Traditional FMCG Companies Adapt to New Consumer Realities
For many years, established fast-moving consumer goods companies dominated store shelves across India. They built vast empires through traditional retail channels. However, the landscape has shifted dramatically with the rise of direct-to-consumer brands. These digital-native companies sell directly to customers through their own websites and e-commerce platforms. They often create entirely new product categories that did not exist before.
This change has put legacy FMCG firms on the defensive. Their sales and revenue have faced pressure. They find themselves racing to develop products in emerging segments like wellness, premium beauty, and pet care. These areas fall outside their traditional mass-market focus but show faster growth rates.
The Investment Strategy Takes Shape
In response, veteran companies have adopted a simple philosophy. If you cannot beat them, join them. They are increasing investments in these upstart D2C brands. They leverage their financial strength and distribution networks to purchase companies outright or secure strategic stakes.
The goal is clear. Legacy players want a share of the action in growing markets. They aim to capture premium and niche segments where consumer preferences evolve rapidly.
Consider recent examples. Hindustan Unilever acquired the skincare brand Minimalist for nearly three thousand crore rupees. This move gave HUL a foothold in the science-based skincare category. Marico invested in companies like Beardo, Just Herbs, and Plix. These investments help diversify beyond its core oils business. Emami fully acquired Helios Lifestyle, which operates The Man Company.
Naveen Malpani, a partner at Grant Thornton Bharat, explains the rationale. "Legacy FMCG firms see D2C acquisitions as a way to accelerate entry into premium, niche and fast-growing categories. Consumer preferences are evolving faster than traditional portfolios can adapt."
Why the Rush Toward New Brands?
The motivation behind this shift is powerful. India expects to add four hundred million upper-middle and high-income consumers over the next eight years. Total consumption expenditure could rise from $2.1 trillion in 2022 to $5.7 trillion by 2030, according to Bain & Company estimates.
These new consumers shop differently than previous generations. They explore diverse brands across categories like shaving creams, deodorants, lip colors, packaged foods, and home care. While legacy firms benefit from deep distribution networks, new-age brands excel at capitalizing on digital trends.
By fiscal year 2024, the combined revenue of new-age consumer brands crossed five billion dollars. This figure continues to grow rapidly, as estimated by venture capital firm Elevation Capital.
Venture Arms Provide Alternative Path
Many traditional companies choose not to pursue outright acquisitions immediately. Instead, they launch venture capital arms to invest in startups. This approach allows them to take minority stakes and participate in emerging trends without full ownership commitments.
Dabur India, for instance, announced Dabur Ventures last October. This investment platform has a capital allocation of up to five hundred crore rupees. It focuses on acquiring stakes in high-potential, digital-first businesses.
Abhinav Dhall, group head of corporate strategy at Dabur, outlines the thinking. "In large organizations, innovation happens, but it takes longer. That's why we need exposure to newer ideas through a portfolio of bets. We can identify innovation and participate early. If we find promising companies and support them meaningfully, acquisitions could follow eventually."
ITC Ltd also maintains a startup fund from its corporate treasury. The company has made multiple investments over the years. Supratim Dutta, executive director and CFO at ITC, states the intent clearly. "The first driver is building a future-ready portfolio. The second relates to emerging consumer trends in high-growth categories. The third driver is capability-led acquisitions."
Wipro Consumer Care Ventures recently raised its second fund of two hundred fifty crore rupees. It plans three to four investments annually in new-age businesses. Vineet Agrawal, CEO of Wipro Consumer Care & Lighting, identifies three primary reasons for backing startups.
"First, the intent is to make money. Second, to learn. Many startups identify opportunities faster and execute better than we can. Third, their capabilities in e-commerce and social media are far stronger." Agrawal adds that acquiring venture-backed businesses might slow them down. "I am not sure we have the capability to operate businesses the way startups do. Their speed and agility are phenomenal."
Navigating Challenges and Integration Hurdles
These investments come with significant challenges. Integrating digital-first brands into traditional FMCG distribution networks proves difficult. Most D2C brands focus heavily on online sales, making offline expansion complex.
Harsha Vardhan Agarwal, vice-chairman of Emami, acknowledges the gradual nature of integration. "Integration takes time and is a learning experience for both sides. It typically happens in phases and does not yield immediate results."
Legacy companies often rely on conventional marketing models. Digital-first brands build their presence through social media and performance marketing channels. Many acquired companies operate at a loss, complicating profitability goals while scaling across traditional retail outlets.
The Broader Market Context
This strategic shift occurs against a challenging market backdrop. FMCG volume growth has moderated, especially in urban areas. Overall, FMCG volumes grew 4.2% pan-India in FY25, down from 6.6% in FY24. The NIFTY FMCG Index delivered marginally negative returns in 2025, declining 0.6% year-to-date as of December 30.
This compares with a 9.4% total return from the broader NIFTY 100. Over three years, the NIFTY FMCG Index gained 14.7% in total returns, while the NIFTY 100 rose 22.4%.
Looking Ahead
Despite integration challenges, the trend of large FMCG companies backing new-age D2C brands appears set to continue. Most legacy firms indicate they will persist with minority stakes and partnerships. They recognize the need to stay relevant in a rapidly changing consumer landscape.
The old guard of FMCG is not standing still. They are adapting, investing, and learning from digital-native competitors. Their goal remains capturing growth in premium and niche markets while navigating the complexities of a transformed retail environment.
