🕹️Mamaearth: Building for babies and moms
A complete analysis of Mamaearth
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Since the beginning, Mamaearth has been playing the game on difficult mode.
They launched in probably the toughest market ever: babycare.
Convincing parents to trust a new brand for their babies is very difficult.
Plus, the baby market is dominated by big companies like P&G and Nestle. Establishing yourself in the market is difficult.
Yet Mamaearth did it.
They found a problem in the babycare market and built a solution loved by lakhs of customers around the country.
But they didn’t stop at the babycare market. After conquering it, they expanded into an even bigger battleground: the personal care market.
Throughout these massive expansions, Mamaearth has stayed close to its roots: natural, toxin-free products.
They have kept experimenting and innovating in this highly competitive market.
The result? Mamaearth is a fast-growing, 1 billion-dollar, personal-care brand.
In today’s newsletter, I’ll give you a complete analysis of Mamaearth:
The Story of Mamaearth
The Market
Their Products
Understanding their Business Model
Financial Deep Dive
Impact of Covid
As you can see, I’m trying a new format for the newsletter. Read it once, and tell me if you liked it or not. Cool?
Let’s go🚀
🕹️The Story of Mamaearth:
When Varun and Ghazal Alagh saw their child had a health problem, they built a billion-dollar company to solve that problem. This is the story behind Mamaearth: the first unicorn of 2022👇
In 2016, Varun and Ghazal Alagh’s baby boy, Agastya, developed eczema. The baby became allergic when it was exposed to certain substances.
No problem. They just needed to find products that didn’t contain these harmful substances.
This is where the problem started. Because India had low safety standards, every babycare product they saw had some toxins.
Varun and Ghazal were disappointed.
As a temporary solution, they began ordering babycare products from America since safety standards in America were much higher.
But this was inconvenient and costly. How long could they keep importing stuff from America?
They needed a better solution.
They also realized they weren’t the only ones facing this problem There were a lot of parents in India who wanted safe products for their babies.
That’s when the couple had the billion-dollar idea: baby products that are toxin-free and natural.
Thus, Mamaearth was born.
They invested 90 lakhs into the startup, spent a lot of time to identify safe raw materials, hired an R&D team, onboarded manufacturing partners, and bought ingredients from the best sources(ISO and GMP compliant). They became Asia’s first brand to get the MADESAFE certificate.
In the beginning, the company sold six babycare products: lotions, creams, shampoos, body wash, oils, and diapers.
Customers loved it. Customers loved it so much that Mamaearth became one of India’s fastest-growing FMCG brands.
In 4 years, the company went from 0 to Rs. 100 crore turnover!
From 6, the company expanded to 100 products and different verticals: skincare, haircare, etc
They have around 50 lakh customers in about 500 cities.
Their innovation in the babycare category is just awesome: India’s first bamboo-based baby wipes, easy tummy roll-on, and natural plant-based toothpaste for children.
Covid proved to be a blessing for them. In 2019, their revenue was 17 crore. In 2021, it was 461 crores!!
And they are targeting 1000 crore revenue by 2023!!
Awesome story, isn't it?
🕹️The Market:
Mamaearth started with the babycare market. Spoiler alert: I’ve got some good news and some bad news.
I’ll tell you the good news first: the babycare market is huge: it will reach Rs. 25,345 crore by 2026.
Plus, it will keep growing in the future at 14% CAGR(according to Mordor Intelligence).
Why is this boring market getting so big?
Because parents have become more conscious about the products they buy for their babies.
More and more parents are realizing the importance of hygiene and convenience in babycare
Rising population of working women and increasing fertility rate in India, the baby care market benefits directly.
Now the bad news: growth.
Mamaearth doesn’t make products for the whole babycare market. They only focus on a very small part: skincare products for the baby.
This is just 2-3% of the whole baby market. The rest is toys and clothes.
Mamaearth couldn’t grow much in this small market. That’s why they expanded to personal care products for men and women.
This was a smart move.
People want toxin-free and natural products not just for their babies, but for themselves too. This has created a huge rush for natural products.
Mamaearth took advantage of this rush and entered the personal care market.
This move paid off: Mamaearth’s revenue increased 25x in 2 years(2017→2019)!!
Thus, by expanding into this market, Mamaearth solved a big problem: growth.
🕹️Their Products:
Alright, this section will seem like a Mamaearth ad, but it’s not, I promise.
Mamaearth’s focus is natural and toxin-free products. They started by making baby care products, but soon they expanded to haircare and skincare products as well. Now they have more than 80 natural products under its umbrella.
Before Mamaearth, most babycare products in India contained harmful chemicals such as parabens, phthalates, sulfates, bleach which can build toxicity in a baby’s body. These chemicals, when applied to sensitive areas of the skin can also cause rashes, irritation, and skin allergy.
Mamaearth started off with 6 baby products: shampoo, wash, lotion, sunscreen, diaper rash cream, and mosquito repellant.
They’ve also made several innovative baby care products:
Some of the most innovative products developed by Mamaearth include India’s first bamboo-based baby wipes, easy tummy roll-on with hing and fennel for colic and digestion relief, and 100% natural plant-based toothpaste for children between 0-10 years.
The ingredients for making each product are bought from the safest sources: which are ISO, GMP, and Non-GMO compliant.
In the personal care category, their products range from sunscreen to stretch mark removal serum.
These products are also made with natural ingredients such as onion, ubtan, tea tree, vitamin C, argan, coco, and charcoal.
They launched a second brand called Derma Co, in late 2019. Derma will focus on expanding the portfolio of personal care D2C brands.
They’ve also launched Aqualogica, a hydration-based skincare brand.
🕹️Understanding their Business Model:
Mamaearth has a D2C business model.
They manufacture their products in 3rd party factories, then sell them to customers on their own website, amazon, flipkart, nykaa, firstcry, plus offline stores.
Traditional babycare and cosmetic companies have fewer margins because there are so many middlemen in the supply chain: wholesalers, distributors, retailers, etc.
Since Mamaearth follows a D2C model, it doesn’t have to deal with all these middlemen. So it has a high margin of 65%.
Even better: Mamaearth has managed to maintain these high margins despite low Average Order Value(rs. 799) and high customer acquisition costs.
How?
Growth! Mamaearth’s smart expansion into the personal care market gave them a lot of growth, that’s why they were able to hold onto their high margins.
For viral growth, D2C companies must have a strong value proposition. This is Mamaearth’s forte: Its value-prop of natural products is very strong. Lots of people want products that are good for their bodies, not contain harmful chemicals.
The only problem: competition.
The baby care market is dominated by 5 big companies, but Mamaearth has figured out a big problem in this market: products with toxins, and it is now solving this problem.
Making toxin-free products isn’t very difficult. Lots of Mamaearth-copycats have emerged. Even the 5 big companies have started making natural, toxin-free products. Mamaearth must figure out how to fight these competitors.
🕹️Financial Deep Dive:
Mamaearth’s revenue in 2019 was Rs. 17 crores and a loss of 3.5 crores.
Next year, it was Rs. 110 crores and a loss of 5.9 crores.
In 2021, revenue jumped to Rs. 461 crore!!!
One more big thing: They finally turned profitable in 2021: Rs. 24.6 crore profit!!
They plan to reach 1000 crore revenue by 2023.
How did they reach from 100cr to 461cr in a year? And how will they reach 1000cr next year?
4 reasons:
strong brand
continuous innovation
op marketing
partnering with retail stores to increase the offline reach of Mamaearth brand
According to investment bank Jefferies, only 20% of the Mamaearth brand revenues now come from its baby products range, while 80% comes from skincare and haircare products launched in the last 2-3 years.
Now you realized how important the expansion into skincare/haircare was? There was no room in the babycare market to grow this big. They had to expand into a bigger market, and that’s what they did.
Jeffries says that their gross margin is 65%, which is quite good.
This gives the company enough head-room to invest in marketing (40-50% of revenue in FY19/ FY20) and ramping up people capabilities.
🕹️Impact of Covid:
Mamaearth clocked 400% growth amid Covid-19!! How?👇👇
Most brands realized the importance of selling online during covid. Mamaearth learned the opposite lesson: they learned the importance of offline selling.
Before covid, they were mainly an online brand. They sold on amazon, flipkart, nykaa, firstcry, and their own online website.
So when lockdown started during covid, they just had to sit back and watch their sales increase exponentially, as everyone turned to online shoping. They acuired a lot of new customers during covid.
But they faced a problem: how to retain all these new customers?
Once lockdown lifted, people would go back to offline shopping. If they didn’t retain all these new customers, all the hard work would go to waste.
That’s when they realized the importance of offline selling. From 3000 retail shops before covid, they increased their offline presence to 10,000 stores so that all those new customers could keep buying Mamaearth.
The result: Mamaearth made 20% of its sales offline after the lockdown lifted.
Another smart move during covid was rapid experiments: Mamaearth kept experimenting with new products.
Many flopped.
But some became popular. Vitamin-C and turmeric laced face washes, face serum, and skincare products launched by Mamaearth during covid became customer favorites.
This is how Mamaearth was able to supercharge its growth during covid.
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Your blogs are really insightful. Keep it up.
Hey Shreyans! Have you used any mamaearth products, how was the experience? I seen that most people on twitter said it wasn't quality enough..I haven't used their products