiment in BPC

Assumption 4: Food is a safe haven for top brands

Assumption 5: Premiumisation only for market leaders

Assumption 6: Margin trajectory will sustain

Source: Companies, HSIE Research Source: Companies, HSIE Research

Source: Companies, HSIE Research Source: Companies, HSIE Research

Will changing business assumption impact valuation premium?

The question is whether FMCG companies’ valuation will rebound (after

Exhibit 32: Valuation impact on change in assumptions

30 EPS Gr (%) P/E (x) 65x EPS Gr (%) P/E (x)

GCPL, 5% ITC, 42% BRIT, 5%

HUVR, 24% NEST, 12%

Exhibit 39: Stock return

Exhibit 40: FMCG Universe: valuation trend

Exhibit 41: Valuation summary

Exhibit 42: Change in estimate, target multiple, TP and rating

Competitive landscape change in BPC

Source: Nykaa, HSIE Research Source: Nykaa, HSIE Research

2,000 60,000 4.6

Source: Nykaa, HSIE Research Source: Nykaa, HSIE Research