Healthful food, Ayurveda skin care, mother and baby care, dairy, and outdoor adventure products are some of the fastest-growing themes in the Indian consumer sector, said panellists at the News Corp VCCircle Consumer Investment Summit held in Mumbai on Tuesday.
Nutritional products are an emerging category, said Shantanu Rastogi, managing director at private equity and venture capital firm General Atlantic LLC. He said his company is looking for opportunities in millennial-driven brands and categories such as personal grooming and eating-out.
Rakesh Sony, global head of strategy and mergers and acquisitions at Tata Global Beverages Ltd noted that healthful food and beverages, mother and baby care and skin-care brands focusing on Ayurveda are attractive investments. The healthful food and beverage category is growing at annual rate of 20-25%, according to industry estimates. Ayurveda market is seen as growing three-fold from $2.5 billion to $8 billion by 2022, according to the central government.
Commenting on private equity opportunities, Imran Jafar, general partner at Gaja Capital, said his firm is looking at food and beverage and sports and outdoor adventure. In 2017, Gaja Capital had invested in Massive Restaurants Pvt. Ltd, which operates the Masala Library and Farzi Café brands, and in Chumbak, an online-to-offline seller of lifestyle products.
Commenting on the fast-moving consumer goods (FMCG) market, Kabir Thakur, director at private equity firm ChrysCapital, said hair colour, beauty cosmetics, deodorants, packaged and ready-to-eat foods, durables, and building-material brands focusing on tiles, laminates, and paints were high-growth categories. India's FMCG market is estimated at $50 billion in size. FMCG is the fourth-largest sector in the Indian economy, according to a study by Indian Brand Equity Foundation. It is expected to grow at a compound annual rate of 20.6 per cent to $103.7 billion by 2020 from $49 billion in 2016.
Dairy, another category in the FMCG market, was brought up for discussion by Sony. He said there is immense potential in categories where there is a shift from unorganised to organised sector, such as dairy. "Dairy is a Rs 5.5 trillion category but only 22% of that is organised... The entire sector (dairy) is growing 17% year-on-year and the opportunity is large," he said.
In consumer sector, Thakur noted that exiting investments is the easiest, with appetite for assets in the category being very strong, whether in the private equity sector or the market for initial public offerings.
Commenting on distribution networks, Rastogi said that companies looking for foreign strategic buyers need to think about them.
The challenge for Indian multinationals, Sony noted, is often valuation. He still expects a lot of mergers and acquisitions in the consumer sector over the next few years.
The panel was moderated by Deepak Shahdadpuri, founder and managing director at DSG Consumer Partners. DSG, a venture fund focused on consumer brands, participates in Series A rounds of fundraising.