Musings From Deepak @ DSG Consumer Partners #66

All things consumer & insurgent brands. What I am currently reading, thinking about, and reflecting upon. You can follow me on Twitter at @dishahdadpuri or follow DSGCP at @dsgcp.

I am back after a short summer break in Europe which got extended as I caught COVID. So much has happened since my last newsletter so it will take me some time to get back to speed and share my perspectives on what I see and read. In the last week, I have spent time with some of the most prominent stakeholders in the CPG ecosystem from Unilever to Kellogg to Nestle to L'Oreal to Verlinvest and others. Very important for us as a community looking to back #insurgentbrands to keep a pulse on the mood of the stakeholders. Biggest concerns are inflation, softening consumer sentiment and how this will impact the consumer wallet. On the deal side, valuations are falling, deals are being renegotiated if you are lucky and down rounds for later stage business are the new normal. All part of the VC lifecycle.

Sula is what Bira wanted to become — themorningcontext.com

I am not sure why the story compares Sula Vineyards to Bira. It is a narrative of how Rajeev Samant built an iconic CPG brand over the last 22 years and how he selected investors who were patient and right for the business. It is more a perspective on Sula's playbook and planned IPO.

I am not an investor in Bira, so cannot comment on their strategy but I think I can confidently say that Sula's playbook was and is unique. It was a business built from day 1 to be profitable with best-in-class unit economics. A business that never chased top-line growth. Never. The investors never pressured the company for a quick exit. A business that put the brand at the core of the strategy. I, via my first fund GEM India, was fortunate to be the first institutional investor in Sula and was on the board for 16 years.

If I had to summarise what worked at Sula, I would say it is:

1. An amazing entrepreneur on a mission to build India's number 1 wine brand. It was never about the exit or the money. It was about building a brand and leaving that for the generation of Indians to come.

2. A strong board and a set of investors who were never in a hurry to exit, never chased vanity numbers, always focused on margins and KPIs, treated stakeholders fairly and knew that it takes at least a decade to build a consumer brand. Verlinvest and Saama Capital have been on the cap table since 2009.

3. Building a strong team that can grow the business for the next decade including Chaitanya Rathi, Karan Vasani and many many more who worked tirelessly and passionately. I give a lot of credit to my friend, the super wine consultant Kerry Damskey, who worked in sync with Rajeev on the grapes and vineyard strategy. Do not forget that Sula is an agricultural business.

We at DSG Consumer Partners is a shareholder and is excited by this next phase of the company's journey.

This is a master class on how to build a consumer brand in India and how to pick the right VC partner.

ps. Not all VCs are the same. Not everyone will push the founder to grow at all costs. Many VCs build each business with the founders on first principles so that it has strong fundamentals to be relevant in the long term.

How 5 food and beverage companies are preparing for a recession — www.fooddive.com

Cooking at home is a clear theme as CPG companies develop their recession playbook.

India's Tata Consumer Products Launches Alt-Meat Brand Simply Better — vegconomist.com

With Tata entering the category, can we now say that is no longer a niche category focused on millennials, hippes and others, which may or may not be a long term trend. The reduction of meat consumer for many different reasons, including health and environmental, is a long term secular trend.

Kellogg Asia: Diversifying the consumer base a major Asia opportunity for food giant — www.foodnavigator-asia.com

Great read on how Kellogg is looking at Asia as they write their growth playbook. Keywords "health", "nutrition", "convenience" and "sustainability".

Nestle India eyes new categories to push growth — www.deccanherald.com

Nestle India is looking to tap opportunities in new categories such as 'healthy ageing', 'plant-based nutrition’ and 'healthy snacking' to boost growth in the country, its Chairman and Managing Director Suresh Narayanan.

These are all areas that have been core to DSGCP's strategy since inception and we are excited to see global MNCs see the same trends and step up their M&A for brands in these categories.

Key findings from Veylinx's study on Alternative Proteins — www.greenqueen.com.hk

A key takeaway for brands looking to entice new customers is confirmation that price and taste are bigger drivers than animal welfare or the environment. It was also identified that certain foods, namely burgers and hot dogs, are at saturation point but there is demand for other meat-free alternatives, including seafood and jerky. Overall, plant-based protein that mimics meat remains a consumer favourite.