Gurgaon-based cosmetics and lifestyle brand Mamaearth, operated by Honasa Consumer Ltd, is grappling with a steep decline in its market valuation. Over the past two months, the company’s market capitalization has plummeted by 50%.
In September, Honasa Consumer’s stock was trading at ₹541 per share, valuing the company at approximately ₹15,000 crore. However, by November, the stock price had nosedived to ₹227 per share, slashing its market cap to ₹7,300 crore.
This dramatic fall has pushed Mamaearth’s valuation below the $1 billion mark, stripping the company of its unicorn status. The development marks a challenging phase for the brand, once celebrated for its rapid growth in India’s competitive beauty and lifestyle sector.
Mamaearth’s sharp decline in share value was triggered by the announcement of its quarterly results last Thursday.
Honasa Consumer Ltd is experiencing a year-on-year downturn, reporting a consolidated net loss of ₹18.57 crore in Q2 FY25, compared to a net profit of ₹29.43 crore in Q2 FY24, according to Business Standard.
The company’s revenue from operations also declined by 6.90% year-on-year, amounting to ₹461.82 crore in the quarter ending 30 September 2024.
The Culprit: Project Neev
At the start of Q4 2024, Honasa Consumer Ltd introduced Project Neev, a new distribution strategy aimed at reducing its reliance on large-scale distributors. These distributors had previously facilitated the supply of Mamaearth products to over 50 cities across India.
While these large distributors initially accelerated the brand’s market penetration, Honasa acknowledged significant drawbacks. The heavy dependence on these distributors limited the company’s access to real-time sales data, leading to an overstock of unsold inventory. To address the issue, Honasa decided to replace large distributors with direct distributors in key urban markets, hoping for better control and efficiency.
However, the transition proved challenging. Operational disruptions resulted in product write-offs amounting to ₹63 crore worth of expired inventory. Of this, the company has already received ₹41.21 crore worth of returns in its warehouses, with an additional ₹21.32 crore still pending collection from distributors. The setback has raised questions about the execution and planning of Project Neev amidst an already turbulent period for the company.
Inside Mamaearth: The Brand, The Founders, and The Challenges Ahead
Mamaearth was launched in 2016 by husband-wife duo Varun Alagh and Ghazal Alagh. The company positioned itself as a disruptor in India’s beauty and wellness sector, marketing its products as toxin-free, eco-conscious, and tailored for the modern Indian consumer. Over the years, Mamaearth gained significant traction, particularly among millennial parents and young adults, thanks to savvy branding and heavy reliance on influencer-driven marketing.
Ghazal Alagh, a former corporate trainer turned entrepreneur, emerged as the face of the brand, particularly after her stint as a judge on Shark Tank India. Her personal story of searching for safe, chemical-free products for her child has been a recurring narrative in the company’s marketing campaigns. Meanwhile, Varun Alagh, a former Coca-Cola executive, brought his expertise in scaling operations and building a robust business model. Together, they created a brand that resonated with India’s rising middle class, offering premium yet affordable products with an emphasis on safety and sustainability.
Despite its rapid rise, Mamaearth has not been immune to criticism. Skeptics have often questioned the brand’s aggressive marketing strategies and premium pricing, especially given the relatively commoditized nature of the personal care market. Additionally, some have debated the authenticity of its claims of being “natural” and “toxin-free,” as these terms remain largely unregulated in the Indian market.
The company’s recent financial struggles, including a sharp drop in share value and market cap, have intensified scrutiny of its operations and growth strategy. While Mamaearth initially gained favor with investors and consumers alike, its ability to sustain growth amid stiff competition from established giants like Hindustan Unilever and newer entrants remains uncertain. Critics argue that the brand’s reliance on heavy advertising and celebrity endorsements may not translate into long-term loyalty, especially as consumers grow savvier and seek tangible value beyond the hype.
