Why I am excited in investing in emerging Direct to Consumer Brands
Often people ask me why I am focus on B2C investments. They require a lot of marketing capital to scale, they are difficult to differentiate from the competitors and the exits are challenging.
I disagree and I identified 5 key reasons about investment opportunities in new brands:
Clean Movement. Millennial and generation Z wants to buy natural and organic ingredients. That’s it. The problem is that in the typical store less than 10% of the inventory is about natural products. The opportunity is huge for natural product in all the different segment, from make up to toothpaste.
Underserved segments like man grooming, teenager, people of colour, GenZ.
To give you an idea, the global men grooming market was valued at $15bn in 2018 but it forecasted to grow to $65bn by 2020.
GenZ grow up with I phone and the way that they want to communicate with their preferred brands is 100% different from the Millennials.
Innovation and Product Development.
Brands are constantly creating new products with their customers;
The product development is done in collaboration directly with the costumers;
The delivery of a new formulation is done in days and not anymore in months or years!
Brands like https://bloomcosmetics.com are asking question on Instagram about how they want new product features (in the example of Bloon about the thickness of a moisturize).
New Distribution approach.
New Direct to Consumer brands compared to the incumbents are able to connect with their customers in different ways;
For example, a key is the growth of contextual shopping. New exciting consumer products are offered in venues that are not retail venues at all (including restaurant and entertainment venues). http://www.neighborgoods.net/category/lifestyle/is an example of this new approach to distribution.
Existing consumer giants have flat revenues.
The existing consumer giants (Kraft, Heinz, P&G,..) are now growing and need to buy growth;
For example, in the Annual Report 2018 Estee Lauder explicitly tell that a significant part of the double-digit growth came from the acquisition of 2 brands (Too Faced and BECCA).