Deepak's Musings #140: CPG companies have diversified their M&A strategies balancing growth and margin expansion

🤝 CPG companies have diversified their M&A strategies balancing growth and margin expansion

A must-read from McKinsey for anyone and everyone in the insurgent brand ecosystem from founders to investors. M&A has always been and will continue to be, the primary exit route for the majority of the brands. Very few will go public in the first 10-15 years of a brand’s journey. Critical to know how MNCs are adapting their M&A playbook and building your brand with that in mind.

Download the full report here.

💅🪞 Are consumers going to pull back on makeup and skincare spending in 2024?

According to surveys conducted by global management consultancy McKinsey & Co., among all merchandise categories, including household goods, toys, pet food, vitamins and fitness, makeup and skincare are the categories that rank highest for consumer intent to reduce spending.

𓇼 Sauce VC continues to grow to help build India’s insurgent brands ecosystem

Our friends at Sauce VC have just closed their latest fund, to continue backing some of the best insurgent brands in India.

👩🏻 Women are changing India's spirits consumption

Did you know that women are transforming the Indian spirits industry, particularly at the premium end, by accounting for 40% of the demand in the luxury segment and 64% of the new growth in single malt sales? I knew it was a large number but not this large. Over my 16 years on the Sula Vineyards BOD, there was a lot of thinking around women, all the way from the liquid to marketing to storytelling and communication. This is a must-read interview with Diageo India’s Nagarajan.

🪤 What is fake cheese and does it matter?

Doing business in India is hard. How complicated is cheese as an ingredient or as a flavour?

💎 Premiumisation is the name of the game

I know I sound like a broken record, but every week we hear from the larger incumbents that premium offerings are driving growth. Last week ITC announced that its focus on premiumising its personal care business led to doubling its contribution to sales to 38% in the last four years.

🧱 Brick and mortar was never out of fashion

Sensationalised headlines may lead you to believe that brick-and-mortar went out of fashion. It never did. Consumers are demanding and want to be able to purchase goods and services across channels depending on occasion.

🙄 How far can you stretch an insurgent brand?

I was “mildly” surprised when I read that Tindle was launching oat milk. I thought Tindle was an alternative meat brand focused on faux chicken. So I jumped onto their website. What did I find?

_{“TiNDLE is a ridiculously good chicken made from plants that tastes remarkably like chicken made from birds. It is the first product by Next Gen Foods, a food startup on a mission to shift to plant-based foods easy, enjoyable and delicious. TiNDLE consists of only nine ingredients and is made with chefs, for chefs to provide the taste, texture and versatility of chicken from birds.” [https://tindle.com/faqs/#what-is-tindle as of 7 March 2024]}

They do say that chicken was their first product so they had planned other products.

It is hard to be successful in one category let alone multiple categories. Yes over time brands earn the right to enter adjacent categories. I am not sure if Tindle has earned that right yet. Even if they have, will they be successful in a category that is still B2B driven where buyers focus on price per litre?

This is what I tell my portfolio companies: First, you get your core right. Make it work! Only then, think of doing something new but before you enter a new category, ask if you have a right to play in that category. If you do have the right to plan, then ask if you have the right to win.

I am not sure I want to buy oat milk, albeit it is plant-based, from a company that is/was focused on chickens. Would you?

As an outsider, it is hard to understand what the BOD have in mind. I wish Tindle all the best with this GTM strategy.

🤌🏼 Are generalist/tech VCs the right investors for consumer brands?

Insurgent brands continue to make headlines as they gain market share in India and Southeast Asia against the incumbents on the back of growing discretionary spending. Over the last 10 years, we have seen the emergence of consumer specialists VCs like DSG Consumer Partners, Fireside, Sauce, Sixth Sense and Blueprint in Singapore. In parallel, we have seen generalist VCs (I would have said tech VCs but given they are now investing in brands, I guess I need to call them generalists) enter this space.

🍷🛢️ Wine in a can

I have been sceptical about the willingness of consumers to drink wines from a can. You may think I am a snob, but for me, drinking wine is more of a ritual and part of an experience. In the past, these were usually more formal, and celebratory, and this comes with the decanting, the glasses, and everything else that comes with wine drinking.

Over the last 5 years, I have changed my POV. I now believe there are occasions when I will be willing to, and actually may prefer to drink wine from a can. Why would I carry 2 bottles of wine, in a big chiller, a corkscrew and glasses, when out on a picnic? This has also coincided with better quality wine being available in a can. This is not the first growth from Bordeaux or a Burgundy. However, this is fresh, fruity and drinkable good quality liquid. I am glad to see India’s Sula Vineyards playing their part like they have for over two decades, in educating the Indian consumer about wine in a can. It is still very early in the journey, but I would put my money on Rajeev Samant and the Sula team, to change how consumers think about the product, create new occasions and grow the canned wine market.

🔮 The changing face of hospitality in India: Riyaaz Amlani

I first met Riyaaz Amlani in 2005 at a dinner hosted by Sula’s Rajeev Samant. Riyaaz has a superpower. His superpower is understanding what Indian consumers want from hospitality before the consumer knows it. My prior fund was the first institutional investor in Impresario Entertainment and I had the fortune to be on the board for 7 years when we transitioned from Mocha to new brands including Salt Water Cafe, Smoke House Cafe and, by now, the well-known chain of Socials. I remember several board meetings where I tried unsuccessfully (thank god for that!) to convince Riyaaz not to do a Social. 12 months later I walked into the first ever Social on Church Street in Bangalore. And I was blown away by the product he had conceptualised and delivered.

Many lessons in this interview from last week’s Great India Retail Summit 2024.

Select funding & deal news

Funding and deal news that caught my attention this week