Dabur India, a leading FMCG giant, is exploring acquisitions in the direct-to-consumer (D2C) arena, especially within the healthcare and personal care sectors, said CEO, Mohit Malhotra.
In a post-earnings investors’ conference call on August 3, Malhotra said that this will help Dabur grow in the high-end market and become stronger in city areas. The company said that they have money on the balance sheet for acquisition purposes. Earlier this year, Dabur bought a 51 percent stake in Badshah Masala, venturing into the branded spices and seasoning sector.
Many companies like Hindustan Unilever Limited (HUL), Marico, ITC, and Tata Consumer Products have been active and have bought many direct-to-customer food businesses. For instance, in January, ITC announced its acquisition of Yoga Bar, a company specializing in healthy snacks. Marico is set to acquire a 58 percent stake in Plix, a plant-based nutrition brand, for Rs 369.01 crore. Marico previously purchased 32.75 percent of Satiya Nutraceuticals Private Limited, the company behind The Plant Fix- Plix. The acquisition of the remaining 25.25 percent is expected to be finalized by May 2025.
Analysts commenting on big companies acquiring D2C brands noted that when traditional brands introduce a new product, consumers automatically associate it with the brand’s existing values. In contrast, D2C brands are seen as more innovative and cater to a younger audience. By acquiring a D2C brand, traditional companies can establish a unique value proposition, promoting their growth.
In the D2C market, food and personal care brands are gaining the most attention. One of HUL’s top beauty brands, Lakmé, offers a smooth and engaging shopping experience through its D2C website, www.lakmeindia.com, which attracts over 25 million visitors annually. It’s harder for homecare brands because customers focus more on price. While people want cheap homecare products, they’re willing to try new things in food and personal care.
Some companies like Hindustan Unilever Limited (HUL) launched their own D2C platform to serve consumers directly. The company has a diverse D2C portfolio that includes the UShop platform and 11 other dedicated brand websites, said a company spokesperson. HUL’s IC Now platform allows customers to order ice creams for home delivery using local delivery apps, he added.
Similarly, Nestle introduced their very first direct-to-consumer (D2C) website, www.mynestle.in, starting in Delhi NCR, with plans to spread to other areas. Additionally, the site provides gourmet recipes and complimentary nutritional advice, said a company spokesperson.
D2C is also cost-efficient. For traditional channels even if the product is good, it may fail due to the cost that is inbuilt in the system. “In case of D2C, the channel itself provides some bit of branding and you get a capital avoidance over there. For D2C the performance can also be judged based on their reviews.” said Ajay Thakur, an analyst at Anand Rathi Institutional equities.
Analysts said that the growth in the D2C space has moderated and has declined to 40-50 percent from a 100 percent growth. But their growth does align with the growth of other FMCG brands in the e-commerce channels. Going forward, the growth should be more or less in line with industry growth, they added.
Talking about the outlook of the D2C brands, Marico spokesperson said that only businesses with strong fundamentals, concentrating on profitability per unit, high customer retention, and low cash expenditures will thrive in the long term. Others might merge or consolidate. “Key to scale up and succeed in this space is the ability to bring differentiated offerings with large addressable market base and strong omni channel capabilities.” he added.