Mamaearth's growth slows down amid changing consumer trends, new competitors
Honasa Consumer, the parent company of popular skincare brand Mamaearth, is growing slower than expected. The firm's CEO Varun Alagh confirmed this to Moneycontrol, emphasizing that reviving the brand is their top priority. This doesn't come as a surprise considering Mamaearth alone accounts for 65% of Honasa Consumer's total revenue.
Honasa Consumer reports first quarterly loss in 5 quarters
Honasa Consumer has posted its first quarterly loss in five quarters. The company posted a loss of ₹19 crore in the July-September quarter, as opposed to a profit after tax (PAT) of ₹29 crore in the same quarter last year. Its revenue also declined by 7% from ₹496 crore to ₹462 crore on a year-on-year (YoY) basis.
Honasa Consumer's offline business model transition impacts finances
The financial setback was largely attributed to a ₹70 crore hit the company took in the quarter, as it transitioned its offline business model. The firm transitioned from supplying to super stockists to directly dealing with distributors, in a bid to expand its offline presence and streamline retail operations. Alagh said inventory correction and unmet growth expectations for Mamaearth were two main factors that didn't go their way.
Mamaearth faces criticism over inventory management
Mamaearth has also been criticized by the All India Consumer Products Distributors Federation (AICPDF) over its inventory management. The federation accused the company of dispatching excess inventory to the market and delaying replacement of damaged and expired goods, costing distributors between ₹50-100 crore. Alagh acknowledged these challenges and assured that they are working on solutions to restore the brand's growth trajectory in a few quarters.
Changing consumer preferences and increased competition impact Mamaearth
Alagh also said that rapidly changing consumer preferences, fueled by social media trends, have affected Mamaearth. He gave the example of consumers now opting for specific face washes for specific needs instead of generic ones, resulting in brand switching. Additionally, he admitted that the emergence of quick commerce firms such as Blinkit, Swiggy Instamart, Zepto, and BigBasket has increased competition by enabling discovery and launch of new brands.
Honasa Consumer initiates Project Neev to revive growth
To tackle these challenges, Honasa Consumer has launched Project Neev. The company has partnered with consulting firm Bain and will be looking to revamp its distribution and supply chain. Alagh revealed they had been spreading their investments across 10 different categories in Mamaearth, which was too broad. He admitted their main tools and categories were receiving suboptimal investments due to this approach.
