New Delhi, Sep 25 Established fast-moving consumer goods companies are increasingly acquiring direct-to-consumer (D2C) players to expand into premium categories and leverage digital consumer insights, a report said on Thursday.
In the past five fiscals, around two-thirds of the acquisitions of FMCG players have been in the D2C space, a report from ratings agency Crisil Ratings said.
FMCG firms gained access to differentiated products, faster innovation cycles, and targeted marketing through these deals, while D2C brands address challenges related to scale and profitability, leading to a win-win situation.
"FMCG firms entered new premium categories and gained access to consumer insights, accelerating feedback loops. Prior to acquisition, less than 15 per cent of the D2C companies in our sample set had managed to cross Rs 250 crore in revenue and only a third reported operating profits," said Anuj Sethi, Senior Director, Crisil Ratings.
D2C companies, which rose to prominence post-pandemic, logged a revenue growth of approximately 40 per cent compound annual growth rate until 2024, in contrast to 9 per cent growth for established FMCG players.
The premium positioning of D2C companies, priced 1.5 to 4.5 times higher than established alternatives, drove this growth.
The acquisitions have now strengthened the business profiles of traditional FMCG players by providing them with entry into niche product categories, the report noted.
Around 60 per cent of acquisitions occurred in personal care, while the remainder were in food and beverages, the report noted.
About 85 per cent of the acquisitions were undertaken to enter niche and premium segments, with around 35 per cent in the health and wellness segment, said Aditya Jhaver, Director, Crisil Ratings.
Acquisitions have not impacted balance sheets, as the average deal value was below 5 per cent of acquirers' net worth, the report noted.
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