Happilo posts Rs 190 Cr revenue in FY22, glides into losses

Direct-to-consumer (D2C) healthy snacking brand Happilo grew over 2.4X in the pandemic-struck fiscal year (FY21) but its growth rate decelerated in the following fiscal year. Nevertheless, the firm managed to bag nearly Rs 200 crore in revenues during FY22.

Happilo’s revenue from operations spiked 35.7% to Rs 190 crore in FY22 from Rs 140 crore in FY21, according to its annual financial statement with the Registrar of Companies.

Happilo offers a range of snacks including dry fruits, trail mixes, nut protein bars, and muesli through online and its omnichannel. The sale of these products was the only source of revenue in FY22.

The cost of procurement of products formed 69.3% of the total expenditure. This cost surged 48.4% to Rs 141.6 crore in the fiscal year ending March 2022 from Rs 95.4 crore in FY21. Its employee benefit cost went up by 175% to Rs 8.8 crore in FY22.

Meanwhile, Happilo’s advertising cost shot up 2.16X to Rs 43.25 crore during FY22. Notably, the company became ‘Snacking Partner’ for Royal Challengers Bangalore for IPL 2023, indicating the scale up in spending on advertising in FY23.

The company added another Rs 3.37 crore towards legal and professional fees which drove Happilo’s total cost to Rs 204.2 crore in FY22 from Rs 124.9 crore in FY21.

It’s quite interesting that the company grew at a rapid clip in FY21 and also posted a profit of Rs 11.43 crore. On the contrary, its growth tapered down in FY22 and Happilo also slipped into losses. It posted a loss of Rs 11.7 crore.

Its ROCE and EBITDA margin also worsened to -4.20% and -5.61%. On a unit level, the company spent Rs 1.07 to earn a single unit of operating revenue in FY22.

With a presence in premium, high rental locations like airports and the likes, Happilo’s omni channel strategy might force it to relook at the viability of many of the channels it probably sustains at a loss right now. In some cases to keep competition from getting a foot into the door.  Losses during FY22 will probably be seen as an aberration by this startup, and we expect the firm to seek a return to profitability in FY23. The D2C firm had secured $25 million from Motilal Oswal in February last year, providing it enough of a buffer to take calculated risks in the competitive category.

In the long term, the snacking segment, for all the competition and new entrants in it, will be won and lost over distribution, as with almost all FMCG goods, and Happilo has shown itself to have the chops to know how to make it work for itself. Balancing the temptation to expand the SKU (stock keeping units) range versus pushing a fast moving cohort of snacks in what is a category with an innovative launch a day is what will decide its long term trajectory in terms of margins.