India's consumer deal machine is buying customers, not code

2026-07-20 — customer acquisition strategy India

I was looking at Q2 2026 consumer M&A numbers the other day. 97 deals, $981 million. Not bad on the surface.

But here's what actually matters: nobody's buying the app anymore.

Strip out the IPOs and a few other noise, and you're sitting with 95 actual M&A and PE/VC deals worth around $918 million. The volumes are up year-on-year, which by itself is interesting given that unit economics in D2C have basically forced investors to stop throwing money at anything with a growth chart. But the real shift isn't in the volume. It's in what buyers are actually looking for when they show up to the table.

Three or four years ago, every strategic buyer in consumer was chasing the same thing: the technology. The algorithm. The proprietary whatever. The assumption was that code scaled faster than distribution, so if you got the software right, everything else followed.

That story is done.

What's getting bought now is simpler and messier. A real customer base. A distribution network that exists in the real world, not in a slide deck. According to the data floating around, strategic acquisitions this quarter were explicitly focused on market presence, product portfolios, and distribution reach. That's almost a different language than what deal announcements looked like in 2021. And most consultants—including us, to be honest—missed this transition entirely when it was happening.

The legacy FMCG houses figured it out first

Hindustan Unilever, Marico, ITC, Emami, Reliance, Tata Consumer—these companies have quietly absorbed more than 40 D2C brands in the last three years. They're not flashy about it. They're just systematic. ITC's acquisition of Yoga Bar is probably the clearest case study. Yoga Bar had real customer loyalty. It was pulling traffic across channels. ITC had shelf space in every major retail outlet already negotiated. So they married those two things. The brand brought the customer relationship. The acquirer brought the distribution infrastructure.

You can't build that organically, which is why the deal logic holds even as the pace has slowed.

M&A activity dropped to 20 deals worth $184 million this quarter. That's roughly half what we saw before. PE/VC carried the load with 75 deals worth $734 million, or more or less 80 percent of total activity. The drop in M&A volume looks like weakness if you're not paying attention. But it's not. It's buyers getting picky. They know exactly what they're hunting for, and they're not moving until the price makes sense for what the asset actually is, not what it might be someday.

Actually, that's not quite right. It's also that strategic buyers have finite capital and limited patience. They're not running PE funds. They're running FMCG companies. They can't afford to buy optionality the way a VC can.

The D2C side feels a different kind of pressure.

Brands that scaled fast on digital-only models are now looking at customer acquisition costs that make pure online economics difficult to defend. The math got harder. So what's the response? Physical retail. D2C brands leased roughly 595,000 square feet of retail space in the first half of 2026 alone. That's a real operational bet. It's also why so many founders are open to being acquired by strategic players who can absorb that distribution complexity without breaking a sweat.

The D2C e-commerce market is sitting at $108.76 billion in 2026. The brands actually gaining ground aren't running one channel. They're managing five simultaneously: their own website for margin, marketplaces for volume, quick commerce for impulse, social commerce for community, and offline for credibility. Maintaining that across a bootstrapped operation is genuinely difficult. An acquirer with established retail relationships and logistics scale can execute it at a fraction of the cost.

PE and VC money is concentrating in wellness, premium personal care, nutrition, and digital-first consumer brands. These are the categories where the spending signal from India's growing middle class is still firing, even though broader consumer sentiment is mixed. Deal-makers aren't betting against Indian consumption. They're just being more careful about which asset has the customer relationship already built in, rather than one that's still projecting.

Healthier market, frankly.

The 97 deals logged in Q2 represent actual conviction. Real businesses. Real distribution. The real question is whether the acquirers can hold onto the customer loyalty that made these brands worth buying in the first place when they start integrating them into their own systems.