Honasa Consumer had overstocked its offline supply chain ahead of the IPO, leaving the company’s distributors in Maharashtra and Goa with about 90 days’ worth of inventory.
While the company sells its Mamaearth brand only through the offline channel and sees almost 35 percent of its total revenue coming from offline trade, the rest is still driven by online sales.
According to sources in the know, the brand usually has a 30-day credit period with its distributors, which has now been extended to 45 days as inventory days have increased.
Mamaearth is the company’s largest brand and also its biggest profit driver.
Honasa Consumer also has other brands including The Derma Co., Aqualogica, BBlunt and Dr. Sheth.
Of the nearly 550 distributors, super distributors and sub-merchants across the country, about 70 distributors have about 90 days of inventory, which for a company of this size typically sees about 30 days of distribution inventory.
The distributors of both states had also gathered for a meeting to discuss the issues of overcrowding of products in the supply chain.
“The inventory of Mamaearth’s distributors is extremely high and is an alarming situation which is not in the interest and unhealthy for the distributor fraternity. Stocking products for three months in FMCG is unheard of across the industry as the product carries an expiry date,” said Dhairyashil Patil, national president, All India Consumer Products Distributors’ Federation.
E-mail queries sent to Honasa Consumer did not elicit a response until the time the paper went to press.
The company listed its shares on the stock exchange on November 7 at a slightly higher premium than the issue price.
In the July-September quarter, Honasa Consumer saw its profit after tax rise to Rs 29.4 crore, up 93 per cent from last year, and revenue from operations grew 21 per cent to Rs 496 crore in the quarter. This was the first earnings update from the digital-first company to announce its results.
According to the Red Herring Prospectus (RHP), these are retail and wholesale stores, including beauty and cosmetics-oriented outlets, supermarkets, pharmacies and self-service department stores. According to NielsenIQ’s Retail Measurement System, we are estimated to have sold products through 154,447 FMCG stores in India for the period July 2023, the RHP said.
In a recent interview with Business Standard, Chairman and CEO Varun Alagh said the company continues to focus on expanding its distribution reach across formats.
“Distribution expansion will continue to be a focus area, as well as gaining market share across categories. We have consistently gained share in categories like face wash, sunscreen, shampoo, etc., and we will continue to do so both offline and online,” he said.
He added: “We have made great progress in increasing our distribution, and we will continue to do so. We will continue to raise awareness through brand building. Our brands are still young and still have a long way to go in terms of awareness.