This Indian couple started a toxin-free products brand and turned into a billion dollar company

In today's world, where everything seems filled with chemicals, finding the right products for young kids and moms can be daunting.

The quest for natural, safe, and reliable products has become a top priority for parents. This is where Mamaearth, a brand dedicated to creating organic and toxin-free solutions, steps in

MamaEarth, the story began when Ghazal and Varun were expecting their first child. In the blink of an eye, they transitioned from a life of bungee jumping to becoming dedicated safety wardens.

It became apparent that an abundance of toxic generic drugs that were unfit for use on newborns was flooding the Indian market. Every choice had to be safe and thoroughly researched. 

Let's look at Mamaearth’s journey, its founders, and how it became one of the few Indian startups whose IPO was successful.

What led Ghazal Alagh to embark on her entrepreneurial journey?

Unlike her husband Varun, Ghazal didn’t have any business and marketing experience, and initially, it was tough for her to start the entrepreneurial journey. 

It all began when Ghazal got her first baby, Agastya, who has a skin condition where any harsh baby care products would irritate his skin. 

This made Ghazal import products from the international market because the ingredients in those products were not as harsh as those in Indian products. But importing the products frequently wasn’t easy for Ghazal as she was from an average middle-class family.

After that, she started doing research and got to know that there are so many Indian companies using ingredients in their products that are internationally banned and can cause severe issues in the baby’s skin.

To solve this issue for Indians, Varun and his wife Ghazal launched 6 baby care products in December 2016. However, it wasn’t easy for them because the duo had worked hard to decide which product was best and had personally engaged with over 700 moms to try and test their products.

The launch of Mamaearth

In the same month, the duo launched their brand ‘Mamaearth’ on the Amazon Launchpad, a programme aimed at helping startups launch, market, and distribute their products to Amazon customers across India and worldwide through a dedicated store.

Ghazal recalls getting her first big order just 15 days after their launch on Amazon Launchpad. 

Gradually, Ghazal Alagh expanded her brand presence in other product categories, such as skincare, haircare, body care, and personal care. Mamearth started partnering with bloggers and influencers to market their products, which was their game changer. 

The duo partnered with MadeSafe, a not-for-profit organisation offering baby product safety certifications to gain parents’ trust. Notably, the customer acquisition was primarily driven by digital content, educating consumers about their products' problem-solving abilities and their superiority in the market.

According to market research by Technavio, the baby care market in India is set to experience a 12% CAGR in revenue over the next three years. 

The product line

Mamaearth offers a diverse product range that includes baby care, beauty, hair care, face care, body care, and gift packs. 

It all started with baby care products and has since expanded to include skincare, haircare, and wellness categories. Mamaearth claims its products are free from harmful chemicals, focusing on using safe, organic ingredients. 

The product range includes innovative items like onion hair oil, which has gained popularity for its hair care benefits, and vitamin C-infused products, catering to skincare needs. 

The company’s offerings include India's first bamboo-based baby wipes, a tummy roll-on with hing and fennel for colic and digestion relief, and 100% natural plant-based toothpaste for children aged 0-10 years. 

The company doesn't just cater to babies; it also extends its product line for mothers, offering solutions from sunscreen to stretch mark removal serum, focusing on every aspect of motherhood.

Does Mamaearth manufacture its own products?

Mamaearth does not manufacture its own products in-house. Instead, the company outsources the manufacturing of all its products to third-party manufacturers under non-exclusive contract manufacturing arrangements. 

This means that Mamaearth relies on external manufacturers to produce its product range and does not have its own manufacturing facilities. This business model allows other companies to use similar formulas or sell products in different packaging, and likewise, Mamaearth can use formulas from others under their brand.

The company operates as a digital-first FMCG company, relying on Direct-to-Consumer (D2C) platforms like Amazon and Flipkart for revenue generation. The company has also started strengthening its offline retail presence across the country.

It has also begun catering to international markets, particularly in neighbouring countries like Bangladesh and Nepal, where Indian brands are well-received. The company's focus remains on tapping into the vast potential of the Indian market while simultaneously broadening its global presence.

Who invested in Mamaearth?

While Maaearth is a publicly listed company, Earlier, it raised over $100 million in funding from private investors, including Peak XV Partners, Sofina, Fireside Ventures, Stellaris Venture Partners, Sharp Ventures, Shilpa Shetty, and Norges Bank, among others.

The company first raised an undisclosed amount in a seed round from Fireside Ventures in July 2016. The following year, It raised $1 million from its existing investor, Fireside Ventures and other individual investors. 

In January 2022, Mamaearth joined the unicorn startup club after it raised $52 million in funding led by Sequoia at a valuation of $1.2 billion. Sofina Ventures SA and Evolvence also took part in the round.

Who owns Mamaearth?

According to Screener, Varun Alagh and Ghazal Alagh collectively own a 35.34% stake in Mamaearth. FIIs hold 7.86% of the stakes, while Fireside Ventures remains invested with a 7.57% holding and Stellaris Venture Partners with 5.78%. Additionally, Sci Investments VI holds 18.84%, Sofina Ventures holds 6.21%, and Sequoia Capital Growth Fund holds a 4.38% stake.

How many brands does Mamaearth own?

Mamaearth currently owns three brands, including The Derma Co, Aqualogica, Ayuga, BBlunt, and Dr. Sheth’s.

The company acquired a majority stake in Dr Sheth’s, a premium skincare brand formulated by dermatologists, in May 2022. The acquisition was valued at approximately Rs 28 crore. Dr Sheth’s, founded in 2015, offers over 30 skincare products and caters to a wide consumer base.

In February 2022, Mamaearth acquired Mumbai-based BBlunt from Godrej Consumer Products Limited (GCPL).

How well is Mamaearth performing financially? 

Prior to the IPO launch, Mamaearth parent Honasa Consumer Ltd reported a significant 58.3% growth in its revenue for FY23, reaching Rs 1,493 crore, up from Rs 943 crore in FY22. 

However, despite the revenue surge, the company's profits took a massive hit. Mamaearth's parent net loss for FY23 stood at Rs 151 crore, a stark contrast to the Rs 14.4 crore profit it registered in the previous fiscal year, according to the company's consolidated financial statements filed with the Registrar of Companies.

A closer examination of the company's financials reveals that advertising remains a major expense, accounting for 35.3% of the total expenditure. The advertising costs alone amounted to Rs 530 crore in FY23, marking a 35.5% increase from the previous year. 

Additionally, the cost of raw materials rose by 65% to Rs 502 crore, and employee benefit expenses doubled to Rs 164.8 crore in FY23 from Rs 78.8 crore in FY22. 

However, since its public listing, the company has started to show robust financial results. 

In the second quarter of FY24, the company recorded a 6.8% growth in revenue from operations to Rs 496 crore during the quarter ending September 2023 (Q2 FY24), compared to Rs 464.5 crore in the first quarter (Q1) of the same fiscal, according to the company’s unaudited consolidated quarterly report published on the National Stock Exchange. 

Besides its operating income, Honasa also earned Rs 7.08 crore in non-operating income (interest and gain on financial assets) during Q2 FY24, bringing the overall revenue to Rs 503.08 crore. 

In the end, Honasa’s bottom line improved as the company’s profits spiked over 19% to Rs 29.44 crore during the quarter (Q2 FY24), against Rs 24.71 crore in Q1 of FY24. 

Compared to the same quarter of the previous year (Q2 FY23), the company’s profits soared nearly 94% from Rs 15.2 crore the company’s profits soared nearly 94% from Rs 15.2 crore.

How Mamaearth Successfully Launched Its IPO

In the last week of October 2023, Mamaearth announced its IPO launch on October 31, 2023.

The IPO comprised fresh shares worth Rs 365 crore and various stakeholders' offer-for-sale (OFS) of 4.12 crore equity shares. Prominent shareholders participating in the OFS include co-founders Varun and Ghazal Alagh, Fireside Ventures, Sofina, Stellaris, and celebrities like Shilpa Shetty Kundra. 

With the raised proceeds, Mamaearth said it would focus on advertising expenses, establishing new exclusive brand outlets (EBOs), investing in subsidiary Bhabani Blunt Hairdressing (BBlunt) for new salons, and other corporate purposes.

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