Why Small FMCG Brands Struggle to Compete for Targets

India’s fast-moving consumer goods (FMCG) sector is a battleground for mergers and acquisitions (M&A), where small brands struggle to compete for targets against large corporations. Financial, operational, and strategic disparities create steep barriers. However, small FMCG brands can still position themselves effectively with smart strategies. This article, customised for senior leaders, explores why small brands face challenges and how they can navigate India’s dynamic consumer goods M&A landscape to compete for targets successfully.

India’s Consumer Goods M&A Landscape: Why It’s Hard to Compete for Targets

India’s FMCG sector has seen robust M&A activity, with deal volumes rising 12% year-on-year in 2024, fuelled by a post-2024 market correction that stabilised valuations. Large corporations increasingly target direct-to-consumer (D2C) brands and regional players to capture niche markets and digital-first growth. In fact, 65% of 2024 deals involved D2C startups. Strategic acquisitions now focus not just on scale, but also on expanding distribution networks and innovation capabilities.

Consequently, large corporations approach M&A with vast capital, streamlined processes, and global networks, enabling them to compete for targets aggressively. In contrast, small FMCG brands aim to acquire targets to enter new categories or regions. Yet, their limited resources and slower execution often hinder their ability to compete for targets effectively against well-resourced giants.

1. Why Small FMCG Brands Struggle to Compete for Targets

Small brands face significant hurdles when trying to compete for targets. These include:

• Limited Capital Access: Large corporations leverage cash reserves, debt markets, or equity issuance to fund acquisitions often offering all-cash deals. Conversely, small brands rely on bank loans or venture capital at higher costs, making it difficult to match this firepower. For instance, a ₹50 crore acquisition may require small brands to dilute significant equity just to stay in contention.
• Slower Due Diligence and Execution: Without dedicated M&A teams, small brands typically face prolonged due diligence and slower decision-making. On the other hand, large corporations, equipped with specialised teams, can close deals within weeks. As a result, small brands often miss opportunities to compete for targets effectively.
• Weaker Networks: Large corporations maintain close ties with investment bankers, founders, and advisors. These relationships provide early access to deal pipelines. In contrast, small brands, with limited networks, often hear of targets too late, further reducing their ability to compete for targets.
• Legal and Regulatory Challenges: India’s complex M&A environment ranging from FSSAI compliance to FDI norms and CCI approvals requires legal expertise. While large corporations manage this seamlessly through in-house legal teams, small brands often face delays, complicating their M&A timelines.
• Inability to Match Valuations and Structures: Furthermore, large corporations can afford to pay premium valuations (8–12x EBITDA for D2C brands) and offer attractive deal structures such as earn-outs or ESOP rollovers. Small brands struggle to compete for targets at these terms, both financially and operationally.

2. Deal Structuring Advantages of Large Corporations in Competing for Targets

Large corporations dominate M&A not only through financial strength but also through sophisticated structuring:

• Deferred Payouts and Earn-Outs: For example, they often structure deals with performance-based earn-outs, thereby reducing upfront cash needs. A ₹100 crore acquisition might involve ₹60 crore upfront, with the remaining ₹40 crore linked to future revenue milestones.
• Global Distribution Access: In addition, large players offer targets access to expansive distribution networks, including international markets. This makes their bids more compelling to high-potential brands.
• Advanced Data Rooms and Risk Frameworks: Their use of secure virtual data rooms and robust risk assessment models ensures faster, smoother due diligence and execution.
• Founder Retention Models: Large corporations also retain founders through equity stakes or ESOP rollovers. As a result, they provide both liquidity and future upside advantages that small brands can rarely match in the race to compete for targets.

3. Strategic Levers for Small FMCG Brands to Compete for Targets

Despite structural challenges, small FMCG brands can still compete for targets by outmanoeuvring rather than outbidding large corporations:

• Prioritise Strategic Fit: Instead of chasing scale, focus on synergy. For example, a small organic snacks brand could acquire a regional health beverage firm to diversify its product portfolio.
• Explore Joint Ventures or Co-Branded Rollouts: Collaborating with other small players can reduce capital needs. Moreover, joint ventures or co-branded launches enable alignment testing before committing to full acquisitions.
• Partner with Financing Entities: By engaging with private equity (PE) firms or using special purpose vehicles (SPVs), small brands can fund deals more competitively thus enabling them to compete for targets without excessive debt.
• Join Roll-Up Strategies: Participating in PE/VC-backed roll-up strategies allows multiple small brands to consolidate, thereby gaining bargaining power and market scale.
• Differentiate Value Propositions: In many cases, founders value autonomy or brand legacy. Offering operational independence or preserving brand identity can make a lower-value bid more attractive.

Illustrative Examples: When Small FMCG Brands Tried to Compete for Targets

• Missed Opportunity: In 2024, HealthyBites a small FMCG player in Gujarat tried to acquire a millet-based snack startup. Despite strong strategic alignment, HealthyBites failed to raise ₹30 crore quickly. Meanwhile, a large corporation closed the deal with a ₹40 crore all-cash offer, highlighting how speed and capital often decide who can compete for targets successfully.
• Successful Differentiation: In 2025, AromaBrew, a midsize FMCG firm, acquired a South Indian spice brand. Instead of matching a large corporation’s ₹30 crore offer, AromaBrew offered ₹25 crore along with a co-branded product line and retained the founder with a 10% equity stake and operational autonomy. Consequently, it secured the target by offering qualitative advantages.

M&A Advisory: Hybrid Consulting Takeaways to Help Brands Compete for Targets

Small brands can enhance their ability to compete for targets through a multidisciplinary strategy:

• Legal: Pre-negotiating term sheets and securing IP rights early can help speed up deals. Additionally, filing regulatory documentation proactively (e.g., CCI approvals) minimises friction. Legal experts like LawCrust can guide this process.
• Finance: Build an acquisition war chest through strategic debt or PE backing. Also, optimise capital structure using cash flow forecasting and valuation justifications.
• Technology: Invest in backend readiness. Align ERP, CRM, and logistics platforms to ensure seamless post-acquisition integration this signals seriousness and lowers perceived execution risk.
• Management: Create M&A playbooks for target screening, valuation frameworks, and integration plans. Furthermore, establish early founder outreach programs to increase access to deal flow.

Conclusion

Small FMCG brands undeniably face structural disadvantages limited capital, slower processes, weaker networks, and compliance complexity when attempting to compete for targets against large corporations in India’s consolidating consumer goods market. However, with strategic precision, creative structuring, financing partnerships, and participation in roll-up models, small players can gain a competitive edge.

By leveraging hybrid consulting insights across legal, finance, tech, and operations and working with experts like LawCrust, even emerging brands can build a compelling, agile M&A strategy. In doing so, they not only survive but thrive as they compete for targets in the evolving FMCG landscape.

About LawCrust

LawCrust Global Consulting Ltd. delivers cutting-edge Hybrid Consulting Solutions in Management, Finance, Technology, and Legal Consulting to ambitious businesses worldwide. Recognised for our cross-functional expertise and hybrid consulting approach, we empower startups, SMEs, and enterprises to scale efficiently, innovate boldly, and navigate complexity with confidence. Our services span key areas such as Investment Banking, Fundraising, Mergers & Acquisitions, Private Placement, and Debt Restructuring & Transformation, positioning us as a strategic partner for growth and resilience. With an integrated consulting model, fixed-cost engagements, and a virtual delivery framework, we make business transformation accessible, agile, and impactful.

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