Paper Boat Investor Eyes Bigger Slice Of India’s Consumer Goods Pie

Food and personal care startups have been drawing investors hunting for ventures to grab a slice of what's expected to be a $103-billion market soon. Several small companies have become household names in a short span.

Kanwaljit Singh, 53, has invested in a few like Hector Beverages, the maker of Paper Boat drinks, and Drums Food International, owner of ice cream brand Hockey Pokey and Greek yogurt Epigamia.

Singh's second venture firm in a decade, Fireside Ventures, plans to take it a step ahead. Its maiden fund will invest in startups that make anything from food and beverages to soaps. It just part-closed a Rs 300-crore fund backed by family offices of Wipro's Azim Premji and Marico's Harsh Mariwala, RP-Sanjiv Goenka Group, Emami Ltd. and WestBridge Capital, who are willing to contribute more than half.

Venture funds focused only on consumer goods firms are rare as most investors are chasing the next unicorn among India's tech-based startups. However, growing consumption on the back of rising incomes offers a huge opportunity in consumer products.

Helion Ventures Partners, India's oldest homegrown venture capital firm that Singh co-founded a decade ago, backed the likes of travel portal MakeMyTrip and cab aggregator TaxiForSure that later merged with Ola.

After leaving Helion over two years ago, Singh funded half a dozen startups as an angel investor. His investments also include health food maker Yogabar, fresh meat seller Licious and loose-leaf tea marketer Vahdam Teas.

Fireside is now looking to invest in multiple tranches of Rs 1 crore, Rs 4 crore and Rs 10 crore each over the life of similar companies, he said.

“Consumer brand needs to be nurtured in the upcoming stage and foundations have to be built right. The fund size is Rs 300 crore so eventually we expect to invest in about 12-15 companies,” said Singh. “We are looking at about Rs 15 crore per company but not as a single cheque, inception to series A would be the journey for us to build out.”

Writing bigger cheques and forcing companies to grow faster is going to be dangerous while creating a consumer brand, he said.

The fast-moving consumer goods market is expected to more than double from $50 billion in 2015 to over a $100 billion in 2020, according to India brand Equity Foundation, a government-backed researcher and think tank. Nearly three-quarters of this will be contributed by food, personal care and home products, its report said.

Singh says consumer brands outside technology are ripe for innovation and it's the right time for a specialist venture firm.

Makers of Paper Boat beverages, Raw Pressery juices, Bira beer and ID Fresh Food ready-to-cook packaged mixes have raised funds over the past two years. In March, ID Fresh raised $25 million for a quarter of a stake from PremjiInvest as it prepares to enter the U.S., U.K. and Singapore this year.

Singh is already in talks with around 20 companies and will be shortlisting firms for investment.

Fireside will fully close its maiden fund over the next three to four months, with contributions from new and existing investors.

India is still a virgin market in terms of creating a brand, Singh said. “Products in natural, ayurvedic (categories) that are in the realms of traditional Indian sciences have the potential to become a global brand.”