Young consumers spark rise of eco-friendly home, personal care products made by startups | Company Business News

Nov 06, 2024

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An increasing number of millennials and Gen Z consumers is turning to new-age environmentally friendly home and personal care products like detergents, handwashes and floor cleaners, ditching traditional brands and offering a new audience for startups in the space.

Beco, Koparo, Bare Necessities, Born Good, Happi Planet and other startups that offer plant-based and toxin-free goods are rapidly expanding product lines and investing increasingly in understanding the psychology of the emerging set of users, hoping to capture and retain mindshare, industry executives toldMint.

These companies are trying to make every part of their products—right from the packaging to the ingredients—safe for the environment. Beco uses 100% recyclable cardboard packaging and a special process to distil natural coconuts into soap form. Bare Necessities sells a powder-to-liquid concentrate that helps to reduce the carbon footprint by eliminating transportation of heavy containers filled with water.

“Categories like cleaning which include floor cleaners, laundry detergents and handwashes are underserved. A few years ago, there weren’t a lot of options in personal care, just a few off-the-shelf ones, but nothing much in terms of choice and quality of ingredients," Aditya Ruia, co-founder of Beco, toldMint.

However, some products like fabric softeners and liquid detergents made by these niche companies can cost 20-30% more than widely used detergents Surf Excel and Ariel.

Born Good’s 1 litre pack of liquid laundry detergent costs ₹279, while Surf Excel’s 1 litre refill pack costs ₹164. Beco is working on introducing small pack sizes and offering value deals on volume packs to enable users to buy more and save more, Ruia said.

Investors are taking note, too. Beco recently raised $10 million from early-stage venture capital firm Tanglin Venture Partners and counts Rukam Capital, Climate Angels and actor Dia Mirza among its investors. New Delhi-based Happi Planet secured ₹8.5 crore from Fireside Ventures in February, aiming to expand its offline presence.

Several consumer-focused venture investment firms are evaluating Shark Tank-featured Koparo and Bengaluru-based Bare Necessities for seed funding, two people aware of the development toldMint on condition of anonymity.

Messages sent to Koparo and Bare Necessities remained unanswered.

“Increased awareness among the youth and growing visibility through quick commerce channels have enhanced the appeal of sustainability-focused homecare brands. I think it’s a very promising premise," said Ankit Kedia, founder of early-stage venture capital firm Capital A.

India’s homecare products market grew almost 27% from 2015 to 2023 across urban and rural regions, fuelled by the government’s Swachh Bharat Mission—Clean India Mission—initiative, according to research agency Kantar, which tracks the consumer sector.

The needs and preferences of young consumers are changing fast, providing space for innovation. Karan, a 37-year-old finance professional living in Hyderabad, recently switched to Beco’s laundry detergent after noticing its attractive packaging and variety.

“I wanted to try something new and had been seeing a lot of ads of plant-based products. The products don’t have a strong fragrance, which is great because it means ituses fewer chemicals," he said.

Dipanjan Basu, co-founder and partner at early-stage venture capital firm Fireside Ventures, said that the changing demographic is aiding the growth of clean-label brands, with the increasing number of nuclear families and youth setting up their homes away from the family and wanting to be more cognizant of everyday products to be of high quality as well as safe for the environment.

Moreover, what users expect from these products is changing too.

“Needs of users have changed in the last decade. If you look at the laundry segment, people are not concerned about getting the stain off as much as extending the life of their expensive clothes. They want their clothes to look new even after 10-20 washes," Beco’s Ruia said.

However, this comes with challenges.

“For instance, it’s common psychology to think that clothes are fresh when they have a strong fragrance after a wash. But adding perfumery in a natural extractant is tough. Changing consumer perception will require a lot of time and brand-building efforts," Fireside’s Basu said.

Adoption of clean-label homecare products is still slower than categories like cosmetics and food where results are almost instantly visible, according to Basu.

“Here, there is less inertia. Only an evolved consumer would want to change something against which he has no complaint. But there are definitely early signs of change as consumers look for products in dishwashing and laundry which are chemical-free, safer for kids and pets at home and a superior product. I expect it to become a large trend in the next few years," he noted.

To be sure, clean-label startups are much smaller than the legacy players.

India’s homecare market is dominated by Hindustan Unilever (Wheel detergent, Surf Excel, Lifebuoy), Procter & Gamble (Ariel, Tide), and Godrej Consumer Products (Ezee liquid detergent, Magic hand wash). While HUL dominates the fabric care segment, Reckitt leads the antiseptic and floor cleaner segment with Dettol and Lysol.

According to Kantar, mass-market products like detergent bars and washing powders did not grow much in the year ended March 2024, an effect of a slowdown in consumption in the country. However, premium products like fabric conditioners and dishwashing liquids grew in double digits, driven by increased demand from richer households.

Beco’s revenue was ₹25 crore in FY23, while HUL’s Surf Excel crossed ₹8,200 crore in sales in 2022, controlling more than a fifth of India’s detergents market.

There are bright spots for specific categories under home and personal care. India’s fabric care market dominated by liquid detergents is expected to touch ₹64,000 crore in 2025 from the current ₹52,000 crore, according to estimates by market research firm Mintel.

“It’s foolish to build to compete with the established players who have mastered their distribution strategy over many decades. Instead, it's smart for brands to create their own niche," said Capital A’s Kedia, adding that there is a strong case for consolidation by larger companies in this category.

According to Fireside’s Basu, companies need to innovate continuously to discover new use-cases.

“There is so much innovation happening in this category in the West. For example, safer detergent products for sensitive skin, products safer for young kids and pets at home. There is an innovation gap there," he added.

Companies must keep laser-sharp focus on unit economics as marketing and other expenses can easily snatch margins, according to Kedia.

“None of the large players operates at gross margins of less than 50-60%. So, it’s crucial to be sustainable on both the pricing and product fronts," Kedia said.