Direct to consumer brands have infiltrated the FMCG sector in India with e-commerce and social media platforms acting as catalysts for their growth. While other categories are performing well, it’s the cosmetics and toiletries which have had the best outing in the Indian market.
These brands utilize exhaustive social media campaigns and influencer marketing deals to reach their target market and few have mastered it like four-year-old Mamaearth.
From your favourite YouTube vlogger to an established Instagram influencer, Mamaearth’s brand integration is pervasive across social media platforms. The brand leaned heavily on its marketing campaigns to grow its scale and the jump in revenues is evident.
The Sequoia-backed company managed to grow its operating revenue 6.5X during the fiscal ended in March 2020 to nearly Rs 110 crore from only Rs 16.8 crore it earned in FY19. It earned another Rs 2.23 crore through income from financial instruments during the same period.
Being the primary growth driver, Mamaearth’s extensive advertising & marketing budget was one of the biggest cost centres for the company. These expenses accounted for 39% of the total costs, surging 5.3X from Rs 8.69 crore in FY19 to nearly Rs 46 crore in FY20.
Started in December 2016 by couple Gazal and Varun Alagh, Mamearth operates on a model with minimal capital assets and purchases all of its merchandise from external vendors.
The company bought stock worth Rs 50.55 crore during FY20, ballooning 7.3X from purchases of only Rs 6.93 crore made in FY19. With an inventory turnover of 14.57X, the company fulfils its inventory every 25 days with decent turnaround times.
The company’s expenditure on freight and transport grew 5.7X to Rs 15.05 crore as the number of orders processed by the company on its website grew during the previous fiscal. Sales commission paid by the company also jumped 10.7X to Rs 3.4 crore during FY20
IT-related costs amounted to another Rs 1.32 crore, pushing the total expenditure to Rs 117.93 crore in FY20 which grew 5.5X as compared to Rs 21.41 spent in total during FY19.
While there was significant growth of operations, Mamaearth has managed to reign in its losses relatively better than other growth-stage startups. While its losses grew by 69% to Rs 5.9 crore in FY20 from Rs 3.5 crore it lost during FY19, EBITDA margins have actually improved by 1392 BPS to -4.98% during FY20.