Honasa to implement structural changes at Mamaearth following weak second quarter results

Honasa Consumer Ltd, the listed beauty and personal care company behind Mamaearth, plans to make major changes to its product lineup, marketing approach and investment allocation across categories to revive growth of its flagship brand, which underperformed in the September quarter. Co-founder and CEO Varun Alagh said Thursday that the brand’s slower-than-expected growth prompted a rethink.

“The model we are trying to execute is similar to past models. We have recognized that we need to make strong adjustments to the product portfolio and be more sharp in investment allocations that we believe are too broad. We need to focus on a few categories and drill down into major SKUs,” Ara said on a post-earnings conference call with analysts.

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Gurgaon-based Honasa reports disappointing second-quarter results with net loss of $185 million, a significant drop from Rs. $The profit in the same period last year was Rs 294 million. Operating income fell to $461 Crores Rs. $496 crore in the same period last year, affected by one-time inventory adjustment.

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

In addition to product adjustments, Honasa will also strengthen its R&D capabilities and offline sales to strengthen its brand. Despite recent setbacks, Alagh remains optimistic about Mamaearth’s potential, underscoring how far the brand still has to go in terms of scale.

The slowdown in urban consumption has affected numerous consumer brands, including industry giants such as Hindustan Unilever Ltd and Nestlé India Ltd, which saw revenue growth stall and profits fall in the second quarter.

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The Treasury’s monthly economic report highlighted the trend, noting that fast-moving consumer goods (FMCG) sales growth fell sharply from 10.1% in the first quarter to 2.8% in the second quarter. In a related trend, India’s largest automaker Maruti Suzuki reported a 4% drop in domestic sales and a 17% drop in profits amid tepid urban demand.

Distribution strategy changes

Honasa launched an improved distribution approach called Project Neev in the third quarter of fiscal 2024, transitioning to a direct distribution model in the top 50 cities and reducing reliance on super stockists. While the company expected some disruption, the September quarter proved more challenging than expected.

“Sales returns and inventory recycling have had a bigger impact than we thought. When we started executing on the program, there were some sub-dealers that we didn’t take into account,” Alagh said.

With most of the transition complete, Honassa expects momentum to gradually return in the coming quarters.

August, Mint According to reports, Honasa aims to reduce dealer inventory holding time from 90 days to 40 days, thereby reducing the inventory burden. The company has also partnered with logistics company Delhivery to streamline distribution using its parent warehouse.