Honasa Consumer, the parent entity which owns beauty and personal care brand Mamaearth, on Wednesday said it will be cautious on increasing prices of its products and continue to drive growth through volume. The company, which started as a digital-first brand, is among the first D2C brands to enter bourses.
“We took about a 1.5% price increase last year. We will again be very selective in terms of price-led growth, so a large part of it will continue to be volume-led,” Varun Alagh, co-founder and CEO, told Fe in an interaction.
To drive sales, the company is doubling down on its offline presence and expects to see a higher share of offline sales for its Mamaearth branded products going ahead. “For a brand like Mamaearth, I think the (revenue) contribution will keep getting skewed towards offline. For the rest of the younger brands that have more than 90% of their sales from online, their offline contribution will build up over time,” Alagh said.
The company retails its Mamaearth branded products through 85 company owned-and-operated stores and over 150,000 distribution channels in the offline category. At present, nearly 33% of its annual sales come from these channels.
Mamaearth was started seven years ago as a toxin-free baby product brand, and eventually launched skin, hair and body care products. It currently houses six brands under its portfolio including Mamaearth, The Derma Co, Aqualogica, Dr Sheth’s and BBlunt. About 80% of its revenue is generated by Mamaearth, its flagship brand.
Among its other brands, Derma Co is at an annual run rate of Rs 300 crore, while Aqualogica is at a Rs 150 crore ARR, Alagh said. Dr Sheth’s, which the company acquired last year, has grown 20x since the deal, he added. The company plans to bring these brands to offline channels soon.
The company currently generates 45% of its revenue from tier 2 cities and beyond and holds a 1.5% market share in the overall BPC (beauty and personal care) category in India. To increase visibility of its products, the company has been spending heavily on advertising and marketing campaigns.
In FY23, the company spent over Rs 500 crore in advertising, marking a jumping of about 30% over the preceding year. When asked about the company spending about 35-40% of its sales on increasing visibility, Alagh said he plans to continue with the advertisement spend to acquire new customers.
Honasa’s products compete with giants such as Hindustan Lever, Godrej Consumer Products, L’Oreal India besides other D2C brands like Minimalist and Plum Goodness, among others. The Indian BPC market is estimated to touch $30 billion by 2027, according to a report by Redseer.
In the last financial year, Honasa saw strong top line growth of nearly 60% to Rs 1,500 crore. With the IPO, Honasa is looking to raise Rs 1,701 crore from the capital markets. Ahead of the launch, the company raised Rs 765 crore from anchor investors. The Gurugram-based company allocated 23.6 million shares to 49 anchor investors to raise the amount.
On the second day of its public issue, Honasa’s IPO was subscribed 70%, with the retail investors’ portion subscribed 61%, compared to the 13% on day one. “Third day of subscriptions is the most critical day, so I think on Thursday one should see a significantly better picture,” Alagh said.
The company posted a net loss of Rs 151 crore in FY23 compared to a net profit of Rs 14.44 crore in FY22. In the latest available financials, for the three months ending June, it reported a net profit of Rs 25 crore. Its revenue has grown at a CAGR of 80% over FY21-23, with a volume growth of 102.28%.
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