Honasa Consumer, the parent entity that owns beauty and personal care brand Mamaearth, posted a surprise loss of Rs 19 crore in Q2 against the Street estimates of a profit of Rs 6 crore, largely due to a slowdown from changes in its distribution model. Revenue from operations, too, fell 7% year-on-year to Rs 462 crore, lower than Bloomberg estimates of Rs 510 crore.
“Over the past few months, we’ve been implementing Project Neev to optimise our distribution model. In this quarter, we have taken strategic steps towards transitioning from super-stockists to direct distributors in top 50 cities. This transition has hit our revenue and profits, leading to a slowdown for Mamaearth,” Varun Alagh, chairman and CEO, said.
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Consequently, Ebitda was also a negative Rs 31 crore, translating to an Ebitda margin of negative 6.6%. If adjusted for one-time inventory correction, the company said Q2 revenue would have grown 5.7% to Rs 525 crore, while the Ebitda margin would have been 4.1%. The company’s expenses also rose 9% y-o-y to Rs 506 crore, due to a broad-based increase across its expense areas.
The company also houses beauty brands such as The Derma Co, Aqualogica, BBlunt and Dr Sheth’s, which recorded more than 30% growth so far this year. However, the bulk of its sales still come from its flagship brand Mamaearth. The company was started seven years ago as a toxin-free baby product brand and eventually launched skin, hair and body care products.
Like most other new-age consumer brands, Honasa has been focusing on strengthening its offline presence and expects to see a higher share of sales of its flagship Mamearth brand from its offline distribution channels, while the younger brands will continue to see higher online sales.
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Honasa noted in its investor presentation that Indian consumers are shifting from family-oriented to individual-centric consumption behavior, while the rise of quick commerce is not only changing distribution but also potentially impacting buyer behavior of pantry and shopping.
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