Complan maker plans to invest up to ₹200 crore in direct-to-consumer brands

In an interview with Mint, Tarun Arora, chief executive of Zydus Wellness, said the company could invest in both international and domestic markets. He added that the BSE-listed company would drive growth through innovation, organic expansion, increasing market penetration, and acquiring new businesses. 

In 2018 Zydus Wellness acquired 100% of Heinz India for ₹4,595 crore. It then bought brands such as Glucon D, Complan, Nycil and Sampriti, along with two manufacturing facilities in Aligarh and Sitarganj.

The focus will be on “specific and right sized" acquisitions, Arora said. He added that while the company could spend ₹100-200 crore, “we are not constrained".

“Now the nature of acquisitions has changed to more gap-filling, bolt-on acquisitions, which fit into either food and nutrition or the personal care space. This will widen our reach, something that would have taken much longer for us to build organically. We could even look at markets outside India, such as the Middle East, Bangladesh or Nigeria," he said.

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The company reported consolidated revenue of ₹2,315.2 crore for FY24, while profit came in at ₹266.9 crore. 

Zydus sells wellness, personal care and food products under brands such as Nutralite, Sugar Free and Everyuth. It operates in more than 25 countries, with Sugar Free and Complan accounting for 80% of its business in these markets. In India its products are sold at more than three million outlets.

Filling in the gaps

Speaking about missing pieces in the company’s portfolio, Arora said startups in the wellness space could be of interest. “Within the wellness space the startup ecosystem has actually demonstrated that they can be agile and do stuff that sometimes we would not. We do believe there is a good opportunity of picking (stakes in) young startups that are built around wellness. We will continue to explore some of those things," he added. The company is also creating a team to develop products that align with emerging consumer trends.

Mergers and acquisitions in the consumer goods space have spiked since covid, especially as companies expand their portfolios to meet emerging needs of consumers.

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Fast-moving consumer goods makers are cash rich and have been exploring investments to diversify their portfolios. For instance, Zydus Wellness had ₹1,711 crore in retained earnings as of 31 March. Retained earnings are the cumulative profits of a company after factoring in dividend payments.

In 2023 Marico Ltd acquired a majority stake in Satiya Nutraceuticals Private Ltd, which owns plant-based nutrition brand Plix, for ₹369 crore. In wellness and personal care, Zydus competes with companies such as Hindustan Unilever and Emami.

In 2022 packaged consumer goods maker Hindustan Unilever Ltd picked up stakes in two digital-first health and wellness companies, Zywie Ventures and Nutritionalab, thereby entering the domestic market for health and wellness products, which is expected to be worth ₹30,000 crore by 2027. 

Not all smooth sailing

Artificial sweeteners have been in the spotlight since the World Health Organisation (WHO) classified aspartame as a possible carcinogen in July 2023. And in April 2024 the union government advised e-commerce portals to stop labelling dairy-, cereal-, or malt-based beverages as ‘health drinks’, citing the lack of a definition and standards for this category under India's food laws. It said these product should be reclassified as food drinks, beverages, or powder drinks.

As a result, brands such as Complan and Sugar Free have had a harder run, Arora said. “Having said that, we've recovered reasonably well," he added.

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Consumer companies are also reeling from the impact of high inflation and tepid consumer demand in the previous two years. Arora said, however, that demand trends are now improving. 

“In the past three to four quarters things have really changed. Gross margins have been consistently moving up. Our volume-value equation is improving," he said. The company draws a fourth of its business from rural markets in India.