With COVID-19 putting the spotlight on the consumption sector, venture capitalists are on the prowl.
For Fireside Ventures, a venture capital firm that largely focusses on consumer brands, this is just the perfect opportunity.
“We are seeing that during COVID times, all fast moving consumer goods (FMCG) companies are doing much better than during pre-COVID days. There is a pent-up demand for almost all products,” VS Kannan Sitaram, Venture Partner, Fireside Ventures, told Moneycontrol.
Interesting times ahead
“Consumer goods industry is only going to get bigger. There are millions of retailers who sell FMCG brands. So, FMCG continues to be on our radar. At the same time, we will also examine different areas and opportunities,” says Sitaram.
Fireside Venture Fund has so far invested in successful brands such as Boat, Yoga Bars, Goodness, Mc Vities, Mamaearth, Samosa Singh, Bombay Shaving Company, and Design Café.
Without revealing details on the companies they are in talks with, Sitaram added: “The work-from-home culture has changed the whole dynamics during COVID, whether its fitness, finance or education. If the consumer is not coming to you, you go to the consumer through online platforms.”
So far, Fireside Ventures has made investments in around 47 Indian companies such as Tasty Tales, Fable Street and The Ayurveda Experience, and holds 19 companies including Goodness Beverages and Kapiva, in its portfolio. One of Fireside’s early investments, Kwik 24, was acquired by online grocery firm BigBasket in 2018.
What is Fireside Ventures?
Fireside Ventures provides growth capital to early-stage consumer brand startups. It usually invests $4-5 million across pre-Series A and Series A stages.
The venture capital fund was founded by Helion Venture Partners’ co-founder Kanwaljit Singh, along with Vinay Singh and Sitaram, in 2017.
Sitaram has spent more than 36 years across sales, marketing, and strategy. He was associated with Unilever, both in India and overseas. He has also been the COO of Dabur India, and CEO of Innovative Foods.
Fireside Ventures already has investments across segments such as personal care, processed foods, lifestyle, and home products.
Fireside Ventures has invested in AnKa SumMor, which offers supply chain and distribution, technology, and intelligence employed by large brands, to challenger brands or smaller companies.
When asked how viable it is to make investments in a supply-chain business, Sitaram said: “When you get to smaller companies, the volume of business is less. In fact, there is a 30 percent cost for getting products to the shelf. For such companies, AnKa SumMor will help cut costs up to 50 percent.”
Sitaram said COVID 19 has increased the demand for FMCG products as consumption has increased as people work from home.
“The first quarter was good, but even in July and August, we are seeing robust demand for FMCG products,” he said.
He feels innovation has thrived even during the pandemic. Sitaram pointed out that there has been a slew of product launches as businesses navigated their recovery from COVID-19.
These launches ranged from health- and sustainability-related offerings to services taking advantage of emerging consumer themes like direct-to-consumer delivery and work-from-home tools.
According to PwC, one in three Indian companies have launched new products. FMCG firms have sanitisers, sprays, disinfectants, fruit and vegetable washes, laundry sanitisers, and vitamin-packed formulations and immunity boosters.
Consumption sector growth
India's FMCG sector is expected to witness a flat growth in 2020 following the severe and extended lockdowns, restrictions on manufacturing units, social distancing norms and store closures, according to data analytics firm Nielsen.
Earlier, on April 30, in the middle of the lockdown, Nielsen had slashed the growth forecast for the sector by almost half to 5-6 percent for 2020, citing adverse impact of the pandemic.
In July, the research firm had said that the April-June quarter had been the worst, with a 17 percent decline in sales as compared to the same quarter of 2019.
Though the FMCG industry has shown some sign of improvement in June, in the first half of the year (January-June 2000), the industry growth declined 6 percent from an year-ago period.
Nielsen expects the growth witnessed in June to continue into the festive season in Q3 and get stronger in Q4 as food categories are expected to see stronger demand.