Market map of 120+ insurgent brands in India
A quick look at insurgent brands across 14 categories
Shopping can be intimidating, be it purchasing a bag of chips, buying a mattress or selecting a beer. Too many options! The decision-making is tiring. Do you struggle with “what to order for lunch“?One way to deal with variety is to restrict the choice-set to select tried and tested brands. Is this brand loyalty? I would like to believe it is more for sanity and not loyalty. A restricted set of choices makes life easy; this is how it was in the pre-internet age. Every time we come across a new, shiny product, there is slight FOMO, and we are back to evaluating the purchase. The struggle is real.
OK, this article is not about making shopping easy, but to talk about the perpetrators of this “choice”, the insurgent brands. The retail shelves (physical and digital) today a full of new brands across categories, each is targeting a specific use-case. We call these brands insurgent because they start in a small niche, vertical and gradually grow (expand portfolio horizontally as well) to challenge the incumbent brands for market share. Take the example of Raw Pressery. The brand started with a fresh cold-pressed juice product, positioned as a better, healthier alternative to canned, sugary juices. With time, Raw Pressery improved the juice portfolio. Positive word-of-mouth led to wider adoption of their product, much beyond the health-conscious early adopters. Raw Pressery has now launched almond milk to target the lactose intolerant customer base.
Insurgent brands grow from a single use-case and replace many incumbents brands in our pantry. Insurgent brands align with our lifestyle, which makes the trial and adoption easier.
In this essay, we will look at 120+ brands[Airtable] that are available on retail shelves and come with stronger recommendation online - this is not an exhaustive list.
You can checkout the interactive report on the above data to explore micro-trends. [Google Data Studio]
Insurgent Brands from History
Insurgent brands are not new to India. Retail shelves carry many locally made products, still do. In the past, these products never became challenger brands because one or more of the following: poor product, inconsistent quality, poor distribution, poor marketing and poor packaging. But there were a few who went on to build lasting brands. Let’s take a couple of minutes to talk about two insurgent winners from past - Nirma (detergents and soaps) and Parachute (coconut hair oil). Both these brands competed with Unilever and won!
Washing Powder Nirma
Every 90s kid remembers the Nirma ad jingle, so much so when you purchased a packet at a local store, customers asked for “washing powder Nirma“ not just Nirma. Nirma was started by Dr Karsanbhai Patel (Karsanbhai) in 1969 in Ahmedabad, Gujarat.
The detergent powder was a premium product in the 70s, and 80s and most households used laundry soaps. Karsanbhai launched a detergent brand that was 80% cheaper (INR 3 vs INR 15 per kilogram) than Unilever’s (earlier Hindustan Lever Limited - HLL) brand Surf. At such a low price point, a detergent powder was now accessible to a large number of middle-class households. Nirma spoke to the bargain-hunting (ok! value-for-money) Indian households. Nirma positioned itself as a product that matched the best brands in features but offered them at a lower price. By the early 90s, Nirma captured almost 60% of the detergent market, usurping Surf from the top.
The Nirma story usually has Surf as the antagonist, but that’s not entirely correct. In the early years, Nirma’s competitor was not Surf but a laundry soap. Evaluate this from the lens of Clayton Christensen’s disruption theory. Nirma was going after non-users (users of laundry soaps). Getting households to replace laundry soap was not easy, and the price point of INR 3 was quite competitive compared to the soap bar. Nirma had to convince the customers early; they did this by selling door-to-door, offering money-back if the brightness of clothes was not satisfactory.
Despite early success, Nirma struggled to set up a distribution network. Distributors/Retailers were unwilling to offer any favourable terms of trade; after all, it was a small brand. Nirma invested in TV advertisements to create demand, but at the same time, they held back stocks to create a sense of scarcity (social blitz and waitlist, ring a bell?). It worked. The customer pull was so intense that distributors and retailers offered better terms.
During this period, Unilever never considered reducing the price of its premium brand Surf. Nirma gradually moved from non-users to target Surf’s consumer base. Finally, Unilever launched a low-priced variant Wheel. Nirma vs Unilever battle was so intense that at one point Unilever had an internal program called STING (Strategy to Inhibit Nirma’s Growth).
Nirma’s growth story faltered by the turn of the millennium. Both Nirma and Wheel were challenged, rather successfully, by another insurgent brand, Ghadi.
Parachute Ki Kasam
Not many of us know about Marico, but we all have heard about Parachute Coconut Oil. Marico owns the Parachute brand. Marico portfolio also includes Saffola, Kaya, Revive, SetWet and Nihar. Marico’s insurgent story from a single coconut oil company to an FMCG juggernaut is fascinating; youcan read more in Saurabh Mukherjea’s Unusual Billionaires.
Interestingly, Nihar too is coconut oil brand as well. It’s not unusual for FMCG companies to have to more than two brands for the same product, e.g. premium, budget brands etc. But Nihar has a much curious story.
In 1992-93, Unilever acquired Nihar from Tata Oil Mill Company (TOMCO). Nihar had a 17% market share, and Unilever wanted it to be the market leader. Unilever’s chairman called Harsh Mariwala to make an unsolicited offer to acquire Marico (Parachute’s parent). Keki Dadiseth, the Chairman Unilever to Harsh Mariwala:
Mr. Mariwala, I will give you enough resources to take care of you and your future generations.
Marico (Parachute and Saffola combined) was just an INR 350 Crore brand back then. Harsh refused the deal and picked up an epic battle with Unilever. In response, Marico went all in - increased distribution network, introduced new packaging, launched new SKUs to encourage trials, acquired smart regional brands and revitalized the sales force. The sales team had a war cry “Parachute Ki Kasam“, which was played up in all internal conferences to motivate the field force. It worked. The Marico assault was so brutal that not only Nihar lost market share, but Unilever sold the brand to Marico for INR 220 Crore and exited the category.
Marico continues to have one of the best retail distributions in the country. Strong physical distribution is considered a moat. Even today, the new insurgent brands focus on building a strong distribution. The strategy of Indian insurgents is in stark contrast with those adopted by brands in US/EU.
So, insurgent brands in the past have gone on to win categories and build bigger brands. Now we have more insurgent brands arriving on retail shelves; some these will go on to be category leaders. Let’s look at the landscape.
Rise of Insurgent Brands, Again
The new insurgents started entering the market in smaller numbers around 2008-09. The numbers were smaller because the market was in recession, and there was a mature private capital market (venture capital). As the economy improved, the new product/brand arrivals increased, and since 2012 the brands arrived in waves. Each wave is bigger than the previous one. We can see that, 2016-17 was a breakthrough year for insurgent brands, many of these brands are successful and growing fast in 2020.
Why do we see more brands in the 2010s than earlier? We can attribute that trend to a confluence of three factors (1) E-commerce (2) Manufacturing layer and (3) Millennials
Ascent of E-commerce and Retail (Distribution)
The growth of the insurgent brands in the past decade coincides with the rise of e-commerce. Setting up a physical distribution is expensive and time-consuming - distributor terms, listing fees, trade promotions etc. E-commerce, on the other hand, offers much wider shelf space at a fraction of cost and enables much faster rollout. Of course, e-commerce has its costs - priority listing, advertisement, discounts/promotions etc. A combination of e-commerce and social media enabled new brands to test the markets, engage with customers before making additional investments in setting up a physical distribution.
Most insurgent brands target India1, so the e-commerce-first approach works well.
Contract Manufacturing Layer (Factory)
Insurgents should send a thank you note to incumbents for manufacturing infrastructure. Yes, incumbent brands have built a strong contract manufacturing network across India. New brands are piggy-backing on this network.
Many national and international brands outsourced manufacturing to reduce operational complexity and costs. Contract manufacturing enabled small- to mid-sized manufacturers to access new technical know-how, best-in-class process and access to raw material. Today, the contract manufacturing layer is quite streamlined; in fact, some of the contract manufacturers have launched their brands!
Working with contract manufacturers reduces time-to-market. It might not be easy to onboard a manufacturer, but it is now easier to approach and evaluate. Successful insurgents have gone on to set up their production facilities to manage quality.
Millennials Going Mainstream (Demand)
The demand-side driver for insurgent brands is millennials. Both these demographics entered the workforce during 2010-15 and brought along higher disposable cash, FOMO, YOLO, high-degree of awareness, strong opinions and a preference for convenience. New behaviour and lifestyle mean new wants and needs which are not met by the incumbent brands, opening the door to insurgents. Many insurgent brand founders are millennials - they understand the market as a consumer and have a unique insight on how to address the market demand.
Venture Capital (Money)
Ok, venture capital is the tiny fourth factor. Venture capital too played a key role in supporting insurgent brands too. Initially, consumer brands were in the same group as digital B2C startups (apps, e-commerce, etc.), but soon, fund managers realized that physical products need a different approach. Consumer product-centric, specialized funds were born. Consumer products need patient capital with a long investment horizon.
The specialized funds not only provide cash but also provide operational support which is crucial for a young brand. We now have a constellation of investment firms that focus on consumer brands - Fireside Ventures, DSG Partners, Saama Capital, Sauce VC are some of the active investors in the space.
Categories Insurgent Brands Target
Food and beverage is the dominant category in the current insurgent landscape. Some of the interesting themes at play: convenience, indulgence, gourmet, crafted, organic, natural, sugar-free. The diversity of the food brands is clear evidence that Indians are hardcore foodies.
In beverages, craft beers and wines account for a large number of brands. The rising trend in beverages is low-alcohol drinks such as seltzers, ciders and non-alcoholic beers, and tonics.
The scope for innovation in food and beverages is endless, and we will notice brisk activity in this category in the coming years.
Next up is “Self“ - apparel (and footwear), grooming and wellness.
E-commerce has made fashion accessible (check the snapshot of data from Bain-Flipkart Report). Fashion is a difficult and highly competitive category. E-commerce private labels and marketplaces have already captured the budget-fashion segment. So where do insurgents look to build a brand? Yes, the premium segment. More than premium it may approrriate to say that insurgent brands build for discerning customers. For instance, Fablestreet offers premium, formal wear for women; Bombay Shirt Company does the same for men.
The only exception (in the current set) to the premium trend is GoColors. It is popular a women’s legging brand. Now GoColors is more a fashion brand with a range of budget and premium apparels and accessories targeted at women.
Grooming, as a category, has become more active in the last 5 - 6 years. Women’s grooming has always been a big market, but is the rise of men’s category is interesting. Men’s grooming was not a specific sub-category at all, but things changed after 2013-14 (most Indian cricketers started sporting a beard?). We are in the peak beard cycle right now (beard was popular in the 70s and 80s). Look at the search trends, India’s interest in beard grew gradually from 2012-13, the launch of brands such as Beardo, and Bombay Shaving Co followed.
Women’s grooming continues to be a big category. The new consumer however is very different from the consumer of previous two decades. Women today care about the type and quality of ingredients in the products, e.g. are the lotions and creams paraben-free. For consumers, sustainability and social causes matter. More women are opting for cruelty-free products, sustainable sourcing etc. Another growing trend in women’s grooming is personalization or bespoke products i.e., products are formulated keeping in mind your treatment requirements, alergies, preferences etc. Brands use mobile apps, personality quiz to capture data in an engaging manner.
The incumbents too, have noticed this change and participating by investing insurgent brands or acquiring them.
Consumer focus on nutrition, immunity and fitness has created a market for new wellness products. From ayurvedic tonics to chewable candies, there many innovative products on the market. The focus on nutrition, fitness is going to accelerate further on the back of COVID-19.
Baby care, pet care and hygiene are other interesting, fast growing categories. We will see more categories tapped by insurgents in the next 2 - 3 years. We will do a deep-dive in some of these categories in the future article, this already too long :)
There is one more way of looking at the insurgent brand landscape, one such framework is called The Blue Room Theory from 2PM. We will cover that in a future essay.
Interesting Side Observations:
The mattress is an interesting category; few like to call it a part of sleep economy. The category has 6-7 very similar brands, sometimes even the colour schemes match. With no apparent differentiation, it may hard to build a loyal customer base.
Delhi NCR and Mumbai are homes to similar/competing brands. One primary reason for this may be a slower growth of distribution. A brand founded in Delhi-NCR may take many months, a year to expand distribution. Another team exploits this small window to set up a competing brand in another region, e.g. Mumbai
Brands seem to have reliable distribution in and around their HQ location.
Let’s Talk Money
Venture capital money is no validation of success, but it is sometimes access to patient capital is very helpful. We will explore the funding angle a little differently. Instead of valuation and quantum of funding, we will focus on determining ease of access to money. For this, we will use a new derived metric funding distance and number of funding rounds (access to follow-on capital). Funding Distance = First Fundraise Year - Founding Year.
Venture-funded Brands
Ease of Funding
Access to seed money has improved significantly over the years. Insurgents are now able to raise their first round within year of inception. New micro-VC funds, CPG-centric funds will continue to catalyze the space. From anecdotal evidence, we can say that investors cut a cheque faster if the brand demonstrates good initial traction and has a decent distribution.
Category Preference
There are no noticeable category outliers. Every category has a decent chance of landing an investment. It is also exciting to see brands get follow-on capital. Brand building is a long-game, period infusion of capital in initial 5 - 6 years is crucial.
City Preference
There is no apparent skew in the regional distribution either. Brands in all cities are equally likely to access money. The big startup cities - Bangalore, Mumbai and Delhi NCR, have good investor base, and this might explain the higher number of follow-on rounds.
Bootstrapped or Unfunded Brands
~37% of insurgent brands in the sample have not raised any external funding. These brands may be either bootstrapped or have not been able to raise a financing round yet. The brands in this sample have been on retail shelves continuously for the last three months (Jan-Mar 2020), so it is safe to assume that most are bootstrapped and growing steadily.
We can ignore the young brands (< three years vintage), even then we have a sizable number of bootstrapped brands going strong. Many of these brands may not have country-wide physical distribution but thriving business on e-commerce platforms, predominantly Amazon, Flipkart, and BigBasket. All three platforms have special programs for insurgent brands.
The success of bootstrapped brands is a sign of maturing consumer base. Consumers today are more than willing to take a chance on a new brand. The current trend is a significant departure in consumer behaviour compared to 90s. The two things a brand has to focus on is (1) good, consistent product and (2) availability, so distribution still matters.
Closing
That’s all for an overview of the insurgent brand landscape. The diversity of insurgent brands is improving and going by the current trend; we can expect a much bigger wave of the brand over the next five years. We will dig deeper into each category in the future to analyze the trends and strategies more closely.
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