Why are industry titans acquiring D2C brands, and how can yours stand out?
Welcome to the ninth edition of Klub Digest: a weekly newsletter breaking down the growth strategies of India’s most loved brands. This edition will be a strategic guide to crafting a brand with acquisition as the endgame.
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Recently, the D2C landscape in India witnessed significant shifts, with industry titans making strategic acquisitions. Reliance Retail Ventures Limited (RRVL) made headlines by acquiring a 51% stake in Alia Bhatt’s children's wear brand, Ed-a-Mamma, for ₹300 crore.
At the same time, Titan’s acquisition of the D2C jewellery brand CaratLane made waves in the D2C landscape. The deal is being hailed as India's largest deal (a whopping ₹4,621 crore) in the D2C e-commerce sector. The acquisition has caused Titan's stake in CaratLane to soar from 71.09% to an impressive 98.28%.
Surge in D2C interest - Big enterprises joining the D2C bandwagon
Such strategic moves as spotlighted above prompt the question: Why are established giants keen on innovative D2C brands?
One potential answer lies in the rapidly flourishing landscape of D2C in India!
Direct-to-consumer (D2C) in India signifies a notable transformation in consumer preferences. India's consumers now gravitate towards brands offering unique voices, value-driven operations, and direct engagements.
Combining this shift with the data that in FY22, D2C brands garnered $4 billion in revenue (approximately ₹32,830 crore) and a projected addition of 8 crore online shoppers within the next three years, it's evident why the D2C’s market potential is estimated to surpass a $100 billion by 2025.
Big enterprises are not just observing this trend; they're actively participating. They view innovative D2C brands, with their niche markets and unique digital footprints, as prime acquisition targets.
The list does not end here.
Here are industry giants that acquired D2C brands excelling in the acquisition game:
1/ Justmyroots acquired The State Plate (TSP)
Backed by Saurav Ganguly, Justmyroots is an intercity food delivery platform that aims to deliver piping hot food from one city to another. They recently acquired the Shark Tank brand, The State Plate. TSP’s founders, Muskaan Sancheti and Raghav Jhawar, will continue to spearhead and manage the TSP brand as it works to become a ₹100-crore brand in the next three years.
2/ G.O.A.T. Brand Labs acquired Chumbak
The more-than-decade-old trendsetter and Klub’s portfolio brand, Chumbak, was acquired by G.O.A.T Labs. Over the next three years, it aims to grow the home and lifestyle brand Chumbak to a ₹500-crore brand. However, this isn’t G.O.A.T. Lab’s first acquisition. It has also acquired a few more D2C brands over the course of the year, including Firangipani, trueBrowns, Pepe Inner Fashion, Abhishti, Breakbounce, NutriGlow, Voylla, Imara and Klub’s portfolio brands, including The Label Life, and Neemli Naturals.
3/ TMRW acquired Bewakoof
Aditya Birla Group's 'House of Brands', TMRW, has acquired a majority stake in Bewakoof, one of Klub's portfolio brands. For ₹200 crores, TMRW secured a stake that, post-transaction, gives the firm ownership of approximately 73-80% of Bewakoof, providing an exit for all existing investors.
The acquisitions in the D2C space in the last 2 to 3 quarters were numerous and impressive. The list goes on.
Here are a few more examples that will truly show the power and potential of this growing industry:
The win-win of D2C acquisitions
While we've discussed the appeal D2C brands hold for large enterprises, it's equally vital to understand how D2C brands benefit from being acquired.
Acquisitions present brands with advantages like financial backing, new market access, and the ability to tap into the operational efficiencies of their acquirers. Inclusion within a giant conglomerate amplifies brand visibility, offers advanced R&D capabilities, and widens the talent and partnership pool.
If an acquisition is in your roadmap, here is what you can take away.
8 foolproof strategies for brands eyeing acquisitions
1/ A unique brand persona
A standout voice and narrative can set D2C brands apart. Acquirers often gravitate towards brands with unique identities and can complement or diversify their existing portfolios.
2/nbsp;A formidable digital footprint
A holistic online presence, spanning from a user-friendly website to vibrant social media engagements, can be a magnet for potential acquirers.
3/ Continuous innovations
A dynamic product line, infused with regular introductions or proprietary offerings, keeps the brand invigorated and the customer base engaged.
4/ Ensure scalability
An acquisition transition becomes smoother when the brand possesses a malleable and scalable infrastructure, from logistics to manufacturing.
5/ A solid financial grounding
A robust financial profile, punctuated by steady growth, sound margins, and consistent profitability, is universally attractive for acquisition.
6/ Customer loyalty and stellar reputation
In today's digital era, online reviews and feedback significantly influence a brand's reputation. A pristine online reputation not only amplifies brand trust but also enhances its allure for potential buyers. A cornerstone of this trust is a strong, dedicated customer base, which inherently underscores a brand's market value.
Also, adopting subscription models or loyalty programs can further bolster customer loyalty. By tapping into customer insights, brands can personalise experiences, finetune marketing strategies, and introduce innovative product lines, positioning themselves as prized assets for potential acquirers.
7/ Ethical initiatives
In today's conscientious market, brands focusing on sustainability, ethical operations, or community welfare stand out and resonate with values-driven acquirers.
“At Reliance, we have always admired brands that lead with a strong purpose and embody a unique design ethos exemplified perfectly by Ed-a-Mamma and its founder, Alia Bhatt. With sustainability as its core proposition, the brand has garnered acclaim for its meticulous attention to detail, using ethically sourced materials and eco-conscious production processes. This aligns seamlessly with Reliance Brands‘ vision of fostering a more responsible future for the fashion industry," said Isha Ambani, director of Reliance Retail Ventures Ltd.
8/ A clear exit vision
Strategising with a potential exit in the backdrop can help shape growth blueprints, alliances, and business models in alignment with the preferences of prospective acquirers.
The D2C landscape in India is brimming with opportunities for acquisition-ready brands. By implementing these strategies and staying attuned to market trends, D2C brands can maximise their appeal and value, ultimately paving the way for successful acquisitions.
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