FMCG Legacy Companies Embrace D2C Investments as Consumer Preferences Shift
Traditional FMCG companies are investing heavily in D2C brands through acquisitions and venture capital arms to capture emerging market opportunities. Major investments include HUL's ₹3,000 crore acquisition of Minimalist and Dabur's ₹500 crore venture fund launch. With new-age brand revenues reaching ₹40,000 crore in FY24 and 400 million new upper-middle income consumers expected by 2030, legacy firms are leveraging these partnerships to access digital-first capabilities and premium market segments despite current sector challenges.
*this image is generated using AI for illustrative purposes only.
Traditional FMCG companies are rapidly embracing direct-to-consumer (D2C) brands through strategic investments and acquisitions, responding to shifting consumer preferences and emerging market opportunities. Legacy firms are leveraging their financial strength and distribution networks to gain market share in premium, niche categories where new-age brands have established strong footing.
Major Acquisitions Drive Market Entry
Several prominent FMCG companies have made substantial investments to secure positions in the D2C space. The following table highlights key acquisitions and investments:
| Company: | Investment/Acquisition | Amount | Strategic Focus |
|---|---|---|---|
| Hindustan Unilever | Minimalist (skincare) | ₹3,000 crore | Science-based skincare category |
| Hindustan Unilever | True Elements (100% ownership) | Not disclosed | Breakfast and snacks segment |
| Emami | The Man Company (full acquisition) | Not disclosed | Men's grooming products |
| Marico | Multiple brands (Beardo, Just Herbs, Plix) | Not disclosed | Diversification beyond oils |
Naveen Malpani, partner and consumer and retail industry leader at Grant Thornton Bharat, explains that legacy FMCG firms see D2C acquisitions as a way to accelerate entry into premium, niche and fast-growing categories where consumer preferences are evolving faster than traditional portfolios.
Market Growth Projections Support Investment Strategy
The investment surge is backed by compelling market projections. India is expected to add 400 million upper-middle and high-income consumers over the next eight years, bringing the total to 557 million. Total consumption expenditure is projected to rise from $2.1 trillion in 2022 to $5.7 trillion by 2030, according to Bain & Co estimates.
The combined revenue of new-age consumer brands across categories crossed $5 billion, or approximately ₹40,000 crore in FY24, according to venture capital firm Elevation Capital estimates. This figure continues to scale rapidly as consumers increasingly seek diverse brands across categories including shaving creams, deodorants, lip colours, packaged foods, and home care.
Venture Capital Arms Enable Strategic Participation
Rather than pursuing outright acquisitions exclusively, many legacy companies have established venture arms to participate in startup growth through minority stakes. Key venture initiatives include:
| Company: | Venture Arm | Fund Size | Investment Range |
|---|---|---|---|
| Dabur | Dabur Ventures | ₹500 crore | ₹25-75 crore per startup |
| Wipro Consumer Care | Wipro Consumer Care Ventures | ₹250 crore (second fund) | 3-4 investments annually |
| ITC | Startup fund | From corporate treasury | Multiple investments since 2018 |
Abhinav Dhall, group head of corporate strategy and executive director at Dabur India, notes that in large organizations, innovation happens, but it takes longer. That's why we need exposure to newer ideas through a portfolio of bets—so we can identify innovation and participate early.
Strategic Rationale Behind D2C Investments
Vineet Agrawal, CEO of Wipro Consumer Care & Lighting, identifies three primary drivers for FMCG companies backing startups:
- Financial returns: Intent to generate profits from investments
- Learning opportunities: Startups identify opportunities faster and execute better
- Digital capabilities: Superior e-commerce and social media expertise
Supratim Dutta, executive director and CFO at ITC, emphasizes that the strategy focuses on building a future-ready portfolio with focus on enhancing market standing and driving growth in line with our broader ITC Next strategy.
Current Market Performance and Investment Examples
The FMCG sector faces mixed performance indicators that underscore the need for diversification:
| Metric: | FY25 Performance | Previous Period | Change |
|---|---|---|---|
| FMCG Volume Growth | 4.2% | 6.6% (FY24) | -2.4 percentage points |
| Urban Growth | 4.4% | Not specified | - |
| Rural Growth | 4.0% | Not specified | - |
| NIFTY FMCG Index (YTD) | -0.6% | - | Negative returns |
| NIFTY 100 (YTD) | 9.4% | - | Outperformed FMCG |
Despite market challenges, companies continue expanding their D2C portfolios. ITC's total investment in Yogabar stands at ₹255 crore with a 47.50% stake, and the company invested ₹131 crore for a 43.8% stake in frozen food brand Prasuma. ITC's investments in VC funds reached approximately ₹135 crore as of 31 March 2025.
Digital-First Portfolio Development
Marico has positioned itself as a house of digital brands, with its digital-first portfolio crossing the ₹1,000 crore annual recurring revenue mark in the September quarter. Saugata Gupta, managing director and CEO, states that the priority is to grow these businesses sustainably while improving profitability, with targets of double-digit Ebitda margins over the next two to three years.
The trend reflects a fundamental shift in how legacy FMCG companies approach growth, combining traditional distribution strengths with digital-first innovation to capture evolving consumer preferences across premium and niche market segments.
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