 "Ahead of IPO, Mamaearth sold excess stock of its products to distributors")
Honasa Consumer, the parent company of Mamaearth, distributed excess stock of its products through its offline supply chain in preparation for the company’s upcoming initial public offering (IPO), said sources. This move has resulted in distributors in Maharashtra and Goa holding goods of around 90 days’ of inventory.
While the company only sells its brand Mamaearth in both online and offline channels. Honasa Consumer sees 35 per cent of its total sales are derived from offline trade, with the remaining percentage driven by online sales.
While the company only sells its brand Mamaearth in both online and offline channels. Honasa Consumer sees 35 per cent of its total sales are derived from offline trade, with the remaining percentage driven by online sales.
Although Mamaearth is exclusively sold through the offline channel, nearly 35 per cent of the company’s total sales are derived from offline trade, with the remaining percentage driven by online sales.
Sources in the know reveal that Mamaearth typically provides a 30-day credit period to its distributors, which has now been extended to 45 days due to the increased inventory.
Mamaearth stands as the company’s flagship brand and is the primary contributor to Honasa Consumer’s profits.
In addition to Mamaearth, Honasa Consumer boasts other brands such as The Derma Co, Aqualogica, BBlunt, and Dr. Sheth’s.
Of the nearly 550 distributors, super distributors, and sub-stockists nationwide, around 70 distributors now find themselves holding an inventory for about 90 days, compared to the usual 30-day period.
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Distributors from both states recently convened to address concerns regarding the overstocking of products in the supply chain.
Dhairyashil Patil, national president of the All India Consumer Products Distributors' Federation, commented on the situation, saying, “The inventory held by Mamaearth distributors is extremely high, posing an alarming situation that is neither in the interest nor healthy for the distributor fraternity. Stocking up on products for three months in the fast-moving consumer goods (FMCG) sector is unheard of due to product expiration concerns.”
Email queries sent to Honasa Consumer did not receive a response until the time of going to press.
The company’s shares debuted on the bourses on November 7 at a slightly higher premium than its issue price. In the July-September quarter, Honasa Consumer reported a net profit of Rs 29.4 crore, marking a 93 per cent increase compared to the previous year. Revenue from operations grew 21 per cent year-on-year to Rs 496 crore in the quarter, representing the first earnings report from the digital-first company after its IPO announcement.
According to its red herring prospectus (RHP), retail and wholesale stores include beauty and cosmetics-focused outlets, grocery stores, pharmacies, and self-service department outlets.
NielsenIQ Retail Measurement System estimates that for the period of July 2023, the company retailed products through 154,447 FMCG retail outlets in India, it said in its RHP.
In a recent interview with Business Standard, Chairman and Chief Executive Officer Varun Alagh emphasised the company’s commitment to expanding its distribution reach across various formats.
“Distribution expansion will remain a focus area, as well as gaining market share in different categories. We have consistently gained share in categories such as face wash, sunscreen, shampoo, etc, and we will continue to do so both in offline and online spaces,” he said.
He added, “We have a lot of headway to increase our distribution, and we will continue to do that. We will continue to drive awareness through brand building. Our brands are still young and have a long way to go in terms of driving awareness.”