FMCG Top Dogs Make Acquisition Play For Reaching Consumers Directly

Fast-moving consumer-goods majors like HUL have been on a shopping spree for smaller direct-to-consumer companies. The reason? By acquiring stakes in new-age digital brands and smaller players, the top FMCG players want to consolidate their presence further.

This trend is driven by the rapid rise of digital-first brands, their niche appeal and the need for legacy companies to stay relevant to Gen Z consumers, according to analysts.

Both parties stand to gain — established players bring financial muscle, while digital-native brands contribute agility, innovation, and strong online engagement.

Relevance has never been more critical, given the entry of e-commerce players reshaping the consumer landscape. Direct-to-consumer brands leverage social media and digital marketing to capture attention, but many struggle to scale due to limited distribution networks and funding constraints.

Large FMCG companies offer nationwide distribution, ensuring these brands can grow beyond their digital-first presence, according to analysts.

Recent deals reflect this shift. Godrej Agrovet Ltd. acquired a stake in Creamline Dairy Products and Hindustan Unilever Ltd. bought skincare brand Minimalist.

Many acquisitions also serve strategic purposes — HUL's January purchase of a palm oil field in Telangana secures a key ingredient for its soaps amid soaring palm oil prices. Its latest investment in Lucro, a plastic recycling firm, aligns with upcoming regulations mandating the FMCG players to use recycled plastic.

Other major moves include ITC Ltd. acquiring Prasuma, known for frozen and ready-to-eat foods, and Emami buying Helios Lifestyle’s the Man Company, expanding its presence in the men's grooming market. Tata Consumer Products Ltd. bought Capital Foods (owner of Ching’s Secret and Smith & Jones) and Organic India, strengthening its position in the organic and health food space.

While D2C brands capture consumer interest, many struggle to scale beyond online sales. Mamaearth, owned by Honasa Consumer, illustrates this challenge, according to Preeyam Tolia, FMCG analyst at Axis Securities Ltd. Despite a strong digital presence and initial success, the brand is now plagued with difficulties expanding in offline channels, limiting its growth.

"Selling to distributors is one thing, but if retailers can’t push products to customers, sales stall," Tolia explained. "In today's funding environment, acquisition by a larger FMCG firm is often a better route than going public."

Anuj Sethi, senior director at Crisil Ratings, said D2C brands could only reach so far on their own. "Social media marketing creates strong recall, but scaling requires financial muscle for advertising and distribution. Rather than building a brand from scratch, FMCG giants prefer acquiring one with proven traction," he said.

For large FMCG players, these deals help accelerate growth. "Traditional companies face slowing organic expansion. Acquiring niche brands can add new categories and boost growth," Sethi added.

From an investor perspective, consolidation is a long-term strategy rather than a short-term valuation play. "Bigger FMCG players are waiting for promising D2C brands to prove their success before making a move," Sethi said. "The trend is likely to continue — India has a young startup ecosystem, and these brands offer strong potential," he added. 

Tolia noted that while new-age brands struggle with scale, they are quick to adapt to trends. Acquiring them helps FMCG firms expand into niche categories faster.

HUL's earlier acquisition of Indulekha, a premium ayurvedic hair oil, serves as a precedent. The brand was relatively small at the time of purchase, but HUL leveraged its distribution and marketing muscle to expand its reach, turning it into a mainstream success. A similar strategy is likely for Minimalist, which fits into HUL's portfolio alongside its science-backed Dermalogica range.

Likewise, analysts expect this trend to continue, with the FMCG top dogs biting into the growing D2C brand market to strengthen their portfolios.