Mamaearth’s parent company Honasa is eyeing a revenue of over Rs 4,000 crore towards the end of 2030, executives disclosed during the company’s Q3FY25 earnings call.
Honasa houses personal care brands such as Mamaearth, The Derma Co, BBlunt, Dr Sheth’s, Aqualogica, and Staze 9to9. Moving to its financial performance, the company’s revenue from its various businesses stood at Rs 518 cr in Q3FY25, a 6% year-over-year (YoY) increase from the same quarter the previous year. The company also recorded a profit after tax (PAT) of Rs 26 crore in the quarter.
Over the past few months, Honasa has undertaken several new initiatives and revamped its distribution strategy, launching ‘Project Neev’. These new efforts and the company’s quick commerce ambition were among the key topics discussed during the company’s recent earnings call. Here are some of the interesting points made:
New initiatives for Mamaearth?
Honasa claimed that it was currently executing changes in the primary areas of messaging, media mix, and products for Mamaearth. For instance, the company developed newer differentiated communications to drive messaging and later form the media mix. As these initiatives pan out, Honasa expects to increase its marketing spend “aggressively” in Q3FY25, before advertising and promotion expenses plateau in the later quarters.
How do general trade and modern trade compare?
Executives also offered clarity on the performance of different channels like online, general trade, and modern trade concerning Mamaearth. They explained that the trends remained comparatively similar to the previous quarter, when general trade declined, online was “flattish”, and modern trade surged in optics and share growth. For context, modern trade represents sales through large retail chains or corporations, while general trade comprises the traditional retail sector like small grocery and convenience stores.
Company executives also shed light on the offline vs online sales mix contribution for different brands. Honasa CEO Varun Alagh explained that online channels contribute 90% of sales for younger brands, while offline channels contribute 45% of Mamaearth’s sales. Within offline sales, modern trade accounts for 40%, and general trade accounts for 60%.
How is Project Neev faring?
Launched in March 2024, Project Neev was the company’s attempt at transitioning from dependence on super stockists to a direct distribution model, thereby changing its general trade strategy. Through the project, Honasa aimed to propel the offline distribution of its “house of brands” strategy, CNBC TV18 reported. According to the earnings call, the company has achieved 100% distributor appointment in its top 50 cities, appointing over 150 distributors in the past six months, more than 80% of whom were classified as “new partners”. Further, executives clarified that there was no major attrition of distributors during this effort.
inventory correction woes
Since this new strategy eliminated one layer in retail, there was an excess inventory stock. During this time, the All India Consumer Products Distributors Federation (AICPDF) raised concerns regarding “substantial volumes of unsold inventory” nearing expiry, causing financial burdens for distributors and retailers, a claim later denied by Honasa. Moving forward while undertaking inventory correction activities, the company’s Q2FY25 revenue suffered by Rs 63 crore, significantly higher than the Rs 40 to Rs 50 crore impact estimated by the company during the previous quarter. Alagh explained that the previous estimate only accounted for inventory held by super-stockists (large-scale distributors) and not sub-stockists (smaller regional distributors) who owed them money.
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During the latest earnings call, he claimed that over 85% of the inventory correction had been completed and the company aims to scale up the new distribution system henceforth.
Keeping its eye on quick commerce
According to the press release, Honasa’s quick commerce channels grew 200% YoY in the first nine months of FY25. Executives claimed that sales from this sector grew 7-8% in Q3FY25 and that Honasa aims to increase the market share of quick commerce beyond its e-commerce counterpart. In seeking to ascertain the benefits of the quick commerce sector, the company focuses on fostering relationships with its quick commerce partners and deploying the “right mediums” to position its brands within consumer perceptions. This response was provided to a query about Honasa’s quick commerce strategy, given that its e-commerce strategy was to undertake new product innovation, whereas the former depended on a limited stock-keeping unit (SKU) model and repeat purchases to drive sales.
“Urban-only” business
Responding to a question about the urban-rural sales mix, Alagh stated that Honasa is an “urban-only” business, deriving 80% of its sales from the top 100 to 200 cities.
What of competitive intensity?
Company executives congratulated the rival brand Minimalist’s founders for building a “great brand” and for their subsequent acquisition by the FMCG company Hindustan Unilever Limited (HUL). Moving on to competitive intensity within this industry and the impact of this buy-out on the same, Alagh explained that it always remained high, increasing during cycles of funding and drying out later.
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