The consumer markets have witnessed a stark change in macro trends post-COVID-19. Fundamental shifts that were already occurring in the consumer markets have been accelerated with the pandemic. Consumers are increasingly looking for omnichannel, sustainable, and transparent solutions to their problems. Consumption is driven by higher disposable incomes, more awareness, and higher access to the internet and smartphones.

With the increasing consumerism, the interest of the investor community in this sector has piqued. In 2021 and 2022 YTD, with e-commerce (incl. quick commerce and D2C), F&B and beauty and personal care attracting many investments, we have witnessed the following key themes play out in the consumer sector.Resurgence of Vertical e-commerce

While e-commerce had lost its shine in recent years, it has re-emerged as a focus sector with renewed investor interest. The pandemic accelerated the learning curve for technology adoption and online commerce among less tech-savvy and first-time users.

Both the novel vertical formats as well as the traditional horizontal formats have seen significant PE/VC investments. FirstCry, the online multi-category baby products brand, has raised US$ 13M Series E funding led by Premji Invest, TPG and ChrysCapital.

Explosion of D2C

D2C (direct-to-consumer) brands selling directly to consumers without any middlemen have been a focal point for both customers and investors alike. Emergence of influencer and social media marketing for brand building has also helped to propel these brands.

D2C brands in Personal care, grocery, and gourmet, apparel and footwear, electronics, healthcare, home supplies, home décor, and garden have seen significant investor activity. Men grooming brands like The Man Company and Bombay Shaving Company raised US$ 7M and US$ 28M resp.  Apr’21 and Jun’22. Damensch, a men’s loungewear and innerwear brand, raised US$ 16M led by A91 Partners. Baby and toddler-focused unicorn, Mamaearth raised US$ 38M in Dec 2021 from a series of investors including Sequoia and Sofina. Wow Skin Science raised US$ 98M Series C funding from GIC and ChrysCapital. mCaffeine, a beauty and personal care D2C that offers caffeine-infused face, body, and hair care products raised US$ 36M led by Amicus Capital Partners.

Increasing focus on health foods and ethnic / traditional food products

Health-focused F&B industry has witnessed significant investment activity with affluent working class increasingly opting for healthier options for snacking. Open Secret, a health foods player with products like almonds, cereals, “un-junked” chips, etc recently raised US$ 10M Series B funding led by Ananta.

Capital. Wingreens, a health focus FnB brand with products like pressed juices, oats, and sauces, raised US$ 18M in late 2021. Happilo, which sells dry fruits, trail mixes, nut protein bars, and muesli raised US$ 30M from A91 Partners and Motilal Oswal PE early this year.

There has also been renewed investor interest across ethnic / traditional food products with an emerging need of the standardization of perishable ethnic fresh foods. Vahdam raised Series D funding of US$ 24M led by IIFL Asset management. Further, iD Fresh Food, a Bangalore-based traditional food products company that sells Idly/Dosa Batter, Parotas, chapatis, curd, and paneer, secured funding of US$ 67M in Dec 2021 from Newquest Capital Partners and Premji Invest.

Redefining Beauty and Personal Care (BPC)

Focus on cruelty-free, chemical-free, organic / ayurvedic brands has increasingly pervaded the BPC product space. Digital-first, science-backed brands are increasingly backed by top investors like Sequoia, TA Associates, and L Catterton. New-age, digital-first beauty and personal care brands like Plum, Purplle, Sugar Cosmetics, MamaEarth and BellaVita have seen increased investor interest.

MyGlamm raised over US$ 232M in funding over 3 deals between Apr’21 to Jun’22. Purplle, the cosmetic marketplace raised US$ 33M from Paramark, Kedaara, Premji Invest and Blume ventures. Purplle had earlier received three rounds of Series D funding of $175M between Oct’21 to Jan’22. Sugar Cosmetics, one of India’s largest omnichannel beauty companies closed a US$ 50M Series D fundraise led by L Catterton, the largest global consumer-focused PE firm. BellaVita Organic, Ayurvedic beauty, and skincare brand also raised US$ 10M from angel investors.

Focus on distribution and supply-chain focused companies

The promise of high-quality products (for example, meat by Licious and dairy by Country Delight) has been made possible by significant improvements in supply chain.

Licious, which owns, manages, and controls all its processing centers and promises to sustainably produce high-quality, fresh RTC and RTE products, has attracted investor interest raising US$ 150M (Series F) on Mar 22, valuing the company at US$ 1.5B.

Country Delight is a food essentials brand that offers fresh milk (and other dairy products) to the doorstep. Taking a tech-first approach, Country Delight has ensured Farm-to-home deliveries within 24-36 hrs of sourcing facilitated by a fully integrated just-in-time supply chain model. The company was able to raise $108M in Series D on May’22, valuing the company at US$ 615M post-money valuation.

Given the change in consumption trends and demand patterns, these themes are expected to be prominent investment avenue for PE / VC community at least in the current year.

Author:

Roma Dixit, Director - PGA Labs and Anil Razdan, Executive Vice President – PGA Labs