FMCG

Inside Look: Disruptor (D2C) vs. Disrupted (FMCG)

FMCG | Sector Report | September 13, 2022

Top-10 D2C have ~3%+ MS in overall BPC
Revenues MS in BPC (RHS)
D2C (Direct-to-Consumer) onslaught is here and thriving. This report attempts to look
30 4
at the changing landscape in Beauty & Personal care (BPC) due to D2C advent from
3.0
three lenses – (1) the opportunity (D2C getting sizeable, we estimate ~6x+ rise over
25
3 FY22-27 to ~USD 4.5 bn; to account for third of incremental growth in BPC), (2) the
20
disruptor (D2C controls ~4.3% share of overall BPC, 33%+ of online BPC already) and
(Rs bn)

15 1.5 2 (%)
(3) the disrupted/ incumbents (D2C in BPC poses higher risk to HUL/ Emami). BPC’s
27

10 0.7 market dynamics and D2C’s surge, D2C’s success factors and scalability challenges,
1
0.3
12

5 FMCG’s defense tactics and risk to incumbents are some of the key debates addressed.
6
2

0 0
FY19 FY20 FY21 FY22 Stage set for D2C brands in BPC; fast-growing online market key impetus
Source: Axis Capital
While a highly consolidated BPC market (top-10 players in the Indian BPC market control
50%+ share vs. ~26% at a global level) and an under-served consumer provide the key
Mamaearth broke in top-10 BPC (FY22 rev)
backdrop for rise of D2C brands, a fast-growing online BPC market (~27% CAGR over
195

250
FY22-27 to Rs 442 bn; ~20% online penetration) where D2C model scores over the
200
traditional distribution, innovation and marketing model puts D2C brands in a strong
(Rs bn)

150
position to grow and challenge legacy FMCG brands.
100
51
48
34
32
32
23
15

50
10

D2C already sizeable in BPC; we estimate ~6x+ growth over FY22-27

9

0
Top D2C companies in BPC have established a sizeable presence (top-10, on aggregate,
GCPL
HUL

Mamaearth
Colgate

Gillette India
Marico

Nivea India
Emami
Dabur
Loreal India

Source: Company, Axis Capital; Note: (1) Mamaearth
refers to Honasa Consumer, (2) Loreal and Nivea
revenue for FY22 is our estimate, and (3) Top-10 in BPC
is ex-P&G (data on BPC revenues not available)
Top-10 D2C added 50%+ of top-10 FMCG rev
80
68
60
(Rs bn)
have seen ~11x rise in revenue over FY19-22 from Rs 2.4 bn to ~Rs 27 bn and have
cumulatively raised ~Rs 50 bn till date). We estimate overall D2C market size in BPC at
Rs 55 bn (consumer level) in FY22, ~4.3% of total BPC and significantly higher 33% of
online BPC market. We estimate it to grow at ~45% CAGR over FY22-27 to Rs 350 bn
(~16% share of total BPC; ~54% in online and ~6% in offline BPC).
What is the D2C secret sauce?
D2C brands are agile and behave differently vs. legacy FMCG brands in the way they
recruit (through online channels), educate (via digital content/ social media and
influencers) and retain consumers (digital marketing, constant feedback loop and fast -
paced innovation). D2C brands have strong understanding of consumers and have been
quick to capitalize on product and price white spaces (often premium-end) which coupled

40 35 with high gross margins (65-70%+) and asset-light model has helped D2C to scale up fast.

20 Low barriers to entry, high barriers to scale

As D2C grows, it is becoming difficult to break away from clutter, retain consumers and
0 improve profitability. However, top D2C companies are rising to scalability challenge
Top-10 D2C Top-10 FMCG through – (1) omni-channel expansion (imperative and way forward, several top D2C
Source: Company, Axis Capital; Note: Refers to companies are getting 30%+ revenue from offline), (2) launching a set of smaller brands to
incremental absolute revenue over FY19-22 at
consumer level in BPC
cater to wider audience/ niches, (3) adopting inorganic route and/ or expand into
international geographies and (4) evolving into a house of brands model (Mamaearth) or
an all-encompassing content-to-commerce model (The Good Glamm Group).

Within FMCG (BPC), we see higher risk to HUL and Emami

We estimate Emami and HUL are at higher risk to D2C disruption (~23%/ ~30% of their
domestic revenue at risk), Dabur and Marico are at lower risk (10-13% of revenue at risk)
while GCPL is at the lowest risk (only ~4% revenue at risk). For HUL, while BPC growth
over FY19-22 at ~3% (weaker ~1%, ex-soaps) was hit by slowdown and Covid
disruptions (impacted offline channel), D2C market in BPC over the same period grew by
Anand Shah ~10x from Rs 5 bn to ~Rs 55 bn as online penetration of BPC surged. Our assumptions
anand.shah@axiscap.in for HUL’s BPC of ~10% (overall) and ~11% (ex -soaps) revenue CAGR during FY22-25
Gaurav Jogani (~13% CAGR over FY23-25, ex-soaps) are at risk if online BPC penetration keeps rising.
gaurav.jogani@axiscap.in

Download Axis Capital is also available on Bloomberg (AXCP<GO>), Reuters.com, Firstcall.com and Factset.com. 1
FOR IMPORTANT DISCLOSURES AND DISCLAIMERS, REFER TO THE END OF THIS MATERIAL
 FMCG
Sector Report

Table of Contents

Story in charts ..................................................................................................................................... 3

Stage set for D2C brands ................................................................................................................ 8

D2C in BPC – a strong force; to grow ~6x+ over FY22-27 to Rs 350 bn ........................13

Risks rising for legacy FMCG com panies from D2C onslaught ..........................................21

September 13, 2022 2

 FMCG
Sector Report

Story in charts

Exhibit 1: Overall BPC to grow at ~12% CAGR, online BPC to grow faster at ~27% CAGR over FY22-27
FY16 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E CAGR (%)
FY16-19 FY19-22 F22-27
Market size (Rs bn)
Overall BPC 897 1,176 1,267 1,120 1,267 1,417 1,584 1,772 1,981 2,199 9.4 2.5 11.7
Online BPC 17 46 70 91 134 179 231 294 368 442 39.1 43.1 26.9
Offline BPC 880 1,130 1,197 1,029 1,133 1,238 1,353 1,477 1,613 1,757 8.7 0.1 9.2
Online penetration (%) 1.9 3.9 5.5 8.1 10.6 12.6 14.6 16.6 18.6 20.1
Incremental market size (Rs bn)
Overall BPC 91 -147 147 150 167 187 209 218
Online BPC 24 21 44 44 53 63 74 74
Offline BPC 67 -168 103 106 115 125 135 144
Online share of incremental (%) 29.6 29.5 31.5 33.5 35.5 33.7
Source: RedSeer, Axis Capital

Exhibit 2: D2C size in BPC to grow at 45% CAGR over FY22-27 to Rs 350 bn (~USD 4.5 bn); ~16% share of overall BPC
FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E CAGR (%)
FY22-27
Market size (Rs bn)
Overall BPC 1,267 1,120 1,267 1,417 1,584 1,772 1,981 2,199 11.7
Online BPC 70 91 134 179 231 294 368 442 26.9
Offline BPC 1,197 1,029 1,133 1,238 1,353 1,477 1,613 1,757 9.2
Online penetration (%) 5.5 8.1 10.6 12.6 14.6 16.6 18.6 20.1
Total D2C BPC size 12 24 55 96 145 207 278 350 44.7
Online revenue salience (%) 95 90 80 76 73 71 70 68
Offline revenue salience (%) 5 10 20 24 27 29 30 32
Incremental share in online (%) 47 52 65 63 65 62 60
Incremental share in offline (%) 8 11 14 16 18 19
Market share of D2C (%)
- in Total BPC 1.0 2.1 4.3 6.8 9.2 11.7 14.0 15.9
- in Online BPC 17 24 33 41 46 50 52 54
- in Offline BPC 0 0 1 2 3 4 5 6
Source: RedSeer, Axis Capital (D2C sizing is our estimates)

Exhibit 3: Top-10 D2C BPC brands in India have grown ~11x over FY19-22 to an estimated ~Rs 27 bn (aggregate revenue)
Company Key brands FY17 FY18 FY19 FY20 FY21 FY22 FY20-22 CAGR (%)
Revenue, Rs mn
Honasa Consumer Mamaearth 2 53 168 1,098 4,609 9,200 189
Vellvette Lifestyle Sugar Cosmetics 73 186 569 1,036 1,263 2,500 55
Body Cupid Wow Skin Sciences 233 216 402 865 1,887 4,000 115
Pureplay Skin Sciences Plum 41 91 219 523 906 1,750 83
Pep Technologies mCaffeine 2 12 46 403 665 1,750 108
Zed Lifestyle Beardo 84 227 482 796 638 949 9
Amishi Consumer Technologies The Moms Co. 11 74 222 457
Sanghvi Beauty and Technologies MyGlamm 138 86 137 440 446 5,000 237
Helios Lifestyle The Man Company 56 120 203 392 429 828 45
Visage Lines Personal Care Bombay Shaving Company 16 40 79 176 377 1,000 138
Total 644 1,041 2,379 5,951 11,677 26,977 113
Source: Ministry of Corporate Affairs – ROC, Axis Capital; Notes: (1) MyGlamm restructured into Good Glamm Group post spate of acquisitions in FY22 (estimated rise in
FY22 due to acquisitions), (2) The Moms Co was acquired by My Glamm for ~Rs 5 bn in Oct 2021 and (3) FY22 revenues are estimates (media reports)

September 13, 2022 3

 FMCG
Sector Report

Exhibit 4: Top-10 D2C in BPC added 50%+ of incremental revenue added by top FMCG companies over FY19-22 (absolute basis)
FY16 FY17 FY18 FY19 FY20 FY21 FY22 CAGR (%)
(Rs bn) FY16-19 FY19-22
Market size
Overall BPC 897 984 1,073 1,176 1,267 1,120 1,267 9.4 2.5
Online BPC 17 26 35 46 70 91 134 39.1 43.1
Offline BPC 880 958 1,037 1,130 1,197 1,029 1,133 8.7 0.1
Online penetration (%) 1.9 2.6 3.3 3.9 5.5 8.1 10.6
BPC revenue of key FMCG cos
HUL 142 144 159 177 173 180 195 7.6 3.3
Dabur 23 22 23 26 26 29 32 4.3 7.7
Colgate 37 38 40 42 43 46 48 4.9 4.6
Marico 35 34 38 45 43 46 51 8.9 4.2
GCPL 21 21 24 26 24 27 32 7.1 7.3
Emami 12 13 14 14 13 14 15 7.7 0.4
Loreal India 29 29 29 33 35 29 34 3.5 1.7
Gillette India 20 18 17 19 17 20 23 -1.7 6.6
Bajaj Consumer Care 9 8 8 9 9 9 9 1.6 -1.4
Nivea India 6 7 9 10 11 8 10 17.0 -0.5
Total Revenues 333 333 360 401 394 407 448 6.4 3.8
Total Consumer level Revenues 475 476 515 572 563 581 640
% share of Top-10 in BPC 53 48 48 49 44 52 51
Top-10 D2C Companies in BPC
Total Revenues 2.4 6.0 11.7 27.0 124.7
Total Consumer level Revenues 3.4 8.5 16.7 38.5
% share of Top-10 in BPC 0.3 0.7 1.5 3.0
% share of online BPC 6 10 15 23
Source: Company, Ministry of Corporate Affairs – ROC, RedSeer, Axis Capital; Note: (1) HUL revenue for FY16-18 adjusted as per LTL growth rates to make it comparable to
post GST/ Ind-AS scenario and (2) FY22 revenues for Loreal India and Nivea India are estimates

Exhibit 5: ‘Relevant’ BPC market for D2C is likely to grow at ~14% CAGR over FY22-27 (55-60% salience of BPC)
CAGR (%)
FY16 ...FY19 FY20 FY21 FY22 FY23E FY24E ...FY27E FY16-19 FY19-22 FY22-27E
India BPC market (Rs bn) 897 1,176 1,267 1,120 1,267 1,417 1,584 2,199 9.4 2.5 11.7
Relevant BPC categories (Rs bn) 473 649 713 624 719 822 938 1,379 11.2 3.4 13.9
% of total 53 55 56 56 57 58 59 63
Other categories (Rs bn) 424 526 554 496 548 595 646 820 7.4 1.4 8.4
Online BPC
Online market (overall BPC market) 17 46 70 91 134 179 231 442 39.1 43.1 26.9
Online penetration (%) 1.9 3.9 5.5 8.1 10.6 12.6 14.6 20.1
Online - relevant categories (Rs bn) 11 31 51 59 86 118 157 305 39.7 39.7 29.0
Online penetration (%) 2.4 4.8 7.2 9.5 11.9 14.3 16.7 22.1
% of online BPC market 73 65 64 66 68 69
Source: RedSeer, Axis Capital

September 13, 2022 4

 FMCG
Sector Report

Exhibit 6: D2C brands in India are well funded

Company Key brands Funds raised (Rs bn)
Honasa Consumer Mamaearth 6.4
Vellvette Lifestyle Sugar Cosmetics 6.0
Body Cupid Wow Skin Sciences 7.2
Pureplay Skin Sciences Plum 3.8
Pep Technologies mCaffeine 3.2
Amishi Consumer Technologies The Moms Co. 0.7
Sanghvi Beauty and Technologies MyGlamm 18.6
Helios Lifestyle The Man Company 0.7
Visage Lines Personal Care Bombay Shaving Company 3.0
Total (Rs bn) 49.7
Source: Media reports, Axis Capital; Note: The Moms Co was acquired by My Glamm for ~Rs 5 bn in Oct 2021

Exhibit 7: D2C brands in BPC space enjoy high gross margin in the range of 65% to 70%+
Company Key brands FY17 FY18 FY19 FY20 FY21
Gross margin (%)
Honasa Consumer Mamaearth 68 69 65 65 71
Vellvette Lifestyle Sugar Cosmetics 53 62 60 61 68
Body Cupid Wow Skin Sciences 65 57 39 39 55
Pureplay Skin Sciences Plum 60 70 65 65 70
Pep Technologies mCaffeine 76 66 63 65 63
Zed Lifestyle Beardo 61 68 73 59 55
Amishi Consumer Technologies The Moms Co. 56 60 53 58
Sanghvi Beauty and Technologies MyGlamm 92 82 69 68 61
Helios Lifestyle The Man Company 63 57 49 50 55
Visage Lines Personal Care Bombay Shaving Company 63 35 52 57 48
Total 69 63 59 58 65
Source: Ministry of Corporate Affairs – ROC, Axis Capital

Exhibit 8: D2C brands have a strong focus on digital marketing and lead most legacy brands in social presence
# of followers on Instagram (in ‘000)
2,300
2,200

3,000
1,100
1,000
1,000

2,000
830
693
655
639
635
569
488
403
324
313
300
248
241
217

1,000
190
129
114
111
106
100
47
41
34

0
Nivea

Vaseline
Mamearth

The Man Co
Beardo
Elle India

Garnier
Juicy Chemistry

Lux
WoW

Mcaffeine

Simple
Renee Cosmetics
Just Herbs

Loreal
Faces Canada
Plum

Nyx Cosmetics
Sugar

Himalaya
Mac Cosmetics

Ustraa
Myglamm
Lakme

Ponds
Body Shop

Good Vibes

Bombay Shaving Co

Source: Instagram, Axis Capital; Note: Grey highlight refers to legacy/ incumbent brands

September 13, 2022 5

 FMCG
Sector Report

Exhibit 9: D2C focus categories in BPC include hair care, skin care, bath & body, cosmetics and men’s grooming
Product presence of key D2C companies across focus categories
WoW Mamaearth Plum MyGlamm Sugar Bombay Shaving The Man Co Beardo
Hair Care
Hair oil
Shampoo/Conditioners
Hair Masks/Serums
Hair styling gels/wax
Skin Care
Face wash/scrub
Face Cream
Face Serum/Mask
Moisturizer
Sunscreen
Make up remover
Toner
Under Eye Cream
Bath & Body
Body Wash/ Scrub
Body Moisturizer
Bath Soap
Hand Wash/Cream
Makeup/Cosmetics
Lips/Face/Eyes/Nails
Men's Grooming
Beard grooming
Electric trimmer
Shaving range
Men's Toiletries
Others
Nutrition & Health
Wellness
Babycare Range
Fragrances
Women's Hygiene
Depilatories
Source: Company websites, Axis Capital; Note: Green indicates presence in category and orange indicates the company is not present in the category

September 13, 2022 6

 FMCG
Sector Report

Exhibit 10: HUL and Emami are at higher risk to D2C disruption
Revenue salience (%)
To calculate portfolio at risk Company/ category Dabur HUL Godrej Marico Emami
BPC - total (domestic) 43 38 46 70 48
to disruption, we have Soaps 14 36
Skin Care 4 11 17
(1) excluded CNO, Amla and
Coconut Hair Oil (CNO) 1 45
cooling oil from hair oils and Value Added Hair Oils (VAHO) 15 1 22 30
Hair colors 11
(2) assumed only ~10% Shampoos 3 7
of soaps revenue for Oral care 18 2
Color cosmetics 3
GCPL/ HUL Deodorants 1 1 1
Baby care 2
Styling Agents 2
Domestic FMCG as % of total 71 100 57 77 82
BPC as % of total Cons revenue 31 38 26 54 39
At risk as % of domestic FMCG 13 23 4 10 30
At risk as % of total Cons revenue 9 23 2 8 24
Source: Company, Axis Capital; Note: Categories in grey are D2C’s focused categories and at higher risk

Exhibit 11: HUL’s BPC revenue (ex-soaps) grew at ~1% CAGR over FY19-22

Reported BPC Ex-soaps BPC

16
HUL’s BPC growth slowed 13.5 13.6
11.9
down over FY19-22 to ~3% 12 10.8
10.4 10.7
overall and a weaker ~1% 9.1 9.6 9.5
8.3 7.8
ex-soaps (as per our 8
estimate). However, during 3.4 3.6 3.6
4
the same period, the D2C 1.8 0.9
market in BPC grew ~11x 0
from Rs 6 bn to ~Rs 69 bn as
(1.8) (1.3)
online penetration of BPC (4)
FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
surged from ~4% to 10%+
Source: Company, Axis Capital

September 13, 2022 7

 FMCG
Sector Report

Stage set for D2C brands

The pandemic has ushered significant changes in consumer mindset, their preferences, and the
way they shop including the transition from offline to online channels and the rise of the digital-
first or Direct-to-consumer (D2C) brands ( refers to businesses which typically get majority of
their revenue or customer acquisition from online channels ).

 Rising awareness and exposure to global trends and higher disposable incomes are
driving change in Indian consumers who have evolved needs now including willingness to
experiment more with both brands and niche categories and pay premium for right product.
D2C brands are thriving on this experimentative culture filling in both product and price
whitespaces in the BPC market often on the premium end of the market.
 D2C brands are agile and behave differently vs. legacy FMCG brands in the way the recruit
(through online channels), educate (via digital content/social media and influencers) and
retain consumers (digital marketing, constant feedback loop and fast -paced innovation).
D2C brands are breaking through the distribution moat of legacy FMCG brands (enabled
by rising ecommerce and digital ecosystem) posing a structural threat especially to
premiumization tailwind of legacy FMCG brands.
 While a highly consolidated BPC market and an under-served consumer provide the key
backdrop for rise of D2C brands, a fast-growing online BPC market where D2C model
scores over the traditional distribution, innovation and marketing model puts D2C
brands in a strong position to grow and challenge legacy FMCG brands.

Exhibit 12: Consolidated BPC market, rising online penetration, evolving consumer and robust ecosystem – stage set for D2C

Consolidated BPC market/rising D2C ecosystem in place

online penetration provide a solid
backdrop
BPC market in India is highly
consolidated - top-5 players control
between 50-80% market share in most
key BPC sub-categories.
On an aggregate basis, top-10 players
in Indian BPC market control 50%+
share vs. ~26% at a global level.
We estimate online BPC market to
grow at ~27% CAGR over FY22-27 to
~Rs 442 bn (USD 5.5 bn; ~20% salience
of overall BPC); likely to account for a
third of incremental growth in BPC.
Under-served consumer is key target
Third party manufacturing, 3PL
Legacy brands are focused on core/ logistics infra and strong online
large categories through existing marketplaces provide for a solid
brands/ variants with most companies infrastructure for rise of D2C.
perceiving online as additional channel
of growth. D2C distribution model cuts through
multiple-tier structure and
Emerging consumer has evolved needs intermediaries and is tuned for faster
including willingness to experiment GTM/ innovation and greater control
more with both brands and niche through data and strong feedback loop.
categories and pay premium for the
right product.
Rising awareness and exposure to
global trends and higher disposable
incomes are driving this change.

Source: Axis Capital

September 13, 2022 8

 FMCG
Sector Report

Highly consolidated BPC market provides perfect backdrop for D2C brands
BPC market in India is highly consolidated and is dominated by the top-5 players - control
between 50-90% market share in several key BPC sub-categories. On aggregate basis, top-10
players in the Indian BPC market control ~53% share (has been trending down from 60%+ over
the past decade) vs. ~26% at a global level. Rich brand legacy, strong dist ribution network and
high media spends have helped legacy FMCG brands flourish, maintain high market share, and
create strong entry barriers (due to high cost of building a new brand). However, many of these
entry barriers are disappearing with rise of ecommerce/ digital ecosystem (well supported by
third party manufacturing/ logistics infrastructure) enabling a flurry of D2C brands.

Exhibit 13: Top-5 control 50-90% share in key BPC categories Exhibit 14: Top-10 share in BPC at 53% (albeit trending down)
Market share of top-5 companies in key BPC categories, FY20 (%) Market share of top-10 companies in BPC market in India (%)
100 86 89 70 65 64
83 62 61 60
80 74 70 60 57 55
68 54 53 53
63 59
60 50 50
(%)

(%)
40 40

20 30
0 20
Facial Skin Care
Shampoos

Men's shaving
Body Wash
Bar Soap
Baby Care

Toothpaste
Body Skin Care
Colourants

10

FY17
FY11

FY12

FY13

FY14

FY15

FY16

FY18

FY19

FY20
Source: Industry estimates, Axis Capital Source: Industry estimates, Axis Capital

Exhibit 15: Top-10 global BPC companies… Exhibit 16: …had ~26% share in USD 522 bn global BPC market
Brand revenue from BPC segments, CY19 (USD bn) Market share of top-10 (aggregate) in global BPC market, CY19 (%)
40 34
Top-10
30 25 26%
19
20 15
10 9
10 7 6 5 5

0
Beiersdorf
P&G
Loreal

Kao

Johnson & Johnson

Unilever

Coty

Amore Pacific
Estee Lauder

Shiseido

Others
74%

Source: Avendus D2C report, Axis Capital Source: Avendus D2C report, Axis Capital

September 13, 2022 9

 FMCG
Sector Report

D2C distribution model tuned for faster GTM and greater control
D2C companies predominantly sell directly to consumer (through their own website or
marketplaces) bypassing traditional method of distribution which goes through multiple
intermediaries (manufacturer -> distributor -> wholesaler -> retailer -> consumer). D2C model
does score over traditional distribution on multiple aspects:
 D2C enjoys faster time-to-market as it cuts through multiple-tier structure/ intermediaries.
 D2C model enables a constant feedback loop with customers, faster innovation timelines
and optimized inventory management.
 D2C also enjoys superior control over customer data and experience enabling better
engagement and repeat purchases.

Exhibit 17: Traditional distribution model vs… Exhibit 18: … D2C (Direct-to-Consumer) model
Marketplaces

Manufacturer Website/ app Consumer

Offline

Source: Axis Capital Source: Axis Capital

BPC a Rs 2.2 trn market by FY27; online penetration to rise to ~20%

Overall, Beauty & Personal Care (BPC) market in India stood at ~Rs 1.3 trn (USD 16 bn) in FY22
and is expected to grow at ~12% CAGR over FY22-27 to reach Rs 2.2 trn (USD 27 bn) as
favorable demographics, increasing spends particularly from non-metro cities and social media
influence are expected to drive greater spends over the next few years.

Exhibit 19: Overall BPC to grow at ~12% CAGR, online BPC to grow faster at ~27% CAGR over FY22-27
FY16 FY19 FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E CAGR (%)
FY16-19 FY19-22 F22-27
Market size (Rs bn)
Overall BPC 897 1,176 1,267 1,120 1,267 1,417 1,584 1,772 1,981 2,199 9.4 2.5 11.7
Online BPC 17 46 70 91 134 179 231 294 368 442 39.1 43.1 26.9
Offline BPC 880 1,130 1,197 1,029 1,133 1,238 1,353 1,477 1,613 1,757 8.7 0.1 9.2
Online penetration (%) 1.9 3.9 5.5 8.1 10.6 12.6 14.6 16.6 18.6 20.1
Incremental Market size (Rs bn)
Overall BPC 91 -147 147 150 167 187 209 218
Online BPC 24 21 44 44 53 63 74 74
Offline BPC 67 -168 103 106 115 125 135 144
Online share of incremental (%) 29.6 29.5 31.5 33.5 35.5 33.7
Source: RedSeer, Axis Capital

September 13, 2022 10

 FMCG
Sector Report

Exhibit 20: Multiple growth levers at play to boost BPC growth

Growth in BPC
spend by Millenials
and GenZ
Rise in spend in
Premiumization
specialized BPC
(led by increased
categories and
awareness and
hyper-
spending powers)
personalization

Explosion of Online
Digital integration
content-led
BPC growth (rising use of digital
discovery (Social
commerce/live levers tools like virtual
try-ons, stores)
selling)

Source: Nykaa Investor presentation, Axis Capital

We note online BPC is likely
to account for a third of
incremental growth for the
overall BPC market
Online BPC a ~Rs 440 bn opportunity by FY27; to account for a third of incremental growth
Within BPC, online penetration in India stood at 10%+ in FY22, significantly lower than the US
(15-20% in CY19) and China (25-35% in CY19) highlighting headroom for growth. We estimate
online BPC to grow at strong ~27% CAGR over FY22-27 more than tripling in size to Rs 442 bn
(~USD 5.5 bn; ~20%+ penetration). Higher discretionary spending especially in non-metro cities,
availability of specialized brands and inadequate traditional retail channels are driving higher
online BPC spends.

Tailwinds in play to improve online penetration within BPC

 Rising digital adoption: India has undergone significant digital transformation in recent
Industry estimates suggest
years, particularly post the launch of Jio that democratized data access and with the success
that there could be an of public digital infrastructure such as Aadhar, UPI, and India Stack. Digital adoption is
addition of ~300 mn expected to continue with increasing smartphone proliferation and growth in the number
smartphone and ~200 mn of internet users. Focus on digital inclusion by the government and availability of vernacular
solutions from startups is likely to provide impetus to e-commerce adoption among these
internet users by 2025
new users.

Exhibit 21: India’s online shopper base set to more than double over CY20-25 to 350-400 mn shoppers

Source: RedSeer, Axis Capital

September 13, 2022 11

 FMCG
Sector Report

 Large young population: India has the largest Gen-Z and millennial population globally.
According to UN Population Division estimates 2019, ~375 mn Indians are Gen -Z (10-24
years of age) and ~333 mn Indians are millennials (25-39 years of age), forming ~51% of the
Indian population. Both groups are considered as India’s biggest spenders, which is likely to
increase further as they enter their prime earning and spending years.

Exhibit 22: India has high % of Gen Z + Millennial population compared to China and US

Gen Z + Millenials (L) % of population (R)

800 100%
708

581 80%
600
51% 60%
(mn)

400 41% 41%

40%

200 133
20%

0 0%
India China USA
Source: RedSeer, Axis Capital

 Strong growth from tier 2+ cities: Industry estimates suggest that ecommerce platforms
serve ~20x the pin codes of organized retail. With ~165 mn of new online shoppers
expected to come from tier 2+ cities by FY26, there is a greater market opportunity for
online channels to tap these regions with limited physical retail infrastructure.

Exhibit 23: Tier 2+ cities to see highest online shopper addition; 165 mn+ over FY21-26
Number of online shoppers split by tier

Metro Tier 1 Tier 2+

400

300
(mn)

200 252

85
100
27 27 37
14
34 48 48
0
FY17 FY21 FY26E

Source: RedSeer, Axis Capital

 Social media influence: Unlike in the past where TV advertisement was the primary
medium for product and brand awareness, young consumers today rely on multiple digital
sources for discovery and research. As per the Google, WPP and Kantar's Connected
Beauty Consumer Report, 9 out of 10 consumer journeys have been influenced by digital.

September 13, 2022 12

 FMCG
Sector Report

D2C in BPC – a strong force; to grow ~6x+ over FY22-27 to Rs 350 bn

Top D2C brands in BPC have a sizeable presence now

On an aggregate basis, top-10 D2C companies in BPC have seen ~11x rise in revenue (actual till
FY21, FY22 revenue estimated based on media articles/ interviews) over FY19-22 from
Rs 2.4 bn to Rs 27 bn. We note this spike is partly also aided by consolidation/ acquisitions
especially by players like MyGlamm which restructured itself to Good Glamm Group in FY22
and undertook spate of acquisitions (~2x rise in FY22 ex-MyGlamm – in a Covid hit year).
 While Mamaearth leads the pack with Rs 9 bn+ revenue in FY22, other top companies like
Wow Skin Sciences, Good Glamm Group and Sugar Cosmetics are estimated to have
revenue of Rs 2.5-5 bn in FY22 (significantly higher on exit basis).
 Cumulatively, these top-10 D2C companies in BPC have raised ~Rs 50 bn (equity funding)
till date with highest raise by Good Glamm group to the tune of ~Rs 18.6 bn. The top-3 in
the space have commanded valuation in the range of USD 0.5 bn – USD 1.1 bn (again led by
Mamaearth).

Exhibit 24: Top-10 D2C BPC brands in India have grown ~11x over FY19-22 to an estimated ~Rs 27 bn (aggregate revenue)
Company Key brands FY17 FY18 FY19 FY20 FY21 FY22E FY20-22 CAGR (%)
Revenue, Rs mn
Honasa Consumer Mamaearth 2 53 168 1,098 4,609 9,200 189
Vellvette Lifestyle Sugar Cosmetics 73 186 569 1,036 1,263 2,500 55
Body Cupid Wow Skin Sciences 233 216 402 865 1,887 4,000 115
Pureplay Skin Sciences Plum 41 91 219 523 906 1,750 83
Pep Technologies mCaffeine 2 12 46 403 665 1,750 108
Zed Lifestyle Beardo 84 227 482 796 638 949 9
Amishi Consumer Technologies The Moms Co. 11 74 222 457
Sanghvi Beauty and Technologies MyGlamm 138 86 137 440 446 5,000 237
Helios Lifestyle The Man Company 56 120 203 392 429 828 45
Visage Lines Personal Care Bombay Shaving Company 16 40 79 176 377 1,000 138
Total 644 1,041 2,379 5,951 11,677 26,977 113
Source: Ministry of Corporate Affairs – ROC, Axis Capital; Notes: (1) MyGlamm restructured into Good Glamm Group post spate of acquisitions in FY22 (estimated rise in
FY22 due to acquisitions), (2) The Moms Co was acquired by My Glamm for ~Rs 5 bn in Oct 2021 and (3) FY22 revenues are estimates (media reports)

Exhibit 25: D2C brands in India are well funded…

Company Key brands Funds raised (Rs bn)
Honasa Consumer Mamaearth 6.4
Vellvette Lifestyle Sugar Cosmetics 6.0
Body Cupid Wow Skin Sciences 7.2
Pureplay Skin Sciences Plum 3.8
Pep Technologies mCaffeine 3.2
Amishi Consumer Technologies The Moms Co. 0.7
Sanghvi Beauty and Technologies MyGlamm 18.6
Helios Lifestyle The Man Company 0.7
Visage Lines Personal Care Bombay Shaving Company 3.0
Total (Rs bn) 49.7
Source: Media reports, Axis Capital; Note: The Moms Co was acquired by My Glamm for ~Rs 5 bn in Oct 2021

September 13, 2022 13

 FMCG
Sector Report

Exhibit 26: …and have raised capital at sizeable valuations

Company Valuation (Rs bn) Date
Mamaearth 80 Dec-21
MyGlamm 63 Jan-22
Sugar 35 May-22
Wow Science 22 May-22
Plum 19 Mar-22
mCaffeine 10 Mar-22
Source: Media reports, Axis Capital

We estimate D2C BPC market size at Rs 55 bn in FY22 (~4.3% of total BPC)

To estimate D2C market size in BPC – (1) we use revenue of top-10 D2C players as a starting
point (at consumer level, grossing up ~Rs 27 bn revenue for commissions/ discounts/ taxes in
FY22 works out to ~Rs 39 bn), (2) add to it private brands’ revenue from BPC platforms like
Nykaa (~11.2% of GMV in FY22; equates to ~Rs 3.5 bn revenue) and Purplle and (3) assume
together they account for ~80% of total D2C pie in BPC. We arrive at an estimated market size
of D2C in BPC at Rs55 bn, around 4.3% of total BPC market and significantly higher 33% of
online BPC market in FY22.

Assuming an 80-20 online-offline mix for D2C players in BPC in FY22 (many among the top D2C
companies in BPC get 30%+ revenue from offline channels) , we believe D2C accounted for
~52% share in incremental revenue for online BPC and much smaller ~8% share of incremental
revenue for larger offline BPC market in FY22. Assuming D2C’s share in incremental online
revenue to settle a shade higher between 60-65% (as exit run-rate for the top-10 D2C
companies is much higher vs. FY22E revenues with aggressive plans) and share in incremental
offline revenue to inch up (to ~20% in FY27E, as they scale up focus on offline), we estimate D2C
market size in BPC to grow at ~45% CAGR (6x+) over FY22-27 to Rs350 bn and share of D2C in
total BPC to rise to ~16% by FY27 (54% share in online and 6% in offline).

Exhibit 27: D2C size in BPC to grow at 45% CAGR over FY22-27 to Rs 350 bn (~USD 4.5 bn); ~16% share of overall BPC
FY20 FY21 FY22 FY23E FY24E FY25E FY26E FY27E CAGR (%)
FY22-27
Market size (Rs bn)
Overall BPC 1,267 1,120 1,267 1,417 1,584 1,772 1,981 2,199 11.7
Online BPC 70 91 134 179 231 294 368 442 26.9
Offline BPC 1,197 1,029 1,133 1,238 1,353 1,477 1,613 1,757 9.2
Online penetration (%) 5.5 8.1 10.6 12.6 14.6 16.6 18.6 20.1
Total D2C BPC Size 12 24 55 96 145 207 278 350 44.7
Online revenue salience (%) 95 90 80 76 73 71 70 68
Offline revenue salience (%) 5 10 20 24 27 29 30 32
Incremental share in online (%) 47 52 65 63 65 62 60
Incremental share in offline (%) 8 11 14 16 18 19
Market share of D2C (%)
- in Total BPC 1.0 2.1 4.3 6.8 9.2 11.7 14.0 15.9
- in Online BPC 17 24 33 41 46 50 52 54
- in Offline BPC 0 0 1 2 3 4 5 6
Source: RedSeer, Axis Capital (D2C sizing is our estimates)

September 13, 2022 14

 FMCG
Sector Report

The D2C way: What has driven their success?

 D2C brands have been quick to capitalize on product and price white spaces: D2C brands
have identified product whitespaces (new niches, often ingredients-based and are mostly
organic/ toxin-free/ sustainable products well supported by brand stories and
certifications) and price white spaces (mass premium) very well, often creating new
markets. Due to access to rich customer data, D2C brands have strong understanding of
consumers which helps them identify white spaces faster and offer superior innovations.

Exhibit 28: D2C has identified multiple product white spaces – ingredient based, natural/organic, solution-based and celebrity-led

Hero ingredient

Wow Skin Science launched mCaffeine has built entire The Man Company has Mamaearth has launched
range of apple cider vinegar- brand around coffee-based launched caffeine-based range range of onion-based products
based products products of products for face and beard

Organic/ toxin free/

sustainable products
HUL’s Clean Beauty brand Plum is India’s first 100% Renee cosmetics is 100% Juicy Chemistry sells 100%
Simple is sustainable, ethical Vegan beauty brand cruelty-free, paraben-free, and organic and natural products
and harsh-chemical free FDA approved

Efficacy, customization or
solutions-based products
Sugar Cosmetics focuses on Minimalist focuses on Skincraft uses tech-driven Deconstruct Skincare focuses
creating products that are delivering efficacy - approach (AI & ML) to provide on transparent, solution-
long-lasting, weather-proof, based skincare products dermatologically approved and oriented and evidence-based
and suitable for the tropical customized skincare solutions skincare products
Indian weather

Celebrity-led brands

MyGlamm launched Haute Nykaa launched Kay Beauty -

Couture Makeup and Luxe
Artisanal Skincare collection
cobranded with Manish
Malhotra (celebrity fashion
designer)
Source: Axis Capital
India's first celebrity makeup
brand cobranded with
Bollywood celebrity Katrina
Kaif

September 13, 2022 15

 FMCG
Sector Report

Exhibit 29: D2C has often identified pricing whitespace… Exhibit 30: … in the mass premium segment
Indexed pricing (to Lakme) of Matte lipsticks Indexed pricing (to Lakme) of foundation compact powder

878
1,000 350

290
800 300
250
600
200

325

125
230
400

100
150
179
166
115

88
100

83
83
200 100
67
32

42
18
0 50
Maybelline NY
NY Bae

Plum

Loreal

MAC
Sugar
Myglamm
Elle18

0
Lakme

Mamaearth

Plum

MAC
Maybelline

Sugar
Myglamm

Lakme
Elle18
Source: Nykaa, Purplle, Amazon, Axis Capital Source: Nykaa, Purplle, Amazon, Axis Capital

Exhibit 31: Indexed pricing (to Dove) of anti-dandruff shampoo Exhibit 32: Indexed pricing (to Lakme) of face wash

130
202
200
200

250 140

116
112
108
108
108
100
120
150

200
140

86
100
100

150
77
94

69
86

65
81

80
70
70

100
57
46

60
50
40
0
20
Loreal Professional
Kesh King

Beardo
Dove
Dabur Vatika

Mamaearth

Wow

Mcaffeine
Clinic
Himalaya

Head & Shoulders

0
Everyuth

Nivea

Pears
Garnier

Mamaearth
Wow
Clean & Clear

Simple

Plum
Myglamm
Lakme
Ponds
Himalaya

Source: Nykaa, Purplle, Amazon, Axis Capital Source: Nykaa, Purplle, Amazon, Axis Capital

Exhibit 33: And in many cases D2C takes the… Exhibit 34: … premium positioning route
Indexed pricing (to Nivea) of body wash Indexed pricing (to Dove) of body lotion
233
199

250 250
185
170
167

190
157
147

200
175
125

200
100
100
100

150
133
125

150
68

109
63

100
57

100
51

85
84
84
83

50 100
69

0
50
Nivea
Pears

Nykaa
Vivel

Beardo
Mamaearth

Mcaffeine
Fiama
Lux

Dove

Wow

Plum
Bombay Shaving Co
Palmolive

0
Vaseline

Everyuth
Nivea

Mamaearth
Parachute

Dove

Wow
Plum
Myglamm
Himalaya
Boroplus

Ponds

Source: Nykaa, Purplle, Amazon, Axis Capital Source: Nykaa, Purplle, Amazon, Axis Capital

September 13, 2022 16

 FMCG
Sector Report

 Agile product innovation and manufacturing: Most D2C brands work largely with contract
manufacturing and are asset light and focus on agile innovation with higher number of SKUs
given – (1) D2C BPC brands enjoy high gross margin in the range of 65-70%+ which gives
them firepower to try and fail and sustain high ad spends and (2) cost of failure on online is
generally low (due to lower cost to launch and limited inventory required from start). Also,
D2C brands are more agile due to 'collaborative innovation'; i.e. they 'ask' consumers
questions day in and day out (online/ social media feedback, search trends etc.) and launch
and fail/ succeed faster vs. legacy FMCG brands.

Exhibit 35: D2C brands in BPC space enjoy high gross margin in the range of 65 to 70%+
Company Key brands FY17 FY18 FY19 FY20 FY21
Gross margin (%)
Honasa Consumer Mamaearth 68 69 65 65 71
Vellvette Lifestyle Sugar Cosmetics 53 62 60 61 68
Body Cupid Wow Skin Sciences 65 57 39 39 55
Pureplay Skin Sciences Plum 60 70 65 65 70
Pep Technologies mCaffeine 76 66 63 65 63
Zed Lifestyle Beardo 61 68 73 59 55
Amishi Consumer Technologies The Moms Co. 56 60 53 58
Sanghvi Beauty and Technologies MyGlamm 92 82 69 68 61
Helios Lifestyle The Man Company 63 57 49 50 55
Visage Lines Personal Care Bombay Shaving Company 63 35 52 57 48
Total 69 63 59 58 65
Source: Ministry of Corporate Affairs – ROC, Axis Capital

 Strong social/ online focus to recruit/ retain consumers: To recruit/ retain consumers,
D2C brands spend bulk of their advertising budget on digital platforms/ social networks
often through influencers with high focus on user generated content . This approach helps
educate consumers/ hasten consumer adoption and enables a strong feedback loop and
higher responsiveness driving superior customer retention and repeats.

Exhibit 36: D2C brands have a strong focus on digital marketing and lead most legacy brands in social presence
# of followers on Instagram (in ‘000)
2,300
2,200

3,000
1,100
1,000
1,000

2,000
830
693
655
639
635
569
488
403
324
313
300
248
241
217

1,000
190
129
114
111
106
100
47
41
34

0
Nivea

Vaseline
Mamearth

The Man Co
Beardo

Garnier
Elle India

Juicy Chemistry

Lux
WoW

Mcaffeine

Simple
Renee Cosmetics
Just Herbs

Loreal
Faces Canada
Plum

Nyx Cosmetics
Sugar

Himalaya
Mac Cosmetics

Ustraa
Myglamm
Lakme

Ponds
Body Shop

Good Vibes

Bombay Shaving Co

Source: Instagram, Axis Capital; Note: Grey highlight refers to legacy/ incumbent brands

While D2C media strategy differs significantly from legacy FMCG companies, both approaches
are based on target consumer (and where they shop) and there is a rising trend of convergence
as well (legacy companies are rapidly increasing digital spends while D2C brands have started to
allocate a higher % of advertising budget to traditional media as they expand offline).

September 13, 2022 17

 FMCG
Sector Report

Not without challenges, scalability being the biggest one

Given the low-entry barriers in D2C, strong ecosystem and funding availability, it is easy to
launch a D2C brand. However, it is getting increasingly difficult to retain consumers and
differentiate or scale up a brand beyond a certain size and delivering consistent growth. We
identify key challenges for D2C brands below.

 Significant clutter: With rising competitive intensity and pressure to sustain high growth,
we are noticing increasing brand launches in similar niches driving significant brand clutter.
This is leading to higher consumer churn/ lower customer loyalty and rising costs of
customer acquisition.

Exhibit 37: Popular ingredients have a high clutter of brands in each of the key segments in BPC
Onion-based shampoo

Mamaearth WoW Love, Beauty & Planet Naturali Plum Good Vibes Just Herbs
Vitamin C -based facewash

WoW Mamaearth Lotus Herbals Dot & Key Plum The Man Co The Moms Co
Charcoal-based body wash

Mamaearth Good Vibes The Man Company Beardo Bombay Shaving Co WoW Ustraa
Source: Axis Capital

 Improving profitability: While initial focus for D2C brands is on growth and not
profitability, as brands scale up and achieve a certain size profitability takes center stage to
ensure sustainability. Maintaining Customer Acquisition Costs (CAC) in a tight band is one
the most important metrics to ensure survival for D2C brands. With rising brand clutter and
proliferation of D2C brands across categories advertising on social media/ cost of
influencers has ballooned pushing CAC higher for most companies. In such scenario, it is
imperative for D2C brands to diversify their channel presence (go phygital/ expand omni-
channel presence) and marketing route (look at alternatives beyond digital alone).
Interestingly, top D2C brands in BPC space have managed to grow with limit ed burn and
companies like Honasa (Mamaearth) have managed to turn profitable in a short span.

September 13, 2022 18

 FMCG
Sector Report

Exhibit 38: Top D2C brands in BPC space have managed to grow with limited burn; Honasa (Mamaearth) turned profitable in FY21
Company Key brands FY17 FY18 FY19 FY20 FY21
EBITDA (Rs mn)
Honasa Consumer Mamaearth (3) (4) (45) (78) 258
Vellvette Lifestyle Sugar Cosmetics 2 6 (37) (165) (168)
Body Cupid Wow Skin Sciences 3 11 (79) (167) (276)
Pureplay Skin Sciences Plum 4 7 15 10 (32)
Pep Technologies mCaffeine (7) (9) (22) (54) (83)
Zed Lifestyle Beardo 3 (2) 6 33 (48)
Amishi Consumer Technologies The Moms Co. (21) (41) (104) (173)
Sanghvi Beauty and Technologies MyGlamm (104) (280) (330) (653) (325)
Helios Lifestyle The Man Company (13) (59) (73) (141) (86)
Visage Lines Personal Care Bombay Shaving Company (17) (54) (86) (153) (150)
Total (132) (406) (691) (1,472) (1,082)
Source: Ministry of Corporate Affairs – ROC, Axis Capital

 Going phygital: After establishing a strong presence in online BPC, most D2C companies
are venturing offline and going phygital (omni/ hybrid) to tap into a larger consumer base
and serve the consumer wherever they shop. However, offline is the bastion of legacy
FMCG players and garnering presence there will be challenging and highly competitive for
D2C companies and will require higher investments (to build distribution network and
stock higher inventory). On the positive side, a successful offline foray will give D2C
companies better visibility for their brands (as online gets significantly cluttered) , reduce
customer acquisition costs and tap into newer markets.

Exhibit 39: D2C revenue salience from offline rising… Exhibit 40: …as they expand physical reach
Offline revenue as % of total, FY22 Number of outlets reached
70 65 60,000 50,000
60 50,000 45,000
40,000
50 40,000 35,000
40 35 35 35
30 30 30,000 25,000
30
20 15 20,000 10,000
10
10,000 5,000 2,000
10
0 0
MyGlamm

MyGlamm
Plum

Plum
Sugar Cosmetics

Sugar Cosmetics
Mamaearth

Mamaearth
Wow Skin Sciences

Wow Skin Sciences

mCaffeine

mCaffeine
The Man Co

The Man Company

Bombay Shaving

Bombay Shaving
Company
Co

Source: Media reports/articles, Axis Capital Source: Media reports/articles, Axis Capital

 Scalability: While it has become extremely easy to launch a D2C brand, scaling up one
beyond a certain size/ scale remains the key challenge, and only a handful have been able to
cross the critical mass with a long tail of brands at sub-scale operations. While a strong niche
and product market fit, solid execution and high spends on branding may get a brandto ~Rs
1 bn size in current market scenario in a span of few years, scaling the brand beyond ~Rs 1
bn requires significantly higher investments and broader strategy including, but not limited
to –
 Going omni-channel: This is not an optional focus area for D2C brands looking to scale
big (as discussed above). We note many top D2C companies are getting nearly 30%+ of
their revenue from offline business.

September 13, 2022 19

 FMCG
Sector Report

 Launching a set of smaller brands to cater to wider audience/ niches: Several

 Adopting inorganic route: (1) Mamaearth has done multiple acquisitions including
The Good Glamm Group
(MyGlamm) has been on a
major acquisition spree
 Expanding into international geographies: Several D2C companies have ventured
 Evolve into a house of brands model with multiple brands across sub-segments
Companies like Honasa
(Mamaearth) are looking at
replicating their playbook
with multiple brand
architecture (house of
brands)
 Evolving into a content-to-commerce model: This is emerging as another popular
The Good Glamm Group has
strongly emerged as the
largest D2C content-to-
commerce behemoth
companies are using this mode to expand their product portfolio – (1) Plum launched a
separate male-grooming brand Phy, (2) Bombay Shaving Company launched a separate
woman grooming and personal care brand Bombae, (3) The Man Company forayed into
wellness category by launching sub-brand MINS under which it launched dissolvable
tongue strips called MinStrips and (4) Mamaearth launched DermaCo (based on
proposition of active ingredients) and Aqualogica (hydration-based skincare brand
formulated for Indian skin and climate).
BBlunt (hair color), Dr Sheth (skin care) and Momspresso (content platform), (2) Sugar
Cosmetics acquired a majority stake in ENN beauty (hair and skin care brand), and (3)
The Good Glamm Group (MyGlamm) has been on a major acquisition spree acquiring
near 11+ companies/ brands including – (a) BPC brands like The Moms Co, St Botanica,
Organic Harvest, Sirona Hygiene, (b) digital media platforms like POPxo, Miss Malini
Entertainment and ScoopWhoop, (c) parenting content platform like Baby Chakra and
(4) Influencer marketing/ analytics companies like Winkl and Vidooly.
into international markets including Sugar Cosmetics (7-8% salience), Plum (~5%
salience) and The Good Glamm Group (recently set up its international business unit,
plans to invest ~Rs 1 bn).
through build or buy route: After establishing organization capabilities pertinent to
the D2C way of business (R&D, fast-paced innovation, marketing to millennials,
technology stacks etc.), companies like Honasa (Mamaearth) are looking at replicating
their playbook with multiple brand architecture (Mamaearth, Derma Co, Aqualogica,
Ayuga, BBlunt, Dr Sheth) and emerging into a house of brands model to cater to varied
individual tastes. We note Derma Co brand achieved Rs 1 bn revenue run-rate in a span
of just one year, a testament of Honasa’a repeatable playbook.
model where D2C companies are integrating content ecosystem (digital media
platforms or influencer marketing companies) with their brand portfolio to get instant
access to larger consumer base, reduce customer acquisition cost and improve
consumer retention. The Good Glamm Group has strongly emerged as the largest
content-to-commerce behemoth with its spate of acquisitions (as detailed above); the
group has restructured its business into three separate divisions – (1) Good Brands Co.
(comprising all its D2C BPC brands), (2) Good Media Co. (comprising digital media
assets), and (3) Good Creator Co. (full stack influencer marketing and services
solutions for consumer brands).

September 13, 2022 20

 FMCG
Sector Report

Risks rising for legacy FMCG companies from D2C onslaught

D2C brands in BPC are gaining meaningful size

As per industry estimates, overall BPC industry grew at just ~3% CAGR during FY19 -22
dragged by flattish growth in offline BPC largely due to Covid impact. However, during the
same period, online BPC continued to gain traction growing at 43% CAGR driving online
penetration of BPC higher from ~4% to 10%+.
 Our analysis of BPC revenue of key FMCG companies (for which data is available) indicates
aggregate revenue for top-10 grew at ~3.8% CAGR during FY19-22 adding ~Rs 68 bn in
incremental aggregate revenue (at consumer level) over the period. Market share of these
top-10 companies in overall BPC inched up from 49% to 51%. We believe this was largely
aided by share gain from local/ regional/ smaller players (as most of them struggled on
supply chain disruption due to Covid) and shift in consumer preference towards stronger
brands.
 In contrast, the top-10 D2C companies in BPC grew at 125% CAGR aided by significantly
lower base and Covid tailwinds. The top-10 D2C companies increased their market share
in overall BPC from 0.3% to 3% and in online BPC from 6% to 23% during the period
(assuming ~80% revenue from online channel, on aggregate).
 Interestingly, the top-10 D2C companies in BPC added Rs 38 bn+ in aggregate revenue
(at consumer level) over FY19-22, nearly 55%+ of what the top FMCG companies added
during the period in BPC on absolute basis (partly aided by consolidation in the D2C space
as well) highlighting that they have become a credible competition to larger players vying
for sizeable piece of incremental pie.

Exhibit 41: Top-10 D2C brands in BPC on aggregate had 3% share in overall BPC and ~23% share of online BPC in FY22
FY16 FY17 FY18 FY19 FY20 FY21 FY22 CAGR (%)
(Rs bn) FY16-19 FY19-22
Market size
Overall BPC 897 984 1,073 1,176 1,267 1,120 1,267 9.4 2.5
Online BPC 17 26 35 46 70 91 134 39.1 43.1
Offline BPC 880 958 1,037 1,130 1,197 1,029 1,133 8.7 0.1
Online penetration (%) 1.9 2.6 3.3 3.9 5.5 8.1 10.6
BPC revenues of key FMCG cos
HUL 142 144 159 177 173 180 195 7.6 3.3
Dabur 23 22 23 26 26 29 32 4.3 7.7
Colgate 37 38 40 42 43 46 48 4.9 4.6
Marico 35 34 38 45 43 46 51 8.9 4.2
GCPL 21 21 24 26 24 27 32 7.1 7.3
Emami 12 13 14 14 13 14 15 7.7 0.4
Loreal India 29 29 29 33 35 29 34 3.5 1.7
Gillette India 20 18 17 19 17 20 23 -1.7 6.6
Bajaj Consumer Care 9 8 8 9 9 9 9 1.6 -1.4
Nivea India 6 7 9 10 11 8 10 17.0 -0.5
Total Revenues 333 333 360 401 394 407 448 6.4 3.8
Total Consumer level Revenues 475 476 515 572 563 581 640
% share of Top-10 in BPC 53 48 48 49 44 52 51
Top-10 D2C Companies in BPC
Total Revenues 2 6 12 27 124.7
Total Consumer level Revenues 3 9 17 39
% share of Top-10 in BPC 0.3 0.7 1.5 3.0
% share of online BPC 6 10 15 23
Source: Company, Ministry of Corporate Affairs – ROC, RedSeer, Axis Capital; Note: (1) HUL revenue for FY16-18 adjusted as per LTL growth rates to make it comparable to
post GST/ Ind-AS scenario and (2) FY22 revenues for Loreal India and Nivea India are estimates

September 13, 2022 21

 FMCG
Sector Report

Why are legacy FMCG companies struggling in online BPC?

Legacy FMCG companies have been unable to keep pace with growth of D2C brands in BPC
space. It can be argued that a slow offline channel (dragged by Covid) during FY19-22 has been
the key reason for legacy FMCG companies posting slower growth during the period and the
same may recover back to historic growth rates as Covid normalizes and consumers shift their
purchases back to offline. However, the D2C players in BPC have become a strong force, on
aggregate, and are nibbling away share as online penetration in BPC rises, a space where legacy
FMCG companies are clearly underperforming. Below we discuss some of the key reasons for
underperformance of legacy FMCG companies:

 Focused on larger opportunity: Even though online BPC space is growing significantly
faster, offline BPC (GT + MT) is estimated to remain the dominant channel constituting
80%+ of the market even in FY27. Most legacy FMCG companies are focused on making
products which target this larger pie through their large distribution network. However,
consumption trends are changing much faster, as consumers move from family to individual
consumption habits. The traditional FMCG model is not servicing a long tail of such
consumers looking for better products.

Exhibit 42: Offline channel to remain dominant channel in BPC (~80% salience in FY27E)

Offline Online
100%

80%

60%
95 92 89 87
40% 85 83 81 80 78 77 76

20%

0%
FY23E

FY24E

FY25E

FY26E

FY27E

FY28E

FY29E

FY30E
FY20

FY21

FY22

Source: Industry estimates, Axis Capital

 Behind the curve on innovation: Legacy FMCG companies are relatively slower on the
innovation curve due to a combination of the following reasons: (1) They do not innovate
enough because they feel certain innovations will not move the needle for them at their
size; hence, they keep on targeting mass cohorts, (2) larger set-up is less agile given rigid
processes and hierarchy which entails a slower time to innovate, and (3) they usually prefer
to launch innovations through variants/ sub-brands within mother brands given the high
cost of building a new brand and the leverage associated with spends on the mother brand.
 Differentiated approach to marketing: In our conversation with Varun Alagh (Co-founder,
CEO of Mamaearth), we picked up strong insights on where traditional marketing lags vs.
D2C marketing:
 Media has been digitized and can be bought in bite sized packets now ( target specific
people looking for specific products). Brands like Mamaearth spend on media in a more
effective and measurable way vs legacy FMCG companies.
 Traditional FMCG way of working is outbound marketing. This involves focusing on
creating brand awareness with non-targeted content (through repeat TV ads, widest

September 13, 2022 22

 FMCG
Sector Report

possible reach) and banking on brand recall. Whereas, digital first brands practice
inbound marketing. This is built on premise that consumers are always looking for
solutions (online) and involves identifying consumer problems and offer products/
services tailored to them.
 Traditional FMCG companies tend to look at consumer segments that are broad.
Digital first brands believe consumers are a more diverse group than the way
traditional FMCG companies segment them; hence, digital brands' communication is
personalized (and automated). Also, their frequency of communication is based on
each customer’s proclivity to purchase (rather than ads on media with wide reach and
low personalization).
 D2C companies are leveraging ‘content’ better than traditional FMCG companies:
D2C companies focus lot more on educating the consumers than advertising their
products/ services. Consumers tend to believe more in a message from trustworthy
bloggers/ youtubers than that delivered by celebrities (in TV ads) . Traditional FMCG
companies have been behind in leveraging these media.

Legacy FMCG companies are fighting back as well

To tap into evolving consumer needs and rising online BPC penetration, legacy FMCG
companies are also stepping up their play in D2C through multiple routes – (1) launching their
own D2C portal (extending their own current brand portfolio through dedicated por tals), (2)
launching D2C brands or variants, and (3) acquiring D2C companies/ brands.
 Launching own D2C portals: Besides selling on marketplaces, many FMCG companies have
launched their own D2C portals – (1) HUL has launched its multi-brand store Ushop and
rolled out D2C websites for eight personal care brands – Lakme, Indulekha, Tresemme,
Ponds, Dove Baby, Dermalogica, Love Beauty & Planet, and Simple, (2) ITC has launched its
D2C store platform – ITC e-store, (3) Dabur has launched its own webstore – Daburshop,
(4) Marico has launched Saffola Stores to retail entire Saffola range of edible oils and foods,
and (5) Emami has launched dedicated D2C store for its healthcare brand Zandu –
Zanducare.com. While additional revenue generation is one of the focus areas, companies
are launching own D2C portals to educate consumers about products/ offers, engage into
brand building, collect direct consumer insights and test pilot premium products before
rolling it out across channels if/ when successful.
 Launching D2C brands or variants: While legacy FMCG companies have been late to join
the D2C wave, many companies are latching on through jumping on D2C trends like
ingredients-based products/ variants or launching own D2C brands.
 Ingredients-based products (e.g. onion based): (1) Marico has extended Parachute
Advansed into onion hair oil, (2) Bajaj Consumer Care has launched Coco Onion’ non-
sticky hair oil, (3) HUL has launched a Sunsilk natural variant range of shampoos
including one with onion and jojoba oil, and (4) Emami has extended Kesh King into
Kesh King Ayurvedic Onion hair oil and shampoo.
 Launching own D2C brands/ variants: (1) Marico has launched Parachute ayurvedic
hair oil Jataa for Men and own organic D2C brands Pure Sense and Coco Soul, (2) Bajaj
Consumer Care launched two D2C brands – Natyv Soul (hair serums, masque and oils
and 100% Pure range (premium hair oils), (3) HUL has launched four key D2C brands –
Dove Baby (baby care), Dermalogica (expert skin care), Love Beauty & Planet
(sustainably sourced, natural beauty and haircare) and Simple (clean beauty skin care),
and (4) Dabur has launched Dabur Baby range (baby care), range of skin and body care
range under Vatika brand, cold pressed oils under Dabur brand and superfoods under
Real brand.

September 13, 2022 23

 FMCG
Sector Report

Exhibit 43: FMCG companies are launching their own variants or brands to latch onto D2C bandwagon
FMCG companies are latching on to ingredient-based wave (e.g. onion)

FMCG companies are also launching their own D2C brands/ variants

Source: Company, Axis Capital

 Using inorganic route: Besides using inorganic route to build a future-fit portfolio of D2C
brands, FMCG companies are also using this route to garner domain expertise on D2C style
of business and tap into newer niche/ micro markets. Some of the prominent examples of
acquisitions/ investments by FMCG companies in BPC include (1) Marico – Beardo and Just
Herbs, (2) Emami – The Man Company, (3) Colgate Palmolive and Reckitt Benckiser –
Bombay Shaving Company, (4) ITC – Mother Sparsh, and (5) Unilever Ventures – Plum and
The Minimalist.

Legacy FMCG companies are increasing their D2C targets/ aspirations

Higher intensity by FMCG companies is also visible in their target run-rate and investments for
their digital-first portfolio. While small in their overall context, the pace of growth/ activity is
surely inching up.
 HUL targets ~Rs 1 bn run-rate for its portfolio of digital-only brands in near-term. The
company has five nano factories for its D2C brands and intends to bring in more of its global
brands into India and introduce them through the D2C mode. We note HUL’s Lakme is the
leading brand on Instagram in terms of followers (2.3 mn+ followers), it has its own D2C

September 13, 2022 24

 FMCG
Sector Report

website (2 mn unique visitors every month) and the brand garners ~30% revenue from e-
commerce.
 Marico’s digital brands portfolio clocked an exit run-rate of Rs 1.8-2 bn in FY22 and the
company aspires to achieve Rs 4.5-5 bn target by FY24.
 Dabur targets ~Rs 1 bn revenue in FY23 through its portfolio of digital-first brands across
personal care and foods segment.

D2C’s ‘relevant market’ in BPC to grow faster at 14% CAGR over FY22-27
D2C companies in BPC are largely focused towards categories like baby care, cosmetics, skin
care, fragrances, hair care, body wash/ hand wash, depilatories, and men’s grooming (including
shaving). This ‘relevant market’ for D2C companies in BPC together constitutes ~57% of BPC
market i.e. ~Rs 719 bn in FY22 (~USD 9 bn).
 While overall BPC is estimated to grow at 11.7% CAGR over FY22-27 (partly aided by lower
base of FY22), the ‘relevant market’ for D2C BPC companies is estimated to grow faster at
~14% CAGR while the ‘other categories’ are likely to grow slower at ~8% CAGR.

Exhibit 44: ‘Relevant’ BPC market for D2C is likely to grow at ~14% CAGR over FY22-27 (55-60% salience of BPC)
CAGR (%)
FY16 ...FY19 FY20 FY21 FY22 FY23E FY24E ...FY27E FY16-19 FY19-22 FY22-27E
India BPC market (Rs bn) 897 1,176 1,267 1,120 1,267 1,417 1,584 2,199 9.4 2.5 11.7
Relevant BPC categories (Rs bn) 473 649 713 624 719 822 938 1,379 11.2 3.4 13.9
% of total 53 55 56 56 57 58 59 63
Other categories (Rs bn) 424 526 554 496 548 595 646 820 7.4 1.4 8.4
Online BPC
Online market (overall BPC market) 17 46 70 91 134 179 231 442 39.1 43.1 26.9
Online penetration (%) 1.9 3.9 5.5 8.1 10.6 12.6 14.6 20.1
Online - relevant categories (Rs bn) 11 31 51 59 86 118 157 305 39.7 39.7 29.0
Online penetration (%) 2.4 4.8 7.2 9.5 11.9 14.3 16.7 22.1
% of online BPC market 73 65 64 66 68 69
Source: RedSeer, Axis Capital

 While several BPC categories (and most of D2C’s focus categories, in our view) have
historical and potential growth rates in double-digits, the overall BPC market growth rate
is lower due to high salience of Bath & Shower and Hair Care categories (together ~48% of
BPC) which grew at 6-7% over CY15-19. A large portion of sales mix in these categories
comes from highly penetrated sub-categories like bar soaps (~85% Bath & Shower
category) and hair oils (large salience in Hair Care) which have medium term growth
potential of mid-single digit in our view. As income levels continue to rise, Indian consumers
will keep upgrading for higher order benefits to sub-categories like body wash/ shower gels
(replacing bar soaps) and hair serums/ styling gels etc. (in Hair Care).
 D2C’s focus categories enjoy higher digital adoption vs. basic personal categories.
Assuming a shade higher digital penetration in relevant category mix vs. overall online BPC
penetration, we estimate 65-70% of online BPC market is addressable TAM for D2C vs.
~57% of overall BPC TAM.

September 13, 2022 25

 FMCG
Sector Report

Exhibit 45: Skincare, cosmetics, fragrances, shampoos form 2/3 rd of D2C relevant market
Breakup of category mix for D2C relevant market in BPC, FY22 (% of total)
Baby care Relevant Bath &
7% Shower
Men's Shaving 6% Hair Colors
9% 7%

Shampoos
Depilatories
11%
3%
Styling agents
1%
Fragrances/Deo
dorants Colour
Cosmetics Hair
11% Skin Care
15% oils/conditioners
27%
3%

Source: Industry estimates, Axis Capital

Exhibit 46: Bath & Shower, hair care, skincare and oral care form 3/4 th of BPC category
Breakup of category mix for overall BPC, FY22 (% of total)
Colour
Cosmetics
8% Men's Shaving
Oral Care 5%
Skin Care 12% Fragrances/Deo
15% dorants
6%
Depilatories
2%
Hair Care Bath and
22% Shower Other categories
26% 4%

Source: Industry estimates, Axis Capital

Exhibit 47: D2C focus categories like cosmetics have ~20% digital adoption

Skin Care Colour Cosmetics Fragrances Oral Care Hair Care

25

19.1
20

15 13.2
11
(%)

8.6 9.1
10

4.6 5.1 5 4.4

5 4 3.4
2.1 2.8 2.5 2.7 2.2
1.21.9 1.4 1.7

0
CY17 CY18 CY19 CY20

Source: Industry estimates, Axis Capital

September 13, 2022 26

 FMCG
Sector Report

Exhibit 48: D2C focus categories in BPC include hair care, skin care, bath & body, cosmetics and men’s grooming
Product presence of key D2C companies across focus categories
WoW Mamaearth Plum MyGlamm Sugar Bombay Shaving The Man Co Beardo
Hair Care
Hair oil
Shampoo/Conditioners
Hair Masks/Serums
Hair styling gels/wax
Skin Care
Face wash/scrub
Face Cream
Face Serum/Mask
Moisturizer
Sunscreen
Make up remover
Toner
Under Eye Cream
Bath & Body
Body Wash/ Scrub
Body Moisturizer
Bath Soap
Hand Wash/Cream
Makeup/Cosmetics
Lips/Face/Eyes/Nails
Men's Grooming
Beard grooming
Electric trimmer
Shaving range
Men's Toiletries
Others
Nutrition & Health
Wellness
Babycare range
Fragrances
Women's Hygiene
Depilatories
Source: Company, Axis Capital; Note: Green Indicates presence in category and orange indicates the company is not present in the category

Within listed FMCG peers, HUL and Emami at higher risk

We mapped BPC revenue (portfolio-wise salience) for all key FMCG companies with significant
exposure to the segment along with categories where D2C is more focused/ operational i.e. skin
care, premium hair oils, shampoos, color cosmetics, deodorants, baby care and styling agents.
Based on this analysis, we estimate Emami and HUL with nearly 23% and 30% of domestic
revenue are at higher risk to D2C disruption, Dabur and Marico are relatively at lower risk
(10-13% of domestic revenue at risk to disruption) while Godrej Consumer Products is at the
lowest risk (only ~4% of domestic revenue at risk).

HUL’s growth assumptions for BPC at risk

 Over FY16-19, HUL posted a healthy underlying ~8% CAGR in BPC revenue (LTL,
adjusted for GST and IND-AS implementation) and BPC growth (ex-soaps) stood stronger
at ~9% CAGR (as per our estimates) despite headwinds of demonetization and
implementation of GST during the period.

September 13, 2022 27

 FMCG
Sector Report

 However, HUL’s BPC growth slowed down over FY19-22 to ~3% overall and a weaker
Overall BPC market during
~1% ex-soaps (as per our estimate). Consumption slowdown in FY20 followed by Covid
FY19-22 grew at a slow pace impact (particularly in BPC) in FY21-22 were the key drags. To calculate ex-soaps revenue
of 2.5% CAGR and offline for HUL, we estimate soaps salience at ~35% of overall BPC in FY22 and ~8% CAGR in soaps
BPC was flattish during FY19-22 driven by price hikes.
 However, we note that during the same period, the D2C market in BPC grew ~10x from
Rs 5 bn to ~Rs 55 bn as online penetration of BPC surged from ~4% to 10%+.
 D2C surge clearly indicates that HUL/ other legacy FMCG BPC players have lost share to
D2C players (D2C, on aggregate, garnered ~4.3% share of overall BPC in FY22; not
captured by company/ Nielsen data due to their inaccuracy in capturing online sales).

Is this shift temporary (channel-led; offline BPC over FY19-22 was flat due to Covid drag –
growth likely to pick up back to 9% CAGR over FY22-27) or structural (consumer-led) will
become clearer over the next few years as Covid tailwinds fade for D2C and offline retail
stabilizes for legacy FMCG companies. However, our growth assumptions for HUL’s BPC
division of ~10% (overall) and ~11% (ex-soaps) revenue CAGR during FY22-25 (stronger ~13%
CAGR over FY23-25, ex-soaps) is at risk if online BPC penetration continues to track as per
expectations driving sustained D2C onslaught.

Exhibit 49: HUL/ Emami are at higher risk to D2C disruption

Revenue salience (%)
Company/Category Dabur HUL Godrej Marico Emami
BPC - Total (Domestic) 43 38 46 70 48
Soaps 14 36
To calculate portfolio at risk Skin Care 4 11 17
to disruption, (1) we excluded Coconut Hair Oil (CNO) 1 45
Value Added Hair Oils (VAHO) 15 1 22 30
CNO, Amla and cooling oil Hair colors 11
from hair oils, and (2) Shampoos 3 7
Oral care 18 2
assumed only ~10% of soaps Color cosmetics 3
Deodorants 1 1 1
revenue for GCPL/ HUL
Baby care 2
Styling agents 2
Domestic FMCG as % of total 71 100 57 77 82
BPC as % of total cons revenue 31 38 26 54 39
At risk as % of domestic FMCG 13 23 4 10 30
At risk as % of total cons revenues 9 23 2 8 24
Source: Company, Axis Capital; Note: Categories in grey are D2C’s focused categories and at higher risk

Exhibit 50: HUL’s BPC revenue (ex-soaps) grew at ~1% CAGR over FY19-22
HUL’s BPC growth slowed
Reported BPC Ex-soaps BPC
down over FY19-22 to ~3% 16
13.5 13.6
overall and a weaker ~1% 11.9
12 10.4 10.7 10.8
ex-soaps (as per our 9.1 9.6 9.5
8.3 7.8
estimate). However, during 8
the same period, the D2C 3.4 3.6 3.6
4
market in BPC grew ~10x 1.8 0.9
from Rs 5 bn to ~Rs 55 bn as 0
online penetration of BPC (1.3)
(4) (1.8)
surged from ~4% to 10%+ FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Source: Company, Axis Capital

September 13, 2022 28

 FMCG
Sector Report

Axis Capital Limited is registered with the Securities & Exchange Board of India (SEBI) as “Research Analyst” with SEBI-registration number INH000002434
and which registration is valid till it is suspended or cancelled by the SEBI.

DISCLAIMERS / DISCLOSURES
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
1. Axis Capital Limited (ACL), the Research Entity (RE) as defined in the Regulations, is also engaged in the business of Investment banking, Stock broking and Distribution of Mutual Fund
products.
2. ACL is also registered with the Securities & Exchange Board of India (SEBI) for its investment banking and stockbroking business activities and with the Association of Mutual Funds of
India (AMFI) for distribution of financial products.
3. ACL has no material adverse disciplinary history as on the date of publication of this report
4. ACL and / or its affiliates do and seek to do business including investment banking with companies covered in its research re ports. As a result, the recipients of this report should be aware
that ACL may have a conflict of interest that may affect the objectivity of this report. Investors should not consider this report as the only factor in making their investmen t decision.
5. The RE and /or the research analyst or any of his / her family members or relatives may have financial interest or any other material conflict of interest in the subject company of this
research report.
6. The research analyst has not served as director / officer, etc. in the subject company in the last 12-month period ending on the last day of the month immediately preceding the date of
publication of this research report.
7. The RE and / or the research analyst or any of his / her family members or relatives may have actual / beneficial ownership exceeding 1% or more, of the securities of the subject company
as at the end of the month immediately preceding the date of publication of this research report.
8. In the last 12-month period ending on the last day of the month immediately preceding the date of publication of this research report ACL or any of its associates may have:
i. Received compensation for investment banking, merchant banking or stock broking services or for any other services from the su bject company of this research report and / or;
ii. Managed or co-managed public offering of the securities from the subject company of this research report and / or;
iii. Received compensation for products or services other than investment banking, merchant banking or stockbroking services from the subject company of this research report.
9. The other disclosures / terms and conditions on which this research report is being published are as under:
i. This document is prepared for the sole use of the clients or prospective clients of ACL who are / proposed to be registered in India. It may be also be accessed through financial
websites by those persons who are usually enabled to access such websites. It is not for sale or distribution to the general public.
ii. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an inves tment decision.
iii. Nothing in this document should be construed as investment or financial advice, or advice to buy / sell or solicitation to bu y / sell the securities of companies referred to therein.
iv. The intent of this document is not to be recommendatory in nature
v. The investment discussed or views expressed may not be suitable for all investors. Each recipient of this document should make su ch investigations as it deems necessary to arrive
at an independent evaluation of an investment in the securities of companies refe rred to in this document (including the merits and risks involved), and should consult its own
advisors to determine the suitability, merits and risks of such an investment.
vi. ACL has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy,
completeness or fairness of the information and opinions contained in this document
vii. ACL does not engage in market making activity.
viii. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alternations to this statement as may be required from
time to time without any prior approval
ix. Subject to the disclosures made herein above, ACL, its affiliates, their directors and the employees may from time to time, effect or have effected an own account transaction in, or
deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment
banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct entity, independent of each other. The recipient shall
take this into account before interpreting the document.
x. This report has been prepared on the basis of information, which is already available in publicly accessible media or develop ed through analysis of ACL. The views expressed are
those of analyst and the Company may or may not subscribe to all the views expressed therein
xi. This document is being supplied to the recipient solely for information and may not be reproduced, redistributed or passed on , directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose and the same shall be void where prohibited.
xii. Neither the whole nor part of this document or copy thereof may be taken or transmitted into the United States of America “U. S. Persons” (except to major US institutional investors
(“MII”)), Canada, Japan and the People’s Republic of China (China) or distributed or redistributed, directly or indirectly, in the United States o f America (except to MII), Canada,
Japan and China or to any resident thereof.
xiii. Where the report is distributed within the United States ("U.S.") it is being distributed pursuant to a chaperoning agreement with Axis Capital USA, LLC pursuant to Rule 15a-6.
The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document may come shall inform themselves about, and
observe, any such restrictions.
xiv. Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or i ndirect, incidental, special or consequential including
but not limited to loss of capital, revenue or profits that may arise from or in connection with the use of the information.
xv. Copyright of this document vests exclusively with Axis Capital Limited.

September 13, 2022 29

 FMCG
Sector Report

Axis Capital Limited

Axis House, C2, Wadia International Centre, P.B Marg, Worli, Mumbai 400 025, India.
Tel:- Board +91-22 4325 2525; Dealing +91-22 2438 8861-69;
Fax:- Research +91-22 4325 1100; Dealing +91-22 4325 3500

DEFINITION OF RATINGS
Ratings Expected absolute returns over 12 months
BUY More than 15%
ADD Between 5% to 15%
REDUCE Between 5% to -10 %
SELL More than -10%

Research Disclosure - NOTICE TO US INVESTORS:

This report was prepared, approved, published and distributed by Axis Capital Limited, a company located outside of the United States (a “non-US
Company”). This report is distributed in the U.S. by Axis Capital USA LLC, a U.S. registered broker dealer, which assumes res ponsibility for the research
report’s content, and is meant only for major U.S. institutional investors (as defined in Rule 15a-6 under the U.S. Securities Exchange Act of 1934 (the
“Exchange Act”)) pursuant to the exemption in Rule 15a-6 and any transaction effected by a U.S. customer in the securities described in this report must be
effected through Axis Capital USA LLC rather than with or through the non-US Company.

Neither the report nor any analyst who prepared or approved the report is subject to U.S. legal requirements or the Financial Industry Regulatory Authority,
Inc. (“FINRA”) or other regulatory requirements pertaining to research reports or research analysts. The non-US Company is not registered as a broker-
dealer under the Exchange Act or is a member of the Financial Industry Regulatory Authority, Inc. or any other U.S. se lf-regulatory organization. The non-
US Company is the employer of the research analyst(s) responsible for this research report. The research analysts preparing this report are resident outside
the United States and are not associated persons of any US regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a US
broker-dealer, and are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with US rules or regulations
regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

The non-US Company will refrain from initiating follow-up contacts with any recipient of this research report that does not qualify as a Major Institutional
Investor, or seek to otherwise induce or attempt to induce the purchase or sale of any security addressed in this research re port by such recipient.

ANALYST DISCLOSURES
1. The analyst(s) declares that neither he/ his relatives have a Beneficial or Actual ownership of > 1% of equity of subject company/ companies;
2. The analyst(s) declares that he has no material conflict of interest with the subject company/ companies of this report;
3. The research analyst (or analysts) certifies that the views expressed in the research report accurately reflect such research analyst's personal views
about the subject securities and issuers; and
4. The research analyst (or analysts) certifies that no part of his or her compensation was, is, or will be directly or indirectly related to the specific
recommendations or views contained in the research report.

September 13, 2022 30