Honasa to implement structural changes for Mamaearth following weak Q2 results | Company Business News

Honasa Consumer Ltd, the listed beauty and personal care firm behind Mamaearth, plans to make significant adjustments to its product lineup, marketing approach, and investment allocation across categories to revive growth for its flagship brand, which underperformed in the September quarter. Co-founder and chief executive Varun Alagh said on Thursday that the brand’s slower-than-anticipated growth has prompted a rethink.

“The model we were trying to execute was similar to what has worked in the past. We have realized that we need to make strong tweaks in the product mix and be sharper on investment allocation where we think we have gone too wide. We need to narrow our focus to a few categories and go deep within the hero SKUs,” Alagh said during a post-earnings call with analysts.

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Gurugram-based Honasa reported disappointing results in the September quarter, with a net loss of ₹18.5 crore, a steep fall from the ₹29.4 crore profit posted in the same period last year. Revenue from operations dropped to ₹461 crore from ₹496 crore a year earlier, impacted by a one-time inventory correction.

Alagh emphasized the company’s commitment to course-correcting, with a focus on piloting regional and category-specific strategies to “bring Mamaearth back to a strong growth path.”

Beyond product adjustments, Honasa is set to bolster its R&D capabilities and offline sales to strengthen the brand. Alagh remains optimistic about Mamaearth’s potential, despite recent setbacks, underscoring the brand’s long runway for scale.

The slowdown in urban consumption has impacted numerous consumer brands, including sector giants like Hindustan Unilever Ltd and Nestlé India Ltd, both of which saw their Q2 revenue growth stagnate and profits dip. 

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The finance ministry’s Monthly Economic Report highlighted this trend, noting a stark decline in FMCG (fast moving consumer goods) volume growth from 10.1% in Q1 to 2.8% in Q2. In a related trend, Maruti Suzuki, India’s largest car manufacturer, reported a 4% drop in domestic volumes and a 17% decline in profits, citing tepid urban demand.

Distribution strategy changes

Honasa had introduced a revamped distribution approach, dubbed Project Neev, in the March quarter of FY24, transitioning to a direct distribution model in the top 50 cities and reducing its dependency on super stockists. While the company anticipated some disruption, the September quarter proved more challenging than expected.

“The impact of sales return and inventory collection is higher than we had imagined. As we went into executing that, there were a pocket of sub-distributors we had not taken into account,” Alagh said.

With much of the transition completed, Honasa expects momentum to gradually recover over the coming quarters. 

In August, Mint reported that Honasa aims to lower distributor inventory holding from 90 to 40 days, easing stock burdens. The company also partnered with logistics firm Delhivery, leveraging its mother warehouse for streamlined distribution.