D2C brands to expand and consolidate under one roof in 2023

With a bunch of brand acquisitions and digital roll-up companies becoming unicorns lately, the ‘House of Brands’ model is gaining popularity.

The concept of ‘House of Brands’ isn’t new in India. It was brought back to life in 2018, when Carlos Cashman and Joshua Silberstein, from Massachusetts in the United States, came up with an idea of setting up Thrasio, a firm that acquires and scales online-first businesses. Since then, there has been unprecedented interest in the concept.

“The model existed in the past, with the likes of Hindustan Unilever (HUL), ITC, Procter & Gamble (P&G), etc. It’s just gained a lot of popularity lately. We’ve seen a bunch of brand acquisitions happen quickly and digital roll-up companies have become unicorns. Like every other retail industry, omni-channel is going to be the way forward. Digital roll up companies already have a presence offline, and this trend will only grow, from hereon,” says Saurabh Sharma, founder, Futurewagon, a platform for brand creation.

Vani Gupta Dandia, marketing consultant at CherryPeachPlum Growth Partners, shares, "'House of Brands' model makes sense for a manufacturer only when the fundamental proposition and the consumer being served is radically different. However, when new age brands are looking to enter new segments or are looking to offer new propositions to consumers, they are actually best positioned in early stages to be able to leverage one strong brand because that allows far greater economies of market spends."

Dandia adds, “This model is quite expensive. Today, the consumer may not know that the likes of Sunsilk, Dove, etc., have the same parent company (Unilever). For a brand that is not a solid one by itself, the most important consideration is threshold marketing spends.”

Today, there are many players in the direct-to-consumer (D2C) ecosystem. A growing number of D2C brands are already moving to the House of Brands model.

A brand that tried to reach unicorn status, is The Good Glamm Group. It has acquired beauty and personal care companies, such as The Moms Co., Sirona, St. Botanica, MyGlamm, Manish Malhotra Luxury Makeup by MyGlamm, POPxo Beauty by MyGlamm, BabyChakra and Organic Harvest.

Unicorns like Nykaa plan to make the company an umbrella entity for lifestyle products, while Lenskart wants to acquire eyewear brands across European countries.

Honasa Consumer (HCPL), the parent company of Mamaearth, The Derma Co., Ayuga and Aqualogica, is based on a House of Brands model. It creates purpose-driven personal care brands for millennials.

Structured on Thrasio’s model, Mensa Brands, India’s largest D2C House of Brands, has partnered with India Lifestyle Network and acquired MensXP, iDiva and Hypp from Times Internet (TIL). The three are leading destinations in men’s lifestyle, women’s lifestyle and influencer management areas, respectively. The D2C unicorn plans to partner and invest in digital-first brands, and scale them exponentially.

Meanwhile, GOAT Brand Labs has acquired five D2C brands, including Chumbak, the iconic home and lifestyle brand. With the acquisitions, the size of GOAT Brand Labs’ portfolio has reached 20.

“Consumers like to test new things and companies all the time. Building consumer loyalty for new brands, is challenging. A D2C firm needs specialists at the helm to scale and grow. Our ability to control content production and distribution for digital media and influencers, gives our companies tremendous visibility and makes it simple to develop powerful brands with devoted followings. This is where our content-creator-commerce strategy gives us an advantage,” comments Sukhleen Aneja, CEO, Good Glamm Brands, The Good Glamm Group.

In India, unicorn D2C startups like Mamaearth, The Good Glamm Group, SUGAR Cosmetics, boAt and Lenskart are already knee-deep into this strategy, as their brand portfolio keeps growing.

The D2C brands in India are predicted to grow at a CAGR of 40% - from $12 billion in FY22 to $60 billion in FY27.

How will the House of Brands model trend consolidate itself this year?

Aneja shares, “By offering services that cater to consumers and being present where they are, the developing D2C area will continue to upend the established industry. Many D2C companies that emerged during the COVID pandemic, have solidified their footing in the past year. Multichannel marketing is the way to go, in the long run.”

“At The Good Glamm Group, for instance, we’re all set for further amplification of online channels and growth into offline points of sale in 2023. Customer retention and loyalty will also be two key focus areas. As social media remains an important tool, customer-focussed branding will take the lead.”

Adds Sharma, of Futurewagon, “2023 is going to be about more consolidation and capability building. In 2022, there were less acquisitions by House of Brand companies, than 2021. Companies realised that it’s more complex to integrate and run multiple brands under a single organisation. Since there are enough players in the roll-up space that are sector agnostic, what we can expect to see in the coming year, is players in niche segments trying to consolidate brands only in a particular industry.”

Many times, individual brands are unable to gather critical mass to scale beyond a certain point and it makes sense for the founders to team up with a larger company.

Speaking about the challenges, Sharma shares, “The challenge, to begin with, is all around integration. It’s quite daunting to bring different teams and brands together, and have them realign towards the larger goal of a House of Brands company. As brand owners, people who’ve been operating as independent entrepreneurs, now suddenly have a structured and more corporate environment to function in and thrive. Not every brand owner is cut out for this and, as a result, fall-outs happen.”

Moving forward in year 2023, will more brands roll up to this concept?