FMCG seeks start-up edge

Fast moving consumer goods (FMCG) brands are suddenly demonstrating a new-found love for start-ups.

Consider this.

In the last few months, Emami invested in start-ups like Brillare Science and The Man Company. While Brillare produces hair and skincare products and sells them to salons, The Man Company makes male grooming products like shave gels, hair gels, body wash and shampoos. Likewise, Marico picked up a stake in a holistic health platform called Revofit recently, which is a curated marketplace for wellness products, fitness equipment and nutritious chef-curated meals.

The RP – Sanjiv Goenka Group, meanwhile, has spoken of creating a Rs 100 crore venture capital fund that will invest in FMCG start-ups.

This increased interest by home-grown FMCG brands towards start-ups has got to do with a desperate attempt to shake off their legacies, appeal to millennial consumers and re-charge themselves digitally, say, experts.

All businesses around the world are going digital. It is necessary to stay relevant in the business, says Manish Singhal, founding partner, pi Ventures, which is an early stage venture fund focused on artificial intelligence (AI), machine learning and IoT.

And brands with legacy systems are seeking out synergies with digitally sound start-ups. Experts say FMCG big brands have robust distribution and wholesaler networks. While the new-age start-ups have strong capabilities in technologies like AI, big data, analytics, cloud, etc. “Legacy companies have a brand. Start-ups know to create products which can appeal to millennials. They also have a stronger technology hold which helps to keep in sync with the changes around,” says Singhal.

The Marico-Revofit deal for example, strategically complements the two brands, as Revofit is a wellness-focused company with an AI-driven engine offering a personalised experience, while Marico has attempted to focus around health through its Saffola brand. According to Sanjay Ghai, co-founder and CEO, Revofit, Marico’s deep domain knowledge in marketing, distribution and product development, “coupled with our strengths in digital channels and focus on niche FMCG products for millennials will enable cross-pollination of ideas to create a robust high growth business.”

There are multiple other advantages because of which established legacy brands sync up with new-age start-ups. Sunil Kataria, CEO – India & Saarc, Godrej Consumer Products, says they are focused on content and conversation. “So any digital start-up that can ameliorate the quality, personalisation and targeting of our content is interesting. And conversion – the opportunity is to have integrated technology that can help us map the comprehensive consumer journey and convert consumers from consideration to purchase online and in stores.”

Then there exist advantages to logistics. Legacy brands often work with traditional supply chain models. “Because of this, they face multiple problems. Prioritisation of retailer locations, time slots for visits, number of mirror beats (repeat routes), maintaining fairness regarding outlets and revenues are a few key challenges faced. Digitisation helps to track the purchase patterns of millennials, and thus predict the products that need to be focused in a particular region and eventually push the right products to the right set of consumers,” says Nishith Rastogi, CEO and co-founder, Locus, a tech platform optimising logistics. New logistics algorithms can optimise efficiency and shipping costs.

Experts believe FMCG brands benefit the most by leveraging the data and analytics might of their start-up partners. According to Kumar Rajagopalan, CEO, Retailers Association of India, traditionally, FMCG brands used to operate through their set channels like distributors and wholesalers to try and understand what is happening at the retail front. “However, they were limited by the information provided by these B2B partners. It is possible to understand the life-cycle of the products from manufacture to consumption. This is creating a need for FMCG brands to tie-up with digital partners so that they can track customer habits, consumer preferences and can quickly respond to the needs in the market by giving the right kind of products and services,” says Rajagopalan.

Experts believe that FMCG brands can effectively cater to millennial wants and needs by using the data that is generated, tracking the real-time conversation, engaging in online conversation, analysing consumer insights, and improving upon their products and services. Moreover, FMCG brands can also build up their social media channels and get savvy with assistance from start-ups, who are strong on social media. Beefing up on social media helps to keep tabs on competitor campaigns and analyse them to derive meaningful insights that can be used to shape up their own campaigns. “We are testing AI copywriting for digital advertising, as well as various tools to help people buy products through social media and online platforms,” says Kataria.

MILLENNIAL PUSH

This rising interest by home-grown FMCG brands towards start-ups has got to do with a desperate attempt to shake off their legacies, appeal to millennial consumers and re-charge themselves digitally

DIGITAL PUNCH

All businesses around the world are going digital. It is necessary to stay relevant in the business. And brands with legacy systems are seeking out synergies with digitally sound start-ups