FMCG Giants Embrace D2C: A Winning Strategy for Premium Growth

In a significant industry shift, two-thirds of FMCG acquisitions over the past five years have targeted the thriving D2C sector, offering established players a pathway to enhance growth and penetrate premium market segments. Notable acquisitions include Hindustan Unilever Ltd's purchase of Minimalist, Marico's acquisition of Plix, and Emami's takeover of The Man Company.

According to Crisil Ratings, these strategic buyouts allow FMCG companies to access valuable consumer insights and foster rapid innovation cycles, while D2C brands benefit from scalability and profitability enhancements. Despite the surge in acquisitions, credit profiles remain stable due to the modest size of deals relative to the acquirers' overall net worth.

Aditya Jhaver, Crisil Ratings Director, highlighted the predominance of acquisitions in personal care and food and beverage sectors, with a significant focus on premium and niche categories. As these transitions unfold, the success of scaling up acquired D2C brands while boosting profitability is set to remain a focus in the medium term.