In its DHRP as well as in all founder interviews and press coverage, Honasa Consumer Private Limited stressed that it had a portfolio of brands beyond Mamaearth and was therefore a ‘House of Brands.’
This positions it in a space occupied by multinational giants like Unilever and P&G, as well as Indian companies like Marico. Interestingly, Emami and Dabur are the only two large companies that seem to have maintained a master brand strategy in this space, (although Dabur’s personal care offerings are limited).
Why is this a smart strategy for Honasa (the name is derived from Honest, Natural and Safe) and what are the lessons for younger companies, especially those that are struggling with the corporate vs product brand dilemma?
#1. Acquiring New Customers
Instead of cannibalising existing brands, a portfolio of distinctly positioned brands can serve to bring in customers who have different needs and aspirations. This is particularly significant, given the wave of ‘premiumisation’ that is gathering momentum in India.
This is not a blanket rule – especially when you have formidable distribution and brand awareness.
For example, Parachute, the market-leading coconut oil from Marico, has successfully targeted a younger audience with the brand extension, Parachute Advansed.
Brands like Lakme, India’s largest beauty company, have by and large stuck to a mother brand strategy, with extensions like Absolute for premium colour cosmetics and Perfect Radiance for skincare. However, when they needed to address a totally different audience like teens, they launched the brand Elle 18.
#2. Explaining Marketing Spends
Honasa’s flagship brand, Mamaearth, was born as a baby products brand in 2016, and has grown to straddle skincare, haircare, babycare and perfumes. It currently contributes 40% of the company’s Rs.1500 crore revenues.
Honasa’s marketing spends are 35%-40% of total revenue, in an industry where 15%-20% is the norm. Online channels – with their typically high costs of customer acquisition – contributed close to 65% of Honasa’s sales.
While these numbers are still being questioned by analysts, they are definitely more palatable when applied to a stable of young and growing brands, versus a single brand.
#3. Digital-First, Not D2C
D2C is a much abused moniker that is used indiscriminately and markets have fallen out of love with it.
Consider two recent, global examples:
Dollar Shave Club, undoubtedly the torchbearer for D2C brands, was bought by Unilever in for US$ 1 bn and sold last week to a private equity firm in a fire sale.
Shoe brand, Allbirds, went public with a market cap of $3.75 bn in 2021. Today, the company is valued at $127 mn, a figure close to their Series A round.
In 2022, the total beauty market size in India was $20 bn, with $3 bn coming from online sales. The is estimated to grow to $33 bn in 2027, with $11 bn coming from online sales. Being digitally native could be seen as an advantage for Honasa, and indeed, it is a fact that is called out on their website.
So while it is certainly not D2C, the company still needs to differentiate itself from incumbent brands in the market to justify its valuation of $1.2 bn. It is doing this by presenting itself as a player who understands younger audiences, is able to grow brands on digital channels quickly and then take them offline. (Mamearth now has a presence in 1,20,000 offline stores).
Side Note: The Naming Dilemma
This is a branding dilemma faced by companies small and big alike.
You start with one product.
Often, the company is also named after the product, since you can’t imagine you would have any more brands until you do. (Examples: Titan, where Tanishq now is significantly bigger than the watches business and Wow Skin Sciences, whose parent company is called Body Cupid, the first brand they launched.)
In other cases, a hero brand gains traction, but the legal entity is completely unknown and you worry about how to increase awareness in the market with limited resources. (Honasa will have faced this issue).
So what should founders do? There is no right or wrong way here – only a series of trade-offs which depend on how you see your brand portfolio growing.