A growing number of direct-to-customer startups are focusing on setting up their own manufacturing facilities instead of relying on third parties to gain greater control over product quality, inventory levels and sales.
Startups following this approach include snacking brand Eat Better Co, fashion and footwear company LittleBox India, travel gear seller Assembly Luggage and skincare startup Minimalist.
Launching a D2C brand has become significantly easier today, thanks to marketing channels, online marketplaces and quick commerce platforms, investors said. The real differentiator, though, is no longer launching a brand but building capabilities that are difficult to replicate.
“Owning manufacturing gives you some sort of proprietariness. You can also iterate much faster on products and R&D if you own a manufacturing facility,” said Harmanpreet Singh, founder and managing partner at Prath Ventures, a venture capital firm. “There is also less fear that the product will get copied easily.”
Further, experts said the old D2C playbook is changing because artificial intelligence has flattened aspects such as brand, design, ads and storefronts. What still holds up in India is depth in the messy, physical, regulated stuff, experts said.
“Manufacturing is one version of that. Owning a diagnostic lab network is another,” said Arjun Malhotra, general partner at Good Capital. “The common thread is absorbing India’s operational complexity instead of routing around it, and that’s what becomes hard to copy.”
Eat Better Co started with a home kitchen in 2020 and invested about ₹10 crore this year to set up a 50,000 sq ft manufacturing facility in Jaipur, giving it a lead time of 2-3 days compared with 30-45 days with third-party manufacturers. Lead times refer to the gap between placing an order and having products ready for sale.
Centre of manufacturing
“When we saw how food was being made in large factories, it was highly industrial, relying on preservatives and chemicals,” said Shaurya Kanoria, founder of Eat Better Co. “The only way to ensure quality throughout the process was by owning the entire manufacturing. If we wanted to innovate on recipes, control quality and maintain consistency while scaling, we had to be at the centre of manufacturing.”
Third-party manufacturers work with multiple clients and divide production capacity, schedules and priorities. They cannot consistently prioritize a single company, founders argue. Owning manufacturing, on the other hand, allows startups to produce smaller batches, restock faster and avoid excess inventory.
“With a third-party manufacturer, the average lead time is 60-75 days. In our case, it is just 14 days. That allows us to carry only about two weeks’ worth of inventory and replenish stock quickly,” said Partha Kakati, founder of LittleBox. The company invested about ₹7 crore over the past four years to set up its manufacturing facility in Noida.
Experts said owning manufacturing can also improve profitability. Startups retain the margin that would have gone to third parties while gaining greater control over production and quality. Manufacturing ownership has increasingly become a key concern for investors.
“Today, one of the questions investors ask is whether a brand can eventually own manufacturing,” said Keshav Agarwal, founder of financial advisory firm Daylight Capital. About 80-90% of D2C brands still depend on China or third-party manufacturers, and investors increasingly see reducing that dependence on third parties as a competitive advantage, he added.
Quick commerce factor
However, owning manufacturing is not a universal moat or a blanket differentiator across consumer brands.
“For a large share of consumer brands, especially in categories like beauty, F&B or apparel, where the differentiation is in brand-building, distribution and go-to-market speed rather than the underlying product science, owning a factory can actually be a liability at the seed-to-Series A or even Series B stage,” said Adarsh Menon, a partner at early-stage venture capital firm Fireside Ventures. “It can lock up capital and reduce flexibility without adding commensurate strategic value.”
However, Menon argues that what is shifting the calculus is quick commerce.
“As more of category sales move to 10–30-minute delivery, the brands that win are the ones who operate with agility, can replenish fast and protect margins against rising platform commissions, and that’s pushing more founders toward owning at least part of their supply chain, even in categories that didn’t traditionally need it,” he added.
Mint reported earlier how product discovery on quick commerce platforms is helping India’s consumer brands to cross the ₹100 crore revenue milestone earlier.