Tata Consumer, a company specializing in the sale of packaged groceries such as salt, staples, water, and tea, has observed a decline in the prominence of direct-to-consumer (D2C) brands that thrived during the pandemic. This change is reflected in the online-only brands’ shift in focus towards local kirana stores, recognizing the significant influence that established firms hold in these traditional retail outlets.
Sunil D’Souza, Managing Director at Tata Consumer, said, “The hype of D2C, which was there during the pandemic, is starting to taper off a bit and that is also one of the reasons why many of the players are now starting to come into the offline world,” Sunil D’Souza.”
“Distribution in general trade in India is not as simple as just putting a product out there and moving along. Companies have spent years building on their distribution systems and these are sources of competitive advantage for the large players,” he added.
D2C brands are defined as businesses that generate a majority of their revenue or customer acquisition through direct-to-consumer online channels or those that initially adopt an online-first distribution strategy before expanding into omnichannel operations.
Tata Consumer, which initially focused on selling tea, coffee, and salt, has significantly broadened its product range over the past few years. In addition to these core offerings, the company has ventured into pulses, spices, ready-to-cook and drink products, and more recently, snacking products. Furthermore, Tata Consumer has intensified its innovation efforts, demonstrating an increased pace by launching 34 new products in the last fiscal year, compared to 19 in FY22.
Nevertheless, many of these emerging product categories witnessed a surge in the number of online-only brands. These brands exhibited innovation by developing products tailored to specific niche markets, capitalizing on consumer data and insights to identify untapped opportunities in the market.
Around two years ago, Tata Consumer successfully acquired a complete ownership of Kottaram Agro Foods, the renowned producer of Soulfull brand of breakfast cereals and millet-based snacks. Interestingly, even their competitors such as Marico, ITC, and HUL have been actively investing in direct-to-consumer (D2C) brands. For instance, Marico acquired a 54% stake in HW Wellness Solutions, the parent company of the popular healthy breakfast and snacks brand True Elements. Similarly, ITC made an investment in Sproutlife Foods (SFPL), the manufacturer of Yoga Bar, while Hindustan Unilever Limited (HUL) invested in Zywie Ventures, which specializes in selling plant-based supplement brand Oziva, and Nutritionalab, the owner of Wellbeing, a line of nutritional products.
The maker of Tata Sampann, Tata Salt and Tata Tea Gold remains unperturbed. “We remain focused on continuing to strengthen this competitive advantage, while at the same time building on our muscles into the D2C space so that we will also continue to take advantage of that shopping behaviour,” D’Souza said.
