Understanding Why Hul Bought Minimalist, And What’s Next

Almost exactly a year before it bought 90.5% in Direct to Consumer (D2C) brand Minimalist, Hindustan Unilever Limited (HUL), India’s largest FMCG company, talked about the status of its own digital-first brands. 

“What has been the progress in terms of brand sizes over [the] last four years now that we’ve been at it for that much time?” an investor asked the management.

“Two (out of five D2C brands) of them have started showing extremely encouraging signs”, its CFO Ritesh Tiwari said, referring to Simple and Love Beauty & Planet . “Today, if I add [our] premium beauty business unit, which is why we launched brands, … our momentum is more than Rs. 100 crores ARR (Annual Run Rate),” for both brands put together.

If you’re wondering about the build-vs-buy conundrum for traditional businesses looking to build digital brands, sample this: Minimalist, by Mohit Yadav and Rahul Yadav (not that Rahul Yadav), has been profitable since inception, has an annual run-rate of over Rs. 500 crores, probably more than all of HUL’s five home-grown brands put together, and it was also started four years ago. 

This also puts into perspective what Tiwari said then:

“When you launch four or five brands, some of them will pick up early and some of them will pick up as time progresses and some of them might not end up having that amount of success.”

None of HUL’s homegrown brands have matched Minimalist’s success.

Doing the math reveals that this acquisition will inject new energy into a D2C space crowded with attempts to build on Instagram, though few have successfully scaled. HUL reported a net profit of Rs. 3,001 crore this quarter, which is slightly lower than the Rs. 2,995 crores pre-money enterprise value (a sales multiple of 5.9 times) agreed upon for the deal. Its profit before exceptional items has been flat year-on-year at Rs. 2,540 crores.

Around two years ago, HUL had also acquired 51% in D2C based plant nutrition brand Oziva (with an option to pick up the remainder at the end of 2025), and picked up 19.8% in Wellness Nutrition, which makes nutraceuticals. “Good news is, both the businesses are doing good,” HUL said last quarter.

How Minimalist ticked all the right boxes for HUL

Minimalist, the company says, “plays in fast growing affluent beauty market”, has “complementarity in portfolio”, “efficacious products with a distinct and sharp positioning” and “strengthens our eCommerce & masstige presence”. Masstige refers to the approach of selling inexpensive products as luxurious.

Minimalist fits neatly into three of the four strategic focus areas for HUL: to lead in “Channels of the future”, which includes Modern Trade (hypermarkets, supermarkets), e-commerce (including quick commerce), the premiumisation of its portfolio, and to reshape its portfolio in high growth spaces, and fits one of HUL’s “six big bets” for the the Beauty and Well Being portfolio, which are digital-first and premium segments, and include Face Cleaning, Light Moisturiser, Serums and Treatments, Sun Care, Deseasonalise, Body and Masstige. 

Premiumisation of HUL’s portfolio

“Minimalist plays a key role in achieving our goal of a 900 BPS portfolio shift toward premium beauty over the next few years. This aligns with our broader premiumisation strategy in beauty and wellbeing.”

HUL strongly believes that India is “Under-indexed on per-capita beauty spends”, and that is changing. Adoption, according to the company, is already on the rise, with Indian consumers on an average using 5.1 face care products, as compared with 7.3 in affluent countries. 

“The India beauty market offers significant headroom to grow. The overall FMCG market is about ₹170,000 crore, and of this, beauty contributes approximately ₹68,000 crore,” and  “India’s per capita expenditure on beauty is significantly lower compared to other countries, providing immense potential for premiumisation.”

HUL said that its skin-care vertical was over-indexed to rural suggesting that a focus on premium, urban-focused solutions was required. While its mass skin care portfolio had declined, it said in July, the “premium skin continued its growth momentum”. Overall, across brands, HUL’s premium portfolio was growing at 2.5 times the mass portfolio. Thus, the key priority, it said “is to transform the portfolio into high-growth spaces”, even though the competition in Beauty is “intense”, given that, like Foods, it “attracts competition across all price points.” Minimalist, it said post the announcement, “operates in the affluent beauty market,” which it previously said contributes 50% of the beauty market, and “is growing at twice the pace of the rest of the beauty market. This growth aligns with our strategy to focus on high-growth demand spaces.”

Currently, the Beauty and Well-Being segment, which includes Hair Care, Skin Care, and Colour Cosmetics—into which Minimalist fits—has Rs 3,438 crores in revenue with margins of 34%. It is the largest segment for HUL in terms of margins and the third highest (out of four) in terms of revenue.

If you do the math, it’s probably very close to being the largest segment in terms of gross profit in absolute terms. With the Minimalist acquisition, it will probably become HUL’s largest segment in terms of gross profit, ahead of Home Care (currently the largest), Foods, and lastly Personal Care. The six big bets, into which Minimalist will fit, were already at around “almost Rs 2,000 crores” last quarter. 

“Minimalist’s focus”, the company said, “on providing efficacious products for skin and hair care has carved a niche for itself. It enjoys high brand loyalty and advocacy, which makes it a valuable addition to our portfolio.” “Minimalist addresses critical gaps in our pricing architecture and product portfolio. It operates in the active/derma-led segment, which comprises two-thirds of the masstige market.”

It’s worth noting that the Skin Care and Colour Cosmetics part of Beauty and Well Being had a muted performance for much of the last year according to the company, but last quarter, it reported “Mid-single digit growth fueled by strong performance in Premium skin care” (which has reported consistent double digit growth), and in “channels of the future,” which includes e-commerce and quick commerce.

Minimalist allows HUL to compete in the premium beauty space without the baggage of legacy brand associations. HUL also effectively eliminates a rising competitor and raises the barrier to entry in the premium, D2C beauty space, and enhances its presence in a fast growing segment: e-commerce.

Channels of the Future: the growth of e-commerce for HUL

E-commerce is about 6-7% of HUL’s overall business, it said in September, and there’s a “secular trend of moving more towards organized trade”.

In July last year, HUL said that e-commerce is growing at three times the pace of modern retail. Of the 20 odd percentage growth of its Beauty and Well being segment, the e-commerce growth of the portfolio was “near about 50 percentage”. Last quarter, it said that “the growth is in multiples of high — very, very high double digits”, and the “six big bets” had “a very high e-commerce and modern trade contribution (of) almost 60-odd percent”, growing 30% across modern retail and e-commerce.

Consumers might be shifting to e-commerce as well. In response to a question in January 2025, it said: 

“…whenever we grow in a channel double digit, especially modern trade, e-commerce, as our next trade, there’s always a growth of the geography, but equally important is the channel shift, where consumers would have moved from other channels and to buy into modern trade and e-commerce.”

It explained, in September, that “we have to go where the growth is and consistently invest behind the longer term, both brands and market development efforts and focus on improving our competitive strength so that we gain share in all market conditions.”

However, HUL recognises that around 2/3rd of its business is still with traditional retail (General Trade), and “kirana merchants, distributor inclusive is our priority number one.” But e-commerce and modern trade are still its top priority.  Following the announcement, the company highlighted that:

“Minimalist is a digital-first brand, with a significant portion of its revenue coming from e-commerce. This complements HUL’s strategic push toward building a stronger online presence. …. Minimalist is a good strategic fit for HUL given the equity the brand brings. We are confident in our ability to scale this brand to greater heights by leveraging our complementary capabilities.” 

What HUL plans to do with Minimalist

HUL expects to close the acquisition of a 90.5% stake in Minimalist by the quarter ending June 2025, and it will buy the remaining 9.5% from the founders within two years.

Here’s what HUL plans to do / will possibly do, with Minimalist:

1. Scale Minimalist to over Rs. 1,000 crores: HUL has 19 brands worth over Rs. 1000 crore in revenue, and three moving in that direction. Its attempt will be to get the Rs. 500 crore Minimalist beyond this mark, since none of its homegrown digital-first brands look like they’ll get there anytime soon. “The masstige segment, where Minimalist operates, grows at twice the pace of the overall beauty market, ensuring continued growth potential.”
2. Expand Minimalist’s portfolio: “We will leverage HUL’s global R&D capabilities and product technologies to bolster Minimalist’s portfolio, ensuring continued innovation and product efficacy.”
3. Expand Distribution to offline and in e-commerce: HUL can help expand Minimalist’s reach in ecommerce and offline, bringing its own network (effects?) into play: “With our wide distribution reach, we are well-placed to scale the brand offline. HUL’s curated route-to-market strategy for premium beauty products will ensure Minimalist reaches affluent-plus consumers through premium outlets.” 
4. Leverage HUL’s supply chain for Minimalist: “HUL’s robust supply chain network will unlock capacity, improve efficiency, and generate margin synergies. Our expertise in supply chain management will strengthen Minimalist’s operational capabilities.” It will also help reduce Minimalist’s dependency on suppliers, and enable/ensure greater cost efficiency by leveraging HUL’s economies of scale.
5. Expand Minimalist’s distribution internationally: “Minimalist has seeded business in a few international markets. Leveraging Unilever’s global presence, we will expand the brand to target consumers and markets globally.”
6. Give it leverage in e-commerce relationships: There are always supplier/distributor and marketplace power struggles over discovery, product placement, and pricing. It hasn’t affirmed this plan, but when it comes to e-commerce and quick-commerce, HUL is a dominant supplier, and will clearly give Minimalist more leverage in these relationships, and possibly be in a position to extract higher margins.
7. Learn from Minimalist on how to build and scale new brands: “Minimalist’s acquisition provides opportunities for cross-learning with our other digital-first brands like Love Beauty & Planet, Simple, and Oziva.” “Although cross-learning synergies are not monetized in our business case, they will enhance HUL’s broader portfolio and capabilities.” To put this into context, HUL CEO and MD Rohit Jawa has said in the past, even about HUL’s own digital-first brands, that “a bigger benefit from this way of working is really how company of our scale is learning how to build digital-first, social-first brands,” and how you scale them. HUL wants to learn from Minimalist, how to find product market fit for new brands, and how to scale them.

HUL is aware of the Post Acquisition Risk

Unilever, HUL’s parent company, has struggled in the past to integrate its famous $1 billion acquisition of the D2C business Dollar Shaving Club, and HUL will aim to ensure Minimalist does not mirror that experience.

An investor on HUL’s earnings call asked the critical post-acquisition question:

“The concern is that sometimes when these very fast growing small companies are acquired by really large companies like HUL. It could lead to a little bit of loss of direction. The founder would probably leave after some time. There are more systems and processes to follow, decision making and slow down. How do you guard against all of this, especially because this is a very dynamic, fast growing business. And how do you think of the integration between HUL and Minimalist in this context?”

“You’re absolutely right”, came the response. “Integration and operational model framework are extremely critical to get it right, as part of any acquisition and equally applicable in case of Minimalist as well. We have put a lot of thinking behind it and we’ve had a good amount of conversation with the founders and we have a very clear playbook on how we’re going to operate the business. But we don’t want to lose the agility of the business, we don’t want to lose the speed of the business, but equally we want to bring all leverage of the scale of technology to the business so that we get the best of both worlds.”

For the initial two years, Minimalist will function independently while utilizing HUL’s scale, technology, and global reach, the management said during the earnings call. They said it will maintain its agile, startup-like approach, acting as a “speedboat” within HUL’s larger framework. The goal is to retain the unique appeal and strong consumer connection established by the founders while fostering the brand’s growth within HUL’s ecosystem.

“This is why team Minimalist and team Hindustan Unilever will come together to ensure that we do best for the brand. Synergies of offline distribution, synergies of international expansion, synergies of supply chain, cost, procurement, capacity, all that once we add, with a very tightly written integration and operating model framework, this should be a success going forward. So we are very confident that we have put a lot of thinking behind this element as well, apart from all commercial elements of the deal as part of the conversation. So we believe that we have the right model to go forward.”

Will HUL buy more D2C Brands? 

As I’ve explained earlier, HUL has the financial muscle, the need (premiumisation, expanding e-commerce) and the pull, for any D2C brand. It’s going about building its portfolio in Beauty and Well Being via four routes: firstly, expanding its current brands (like Ponds and Lakme) and expanding them into other spaces like face-cleaning and suncare; bring Unilever’s global brands to India; Third is launching its own brands like Novology, and the last is doing acquisitions like Minimalist. 

“When we come across a business which we believe is a fabulous fit, and we can add value and we can create more synergies, we will go ahead with it. We are very selective about it.”

I wouldn’t expect HUL to go on a D2C buying spree – it’s just not that kind of company. However, what we will see is that this acquisition by this company will put pressure on HUL’s competitors, including P&G, ITC, and Emami: their investors will ask them about HUL’s acquisition of Minimalist, and want to know if they’re looking at buying anything. They’ll be asked about HUL’s focus on premiumisation, and growth in e-commerce, as well as building a D2C portfolio. There will be pressure on them to do something.

Therein lies the exit for other D2C founders and investors. 

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