Brands
Flipkart, Amazon reduce ad spends on Google
MUMBAI: With Google launching an e-commerce platform in the near future, the country’s largest online retail stores, Flipkart and Amazon India, have slashed advertising spends on the web-search company. Both the players see this as a serious threat, as a Mint report quoted two people, familiar with the matter.
According to a person quoted above, Flipkart and Amazon have reduced spending on Google by more than 30 per cent in the previous three months compared to months before and shifted some of that ad spending to other platforms. Until last year, the two online retailers used to spend hundreds of crores of rupees buying ads on Google.
Google’s interest in e-commerce stems from its worry that some shoppers are going straight to Amazon to search for products rather than using Google. If this trend continues, it could threaten Google’s core business of digital advertising. Amazon is already generating billions of dollars in ad revenues in the US.
The people added that, Google was keen on investing in Flipkart because it wanted a strategic partner to help it with its e-commerce push. However, Google wanted a much closer collaboration than Flipkart and its new owner, Walmart, were willing to offer.
Google’s e-commerce push and the rising importance of Flipkart and Amazon in digital ads are the latest examples of how intertwined the tech business has become and how internet firms are increasingly encroaching on each other’s turf.
Google’s retail entry may result in higher losses for existing e-commerce firms. The e-commerce market grew 23 per cent to $18 billion in 2017, according to RedSeer Consulting. India’s e-commerce market is a fraction of the size of China’s or the US. Yet, Flipkart, Amazon India and Paytm Mall bear huge losses while specialty e-commerce firms are struggling to grow sales quickly.
A new serious entrant with deep pockets like Google will strengthen the view that India’s e-commerce market is overcrowded.
Brands
Honasa’s Varun Alagh targets next Rs 500 crore brands as profit doubles
Profit doubles as Mamaearth rebounds and new labels race to scale
MUMBAI: Honasa Consumer’s co-founder and chief executive officer Varun Alagh has set his sights on building the company’s next crop of Rs 500 crore brands, as the beauty and personal care firm delivered record revenue and nearly doubled its profit.
The Mamaearth parent reported revenue of Rs 602 crore, up 21.7 per cent year on year, with volume growth of 30 per cent. Ebitda rose to Rs 66 crore at a margin of 10.9 per cent, while profit after tax reached its highest-ever quarterly level.
“We have delivered our highest-ever quarterly revenue and almost doubled our PAT,” Alagh said. “The fundamentals we have rebuilt over the past few quarters are clearly delivering outcomes.”
With Mamaearth back to double-digit growth and The Derma Co sustaining strong momentum, Alagh believes the next wave of brands is ready to step up.
“It’s a race to become the next Rs 500 crore brand,” he said. “Reginald Men, Dr. Sheth’s, BBlunt, even Staze in colour cosmetics, each of them has the right to win in its category.”
Honasa’s portfolio of young brands grew more than 25 per cent during the quarter. The Derma Co, its science-led skincare label, has now achieved double-digit Ebitda margins and continues to gain share in sunscreen and actives-based skincare.
Mamaearth, once the company’s sole growth engine, has returned to the teens in year-on-year growth after a strategic reset.
“We focused on superior formulations, sharper communication and six core categories,” Alagh said. “We are seeing strong share gains, not just growth riding the market.”
Importantly, over 90 per cent of Mamaearth’s growth came from existing distributors and large retail partners, reflecting stronger consumer pull rather than mere expansion of reach.
From a channel perspective, e-commerce grew over 20 per cent, while general trade and modern trade delivered more than 25 per cent growth in secondary sales. Direct distribution now contributes nearly 80 per cent of revenue.
Honasa has also made a calculated entry into men’s skincare with the acquisition of Hyderabad-based Reginald Men. Alagh believes the category is at an inflection point.
“In the last two to three years, we’ve seen searches for ‘sunscreen for men’ and ‘face wash for men’ grow multi-fold,” he said. “Men want multi-benefit products without complicated regimes.”
Beyond category expansion, the acquisition strengthens Honasa’s footprint in South India and broadens its talent base.
The company reiterated its target of expanding Ebitda margins by around 100 basis points annually.
“Our endeavour is to unlock at least 100 basis points every year through a mix of A&P efficiency and overhead leverage,” said chief financial officer Raman Preet Sohi.
While advertising spends in absolute terms have risen, improved effectiveness has driven percentage efficiencies. Gross margins remained broadly stable, with guidance to maintain levels above 70 per cent.
With legacy FMCG giants sharpening their digital play and acquiring new-age brands, Alagh remained unfazed.
“Competition is not new to us,” he said. “We were born in categories where much larger players existed. The real value gets created when you focus on the consumer and where the consumer is moving.”
For Honasa, that focus now extends beyond one hero brand. As Alagh put it, the company is not content with a single success story. It wants a stable of them, each marching towards the Rs 500 crore mark.
