Sugar Cosmetics operating revenue touches Rs 104 Cr in FY20; losses surged to Rs 28 Cr

Direct to Consumer or D2C lifestyle brands have seen an upsurge in demand in the last couple of years. Companies such as Bewakoof, Mamaearth and Beardo have been scaling at a quick pace. While Bewakoof and Mamaearth had crossed Rs 200 crore and Rs 100 crore revenue mark in FY20, Beardo’s revenue surged to Rs 79 crore in the last fiscal.

On the lines of its peers, Sugar Cosmetics also scaled at a lightning pace in FY20. The company scaled up its operations 5.6X within the last two fiscals with its hybrid online-offline sales.

Sugar Cosmetics revenue from operations has swelled up by 82% from Rs 57.14 crore in FY19 to nearly Rs 104 crore in FY20. Notably, around 15.4% of its sales i.e Rs 16 crore came from international buyers. It earned another Rs 1.4 crore from its financial assets during FY20.

Purchase of stock in trade was the biggest cost centre for the Mumbai-based D2C brand, making up 38.45% of the total expenditure incurred during the last fiscal. These payments grew by only 29.2% to Rs 48.35 crore as compared to the 82% rise in sales as the company improved its procurement costs with economies of scale kicking in.

On the other hand, employee benefit expenses grew by 127% to Rs 12.7 crore in FY20 from Rs 5.6 crore in FY19. These costs made up around 105% of the annual costs and included ESOP related expenditure of Rs 27.03 lakh during FY20.

Akin to other D2C beauty brands such as Mamaearth, Ustraa and Bombay Shaving Company, Sugar Cosmetics has a social media-focused marketing plan and spent 22.60% of their annual expenditure on advertising and promotions during FY20. These expenses grew by nearly 77% to Rs 28.43 crore in FY20 from Rs 16.06 crore during FY19.

With the growing number of orders, expenses on outsourced labour and support ballooned by 274.3% from Rs 5.13 crore in FY19 to Rs 19.2 crore in FY20. These costs accounted for 15.2% of the annual expenditure spent by the beauty brand during the last fiscal year. Expenses incurred on packaging material also grew by 115% to Rs 2.3 crore during the same period.

Apart from online sales, the brand is available in brick & mortar stores such as Pantaloons, Lifestyle, ShoppersStop as well as its own exclusive stores. The company bears the costs for testers and consumables and these expenses grew by 39% to Rs 2.5 crore during FY20.

Another Rs 4.33 crore were spent on rentals, pushing the total expenditure incurred grew by 98.4%  to nearly Rs 126 crore in FY20 as compared to Rs 63.5 crore spent in FY19. Sugar Cosmetics spent Rs 1.21 to earn a single rupee of operating revenue during the fiscal ended in March 2020.

While Sugar Cosmetics has been growing at a steady pace, it is spending cash to build its product line, customer base and streamline its supply chain. Annual losses have surged by 389.2% to Rs 28.23 crore during FY20 while EBITDA margins have gone further into the red from -5.92% in FY19 to -14.43% in FY20.

The Vineeta Singh-led company has demonstrated significant growth and managed to grow its operating revenue to the tune of Rs 100 crore. Unlike many growth-stage companies, its unit economics is far better. The company competes with Nykaa, MyGlamm, Mamaearth, Purplle, Juicy Chemistry and Plum.

While Nykaa is the de-facto leader in the online beauty space, Purplle didn’t grow that rapidly like others and its pivot to a marketplace model appears to be the reason for that. According to Fintrackr, Purplle’s operating revenue dropped by around 14% to Rs 86.8 crore during FY20 whereas its annual losses surged by 512.3% to Rs 24.92 crore during FY20.