Surfs up! Mid-sized companies catch the PE/VC wave

The list includes Dairy Classic and NIC ice creams, SkinQ dermo-cosmetics, Grameen Kulfi, Fresh Press juices, Woodsmen Mountain Whiskey, Yu instant foods and Natch snacks, among others.

"There was a reduction in investments from during the second half of 2022," said VS Kannan Sitaram, partner and cofounder at early stage-focused Fireside Ventures. "But in recent months, Indian and overseas investors are clearly seeing strong economic growth, leading to a greater willingness to invest at different stages."

Fireside recently invested in consumer brands Good Bug, Happi Planet and Sole Threads.

Funds for companies likely to rival large players
Executives said the fresh round of investments is playing out for brands that are either occupying niches or already taking from established brands.

"Breaking away from age-old India-made foreign liquor (IMFL) codes, we're building an origin-led Himalayan whiskey catering to young India," said Shivam Ginglani, founder and chief executive at homegrown Ginglani Distillery, which raised Rs 12.5 crore in a round led by Finfirst Group and Anthill Ventures in March for its Woodsmen Mountain Whiskey.

Ginglani said there's a "genuine lack of a clear identity for Indian whiskies, currently defined as IMFL, which serves no purpose in defining either the origin or the style of whisky."

Yu, which makes ready-to-cook noodles, pasta and packaged coconut water, raised Rs 20 crore two months ago. It's expanding into categories led by Nestle, and Capital Foods' Ching's Secret. (Tata Consumer announced its acquisition of Capital Foods in January.) Yu said the funding is being utilised for expansion in India as well as South Africa and West Asia.

Likewise, cold-pressed juice chain The Fresh Press, which also makes fruit platters and desserts, has raised funding from Nikhil Kamath-backed Gruhas Collective Consumer Fund. It is expanding into a category where brands like Real, Minute Maid, Paper Boat and Tropicana - backed by the likes of Coca-Cola and - are pushing their own "healthier juices."

The Fresh Press cofounder Mithil Lodha said the latest funding will facilitate "exponential growth, helping it become a prominent name in the healthy beverage industry." Actor-entrepreneur Dino Morea has also invested in the juice chain.

"Listed players have seen higher underperformance, compared to unlisted peers in FY23," ICICI Securities wrote in a report on March 27. "Higher competitive pressure at both, mass regional levels and premium digital-first brands, has led to underperformance of listed players."

SkinQ, which says it addresses the needs of "melanin-rich" skin, has raised Rs 3 crore in a seed round led by Inflection Point Ventures, in addition to Venture Catalysts and Super Angels. It has expanded into the US market.

Ice-cream maker Walko Food raised $20 million in February from Jungle Ventures, a Singapore-based early growth-focused venture capital firm. According to a company statement, the new round will "further supercharge Walko's expansion across its product portfolio and customer reach, and accelerate its penetration into the Indian ice-cream market."

The domestic frozen desserts and ice-cream market is currently dominated by Amul, , Mother Dairy and .

HUL, ITC and Nestle said on recent post-earnings calls that have gained momentum at the cost of their own market share. Nestle acknowledged local competition in categories such as coffee and noodles and said the company is "trying to respond fast by tailoring price points."

Brokerage firm Elara Securities last week said the rise of small regional competitors is adversely affecting larger companies. Its report noted the trend particularly in biscuits and laundry products.

Executives said new-age and regional players are increasing their share every month at the cost of national brands. They spend less on marketing and offer better incentives to retailers.

This is a reversal from 2020-21, when pandemic-induced disruptions had resulted in dozens of regional brands either shutting down or downsizing, unable to keep up with distribution and supply challenges. That was followed by a steep rise in prices.

Since then, while pandemic disruptions have ended, inflation has eased at least in select commodities, leading to a resurgence of smaller, regional and new-age brands, experts said.