Interview: Varun Alagh, co-founder and CEO, Honasa Consumer

Honasa Consumer, the company that owns internet-first personal care brand Mamaearth, has set its sights on the offline channel to scale up. The company plans to add over 30,000 retail touchpoints over the next one year. Varun Alagh talks to Devika Singh about creating visibility and demand for Mamaearth in stores, its new brand The Derma Co., and the market for niche personal care products in India.

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As you build your offline presence this year, will the focus be on general trade stores?

We will be focussing on shopper footprint rather than general trade (GT) or modern trade (MT). Now that Mamaearth has reached a certain scale online, we believe there is a large opportunity in the offline segment. There are consumers who shop in the category but don’t purchase from us because we have a limited presence in physical stores.

For the past one and a half years, we have been trying to understand the formats and stores that work for us; we will be scaling up our presence now. For example, stores like Health & Glow and Wellness Forever will be relevant for us. Similarly, self-service GT stores and premium chemist shops will also be critical. We also plan to pilot some exclusive brand outlets in Delhi-NCR this year; and after evaluating their performance, we might launch more next year. Our offline expansion is going to be a strong lever of growth for the next year.

Despite being present in over 10,000 retail points, offline contributes only 20% to your revenue…

The first challenge is to convince the store owner to stock our products. It is fairly easy for large companies like HUL and P&G to get their new products stocked in these stores as they have been working with them for years. We are creating mass awareness through television campaigns, so that consumers seek our products, and store owners entertain our calls. The second challenge is to ensure that our products sell out from stores. For this, we are trying to increase visibility in stores, offering assisted selling and good trade incentive to store owners.

How big is the market, especially offline, for niche products like face masks and hand creams in India?

We are very clear that while we can service the long tail in the online channel, certain products and categories are far more relevant for the offline channel, such as face washes, shampoos, oils and baby care. We also strongly believe that some of the categories that are small today will become large in the future, and companies that have a strong play in those today will build strong businesses over time. For instance, in India, face masks are just 0.5% of the overall personal care category; whereas in China, they command an 8% share.

What is your go-to-market strategy for the recently launched The Derma Co.?

For any new brand, our strategy will always be digital-first. We would like to initially tap D2C and then launch these products on marketplaces such as Nykaa and Amazon. Once the brand matures, we will take it to the offline channel. We are already seeing a good response for The Derma Co. and are quite confident that, by next year, it will cross Rs 100 crore in sales.

Several new-age brands offering ‘organic’, ‘cruelty-free’ products have sprung up in the market. Is this segment headed for consolidation?

In the next 18-24 months, a lot of acquisitions will happen in this space, and larger companies will take over some of the smaller brands. We are also open to acquiring companies in the beauty and health category, and are evaluating some offers.

Though your revenue for FY20 grew to Rs 112 crore, losses, too, increased to Rs 5.9 crore. What’s your FY21 projection?

We are projecting a revenue of Rs 500 crore for FY21. If you look at it year-on-year, in terms of percentage, while the business grew 600% in FY20, the loss has grown only 60-70%. Our business has strong unit economics, and we are not worried about profitability, as our focus remains on growth.

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