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Honasa Consumer, the parent company of popular brands like Mamaearth, Aqualogica, and Bblunt, recorded a profit of Rs 30.4 crore in the March-ended quarter, a significant recovery from a loss of nearly Rs 160 crore in the same period last year.
The company's revenue from operations surged 21% to Rs 450.8 crore. For FY24, Honasa reported a profit of Rs 111.7 crore against a previous loss of Rs 142.8 crore, with operating revenue rising 28% to Rs 1,919.9 crore.
The company aims to grow at a compound annual growth rate (CAGR) of over 20% over the next three years.
Changing distribution strategy
Mamearth is also undergoing significant changes in its distribution strategy.
The company has shifted to a direct distribution model in the top 50 cities, phasing out its reliance on super stockists.
This transition, initiated last quarter, is expected to impact short-term revenue but aims to enhance long-term margins and streamline operations.
"While we expect some impact over the next three quarters, it is the right move from a long-term perspective as super stockists add an extra cost in the distribution chain," said CEO Varun Alagh.
The direct distribution model affected Honasa's primary sales by 200 basis points last quarter and is anticipated to further decrease by 50-100 basis points over the next three quarters
Plans for new product lines and market segments
Honasa plans to introduce products under its Mamaearth brand in the Rs 99 category. However, the company will not enter the sachets market to maintain its aspirational brand image.
"We will not enter the sachets category given that we have aspirational brands and we would like to maintain that. But, we want to get into smaller packs," Alagh explained.
The move is expected to boost the company's distribution in general trade. It aims to scale up its product line of shampoo and face washes in the Rs 99 price point this year and potentially look at lower-priced categories next year.
Acquiring Cosmogenesis Laboratories
Honasa announced the acquisition of research and formulation firm Cosmogenesis Laboratories to enhance its R&D capabilities.
Additionally, The company completed its acquisition of Fusion Cosmeceutics Pvt. Ltd., which sells skincare and beauty products under the brand Dr. Sheth's, by acquiring the remaining 34.51% stake for Rs 30 crore.
According to Varun Alagh, the acquisition will help the company to further strengthen its product development expertise and enhance its understanding of crafting products for Indian consumers.
What Is Honasa's Outlook for FY25 and Beyond?
Honasa is optimistic about its future growth and aims to improve margins this year compared to last year by at least 150 basis points in FY25.
Alagh shared that the company is targeting a double-digit growth for Mamaearth in FY25-FY26.
The Derma Co. achieved an annualized revenue rate of Rs 500 crore in Q4 and is projected to reach Rs 1,000 crore in the next three to five years.
Emerging brands like Aqualogica and Dr. Sheth’s are expected to hit Rs 500 crore in the same timeframe.
"Quick commerce is growing very fast for us. In terms of contribution as a sum, it has already entered the top 5 among all channels. It is growing much faster relative to mainstream e-commerce channels and can be more profitable for us," Alagh said.
Skincare segment remains the fastest-growing
Honasa's skincare segment remains the largest and fastest-growing, contributing over 60% of the volume, with significant growth in sunscreen products.
As of March 2024, Mamaearth has a presence across 1,88,377 FMCG retail outlets. The company drives about one-third of its sales via offline distribution and the majority from online, with modern trade and institutional business contributing about 40% and general trade 60%.