Channel shift by consumers fuelling D2C growth: HUL chairman Sanjiv Mehta

Hindustan Unilever, the country’s biggest consumer goods maker, said a significant part of direct-to-consumer brands’ growth is driven by existing shoppers shifting to online channels instead of incremental growth.

“If you look at the total FMCG industry, direct to consumers (D2C) is still a very small part of the total mix,”

chairman Sanjiv Mehta said at an investor call. “A large part of the growth that is coming to many of the ecommerce players are not consumer growth; they are channel shift growth.”

D2C brands refer to businesses that have most of their revenue or customer acquisition from direct-to-consumer online channels or those started with an online-first distribution before going omni-channel.

The maker of Dove and Rin said it has an annual business of ₹50,000 crore, and if it grows by 10%, an additional ₹5,000 crore will be significantly higher than dozens of D2C brands put together.

“You may find some time that certain trends are captured by some company before us and so be it,” Mehta said. “Not all the trends would be captured first always by us and we could be second and still be better.”

‘D2C Cos Looking to Expand’

Nearly 590 new D2C companies have entered the Indian market in the past three years, and they have raised Rs 6,700 crore altogether, according to Tracxn, a market intelligence provider of private company data.

With consumers shopping behaviour tilting towards online platforms post Covid-19 outbreak, experts said D2C brands have already built reasonable heft in the sub-category by playing the role of category creators and disruptors. This is against a preconceived notion of such companies having limited potential to scale.

“D2C companies are now looking at adjacencies, geographical expansion and omni-channel to achieve scale,” a recent report by financial services firm Ambit. “Most D2C companies are guiding for 6-8 times revenue growth over the next 3-5 years, signifying share gains largely from incumbent players.”

Several mainstream companies have acquired online-first brands in the past three years. For instance, Colgate Palmolive bought a stake in Bombay Shaving Company, Emami purchased a majority stake in The Man Company, and Parle Products invested in health food company ASAP Bars. Unilever Ventures has a minority stake in personal care brands Phy, while Marico has acquired stake in Just Herbs and Beardo.


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