In consumer goods, access to capital no longer the primary differentiator; profitability key for survival

Mumbai: India’s consumption story is entering a more structured phase, where access to capital is no longer the primary differentiator and profitability is increasingly defining survival.

Investors and founders say a shift is underway where the country’s consumer firms are moving away from the “grow at all costs” playbook toward a model closer to traditional conglomerates that have measured expansion, early profitability and sharper capital allocation.

“The opportunity set in India is very different from the US,” said Sandeep Murthy, founder at Lightbox Ventures. “You’re not building software companies. At the end of the day, most of these are real-world businesses, and they have to make money.”

A key driver of this shift is the rapid rise of organised retail channels especially e-commerce and quick commerce which have fundamentally altered how brands are built.

A decade ago, consumer firms had to invest heavily in distribution from day one, navigating fragmented general trade networks. Today, digital marketplaces such as Amazon, Flipkart and quick-commerce platforms like Zepto and Blinkit allow brands to achieve scale quickly without that upfront burden.

This has enabled a new playbook: build online, prove demand, reach profitability, and then expand offline. Feminine hygiene brand Nua, for instance, derives roughly 70% of its sales from marketplaces. “Earlier, you had to build distribution first and hope demand would follow,” Murthy said. “Now you can build demand first, and distribution can come later.”

The funding winter and rising cost of capital have reinforced this shift. Businesses that once relied on continuous funding are now being forced to stand on their own.

“If you’re not profitable, you’re not a business—you’re an idea,” Murthy said.

Even global consumer-focused private equity firm L Catterton said it is sharpening its bet on the Indian consumption story with a clear principle-- Back differentiated, founder-led businesses in attractive categories, while avoiding models that prioritise growth without demonstrating economic strength.

According to L Catterton, while India offers structural headroom across segments it is focused on identifying businesses that ride more than one tailwind, citing its investment in Farmley as an example, which taps into rising health awareness, increasing snacking occasions and the rapid expansion of quick commerce in the Indian market.

“Now there is more sanity… people were willing to put in money at any valuation,” said Mehta, adding that L Catterton will remain disciplined and “won't fall under the FOMO trap.” Sanjiv Mehta, the executive chairman of L Catterton India arm.

Furniture rental firm Furlenco, also backed by Lightbox, has improved unit economics by cutting borrowing costs from about 24% to near 10%, turning what was once a capital-intensive experiment into a cash-generating model.

Cash-rich incumbents, including Hindustan Unilever and Marico, are increasingly looking to acquire scaled digital-first brands rather than incubate them internally.

Brands are increasingly investing in differentiated physical experiences to compete with global fast-fashion players like Zara and H&M. Portfolio company Bombay Shirt Company, for example, generates about 90% of its revenue from offline stores, built around a concept that combines tailoring, grooming and leisure. Cloud kitchen operator Rebel Foods has built a multi-brand platform that leverages shared kitchen infrastructure to rapidly scale new concepts, reducing real estate costs to as low as 2% of revenue compared with 10–15% for traditional restaurants. Similarly, pharmacy chain Zeno is using a combination of private labels and physical trust-based interactions to drive higher margins by promoting generic drugs.

“These are not just brand plays. They are model innovations. Technology is impacting either distribution, production or customer acquisition costs," Murthy added.