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“Most VCs are men; they don’t understand why a consumer might need a lipstick that lasts three hours longer,” Vineeta Singh, Co-founder of SUGAR Cosmetics, told YS Founder and CEO Shradha Sharma, when asked about the many challenges that SUGAR faced while trying to raise funds. 

Co-founders and life partners Vineeta and Kaushik Mukherjee in 2012 started Fab Bag, a monthly makeup and beauty subscription platform for women. In 2015, the duo decided to pivot and focus full time on cosmetics made specifically for the Indian woman.

But the going wasn’t easy.

The Mumbai-based D2C brand did not even have enough money to even import its first batch of lipsticks, which were manufactured in Germany. 

Things have changed five years down the line.

The women-centric D2C brand, with a focus on core business fundamentals and an innate understanding of the customer and her needs, showcased an unrelenting never-give-up spirit to endure one of the longest waits for funding – 58 months from seed to Series A.

But playing the waiting game helped SUGAR score.

In February 2021, the cruelty-free brand raised $21 million in a Series C funding round led by Elevation Capital (formerly SAIF Partners), with existing investors A91 Partners and India Quotient participating, and strategic venture debt from Stride Ventures.

During a recent episode of Money Matters with Shradha Sharma, Vineeta said SUGAR Cosmetics has been profitable since the last quarter. The cosmetics startup, which works on a hybrid model, now has a presence in 10,000-plus retail outlets across 130-plus cities. It has recorded about 6x growth in its revenues in the last two years.

Taking the omnichannel route

SUGAR was built targeting the new-age millennial woman. “They are very different from their mothers — they wear makeup on a regular basis, and not just for special occasions and weddings; they are inspired by other real women and not starstruck by celebrities; and they shop online,” Vineeta explains.

This is why the founders decided to launch SUGAR as a digital-first brand. 

However, 95 percent of the Indian beauty and cosmetics market is offline. While COVID-19 has led to disruptions, Vineeta believes that only 15 percent of the total beauty and cosmetics market will move online in the next five years.

 “To give a good fight to the Unilevers and the L’Oreals, we had to build omnichannel distribution. And thus, we embarked on our retail journey,” she says.

SUGAR focuses on three main factors: creating products that are long-lasting, weather-proof, and suitable for the tropical Indian weather. 

Marrying content and commerce 

A lot of companies end up spending money on acquiring customers, but SUGAR decided to take a different path – balancing brand marketing with content marketing.

“Performance marketing is the easiest way to grow ecommerce companies,” Vineeta explains. Initially, 95 percent of SUGAR’s spending was on performance marketing.

Today, content marketing is extremely critical for SUGAR’s business. Firstly, because makeup, whether sold offline or online, is based on education. The art of how to wear winged eyeliner or contour one’s cheeks is as important as shopping for a particular product. Secondly, 95 percent of the customers were inspired digitally.

SUGAR leveraged Instagram and YouTube for visual storytelling around makeup. “We figured that we had the opportunity to build ourselves as a content-driven company,” Vineeta says.

In the last two years, SUGAR has on-boarded a team of women who are passionate about makeup and create all its content in-house. Besides that, the brand also launched its own app, presently downloaded by more than a million users. Every month, more than 250 million people engage with SUGAR’s in-house content, through the various marketing channels. 

“The one thing that we did well was being obsessed with the idea of using content, digital and social media to reach the consumer, and to do it in a very capital-efficient way, instead of spending on influencers,” Vineeta says. 

“Forget performance marketing; focus on building the brand,” she adds. 

The fund-raising journey

Raising funds has never come easy to SUGAR. After its pivot, the brand manufactured four shades of lipstick in its manufacturing facility in Germany. “We knew they (the lipsticks) were amazing and would do well, but we did not have the funds to import them to India, and eventually sell them…We needed some cash to prove that SUGAR was going to do well,” Vineeta says.

The co-founders approached IndiaQuotient, also angel investors in Fab Bag, at a time when there was no category for D2C brands in a VC’s portfolio. “We just wanted Rs 1 crore to bring the lipsticks to India,” Vineeta reveals.

IndiaQuotient gave them the money, and “they told us that whatever happens, the money shouldn’t go down. They had this crazy faith in us and we made sure that we really make that Rs 1 crore count”, she says.

Five years since its pivot, SUGAR is now backed by A91 Partners and IndiaQuotient. Recently, it raised $2 million in debt funding from Stride Ventures. The cruelty-free brand clocked net revenue worth Rs 105 crore in FY20. 

“There is an inside joke with our first investors, India Quotient. Whenever you check their profile, you will see how ours is the company which took the longest time to move from seed to Series A round,” Vineeta jokes. 

Building for India 

SUGAR manufactures its products in India, Germany, Italy, and Korea, and targets the Indian millennial women. Almost 50 percent of its customers are from metros, but the pandemic was an eye-opener for the cosmetics brand. 

“We realised the large number of aspirational women in Tier II and III cities. They are either beginning to shop online or be inspired by social media,” Vineeta says.

She believes that there is a big opportunity for SUGAR to expand from the 10,000-plus stores that it is available in at present to 40,000-50,000 stores across more than 300 cities, and have much deeper distribution in Tier III and IV towns and cities.

“We have the potential to be one of the top three brands in India,” Vineeta says. 

SUGAR already distributes in the US and has plans for expansion in the Middle-East markets as well, but it ultimately wants to keep building for Indian consumers. “International markets will contribute to five to 10 percent of the revenue. Our focus will continue to be India,” Vineeta says. 

Speaking about what keeps her anchored on her worst days, Vineeta says, “When you are running a company, the only thing guaranteed is that whenever you have a high, there will be a low.” She refers to how after crossing Rs 100 crore (in revenue), SUGAR gained immense momentum only to plummet to zero revenue when the pandemic hit. 

But Vineeta, a marathon runner, is a strong believer in the power of compounding, and the importance of being patient and consistent.

The only thing that drives her are the colleagues and investors who have supported SUGAR through thick and thin. “I do not want to let them down. I am not waiting for the IPO but living the dream every day,” Vineeta says.