Several direct-to-consumer (D2C) brands in food and beverages sector are drawing significant amounts of venture funding.

The influx of new start-ups with innovative product ranges has revitalised the sector. Several F&B start-ups including Boba Bhai, Blue Tokai Coffee Roasters, Plix, Pluckk and others have been making waves in the industry, backed by investors’ trust.

The direct-to-consumer (D2C) start-ups raised $635.5 million in 2023 across 174 rounds. In the first five months of this year, the D2C brands have raised $278.1 million, according to data from intelligence platform Tracxn.

When economies grow, consumer spending naturally shifts towards enriching experiences in areas like travel, fashion, lifestyle, and notably, food. This has led to a surge in demand for unique and premium food products, noted industry executives. The Direct-to-Consumer (D2C) model is thriving because it meets these evolving consumer needs by offering personalised, high-quality food experiences, they added.

Omni-channel presence

“Venture capitalists are particularly interested in this space due to its potential for high returns and the opportunity to diversify their portfolios. At Fireside Ventures, we have invested in a few new-age promising F&B brands, such as Frubon, Sweet Karam Coffee, The Baker’s Dozen, Slay Coffee, Yoga Bar, and Samosa Singh. We’re also particularly interested in the emergence of strong regional opportunities such as Frubon and Sweet Karam Coffee. These investments reflect our belief in the sector’s potential and the innovative products these companies offer,” said VS Kannan Sitaram, Co-founder & Partner, Fireside Ventures.

Recently, Bengaluru-based restaurant chain Boba Bhai has raised ₹12.5-crore in seed funding from investors led by Snapdeal founders’ venture fund, Titan Capital, and Global Growth Capital UK. The company is in the process of raising more funds in order to deepen its onmi-channel presence.

The company currently operates 25 outlets across cities, including Delhi, Gurugram, Udaipur, Bengaluru, Mumbai, Hyderabad and Chennai. It plans to have 100 outlets within the next 12 months, said Dhruv Kohli, Founder, Boba Bhai, told businessline earlier. All the outlets are company owned.

“Platforms like Swiggy and Zomato have revolutionized food access, making it incredibly convenient for people to order and enjoy diverse cuisines from the comfort of their homes. Investors are increasingly interested in the F&B sector because it promises scalable growth and high returns. Brands that can leverage modern infrastructure, digital platforms, and consumer trends are particularly appealing, as they are well-positioned to capitalise on the growing market demand,” said Kohli.

Ahmedabad-based Hocco Ice Cream, launched last year, has concluded a ₹100 crore ($12 million) fundraise led by its promoter group Chona family and existing investor Sauce VC. The primary capital infusion, at a valuation of ₹600 crore after the investment, also saw participation from angel investors, including film producers Ritesh Sidhwani and Farhan Akhtar.

Another customised bakery start-up Crème Castle has also raised funds according to sources.

“With the advent of social media, the young demographics in our country are increasingly aware of global food trends and aspire to experience them. The first-mover advantage will play a crucial role in building brands beyond metro cities, specifically in tier-2 and Tier 3 cities. The key to succeeding in these markets lies in accessibility and affordability. Brands that can offer high-quality food products at pocket-friendly prices are poised to be winners,” said Pranjay Mittal, CEO, Creme Castle.