An Indian Unicorn

Company Analysis Report

Submitted By
Vachica Gupta
H20058

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Introduction:

Mamaearth was founded in 2016 by Honasa Consumer Products Pvt. Limited, a holding firm
which is currently the first unicorn of 2022. This brand began as a need for the owners, Ghazal
& Varun Alagh, rather than a concept. When they were expecting their first child, they looked
for brands in India that offered toxin-free infant care products. It came as a surprise to them
that, because the Indian government had not established any laws or norms, the majority of the
items included dangerous ingredients. They began ordering from the United States since they
did not want to jeopardise their child's health. Because it was too expensive, they started to
explore for alternatives, and when they couldn't find any, they decided to create their own line
of products under the brand Mamaearth.

The company is a FMCG that sells infant care items, pregnancy care products for pregnant
and postnatal ladies, and skin and hair care products for men. While there are various firms in
the infant care market, including corporates and startups, the cosmetics category is controlled
by organised giants such as J&J, HUL, Kimberly Clarks, and P&G. Mamaearth competes
directly with these established players and has quickly emerged as a market disruptor.

Industry Attractive Analysis Using Porter’s 5 Forces

1. Bargaining Power of Buyers

 Due to availability of multiple alternatives and substitutes in this category, the
bargaining power is high
 Due to strong bargaining power of buyers, Mamaearth has to sell their high-
quality products at low prices.
 Economic cost of alternatives is low which makes it easy for the customers to
switch

2. Bargaining Power of Suppliers

 Abundance of suppliers in this category gives weak bargaining power to the
suppliers
 Due to high total supply and low supplier control over distribution links,
further reducing negotiating leverage

3. Rivalry from Competitors

 Intense rivalry from competitors like Body Shop, Forest Essentials, Loreal etc.
 Difficult to maintain the initial product differentiation that Mamaearth created
since the competitors are catching up

4. Threat of Substitutes
 Technological innovation has increased the threat of replacements, since
numerous rivals are now producing the same items, removing distinctiveness
and differentiation.

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  Due to a rising trend toward utilising healthy or chemical-free goods, there is a
risk of being supplanted.
 Because of the low switching cost and wide availability of replacement items,
the danger of substitution is quite significant.

5. Threat of New Entrants

 The danger is minimal, since new entrants will have a tough time breaking into
the market. New entrants will need to spend a lot of money on marketing before
they can enter the market.
 Mamaearth's recent fundraising has secured a solid cash flow, which will reduce
the danger of new entrants.
 This danger emerges because a firm that enters the market with a competitive
product can win over clients due to low switching costs, both economically and
psychologically.

Mamaearth’s Business Strategy

Initial Strategy:
 It initially started off with focused differentiated
strategy with six products in the baby care range.
 The Target Segment was children (0-2 years),
and since they were the first childcare brand in India
who provided 100% chemical free products, they
had the first movers advantage with this
differentiated offering.

Current Strategy & Way Forward:

 To survive and regain the lost market share its competitors shifted to natural
ingredients and therefore to stay competitive. Mamaearth diversified into skin and
hair care products for men and women across 80 SKUs keeping the price range
around the same level.
 The company aims at promoting the “toxin free nature of products” and capture the
segment of customers who are really worried about the same.
 It is a plastic-positive brand in India, emphasising the fact that it seeks to save Mother
Earth for future generations.
 The client base is always expanding, as are its offers, but the goal is to attract young,
intelligent millennials by delivering natural and non-toxic items.
 Mamaearth will continue to raise awareness in the future through excellent influencer
marketing techniques and digital funnels. Diversifying into tier 2 and tier 3 cities with
low-cost items is the way to go.

Signalling Strategy

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  People are sceptical of the information supplied and the claims made by corporations.
As a result, corporations must rely on costly signals to persuade and acquire market
trust.
 Certifications

o Mamaearth, as a startup, recognised the importance of signalling early on and

was thus the first Asian brand to be accredited by MADE SAFE.
o All of its products are dermatologically tested in European labs according to
European certification criteria, which are far higher than in India and among
the most demanding in the world.
 The products contain natural ingredients, are cruelty-free and have been approved by
PETA.

Brand Ambassadors

o Workforce of people who deliver trust signals to their networks.

o Having Shilpa Shetty, a mother of two, as a brand ambassador who personally
tried all of the products before being linked with the company, made perfect
sense.
o Collaborating with her proved to be a gold mine for Mamaearth, as she
became an equity investor in the company, allowing them to attain a 100Cr
turnover in just four years.

Challenges and approach

1. Brand visibility on a budget

The cosmetics and infant goods industries are strongly crowded, with numerous established
competitors operating with large marketing and advertising expenditures. Gaining market
exposure and visibility on a miniscule budget compared to industry heavyweights was a
significant issue for a brand like Mamaearth, which aspires to compete in the mainstream
market with a distinctive offering.

2. Influencer Marketing
 Mamaearth has a comprehensive and nodular influencer marketing programme
that extends over social media platforms like as YouTube, Instagram, and
Facebook.
 The company signs up influencers and content makers on various platforms to
evaluate their goods via real-world usage. For example, the firm signed up a
renowned YouTube influencer, Gaurav Taneja, to advertise the items through

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 consumption in daily videos, with the creator rewarded with bespoke coupon
codes for sales commissions.
 The influencer marketing strategy has provided them with a hyperlocal path to
brand awareness.
 Using influencer networks expanded the brand's reach and offered organic
visibility.

3. Relationship Marketing Strategy

 Mamaearth is a company by the moms, for the moms, and through the moms.
 Involving the target audience – The Moms: In order to focus on customer
retention and satisfaction to strengthen relations with existing customers, they
devised this strategy.
 The products pass through rigorous procedures including conceptualizing, testing,
and formulating with assistance of 200 young mothers.

4. e-Commerce Challenges

Initially, Mamaearth had around 20-30 orders a day that grew rapidly to the range
of 500-600 a day in few months. In these days of their business scaling, the
company was struggling with operational issues. Below are some of the issues the
company faced:

o It was difficult to keep track of the inventory and for multiple SKUs with
defined shelf life. Due to unavailability of a proper system in place, the
company struggled to report & forecast inventory levels and maintain
visibility.
o The major challenge that e-Commerce industry faces is high order
cancellations and huge shipping costs since the customers expect the
delivery as soon as possible. The company had to bear huge shipping
costs.
o The company had not separated the inventory for B2B and B2C that
increased the cost of inventory and labour to handle the B2B arm of the
business.
o It is difficult to scale a business to higher volumes without proper system
in place for the team to manage operations.

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Competitor Analysis

Leading competitors of Mamaearth in e-Retail segment in 2021 by monthly traffic on their

website

Company Name Monthly Website visits (in Mn)

Sephora 47.95
Myntra 36.42
Stylecraze 7.9
Mamaearth 3.81
Purplle 2.99
Makeup and beauty 1.39
Forest essential India 0.44
The Body Shop 0.42
Market Share by Revenue of the top 12 companies in the Beauty and Wellness Segment

Mamaearth is ranked eighth, with a 1%

market share. The company began as a
personal endeavour for the founders but has
since grown to become one of India's fastest
growing businesses, with a revenue of 100
crores achieved in four years. Given the
market conditions, this is a great
accomplishment. In fiscal year 2019-20,
revenue increased by 6.7 times. Despite rapid
expansion, has a little market share due to the distinct nature of its product and the power of
the incumbent FMCG competitors in the cosmetics sector. The brand intends to enhance its
position in the present concentrated distinctiveness; as a result, there is little possibility of the
brand switching to target a larger section with mass-market items.

PEST Analysis

1. Political – Mama earth is required to study the government policies which are being
updated related to toxin safe products for health of the kids. Company’s presence in
multiple markets comes with a risk of political instability. Recent developments in the
global political scenario have increased the geopolitics risk.
2. Economic – The company’s pricing strategy is greatly impacted by inflation rates.
Due to presence in multiple markets, the marketers must adapt different strategies as
per the customer behaviour in peak and recession seasons. The marketing strategies
must be designed as per the customers’ purchasing power and market pressure.
3. Social – As the company offers products which are related to health, it becomes a
huge responsibility of the company to ensure quality and in turn it imposes a risk on
the company in case of health consciousness among the customers. The huge
population of India and rising low end market offers a great opportunity to the
company.

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 4. Technological – It is crucial for the company to protect their intellectual rights as
there are multiple new entrants in the market and investing in Research &
Development. In this era of technology, the production cost has reduced, and supply
chain can be restructured to perform optimally. Technology advancements have
reduced the life cycles of the products which is an opportunity for the company to
improve efficiency of the value chain.

SWOT Analysis

Financial Analysis

1. Revenue

FY21 FY20
Domestic Sales 452.6 Cr 108.9 Cr
International Sales 8.2 Cr 0.86 Cr
Profit/Loss 24.6 Cr -5.92 Cr

The operating revenue saw jump of 4.2 times, from 109.8 Cr in 2020 to 461 Cr in
2021. The increase in sales, along with increased operating efficiencies, enabled
Mamaearth to make an post tax profit of Rs 24.6 crore in FY21, up from a loss of Rs
5.92 crore in FY20.

2. Total Expenses
FY21 FY20
Cost of Raw Material 133.1 Cr 38.3 Cr
Transportation & 62.7 Cr 15.02 Cr
Packaging Cost

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 Marketing Cost 192.23 49.2 Cr
IT & Payment Costs 6 Cr 1.93 Cr
Employee Benefits 27.8 Cr 8.5 Cr
Expenses

In total, annual cost of Mamaearth increased to 435.6 Cr in FY21 from 118 Cr in

FY20. The cost of raw material has risen due to increase in demand. To promote its
product lines, the five-year-old firm relies on digital marketing platforms, including
social media and influencer marketing. As a result, its marketing expenses have
increased.

3. Ratios

FY21 FY20
EBITDA Margin 6.5% -4.99%
ROCE 16.22% -3.84%
Inventory Turnout Ratio 16.75 14.57

Despite the pandemic hurting the financial results of various enterprises, Mamaearth continued
to grow at a rapid pace, surpassing Rs 460 crore in revenues in FY21. By turning a profit from
loss in the previous year, the firm distinguished itself from other unicorns and FMCGs. As
visible from the company’s financial health, it is India’s one of the most successful direct to
consumer brands currently.

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