Mamaearth parent Honasa Consumer plans to undertake an inventory pipeline correction in a project titled “Neev” as it looks to ramp up its offline distribution to double down in its house of brands strategy.
This is in line with the company’s plans to shift from a super stockist distribution model to direct distributors for its general trade channel.
“The type of distribution system we have had, we have ended up carrying relatively higher inventory in the system compared to other industries, which does take investment from our distribution system into our inventory rather than in-market and in-market resources,” said Ghazal Alagh, Co-founder of Honasa, during the post-earnings call for Q1 FY25.
The house of brands, which owns and operates beauty and personal care brands including The Derma Co, Aqualogica, Dr Sheth’s, and BBlunt, also witnessed 8.3% EBITDA margin improvement in its April-June quarter on account of improving gross margin and scale efficiency.
“As we scale, we continue to get some procurement efficiencies. Secondly, in terms of brand mix, given our younger brands have a higher gross margin profile—that’s also helping bump up our gross margin profile,” said Ramanpreet Sohi, Honasa CFO, in the earnings call.
Honasa’s new products accounted for around 9% of its operational revenue in the April-June 2024 quarter. The omnichannel BPC retailer continues to expect 70-71% of gross margin for the year.
The company clocked its all-time high net profit of Rs 40.26 crore in the quarter compared with Rs 24.7 crore earned during the comparable period last year. During the same period, it logged a 19% rise in its operating revenue to Rs 554 crore from Rs 464 crore in Q1 FY24.
The company also announced that it has discontinued its Ayurvedic Beauty Products brand Ayuga as it could not find a product-market fit for the vertical. It also launched ‘Skin Renew by Dr. V’—a new premium brand under The Derma Co. as it tries to penetrate the premium skincare segment. This range would be priced at over 2X of the other ranges in The Derma Co.
Honasa Consumer has been banking on its house of brands strategy to attract customers looking for different value propositions within its umbrella of brands.
Shares of the company closed 4.70% lower at Rs 473 on NSE on Friday.
