Healthy snacks: Consumer awareness, social media put healthy snack brands on growth path

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Healthy snack brands are seeing explosive growth, propelled by a surge in health-conscious consumers, further amplified by social media influencers. However, scaling these businesses beyond the niche markets while staying profitable presents a major hurdle.

Peak XV Partners-backed The Whole Truth clocked 125% growth in operating revenue to Rs 36 crore in FY23, while Matrix Partners India-backed Open Secret nearly tripled its revenue to Rs 37 crore.

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Larger players in the segment such as ITC-backed Yoga Bar clocked 31% revenue growth to Rs 88 crore, while Tata Consumer Soulfull’s revenue grew 88% to Rs 64 crore in FY23. Marico-owned True Elements posted a 24% growth to Rs 57 crore, regulatory filings sourced from Registrar of Companies and Tofler showed.

However, these brands, which sell products such as chocolate and protein bars, millets and dry fruits-based snacks, granola bars, oats, and breakfast cereal, also widened their losses during the year.

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“When we invested in The Whole Truth in 2019, it was just an idea, and the company was pre-revenue. We believe that awareness about what people are consuming is increasing, and that awareness levels will start influencing what people consume,” Manu Chandra, founder and managing partner at Sauce VC, a New Delhi-based early stage consumer-focussed venture capital firm, told ET. “The way it has panned out now is beyond what we had anticipated”.

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Chandra said consumers are becoming significantly more aware of what they are consuming, and this is a function of increasingly available information through social media.

“Earlier, your source of information would be a trainer or nutritionist but now there are influencers like Andrew Huberman, Cyriac Abby Philips (The Liver Doc), Revant Himatsingka (FoodPharmer) who are household names, and they are the ones who are perpetuating awareness and it’s becoming more mainstream,” he said.

Next steps

Even as investments in creating awareness by brands are likely to continue, companies are exploring various ways to scale their businesses.

Suhasini Sampath, cofounder of Yoga Bar, said the brand is expected to get its next phase of growth from offline channels. In January 2023, cigarette-to-hotels conglomerate ITC said it would acquire 100% stake in Yoga Bar over a three-to-four-year timeframe.

“For Yoga Bar, which has the support of a strong distribution network, offline is a huge growth area. While you can be a brand that can primarily serve through quick-commerce, presence offline is critical. Food, as a category, has low gross margins of 30-40%, which makes it difficult to sustain growth either as a D2C brand or primarily serving online,” Sampath said.

“We’re actually cutting back on D2C because it is impractical to scale beyond a point. Once you cross the Rs 100 crore scale, you have to make sure you’re sustainable in the long run and the focus is now moving away to getting the brand into DMart and Reliance Retail,” she added.

Yoga Bar expects to clock a 50% revenue growth in FY24 to more than Rs 130 crore.

However, The Whole Truth, a comparatively younger brand that expects to double revenue growth in FY24, will continue to focus on the top layer of the market.

“All the brands (in this space) are premium brands and that’s largely because input costs for good ingredients are higher. It’s still largely a top 8-10 cities phenomenon,” said Shashank Mehta, cofounder and CEO of The Whole Truth. The startup last raised $15 million in January 2023 led by Peak XV Partners (then Sequoia Capital India).

“It’s not a mass offering that allows us to go to tier-II, tier-III yet, and it is largely being driven by quick-commerce, modern trade, and top general trade play. We can’t build a large food brand in India without going offline…but for brands like ours, the focus is not to go to 80 or 100 cities but to target top 8-10 cities and go deep,” Mehta said.

Sauce VC’s Chandra said startups in the segment “will become mid-sized brands who will get acquired as long as they have something that a strategic investor would want and don’t have in their portfolio”.

In addition to ITC, FMCG major Marico had bought a 54% stake in Pune-based healthy snacks brand True Elements in May 2022, and Tata Consumer acquired Soulfull, a D2C brand, in 2021 for Rs 156 crore.

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