Global factsheet India

factsheet
Funding Transactions Brands launched Brands with $50 Mn+ ARR

Projected growth of online

Unicorns M&A Brands with $15 Mn+ ARR
shoppers in 5 years
s
 Robust growth in organized retail led by increasing online retail penetration presents a massive opportunity for brands in
India
Indian retail market Organized retail penetration E-tail market
size (% of overall retail) size
($Bn) ($Bn)
1,757 30%
85%

11% 55% 1,500

CAG 11%
977 R
45%
4% 200
39

2019
17% 2019 2019 2025
2025

31%
2019 2025 E-tail market size ($Bn) XX% E-tail market (% of overall
retail)

Huge retail opportunity Largely unorganized market E-tail is India’s organized retail
India is the 5th largest retail market globally High rentals and low number of malls and shopping India e-tail to mimic China trend of high e-tail penetration due to
complex are constraints to organized retail penetration sluggish growth in retail mall space (0.8 malls per million people in
India vs 36 in USA) and high rental costs (20-25% of sales in India
and China vs. 10-15% in USA)

Source: Deloitte and the Retailers Association of India report ”Unravelling the Indian Consumer February 2019”, Avendus estimates 11
Low brand penetration and high customer reach provide a Traditional players are focused on their portfolio brands; the
significant ecosystem
headroom to scale up a brand is not witnessing active brand launches from most of the incumbents
Time taken to achieve
Brand Product INR 100 crores ($13 Mn) Traditional players are focused on their portfolio brands
revenue

Incumbents have created brand outcomes by leveraging product white space and well-
developed distribution
Focus on existing brands Fewer brand launches Inorganic growth
Pulse
y
DS Group cand 6 months Launch more products New brand launches by Reliance on inorganic
(2015) SKUs and variations large players have growth for
under existing brands been few and far enhancing brand
Coke
8 months between portfolio
Zero
(2014) Few brands introduced by the incumbents in the last few years
Silk
te Brands launched by FMCG companies in the last 5 years (#)1
chocola 8 months
(2010)
4
New market entrants have also demonstrated ability to scale in a short timespan
2
Bira 91 bee r 1 1 1 No new
(2015) <24 months
B9 Beverages launches

Fogg
ant
Vini Cosmetics deodor <24 months
(2010)

Note: 1 – Own brands introduced in the market (does not include acquisitions)
Source: Company filings, Public disclosures, Avendus research 12
 D2C brands refer to businesses that have: (i) majority of their revenue or customer acquisition from direct to consumer online channels; OR (ii)
started with an online-first distribution before going omnichannel
Years taken to reach INR 100 crores ($13 Mn) revenue in India

Food & Beauty & Personal Fashion Electronics &

Beverage Care appliances

21
20
19
17
15
13

9 9
7
5
4 4 4 4
3 3 3 3 3
2

Traditional D2C brands

players
Source: Company filings, public disclosure, Avendus research 13
Strong growth momentum in India D2C ecosystem is at an inflection point of rapid growth in
India

2020 2025
$1.6 Bn+ Funding in D2C startups
since 2016
Online shoppers added in the Online shoppers expected to be added
last 3 years in the next 5 years

600+ Number of D2C brands

launched since 2016
Active social media users Active social media users
52% are millennials

20+ Global D2C unicorn

startups, 1 in India
Funded D2C brands Addressable market size for D2C
brands

Source: Tracxn, Talkwalkers report on “Social media statistics in India”, CB Insights, Avendus research 14
 An Women as a separate Room for Robust
01. unsatiated 02. new class of 03. product 04. supporting
consumer consumers innovation ecosystem

Underserved new-age Women now constitute 44% Product and price white Horizontals make D2C
consumers; incumbents are of online shoppers, up spaces enabling emergence viable: bring shoppers
not catering to niche from 10% four years ago of new players online, aid discovery, enable
requirements distribution
Increase in online spends by Quick R&D and launch of
Customers seeking personal women; final say in majority products addressing Customer interaction through
connect with brands; of purchasing decisions1 customer needs social media engagement and
receptive to experimentation digital awareness
Emerging outcomes across Keeping the brand relevant
Consumers habituated to women-focused categories by continuous innovation Availability of third-party
quick solutions and like beauty, hygiene, in product and marketing logistics services for
convenience; looking for fashion transportation and fulfilment
similar experience while
shopping online

Source: 1 – BCG publication - “Ten Trends That Are Altering Consumer Behavior in India”, Avendus research 15
 Differentiation Key illustrations

01. Identification of trends, consumer needs and

Customer and feedback-led product development by leveraging Offers toxin-free SKUs Focus on feedback-led Offers personalized skin care
need identification data and insights designed specifically for development and re- and hair care products based on
baby care and mother engineering of products consumer feedback
care

02. Digital marketing and storytelling to form

Innovative marketing emotional connect and attracting right Leveraging gym trainers as 360-degree marketing with Focus on storytelling
and communication customers to ensure higher repeatability influencers for assisted sales celebrities, influencers approach for better targeting
and marketing and social media content and retention

03. Operational efficiencies through third-party

integrations, outsourcing manufacturing and
Vertically integrated supply High quality antibiotic-free Own manufacturing enabled
Reduced supply chain chain with omnichannel meat sourced directly a very low design-to-shelf
eliminating middle-men
complexities presence from farmers with timeline of 45-60 days
efficient cold chain

04. State of the art technology for control over Launched virtual 3D imaging Uses analytics and R&D to Leveraging Qualcomm chipsets
Technology for control demand forecasting, cost optimization, quality app enabling users to try- offer geography specific to bring noise cancellation to
and optimization control and traceability on variety of jewelry on the products to increase earbuds
go customer loyalty

Source: Avendus research 16

Value creation has been driven by factors such as category white spaces, product innovation, focus on brand visibility and subscription-based
models
Beauty and personal care
Cosmetics

Valuation: $4 Bn

Valuation: $3 Bn

Valuation: $1 Bn+

Men’s grooming

Valuation: $1 Bn+

Valuation: $1 Bn

Baby care

THE HONEST COMPANY

Valuation: $1 Bn
 Early Mid/Growth Expansion
stage stage stage
Digital-only distribution Going offline for further scale Multiple brand expansion
strategies
D2C brands in India leverage a mix of own platform Offline distribution increases customer reach and
and marketplace distribution expands addressable market Expansion to adjacent categories
Own platform to access customer data; marketplace Increases brand discovery and credibility
to increase discovery and reduce CAC Increases target audience, basket size
Enables touch-and-feel factor for customers and
Own platform sells the product as well as the repeat behavior of the customers
However, rapid online adaption is pushing Omni-channel
brand
the omnichannel expansion further out expansion
Own the purchase Channel for driving D2C brands have demonstrated the ability to Multi-channel distribution – own
experience loyalty and scale without offline expansion as well platform, marketplace and offline
retention
House of brands
Marketplace distribution can ascertain the
architecture
product- market fit
Multiple sub-brands under the parent
Large global outcomes have been created through brand to create targeted propositions
Launch Channel for discovery, digital- only distribution
minimum viable customer acquisition International
products expansion
Overseas distribution to North America,
Middle East and Southeast Asia

Source: Avendus research 18

 Successful D2C brands leverage a combination of order value, purchase frequency, margins and brand
communication
Average order Customer Gross Brand resonance
value repeat margin

Brands with high order value are Better repeat rates indicate Higher margins enable brands to Communication of brand identity
more likely to demonstrate higher purchaser spend more on marketing and and proposition establishes
better unit economics frequency and/or product- distribution customer connect
Premium pricing market fit Low production cost Social media engagement
Larger basket size per High purchase frequency Low logistics and delivery cost 360-degree marketing
transaction Expanding to adjacent
categories

Basis favourable characteristics, tailwinds and headwinds, the following industries look better positioned to create a higher number of large
outcomes

Beauty & Personal Food & Fashion

Care Beverage

19
 Beauty & Personal Care Food & Beverage Fashion Electronics Home & Furnishings

Size of digital market in 2025 $4 Bn $15 Bn $32 Bn $48 Bn $4 Bn

Gross margin of the category 65-75% 45%-55% 45-60% 20%-40% 50-60%

Purchase frequency Monthly purchase Weekly purchase Once in 3-4 months Once in 1-2 years Once in 5-8 years
Category characteristics

Taste-specific, high
High customer repeats Consumers survey Consumers survey Every sale is a new
Customer repeat behavior opportunity to create
for product portfolio multiple brands multiple brands customer
repeats

Necessity with Necessity with Necessity with

Essential products of Essential products of
Non-discretionary nature discretion in purchase discretion in purchase discretion in purchase
daily use daily use
timing timing timing

Emerging
Large opportunity in Easily replicable Customer experience
Product uniqueness health Standard specifications
unaddressed designs innovations
consciousness,
niches
unaddressed

High penetration on High focus on digital Some segments use Some segments use
Digital marketing presence High presence
social media marketing digital marketing digital marketing

Average order value INR 400 – 2,000 INR 400 – 2,000 INR 300 – 2,500 INR 500 – 5,000* INR 5k – 100k+

Source: Avendus research

Note: *While products sell for higher prices, D2C electronics AOV is estimated in the INR 500 -5,000 range 20
Global Beauty & Personal Care market is expected to become a $725 Bn+ market by 2025. D2C brands in this category have flourished on the back of product and
price white space, business model innovation and growth capital. While D2C brands might face some execution challenges like revenue stagnation, low retention or
high customer acquisition costs, multiple Billion Dollar valuation outcomes have been created across US and China.

Exciting opportunity for personal care categories like skin care, hair care and body care
Estimated Beauty and Personal
$28 Care market size in India by 2025 Indian market is dominated by traditional players focused on existing brand portfolio with fewer brand launches
Bn (5year CAGR of 9%)
Customer preference shift is being demonstrated by increase in wallet spend and demand for premiumization
Product innovation, adoption of digital distribution and inability of incumbents to tap into niche segments present
an opportunity for brands
While traditional distribution channels are cheaper, digital distribution has lowered barriers to entry for newer
D2C brands across beauty, care,
80+ cosmetics and men’s grooming
brands
Beauty & Personal Care in India is witnessing a wave of D2C brands

D2C brands are capitalizing on product and price white space across personal care, cosmetics and men’s
grooming
Dedicated efforts towards customer interaction, social media engagement and next-door credibility of
Expected 5-year CAGR for online
29% Beauty & Personal Care market influencers Personal care products have high product margins with potential for high LTV/CAC ratio
(2025 online market size of $4.4 Bn)
Explosive value creation can happen in the
category
Successful on the back of clear brand proposition, agile DNA, asset light operations and plug-and-play supply chain
~70% Product margins in the category While own platform gives access to customer data and insights, marketplace distribution gives velocity as well
(Margin range of 65-75%) as reduces CAC
Long-term scalable and sustainable strategy could be omni-channel distribution with a house of brands
architecture
Source: Avendus research 13
 The impact of country-wide lockdowns imposed by the Indian government in response to the pandemic varies across
sectors
Beauty & Personal Care Food & Beverage Fashion

Immediate impact Overall increase in online buying Increased spending on packaged food and Shift towards online buying
of COVID-19 Increase in sales of DIY, at-home and self-care beverages Growing instances of ‘Down trading’ where sale of
products Push for newer brands as customers more willing to luxury items is declining; while the ‘value’ segment
Rise in sales of personal care and hygiene experiment given the lower preference towards online has remained strong over the past few
products dining out months

State of offline retailing Mellowed recovery in offline beauty products sale Minimal overall impact on grocery store sales due to Bottoming out of retail sales and lacklustre recovery
due to regional restrictions the essential nature of category due to closure of malls
Personal care segment is tracking near pre-COVID- Consumers shifting to stores that are more hygienic Longer term adverse effect due to high amounts of
19 levels and less crowded unsold inventory and uncertainty over store
reopening

Impact on Online sales have proven to be resilient despite Convenience of buying fresh, hygienic meat & dairy Digital channels have been able to recover up to
D2C sales dip in April 2020 products online has increased the sales for D2C 70% of their pre-COVID-19 sales by August 2020
companies D2C brands looking at increasing their online brands Low traction at physical stores with high-street
footprint to tackle the issues associated with offline Shift in consumer awareness around immunity and outlets performing comparatively better than malls
shopping health has triggered customers to order health &
wellness products online

Behavioral shifts Comfort associated with offline shopping reducing Structural shift in consumer behavior with higher Consumers becoming more open to online channels
and online channels seeing increased consumer acceptability of internet as a channel while shopping while buying clothes due to COVID-19
confidence for food
Consumers spending more time in browsing and Shift in preference towards groceries and ready-
searching to make informed decisions made foods due to rise in home-cooking and low
dine-out spending

25
 3x 3x 1.8x

Mar'20 Aug'20 Mar'20 Aug'20 Pre-COVID-19 Current

3x growth attributable to shift in Unprecedented acceleration - 1.8x growth driven by increased

consumer preference towards 3x growth in 5 months demand for high quality farm fresh
hygienic meat/ seafood products milk during COVID-19

Leading D2C brands in personal care and food spaces have witnessed over 100% growth in scale with respect to pre-COVID-19
levels
Source: Company data and Avendus estimates 26
 Strategic sale to incumbents Subsequent funding round Long road to exit through
IPO
Strategic M&A can happen for acquisition of team & D2C brands have received funding from both strategic Indian consumer brands have typically gone for IPO
tech capabilities, digital distribution expertise, filling as well as financial investors globally as well as in India after reaching a level of scale and profitability;
product white space and experimentation with niche
Few IPOs in global landscape, none in India
categories
Year Acquirer Company Size ($Mn) Funding
Year Company Sector Round
US D2C IPO compared to strategic sale1
($Mn)
Beardo (Men’s
2020 Undisclosed
grooming) 2020 Ro Wellness Series C 200
2020 Billie (Personal care) Undisclosed Persona
2020 Series D 18
l Care IPO in this space M&As/Strategic sale
2020 Kylie Cosmetics 600
2019 Eyewear Series G 235
2020 Be & Cherry (Food) 705
2019 Bedding PE 100
2019 Have & Be (Skincare) 1,700 Scale and profitability expected at the time of
2019 Luggage Series D 100 IPO
2019 Graze (Snacks) 195 India Consumer brand IPO benchmarking2
2019 Beauty Series B 11
Drunk
2019 845
Elephant 2019 Beauty Series D 100
(Skincare)

2019 Tatcha (Skincare) 500 2019 Apparel Series B 55 Scale at IPO Net margin at IPO

2019 Quest Nutrition 1,000 2019 Wellness Series C 100

Note: 1 – Data for US for the last 10 years; 2 – Median data for consumer IPOs in India in the last 5 years, Assumed USD/INR FX of 75
Source: Company filings, Public Disclosures, Avendus research 27
 Beauty & Personal Care Food & Beverage Fashion Electronics & Appliances

Personal Care Meat & Meat alternatives Western wear

Chase
Labs

Utility and lifestyle

Ethnic wear

Cosmetics

Specialized segment Home & Furnishings

Men’s grooming Meals

Note: The list is representative and is not exhaustive

Source: Avendus research 28
2.1.
Beauty &
Personal Care

29
Brand revenue from Beauty segments1 Global Beauty & Personal Care market Beauty & Personal Care market
($Bn) size size
($Bn) ($Bn)
$34 Bn $278
733
91
$25 Bn
$45
522
$19 Bn 63
5.8%
$15 Bn CAGR
$10
$10 Bn $242
18 16
$9 Bn

$7 Bn
CY19 CY25P USA China India UK
$6 Bn

$5 Bn
Global market is estimated to grow at ~6% for the next $xx Per capita spend on beauty and care
$5 Bn 5 years

Offline retail holds more than 85% market share of the

global Beauty & Personal Care market USA has ~18% of the global market share, followed by
Top 10 brands across the world command 26% China with 12% market share
of the market

Note: 1 – Brands’ net revenue for Beauty & Personal Care in CY19
Source: Company filings, public disclosures, Avendus estimates 30
New generation’s preferences and changing consumption patterns Evolving themes like increasing confidence in organic products, shift to chemical-
free products and demand for vegan formulations
Delayed marriages: Higher spend on discretionary category during bachelor years
Simplicity of products (in terms of limited product offering) combined with
High content consumption: Considerable time spent on entertainment, music and high functionality
content
Young spenders in non-Tier I cities: High affordability but lower access to
premium products driving online growth Large pricing arbitrage compared to the existing products in the market to gain
early traction and user base
Rising customer aspirations resulting in popularity of personalized products and
celebrity- backed brands enjoying organic virality Price gaps that existed between the affordable category and high-end products

Toxin-free beauty and care Started with 4 high Started with 2 razors &
Celebrity-led brand
products functional products 1 type of blades
The Honest Co.

New distribution channels like online marketplace and online-to-offline Availability of funding, enabling experimentation in the category and SKU
Relatively lower investment in supply chain infrastructure to launch a minimum viable expansion
product
Significantly lower Mass-market Raised $530 Mn over Raised $375 Mn over 7
blade prices priced products 7 rounds rounds
The Honest Co.

Source: Tracxn, TechCrunch, CB Insights, PitchBook 31

Product white space Virality Valuation Key differentiators / innovation

D2C brands start by tapping into $400 Mn+ $4.0 Bn Low priced color cosmetics with focus on brand storytelling
underserved niches like low revenue in 3 years Engaged online community, leveraged influencers & WeChat private traffic to
synthetic chemical products access millennials
Founded 2017

$550 Mn+ $3.0 Bn Focused on ethnic diversity

Brand visibility revenue in 1.5
Fenty Beauty years High SKU variety to build inclusivity for all skin types (40+ shades, a first in the
Founded 2017 industry) Stradling mid-market price segment with celebrity appeal (Rihanna)
Strong emphasis on brand
storytelling and aggressive digital $325 Mn revenue $1.4 Bn Simplicity of choice: one type of razor (for $9) and blade cartridges (for $1.9);
marketing to rapidly acquire in 7 years Limited SKUs, cheaper than incumbent
mass mindshare Founded 2012 Pre-launch digital marketing campaigns, incentives for referral sales and
social community build-up
Subscription models $300 Mn+ $1.0 Bn Clean, toxin-free products across a wide SKU range
revenue in 4 years Safety proposition cemented with the line of baby products
Low involvement categories where
customers don’t do repeated pre- The Honest Co. Celebrity status leveraged by the Founder (Jessica Alba) to communicate brand story
Founded and garner $10 Mn sales in the first year
purchase research have been 2012
successful
$100 Mn+ $1.2 Bn UGC marketing & product reviews as against big brand celebrities boosting
revenue in 4 years credibility; Loyal online community and engagement
Founded 2014 Limited products and SKUs, Online skin tone matcher tool and Product co-creation
Influencer-backed brands
with
Celebrity-led brands leveraged an users from the Founder’s blog (1.5 Mn users)
engaged fan audience to inspire $200 Mn+ $1.0 Bn Simplified repeat purchase combined with a white space in
credibility and customer revenue in 5 years
pricing Catchy product and packaging along with brands
aspiration
Founded 2011 marketing hook
Viral digital marketing campaigns by the Founder; Consistent engagement and
posts across all social media channels everyday 32
Source: Tracxn, TechCrunch, Company filings, Avendus research
 Brands may witness stagnated revenues beyond first level of euphoric growth
01. Chosen niche may not have enough depth or may have high level of consumer education
Used same branding
for all skincare
Revenue requirements product categories
Having a brand which can adapt to other adjacent has proven better in the long
stagnatio categories as they expanded
term
n

Branched out from baby

care to a larger
02. Brands may find it challenging to maintain a healthy repeat purchase pattern
The Honest Co. personal care market
As a category, it experiences high experimentation and switching by
Low
retention customers
Strong brand ethos combined with category is needed to keep the brand Expanded from
relevantexpansions cosmetics to skincare

Typically, it is expensive to acquire customers for own platform due high performance marketing
03. to
cost Digital25-35% of the revenue
High acquisition or As an alternative brands leverage marketplaces for distribution; while providing fulfilment, First is spent on marketing/
distribution cost and product listing services, marketplace charge 25-35% of customer sales as channel
payments Brands channel commissions
commission
Over-dependence on direct-to-customer with minimal presence on alternate channels may not
be a successful long-term strategy Started with offline
04. Brands often find it difficult to diversify channels and end up with a skewed channel mix or distribution to get first set
Lack of channel low bargaining power with marketplaces of customers, then set
diversification Keeping a mix of marketing and distribution can help cultivate indirect up online to increase
TGs channels repeats

Source: Avendus research 33

 2.1.

Increasing wallet
Large market Dominated by large Untapped supply
share for the
opportunity FMCGs focused on chain and
category and
of their existing operational
demand for premium
$28 Bn by brands efficiencies
products
2025

34
Wallet share1 of Beauty & Personal Care in India Mix of mass versus non-mass Beauty & Personal Care segments in
India
($Bn)
27.
5
1.2% 17. 10.2
0.7% 1.0% 8
4.7

17.3
13.1
FY15 FY20 FY25
FY20 FY25
Mass Non-mass
Wallet share of Beauty & Personal Care in China in CY19

Share of
26% 37
non-mass
%

Increasing wallet share Increasing Premiumization

India’s Beauty & Personal Care wallet share in FY25 is expected to be at the China While mass category in India will grow at 9.7%, non-mass categories are expected to
wallet share level today grow at 19% CAGR

Note: 1 - Wallet share calculated by computing category spend as % of private consumption

Source: Avendus estimates 35
Beauty & Personal Care market in Brand-wise net revenue of Beauty & Personal Care segment in
India 27.5
FY20
($Bn)

17.8

9.1% $775 Mn

CAG $2,269 Mn
R $598 Mn
FY20 $482 Mn

FY25P $441 Mn

Beauty & Personal Care market in India is estimated to grow 1.7 times in the $307 Mn $300 Mn $340 Mn
next 5 years $289 Mn
Beauty & Expected growth of
8-9% Personal Care 15%+ underserved
$295 Mn
market CAGR for categories (like herbal
2014-19 products, men’s
grooming)

Retail touchpoints selling

70% Sales through 12 Mn FMCG products
(relatively easier for Top 10 FMCGs in Beauty & Personal Care comprise over 30% of the market
unorganized retail
FMCGs to get shelf (excluding distributor and retailer margin)
space)

Note: Foreign exchange rate used as USD 1 = INR 75

Source: Company filings for FY20 and FY19, Broker reports, Avendus research 36
 Company (Beauty Brand Brands >$150 Brand launches Key brand activity in 2018-
segment revenues) portfolio Mn Revenue in last 5 years 20
Launched the brand Love, Beauty and Planet in India, partnered with Amazon
7, of which to launch exclusive men’s grooming products, introduced Lakmé’s natural
7 range owing to demand for natural ingredients
3
$2.3 Bn + 24 more inorganic Acquired VWash, a female intimate hygiene brand in 2020

Launched its international brand, Herbal Essences, with online-only distribution

2 1 Innovation in own brands and online distribution of select SKUs depending
$775 Mn upon the product target audience
+ 2 more

Launched Dermafique, premium skin care brand

0 1 Focused on introduction of new product range or variants within existing
$260 Mn sub- brands
+ 2 more
Launched Keepsafe, a range of premium personal hygiene products
2, of which1 Completed acquisition of men’s grooming brand Beardo, originally invested
1
inorganic in 2017
$340 Mn + 9 more Concentrates on frequent launches of new variants under existing brands

Launched exclusive make up collection by designer Sabyasachi through

2 No new launches ‘Instagram only’ route in 2018
$482 Mn Re-launched Majirel, professional hair color brand, in 2020
+ 10 more

Fewer brand launches: Inorganic growth: Focus on existing brands:

New brand launches by large players have been few and far Growing reliance on inorganic channels for Launching more products and sub-brands
in- between enhancing brand portfolio under existing brands

Note: Foreign exchange rate used as USD 1 = INR 75; Source: Company filings, Investor presentations, Avendus research 37
 Manufacturing Online
D2C ecosystem Customer
brand platform/
marketplace

Marketplace commission and visibility spend of 22-32% | Own platform spend on acquisition and logistics of 25-
35%

Traditional Manufacturing
Distributor Retailer Customer
brand
ecosyste
m
Combined commission of distributor and retailer of 20-
30%
Traditional companies have standard processes across brand, product and
operations
Brand strategy Product strategy Execution strategy
Launch 1 brand in 1-2 years through organic or Investment in quarterly or annual activations or Multiple departments (like sales, marketing,
inorganic expansion variations within the existing brands development) with standard processes and
decision-making guidelines
Focus on categories with large markets and huge Do not capitalize on early or niche market trends owing
audience to ensure viability and assured return on to large investment of time, effort and marketing Template operational procedures like customer
investment budgets surveys, focus group discussion, trials, testing,
brand creation and approval at global levels
Launch a new brand only if there is comfort of achieving Annual or quarterly activations or introduction of
$65 Mn+ in brand revenue variants / SKUs to provide incremental offerings

Source: Avendus research 38

 Demographic
White space of Adaptation of
changes and Low agility of
offerings / ability to digital distribution
behavioral shifts well traditional
create brand affinity and emerging
positioned to players
platforms
expand market

39
 Number of online beauty shoppers1

Rising number of online beauty 135 Mn

shoppers 25 Mn

FY20
FY25

Increased spend by mid aged women Increase in women borrowers as a proxy2

shoppers Increase in women
Increase in women
Women have started taking dedicated interest in self- 33% borrowers (age
41 borrowers (age 50+)
care and consumption 36- % since Dec-17
50) since Dec-17

Expansion of men’s grooming market3

Higher focus on grooming by men
Mid aged men are becoming more conscious of
hygiene and wellness
FY20 FY25

Top attribute searched4

Online personal care search driven by brand (% of total searches)
60%
preference 60% of the total searches for online
personal care are driven by brand
preference

Source: 1- Avendus estimates, 2 - CRIF High Mark (credit bureau): data for Dec-17 to Mar-20, 3 - Avendus estimates 4 - Bain and Company report “How India Shops Online” 40
Product white space Marketing white space

Consumer demanding new categories, like body scrubs, Vitamin C serums, that are Lack of direct engagement & feedback channels with customers
not mainstream in India
For instance, direct messages on Instagram, v/s write feedback to a
Niche, personalized and targeted products
corporation Attention rapidly moving to newer media channels
Ability to offer a wide range of SKUs
Incumbents have not yet cracked the code of online brand storytelling and digital
Unproven addressable market size of the white space, hence left untapped by the marketing
existing players

Similar to the offline brand journey, online customers need to traverse the five stages to brand affinity before they become loyal
customers..
Getting to know about Looking for association Seeking product utility Trying out the Coming back to the brand
the brand and with the brand story or functionality brand due to value discovery
offering offering

Brand campaigns Association with oneself Aspirational value Platform UI/UX Product experience
Digital Emotional connect Utility / functionality Purchase experience Lead time
storytelling Pre-launch campaign SKU depth Payment options Social engagement
Social presence Performance marketing Category expansion Return period After sales service

Source: Avendus research 41

Evolution of distribution Online Beauty & Personal Care market size in India1
($Mn)

1,067

73%
Offline Horizontal Vertical Direct to CAGR
distributio platform customers
652
n platforms s

374

206
Evolution of distribution and access to multiple channels and niche target segments has made
it easier for D2C brands to focus on market insights and customer need identification as
against operational aspects of distribution
FY17 FY18 FY19 FY20
Barriers to entry in offline trade gave rise to the popularity of online marketplaces

Online marketplaces
General trade distribution Modern trade distribution
Success in general trade requires a large Long drawn process of getting entry in
branding and product awareness spend modern retail
Regional distributors are the gatekeepers Competition with traditional players for
to the channel shelf space
Takes time and scale to build distributor High sensitivity of retailers to inventory
relationship and boost sales turns

Source: 1- Analysis of e-tail GMV in Beauty & Personal Care for FY20 (Avendus research) 42
 Internal Factors External Factors

Organizationa Focus areas and Areas of Brand Volume

l agility incentive expertis efficiencie
structures e ethos s
Rigidly defined processes New trends are often absorbed Traditional strengths are brand A large co-brand ethos is Total addressable market for
Top-down and multi- within an existing established marketing and distribution driven as a sum-of-the-parts niche use cases is too small
brand as new brand-building is making it tough to redefine or and often unchartered
layered Low degree of digital expertise
a mammoth exercise have a contrasting ethos
decision-making flows and exposure

Emami’s launch of hand

Global
sanitizer under existing BoroPlus Men’s skin care market, being sub
Claims of existing FMCG players to
brand 2.8% rebrand as “sustainable, toxin-free”
$250 Mn in size, has mainly seen
HQ India Average digital sales for top indirect participation from FMCG
ITC’s reuse of Charmis brand to products company are difficult to
FMCG brands in India giants through investments in niche
launch skincare products maintain
players
HQ HUL’s new natural cosmetics
launched under Lakme
Implementation
Longer timelines in launching More aligned towards Markedly different DNA and Difficult to break away from The scale is insufficient to
new products - usually over 12 growing an existing brand marketing approach existing brand image move the needle on channel
months, due to repeated rather than on accountability required efficiencies
ideations and testing for new revenue
Overall digital ad spend Costs of failure are higher for
procedures
constitutes only 20% of big established players
Intrapreneurial culture total ad spend

VC funding is allowing smaller, more agile outlets to explore the white

spaces
43
 Global benchmarks of online penetration in Beauty
&
Personal Care category
Beauty & Online Online retail
FY20 FY25
Personal Care %
market
580 Mn 1.2x 720 Mn Mn
720
Internet users in India 43% of 50% of of
50%
population
populatio CY19 $91 Bn 17% $16 Bn
population n
Online shoppers 130 Mn 2.5x 325 Mn
22% of users 45% of users
CY19 $63 Bn 19% $12 Bn

Penetration of online Beauty & FY20 $18 Bn 6% $1.1 Bn

Personal Care category 19%1 34%

FY25 $28 Bn 16% $4.4 Bn

Beauty & Personal Care online 4.4x
25 Mn 110 Mn
shoppers

Average spend per shopper $43 $40

34%
Online Beauty & Personal CAGR
$1,067 Mn $4,398 Mn
Care opportunity

Source: 1 – Bain and Company report “How India Shops Online”, Avendus estimates 44
 Personal Care Cosmetics

Natural, Organic, Vegan, Ayurveda Personalized

Niche
Men’s Grooming

Women’s Hygiene

Source: Avendus research 45

 Agile DNA
Clear brand Plug and play Flexible
and asset
supply distribution
light
proposition chain
operations

46
 Customers looking for a “made-for-me”
product addressing a personalized need
Unique Offering
A well performing hero product
addressing a niche need cuts through the Range of Apple Cider Coffee infused range of Celebrity-backed premium
noise, gives the early traction and Vinegar products by Wow personal care proposition by MyGlamm
credibility products

Creating brand resonance with

Creating emerging consumer trends – toxin free,
organic, sustainable products which is
resonance
not addressed by larger corporations –
Toxin-free personal care by 100% vegan proposition by Small SKUs, long-lasting
”I support this cause for my own good”
Mamaearth Plum Goodness cosmetics by Sugar

Extensive use of social media channels

Multi- to give customers a direct voice to the
touchpoint, brand – “my feedback counts”
personalised Girl-next-door influencer marketing to
communication increase exposure 360 degree digital New age customer Influencer marketing to
marketing engagement channels reach the right audience

Source: Avendus research 36

 Social media has some inherent advantages as a medium which are better suited for D2C
commerce
Characteristics of brands leveraging social media marketing effectively
Freedom in form-factor; visual and video formats
Tutorial-based posts Direct engagement Rapid gain in followers
Effective for products and ingredients that require
customer education

Enables users to give information on their

preferences
Better targeting, enables brands to fulfill
personalized needs Total since Jun’15; 67K in Sep’20

Instrumental in driving brand ethos such as sustainability

or organic ingredients

Allows for deeper connection with customers

Total since Mar’15; 18K in Sep’20

Cost advantages and effective
tracking
Lower cost per impression with better ability to
track customers as well as measuring ROIs

2%+ Engagement
informative rate on <2hrs Response time on
direct messages Total since Dec’16; 63K in Sep’20
posts
Note: Instagram metrics as on 8-Oct-2020
Source: Avendus research 37
 Influencer marketing is the new buzzword, but returns remain to be
evaluated
Increasing focus on influencer marketing to create awareness
Raison d’etre
Instagram influencers
Indian culture has traditionally been celebrity-led. Influencers 34% have over 20K
bring a friendly perspective, with the authenticity of a real followers
user’s experience
Non-intrusive native advertising – subtler way to introduce
products through content that is beneficial for the target
Marketers/strategists
audience
Indian market is 94% launched at least one
fragmented influencer campaign in
Influencers with <100K followers manage their own accounts 2019
with agencies operating in small niches
Influencers are paid basis posts as against the more
common model of affiliate marketing in US Marketers had
influencer marketing
Pricing is linked only to follower count and starts from as low
as
58% budget of more
$25. Metrics like engagement are increasingly gaining than INR 100K in
Driver of awareness, not sales
importance 2019

Influencer marketing is not performance linked and viewed

Brands collaborate
mainly as a medium of awareness
with influencers with
Forms a small part of overall marketing budget of large 56% the primary aim to
brands, but a substantial part of D2C brands gain visibility
Note: Instagram metrics as on 12-July-2020
Source: HypeAuditor report on State of Influencer Marketing; “India Influence Report” by Zefmo Media; Talkwalker report on State of Influencer Marketing in India 49
 D2C brands have made it easier to leap to premium offerings by filling the white space in the category’s price
spectrum
Category Start of the range offerings Value offerings to fill the price gap Premium products by traditional cos. at higher prices

Daily-use Sulphate-free Sulphate-free

Hair care shampoo shampoo shampoo
Garnier Ultra Dove Mamaearth Wow Skin L’Oreal L’Oreal Pantene
Shampoo
Blends Oxygen Shampoo Sciences XTenso EverPure Gold Series
Price for 250mL INR 188 INR 200 INR 349 INR 415 INR 800 INR 1,295 INR 3,817

Liquid foundation Stick foundation Stick foundation

Cosmetics Sugar
Lakm Maybelline M.A.C. Studio Bobbi Brown
Foundation Ace of Face
é Fit-me Fix Matte Foundation Stick
Sticky
Liquid
Price for 1 unit INR 150 INR 500 INR 999 INR 4,000 INR 4,000

2-blade and 3-blade razors 5-blade and 6-blade razors 5-blade razors
Men’s
groomin Gillette Presto Gillette Mach3 LetsShave Pro 6 The Man Company Gillette Fusion Gillette Proglide
g Razors (2-blade) (3-blade) (6-blade) (5-blade) (5-blade) (5-blade)

INR 20 INR 200 INR 319 INR 349 INR 460 INR 499
Price for 1 unit

Budget Mid-range offering Higher end expensive products

formulations
Skin care
Hand cream Nivea Vaseline Mcaffeine Plum Hand Body Shop L'Occitane
Hand Cream Hand cream Hand cream Cream Hand Cream Hand Cream
Price for 50mL INR 60 INR 249 INR 325 INR 370 INR 658 INR 1,250

Source: Company website, marketplace listings 50

 Agile DNA and asset light operations across value chain Impact of inventory management1

Iterative Asset light Data driven production & Catalogu

Inventory days for
product manufacturin inventory management e ~110 days
traditional cos.
development g discovery
Inventory days for D2C
Design process driven by D2C brands opt for Access to rich data helps in Digital brands have the ~60 days
brands
product & functionality contract manufacturing or forecasting the SKU-wise luxury of displaying the
white space toll manufacturing demand accurately entire product catalogue Assuming 65% gross margin for D2C
and leverage SKU depth brands
Development Clear brand specifications Lower inventory risk - 3-4 for purchase conversion
accompanied with and SOPs, leveraging an weeks of inventory data can Cost of goods 35% of sales
customer feedback loop ecosystem that is already guide which SKUs to Lesser risk of stockout
set up and available produce further and which due to absence of Reduction in capital 50 days
Customer engagement requirements
ones to discount storefront and centralized inventory
data generating inputs for fulfilment
new products 50
∗ 35%
365

4.8% of sales

D2C brands may reduce working capital

Operations conducive to innovation requirement by ~5% of sales by leveraging
centralized fulfilment for inventory
Low cost of failure Lower time to market Continuous experimentation optimisation
D2C brands require lower D2C brands can introduce D2C brands strive to consistently
supply chain investment and products from ideation stage to identify product white spaces Lower cost of carrying inventory
capital for launching distribution-ready in as little as 3- that can garner enough
products 6 weeks customer demand
! Smaller-batch
production

Source: Avendus estimates 51

 Well developed supply chain ecosystem and B2B services enabling brands to focus more on product and consumer need
identification
Procurement Typically 100% self procurement coupled with contract or toll In-house Toll Contract
& manufacturing manufacturin manufacturin manufacturin
manufacturing g g g

Readily available digital distribution pipelines – marketplaces, Own

Distribution own website platfor
m

Digital advertising and marketing channels to target only the

Marketing appropriate audience resulting in higher return on ad spend Josh

Fulfilment Third party logistics (3PL) for fulfilment and doorstep delivery

Source: Avendus research 52

Flexibility of choosing from a set of options, large outcomes will be created by leveraging a mix of distribution
channels
Online Distribution Offline Distribution
Co-existence of own platform and marketplace; Own platform to Significant investment required to establish distribution;
access customer data and marketplace to reduce CAC Distributors require scale & retailers look for inventory turns

Own Online Modern trade General trade

platform marketplace

Focused brand visibility Aggregated demand with Association of brand with

Highest customer reach
and proposition higher customer reach high credibility
communication

Access to customers for Higher degree of trust in the

Higher visibility and brand recall Large growth opportunity
retargeting, rich data & channel
insights

! Large marketing efforts

to generate traffic
High product competition
from multiple brands ! Difficult to get retail shelf space
High spend on brand and
product awareness

! Lack of trust in early days

Restrictions on seller-related
marketing efforts ! Higher bargaining power of the
retailer
Inventory management

53
 Own platform distribution Marketplace distribution

Channel Own the purchase experience Launch minimum viable products

propositio Ascertain product-market fit
Sell the product as well as the brand
n
Channel for driving loyalty and Channel for discovery and
Key takeaways
customer acquisition
retention
Demand Paid and organic platform traffic Marketplace traffic, wide reach across demographics Own platforms drive higher loyalty
Marketplaces being search-led platforms, are great
for need-based purchases and repeat fulfilment

Discovery SKU and catalogue discovery, additional 20- Brand and product discovery, competition benchmarking Vertical marketplaces like Nykaa solve for product
30 seconds for customer education credibility via verified listings and customer
reviews
Customer Complete ownership and visibility on Customer ownership with the marketplace; Own platforms offer the advantage of rich insights on
ownershi conversion, repeats; ability to re-target Limited access to customer data; however marketplaces demographics and customer engagement
p customers have begun to share consumer behaviour insights to help
brands strategize their marketing spends

Branding Free rein on marketing, education and Marketing with restricted bounds, primary purpose is Own platform focus is on communication
building a consistent brand message product listing and messaging
Marketplace can be leveraged for discovery and
visibility

Operations Need to build and integrate all the processes Well-oiled machinery that customers trust for order Customers have higher trust in marketplaces due
related to order fulfilment management, redressal services and delivery (forward and to their past experiences, return/refund services
reverse logistics) and standard policies

Note: Brands.flipkart.com is an initiative to help brands selling digitally to learn more about changing user behavior 54
 Three-pronged strategy to deliver a Billion Dollar valuation
outcome
01. Early scale and velocity from online sales 02. Large addressable omnichannel opportunity 03. Brand architecture: House of brands
Achievement of topline at various stages

$30-40 Mn $100-300 Mn+

Online Beauty & Personal Care shoppers Share of offline retail in India Beauty & Personal Care Co-existence of sub-brands under the parent brand
market
25 135
Mn 1 3-4
Mn 94%
84%
FY20 FY25 FY20 FY25 Large sub-brand Smaller sub-brands

More than 5x increase in online Beauty & Personal Beauty & Personal Care market would be Each brand has its own proposition, target segment
Care shoppers by 2025 dominated by offline retail even in 2025 and marketing strategy
Revenue driven by a number of SKUs, category Revenue driven by the longtail of new and repeat Revenue driven by replication of customer insights
adjacencies and high repeat customers and analytics across audience sets
Mix of own platform and marketplaces can ensure 4 Pan-India omnichannel distribution to achieve $150 Higher reach due to offerings for multiple target
Mn annual customers (spending an average of $10) Mn+ scale segments without diluting the brand
to reach the desired scale

Digital brands may choose to do steps 2 and 3 sequentially, parallelly or either one to achieve scale

Source: Avendus estimates 44

Illustrative unit economics across
channels Own platform economics Marketplace economics
Average selling price INR 600 Average selling price INR 600
Basket size # 1.8 Basket size # 1.5
Average order value INR 1,080 Average order value INR 900
Purchase Frequency # 2.5 Purchase Frequency # 2.5
Customer sales INR 2,700 Customer sales INR 2,250
Cost of goods INR 945 Cost of goods INR 788
Gross profit INR 1,755 Gross profit INR 1,463
Gross margin 65% Gross margin 65%
Logistics (INR 65 * 2.5 times) INR 163
Pre-marketing contribution INR 1,593 Pre-marketing contribution INR 1,463
Customer acquisition cost INR 700 Marketplace commission (28% of sales) INR 630
Contribution INR 833
Own platform revenue retention
Year Y0 Y1 Y2 Y3 After Y3
Halved every
Retention 100% 60% 45% 30%
year
Contribution 1,593 956 717 478 4781
Lifetime value 4,220
LTV / CAC 6.0 x

Note: 1 - Using summation of infinite GP i.e. Sum = a/(1-r) where a = 478/2 and r = 0.5 since retention is reducing to half every year
Source: Avendus estimates 45
 Why Indian traditional players opted for acquisitions in
past
Acquisition Acquire talent and Build distribution Aid product and/or Experiment in niche
rationale tech capabilities expertise brand extension categories

Founding team Scale of operations Target Potential revenue outcome

Factors Management team Distribution mix audience Unique proposition
influencing
Customer data analysis Business growth Product Financial risk
the decision
Tech stack Customer retention Price
range SKU
depth

Precedent transactions of beauty and personal care brands

Date May-20 Mar-20 Jan-20 Nov-19 Oct-19 Jan-15

Acquirer

Target
(Valuation
) Undisclosed Undisclosed Undisclosed $600 Mn Drunk Elephant - $ 855 Mn $220 Mn

Source: Company filings, Public disclosures, Avendus research 57

 Global India

Relevant brand acquisitions and strategic Brand acquisitions

investments
Deal Year Acquirer Company Company Description EV ($ Mn)
Year Acquirer Company Company Description
Value
2020 Marico Beardo Men’s grooming brand; na
2020 P&G Billie Premium female body care brand na
Feminine hygiene products
2020 Coty Kylie Cosmetics Celebrity-led cosmetics brand $0.6 Bn 2020 HUL Vwash na
company

2019 Estee Lauder Have & Be Korean skin care company $1.7 Bn 2019 Emami Crème 21 German personal care brand 13
2019 Shiseido Drunk Elephant Prestige skincare brand $0.8 Bn
2015 Emami Kesh King Hair care brand 220
2019 Unilever Tatcha Prestige skincare brand $0.5 Bn
2015 HUL Indulekha Hair care brand 44
2018 P&G Walker and Co Beauty brand for ethnic diversity na

2017 Unilever Carver Korea Korean cosmetics brand $2.7 Bn Strategic investments to remain
agile
2017 L'Oréal CeraVe, Beauty brands $1.3 Bn Year Investor Company Company Description Stake
AcneFree and
Professional skin and hair
Ambi 2018 Emami Brillaire 26%
care brand
2017 Coty Younique Social-media-driven cosmetics co. $1.0 Bn
Colgate- Bombay Shaving
2018 Men’s grooming brand 24%
2016 Estee Lauder Too Faced Millennial-focused cosmetics $1.5 Bn Palmolive Club
brand The Man
Cosmetic 2017 Emami Men’s grooming brand 30%
Compan
s y
2016
Note: 1 USDUnilever
= 75 INR Dollar Shave Club Men's grooming brand $1.0 Bn
Source: Company filings, Avendus research 58
 Proposition Unique, innovative and natural Toxin-free natural personal care products Premium quality products customized Customized skin and hair care regimen
ingredient based product for India at affordable price and products
range
Products Hair care - shampoo, Hair care - shampoo, Personal care – lotion, shower gel, Skin care - facial
conditioner, oil conditioner, mask oils, cream, mask, scrub, soap cleansers,
Skin Care - face wash, Skin Care - face care, Cosmetics – makeup, nail polish, moisturizers Hair care
cream, moisturizer body care brushes, kits, fragrances etc. - Shampoo, Serum,
Baby care conditioners

Distribution Primarily through online marketplaces Primarily online Primarily online Online only

Scale Aug’20 Revenue ARR: $90 Mn; Aug'20 Revenue ARR: $55 Mn 1,100+ SKUs, 250+ cities Aug’20 Revenue ARR: $30 Mn+;
100+ SKUs 200+ SKUs; 4.5 Mn customers 0.5 Mn+ SkinKraft and Vedix profiles
created

Founded 2013 2016 2015 2018 (SkinKraft launched)

Capital raised Bootstrapped $21.3 Mn NA $4.0 Mn

Investors Bootstrapped

Founders Manish Chowdhary Varun Alagh Falguni Nayar Chaitanya Nallan

Karan Chowdhary Ghazal Sangram Simha
Aravind Umapathy Sokke Alagh Veerendra Shivhare
Ashwin Sokke

*Illustrative products, complete catalogue of brands is much wider; Assumed USD 1 = INR 75
Source: Market intelligence, Avendus research, Publications 48
 Proposition Portfolio of sub-brands across Superior color cosmetics at affordable Caffeine based skin care and hair care 100% vegan products developed with
Makeup, Skincare and Personal Care price points products deep ingredient research

Products Color cosmetics - lipstick, Color cosmetics Body care - scrubs, lotions, Skin Care – scrubs,
primer, foundation, eyeliner, lipstick, primer, cream, oil moisturizers, cleansers
Skin & Personal care - face & eyeliner, nail Face care - face wash, Hair care - shampoos,
body paints, moisturizer Scrub, mask, serum conditioners, masks
Men’s grooming

Distribution 50% Online 50% Offline. Offline is 2,000 45% sales from online channel; offline 70% online through own channel and
Online only
point of sales across 50 cities of India presence in 1,800+ stores marketplaces; 30% offline

Scale FY20 Revenue: $15 Mn; FY20 revenue: $10+ Mn;

Revenue: $18 Mn+ Revenue: $15 Mn
17 SKUs, 1.5 Mn customers till date 80+ SKUs

Founded 2017 2015 2016 2013

Capital raised $30 Mn $13 Mn $5 Mn+ $2 Mn

Investors

Founders Darpan Sanghvi Vineeta Singh Tarun Sharma Shankar Prasad

Kaushik Mukherjee Vikas Lachhwani

*Illustrative products, complete catalogue of brands is much wider; Assumed USD 1 = INR 75
Source: Market intelligence, Avendus research, Publications 49
 Proposition Premium men’s grooming product Premium experiential shaving and Natural, chemical-free product brand for One shop for all hygiene related needs
grooming brand mothers and babies

Products Shave - razor, foam, Shave - razor, cream, Mother care - Anti- stretch Hygiene - Menstrual cups,
gels, after-shave foam, brush marks oil, face cream, Sanitary pads, toilet seat
Grooming - beard Beard care - oils, serum Baby care – baby sanitizer spray, tampons,
oil, wax, hair cream kits Bath & skin wash, lotion, face cream, hand sanitizers, masks
care diaper rash cream

Distribution 60% sales through online channels; Mix of online and offline 95% online through own channel and Mix of online and offline (6,000+ retail
1,000+ offline touchpoints (Jul’19) (retail touchpoints in 6 cities) marketplaces touchpoints in 19 cities)

Scale FY20 revenue: $12 Mn FY20 Revenue: $6 Mn+ FY20 revenue: $5 Mn+; FY20 Revenue: $4 Mn+
45+ SKUs 30 SKUs; 500K+ customers

Founded 2015 2015 2017 2013

Capital raised Undisclosed $11 Mn $10 Mn $6.2 Mn

Investors

Founders Hitesh Dhingra Shantanu Deshpande Malika Sadani Vikas Bagaria

Bhisham Mohit Sadani Srijana Bagaria
Bhateja Parvesh
Bareja

*Illustrative products, complete catalogue of brands is much wider

Assumed USD 1 = INR 75 61
04.
Conclusion

129
Historically, brands from MNCs have created Indigenous brands have also seen disproportionate value
tremendous creation over years
value for investors
2010
2010
$9 8x $68 2020
$4 7x $25
2020
Bn (CAGR: 23%) Bn Bn (CAGR: 21%) Bn

$1 10x $10
Bn (CAGR: 20%) Bn
$4 5x $21
Bn (CAGR: Bn
18%)
$2 5x $9
Bn (CAGR: Bn
17%)

$1 4x $4 $1 6x $6
Bn (CAGR: Bn Bn (CAGR: Bn
16%) 20%)

Source: BSE data, Market cap of 2020 as of Sep 4, 2020 and Market cap of 2010 as of Sep 3, 2010
Assumed 1 USD = INR 75 (constant for negating currency impact) Denotes Market cap 130
D2C companies are well positioned to create Brand and category characteristics to win D2C
value game
Fighting incumbents through traditional distribution places is difficult
Restricted physical retail space High purchase frequency
Category Viable average order value (AOV)
High commission in distribution till the brand reaches large volumes characteristics
Possibility to expand into adjacent categories
D2C companies will play to their digital strength and will establish themselves as
strong contenders

D2C companies will judiciously use own digital platform, large marketplaces and Brand resonance
omni-channel strategy as needed, to continue judiciously to grow rapidly Brand
managemen Personalized communication
D2C companies have demonstrated their learnings from failures of Western t
D2C brands and excessive spending on customer acquisition 360-degree feedback

Data access (at least partially)

Operational
levers Nimble supply chain
DNA of frugality in operations

131
 Incumbent consumer companies are still in Strong funding and M&A activity expected in
01. 02. 03. IPO activity expected after 3-4 years
wait and watch mode D2C space in the next 3-4 years

Domestic and international consumer companies are At Avendus, we expect to see a significant funding and Inherent characteristics of successful trading
closely monitoring the emergence of D2C players M&A activity over the next few years companies with high multiples: High RoE and
sustainable growth

1. Consumer companies are observing the D2C 1. Given the nature of the business, large funding 1. Historically there have not been too many
market as the size and scale of the brands is not rounds would probably be limited, but secondary successful IPO stories in consumer sector because
large enough yet to become a threat to the transaction activity will be high of lack of great success in traditional distribution
incumbents
2. This industry has a potential of creating great 2. However, we expect at least 4-5 strong IPO stories
2. Some of the consumer companies have been outcomes with high capital efficiency with of more than US$1 Bn market cap outcomes
experimenting with minority stakes and smaller over the next 4-5 years
acquisitions and also trying their own experiments 3. Mergers & acquisitions, either through roll-up
strategy or acquisitions by incumbents are likely to
3. However, soon-enough incumbents will be forced to be witnessed over the next 2-3 years
have their own aggressive digital strategies and also
will be pushed to acquire some of these
companies. Some of these trends are already
visible

Current data as on February 10, 2020 (pre-COVID); Historic conversion rate used for IPO revenue and valuation; current exchange rate: USD 1 = INR 75 132