FMCG firms take start-up route to new turf

Source: The Hindu Business Line, Jan 04, 2017

Mumbai: When Dabur copied Paper Boat’s famous ‘doy’ packaging for its Hajmola Yoodley ethnic beverage brand, the start-up did not object. After all, there was a connect with the FMCG major since one of its family members had already picked up a small stake in Paper Boat.

“We are a small company and when a larger company like Dabur has similar packaging, it helps in extending our brand to the masses,” says Neeraj Kakkar, CEO, Hector Beverages, the maker of Paper Boat.

When it comes to new products or packaging innovation, large FMCG companies and their family offices have been taking a leaf from start-ups they have invested in. Globally too FMCG majors like Coca Cola and Pepsico have been regularly investing in new-age start-ups to enter fresh categories.

For instance, Pepsico made an entry into fresh dips by acquiring Sabra Hummus, while Coca Cola entered the smoothies segment by taking over Innocent Drinks. Besides, Unilever has its own fund which participates with PE funds for new-age ventures. In India, however, the trend is just catching up. Last year Marico picked up a 45 per cent stake in a Mumbai based start up — Bellezimo — to gain access to the salon distribution channel for its hair and skin-care products.

“Instead of starting a new journey of manufacturing and marketing skin-care products for salons internally, where the company might not have a ready-made capability, Marico has taken a stake in a start-up to learn about consumer habits and see if the salon can be used as an influencer,” says Saugata Gupta, Managing Director & CEO, Marico. Now after a year, Bellezimo is on its way to have a pan India presence, with financial back up from the FMCG major.

Dinesh Bhat, Managing Director, Bellezimo, says, “We had presence only in eastern India… Today we have 10,000 salons and are now entering the southern markets.”

Tea and coffee start-ups have been attracting the attention of big FMCG players. For instance, when Tata Global Beverages wanted to enter the gourmet coffee segment, it sent feelers to Indian Bean, which had entered online coffee retail.

Kunal Ross, Founder, Indian Bean, said, “Tata Global Beverages had shown interest in our start-up as it wanted to enter the gourmet section under a new brand of Tata Grande.”

Meanwhile, the Apeejay Surrendra Group which owns the Typhoo tea brand, is interested in coffee start-ups, as it wants to enter the segment under a new brand.Subrata Mukerji, Business Head, Typhoo India, said: “Coffee is now on our radar, and we are scouting for companies to make a strategic investment.”

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