How celebrity brands finally reach the point of sale

It’s a trend that’s likely to continue, said industry experts who cited recent deals to note that, often, such personalities may have limited entrepreneurial skills and time to run a full-fledged business.

“It’s a valuation game at the end of the day. It will be a ‘build valuation and cash-out strategy’ and most celebrity brands will go this way in the future," said Vivek Mehta, partner at executive search & talent advisory firm ABC Consultants, adding that running a successful business requires full-time professional expertise, bandwidth and dedication.

For example, in September 2023, Reliance Retail Ventures bought a 51% stake in Alia Bhatt's kid and maternity-wear brand Ed-a-mama (founded 2020).

In January 2022, Aditya Birla Fashion & Retail scooped up a 51% stake in designer and actress Masaba Gupta's House of Masaba Lifestyle, an entity that houses apparel, non-apparel, beauty and personal care and accessories business and was founded in 2014.

And in July 2016, online fashion house Myntra bought a majority stake in Hrithik Roshan's clothing and shoes brand HRX, which was launched in late 2013.

While some celebrity-backed brands have picked up pace in recent times, beauty and apparel platforms alike have been struggling with rising cost of acquiring customers in a market inundated with new-age brands.

To be sure, experts and industry watchers believe that onboarding a celebrity to the cap table or being backed by a known figure adds a layer of credibility, facilitates greater reach, and reduces the overall costs to some extent.

However, most of these brands may not actually be run by the celebrities themselves but merely endorsed by them, Ankur Bisen, head of retail at India's Technopak Advisors, explained. “There is a lot of fragmentation in the market with a plethora of brands today...so bringing a celebrity on board will help create a pull with the consumers and produce faster results with lesser resources," he said.

Bisen added that if a brand does become a target for acquisition, it means it has moved in the right direction, addressed a gap in the market, and created a recall factor in the consumer's mind.

Other examples of celebrity-backed apparel brands include Nush by Anushka Sharma, Being Human by Salman Khan, Prowl by Tiger Shroff, Wrogn by Virat Kohli, True Blue by Sachin Tendulkar and Saaki by Samantha Ruth Prabhu.

Some of these brands, such as Nush, Wrogn and True Blue, have not become large-scale successes and have somehow faded with the onset of newer brands coming into the space, an industry watcher said.

“Brands may not get the desired results due to improper execution. Even if you have a celebrity backing the brand, you still need to do the basic hygiene, the usual go-to-market retail business strategy, and implement it," Bisen said.

For smaller brands to scale up beyond a certain threshold has been challenging and the association with a bigger company helps them maximise their reach, said Karan Taurani, senior vice president of Elara Capital. He added that while online shopping has been growing at a faster pace thanks to pandemic-fuelled demand in recent times, about 80% of apparel sales continues to come from offline avenues.

According to Taurani, many startups have been able to reach their online target market through partnerships with the 4-5 main players in the space that already have a large digital and brand presence. After they see a significant scale at a 3-4x level, their growth tends to plateau as the online market has become intensely populated by newer brands alongside platforms launching their own private labels, he said.

With rising competitive intensity and aggressive discounting to grab a larger share of the pie, brands will also need to evaluate and set up offline centres to have an edge and maximise their footprint, he added.

This, however, has been a challenge for even the bigger players as offline distribution or opening stores is a heavy investment for any business and there are several dynamics at play. This can be seen in the case of online beauty retailers such as Nykaa and Mamaearth as they look to open more offline centres to cater to consumers' evolving preferences through a hybrid model.

Meanwhile, India's apparel market this year is projected to reach $105.5 billion and is expected to grow annually by 3.81% till 2028, according to a report published by research firm Statista.

While celebrities launch their own lines by banking on this growing demand, a rising focus on sustainable clothing driven by environmentally conscious consumption also plays a part. Some examples of brands that operate in this segment include Bhatt's Ed-a-mama and baby apparel brand Greendigo, which counts Bollywood actress Dia Mirza as an investor.