Ladies and gentlemen, good day and welcome to Q4 and FY 2025 earnings conference call of Honasa Consumer Limited, hosted by JM Financial Institutional Securities Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Pooja Kubadia from JM Financial Institutional Securities. Thank you, and over to you.
Good evening. I would like to welcome you all to the FY 2025 earnings conference call of Honasa Consumer Ltd. Today on call, we have Mr. Varun Alagh, Co-founder, Chairman and CEO; Ms. Ghazal Alagh, Co-founder and Chief Innovation Officer; and Mr. Ramanpreet Sohi, Chief Financial Officer. We will start the call with opening remarks prepared by the management, followed by the Q&A session. Over to you, Mr. Varun.
Thank you. Hi, everyone. Welcome to the Q4 performance update for Honasa. I'm going to spend the next few minutes just taking you through the update that we've shared, and then we will open it for your questions. Starting with the 1st segment of our presentation, which is basically crystal gazing the future of eye beauty. It's a segment that we've been sharing for the last four quarters as well on what our view of how Indian BPC segments are going to shape is. Today, we're going to talk about hair care, which we believe is a large category that's growing, and there is a lot of growth that's going to happen because of premiumization in this segment. Our view is shampoo, conditioners, hairstyling categories which are going to grow faster than others in the segment.
Even within these categories, we believe there are four areas which are going to drive premiumization. Within shampoos and conditioners as a category, there are three clear emerging spaces where consumers are willing to give premium for brands. The 1st one, which has already existed and has been taking this share, has been the naturals segment. Naturals as a category has actually grown 2x compared to the rest of the category over the last five years as well, and we expect naturals to continue to take share from non-naturals over the next five years as well. There are two newer spaces, one which has already emerged, which is the space of professional hair care, be it in salon or at home use. This is also a market which we expect that will grow much faster in coming times and will help premiumize the category.
We have Bee Blunt as a brand which plays in this. The 2nd big trend that we see shaping over the next five years is the way actives have taken share in skincare as a market. Scalp is the new skin, and hence actives in hair care is a trend that we expect to see over the next five years. Our brand The Derma Co will participate in the category through that trend. Overall, I think premiumization is something that will continue to drive this category. Moving on to our financials of quarter four and FY 2025, we have been working on certain fundamental changes and improvements, be it in our distribution system or in our investment allocation. We have started to see green shoots which are showing up, which are now visible in our results as well. In Q4, Honasa grew by 13.3%, a healthy double-digit growth.
The UVG growth, which demonstrates our consumer traction, was healthier at 21.2%. Gross profit has improved by YoY , and EBITDA stable compared to last quarter, even after some of the experimentation that we have done this quarter. We generated almost INR 74 crore of cash being a negative 24 days working capital for the company. From an FY 2025 perspective, we have grown at about 7.7% to deliver INR 2,067 crore in revenue. Gross margin improvement has been there. Profit did take a hit because of the project need for execution and inventory corrections that we had to sort of take. Overall, I think some of those fundamental changes have actually added beautifully to the company's future, and we are already seeing green shoots of the same.
If you were to double-click on some of the highlights of the quarter, the 1st that I would start with is our core brand, Mamaearth. This has been a strong focus area for us, and we made certain changes to make sure that the brand gets back on the growth path, which is where we would like to see it. We have decided to focus on a few big categories, which are face wash, shampoo, sunscreen, moisturizer, and baby. We also changed our investment allocation mix towards this and deployed a better media mix, which is more effective. It's happy to share that we're seeing early green shoots of this change in strategy. These focus categories, which contribute to about 70% of the brand.
In Q4 itself, in channels like e-commerce and modern trade, where you see the impact of any of your actions earlier than other channels where there can be a lag, have actually grown in double digit for Q4, which is a healthy sign. We will just remain consistent with what we've been doing, and also sort of continue to drive our distribution and product superiority agenda. We are very confident that over the coming year, we will be able to turn around the brand fortune as we have sort of planned. This is also visible, of course, in the retail Nielsen shares. Our brand has gained about 100 basis points YoY in face wash as a category, becoming top five brands in face washes in basis Nielsen in the offline market as well now. Even in shampoos, we have gained 22 basis points in value market share.
The changes that we have done in our GT system are also sort of starting to stabilize and show up in some of these Nielsen shares. Coming to the GT distribution system update and overall offline update, I think we're seeing the changes now deliver stable, consistent sort of outcomes. It's a step-by-step journey, and we need to build this back inch by inch. We are clearly seeing that happen. The teams have been consistently adding direct distribution. For FY 2025, our direct distribution has now reached about 102,000 outlets, which used to be at about 45,000-50,000 before we started this year. All of this has happened because of the direct distribution transition that we have done. Our direct distributor contribution has gone from 38% - 71%, which is what we had planned for as we ended the year.
A modern trade uptick also in Q4 on account of the investment changes that we did have become healthier at about 20%+ for our key accounts. Younger brands, of course, continue to drive good growth momentum. For FY 2025, young brands have grown at 30%+ YoY. There are new categories and portfolios that each of the brands are building, and they're focusing on making sure that they win and build in these portfolios, both from product superiority and right consumer insight. Derma Co continues to move from strength to strength. It is the largest actives brand in the country and continues to grow strongly. This quarter, because of the improved distribution system, where we had clearly called out that improving that pipeline will also allow us to build our other newer brands as they scale. We have actually seen that goodness coming in.
Derma Co now in offline, which is GT plus MT in March, has done INR 100 crore ARR. This is a healthy sign that the distribution system is able to distribute more brands as well, as well as the brand is seeing traction in offline, and that will also become one of the levers of growth for the brand in coming years. Of course, online continues to enjoy the consumer love that it was in terms of being a bestseller. Its face cleanser business, which was the 3rd business for it after serum and sunscreen that we were building, has now grown about 100% in Q4. That is also a healthy sign for the brand. Innovation capability continues to be our strong area of focus, but now we are deploying it very sharply across our focus categories for Honasa to drive both newer partitions, ingredients, as well as to drive premiumization.
We've done some really breakthrough innovations in the prestige category to build premiumness for our brands. These are 1st-to-India innovations. Derma Co was the 1st Indian brand to launch a microneedle-based serum shot and the 1st brand to launch an LSCOBY-based ampoule kit in serums. Dr. Sheth's is the 1st brand to launch PDRN as an active in India. Clearly, we are looking at how we can bring the best of global actives and technologies to India, and also at prestige pricing for our brands to become more premium. R&D and product superiority continues to be an agenda which is very high priority for the team. This year, we've done a fair bit of strengthening across our R&D capabilities by our early acquisition of Cosmogenesis and then further strengthening our R&D muscle. It's already showing in our product improvements and superiority that we've been driving.
These are two examples of what we've been able to achieve over the last 12 months with this new R&D muscle. We have improved our serum basis by working on a new technology which is based on certain penetration enhancers and using nanoparticle actives sizes, which has shown in consumer preference as well, where in blind testing, Derma Co serums were preferred significantly over a leading Indian brand and a leading international brand. Also, in face cleansers, Mamaearth's gel face washes have finally beaten the market-leading gel face washes in blind testing. Again, something which is an area that is going to be an area of continuous focus for us. We're not stopping here. We will continue to work on these areas and further improve and extend these gains, as well as deliver them in other different categories as well. AI is something which is clearly not a buzzword anymore.
It's become a genuine technology that is going to make a significant difference in terms of how organizations can become both more effective and more efficient. Agentic workflows is something that at Honasa, we're taking extremely seriously, and we have got a dedicated team who's working on different agentic workflows which can help make our different teams more effective across marketing, supply chain, finance, etc. These are some of the examples of things which we've already executed on: skin analyzer, purchase assistance, which can actually talk to consumers in any language and answer any kind of questions around products. Social listening has been taken to a next level based on the learning models, and content evaluation and generation, which is being done by generative AI, as well as in customer service, multilingual capabilities, etc. have already been moved.
I think this is an agenda where in this year, we want to focus a lot on and build a lot of internal agentic workflow tools which will help our teams execute better. Aside this, our purpose agenda continues to remain strong. As our brands grow, their contribution to the community also grows. This year, we expect Mamaearth to hit the 1 million trees mark that we had sort of set out for five years back when we had started this initiative. The rest of the brands also continue to touch the communities across India, and add value in whatever little way we are able to. With this, I come to the end of the presentation. Thank you so much for listening. Would love to answer your questions.
Thank you very much. We will now begin the question and answer session.
Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take a 1st question from the line of Percy Panthaki from IIFL SECURITIES. Please go ahead.
Hi everyone. Good evening. I just wanted to understand the Mamaearth growth on a primary basis. Has it turned the corner and come to a positive YoY growth? Because last couple of quarters, I mean, the growth was, I mean, it was a decline rather than a growth. So have we reversed that, or are we still marginally negative?
Hi Percy.
Percy, as I mentioned, in Mamaearth, our entire focus is now on a certain set of focus categories. In those focus categories, yes, our growth is positive. It is in double digits in specific channels like e-commerce and modern trade. Those are the categories that we will continue to sort of focus on and track. We will continue sharing updates on those categories as a sum with you going forward as well. Those categories currently contribute to 70% of the brand. We believe with the kind of efforts we want to put in over the next two to three years, they should get to 85%-90% of the brand's contribution. That is the strategy implemented. That is the early result that we have seen because we have only implemented our efforts starting February onwards.
Got it. Got it.
Mamaearth as a whole, including the non-focused categories, when do you think that comes into a positive YoY growth territory? Will it be like in one or two quarters, or could it be longer than that in your view? I understand the strategy overall, and I agree with that. Just the fact that the non-focused parts declining does put pressure on the overall top-line growth. I just wanted to understand from that point of view that as a brand as a whole, when does it come to a positive YoY growth in your view?
Percy, difficult to comment. I would not even want to sort of comment on that because the max is that these focus categories where we are putting in the effort, they need to show the right kind of green shoots.
It has only been sort of two to three months of execution of those strategies. Hopefully, the growth momentum in these categories continues to become better. The decline in non-focused categories, sort of we cannot comment on how much or how that will sort of take shape. From a strategy perspective, I think our whole goal will be that these focus categories continue to grow in double digits as we move forward.
Got it. On the other brands, apart from Mamaearth, you have mentioned that they are at 30%+ . Just a small clarification here. Is it that as an aggregate, they are 30%+ , or each of them individually also is 30%+ ?
If there is any sort of differential performance in terms of some of the brands doing significantly better at 50% and some of the brands being slightly slower at, let's say, 15%-20%, I mean, without quantifying, if you can just call out any such differential, if at all there is one, that would be great.
The number actually refers to aggregate, and it is not. We are not disclosing brand-level performance. Of course, that aggregate is arrived at by certain brands being above that and certain brands being below that. That is how that is.
Got it. Got it.
No, my only question was that do we feel that each of these four or five different brands are sort of doing well on their own, or is there any of these brands where you think that this is a little bit iffy in terms of that particular brand's growth trajectory?
Percy, I think every brand has its own journey. Every brand sort of goes through a different kind of category creation and development. Our agendas, depending upon what kind of category and proposition the brand lies, and how consumer sort of traction on that sort of category or trend line is, our investments also vary according to that. The growth will also vary according to that. As long as the overall cohort sort of continues to do well and gain share, I think that's what we should probably watch out for.
Fair. Fair.
Last question is on the GT sort of disruption that we had. I mean, where are we on that now? Would you say that stock levels have stabilized or are very close to stabilizing? Let's say from next quarter, within GT, we would have primary equal to secondary, or it will take a few more quarters for that?
Oh, yes. In terms of our transition, in terms of our inventory levels and cleanups, all of that is completely done. Now, as we move forward, it's just about building on that strength. Every quarter, we'll continue to sequentially build on that sort of strength. It's a bit of a physical inch-by-inch journey where a lot of on-ground execution is required to get better.
As we have shown in the last three quarters also how the team has been able to build direct distribution, I think that agenda will continue to thrive over the next three quarters as well.
My comment was just in the context of your comment in the PPT saying secondary has grown faster than primary, which means that you are still sort of bringing down stock levels with the distributors. Is that something that will still happen over the next few quarters, or are we at the end of that process now?
Yeah. I mean, we are almost at the end of that process. I mean, see, some of that secondary primary is very BAU because on an ongoing basis, there is also sort of damage expiry that you take back. Sometimes secondary primary gap is because of that also.
But now it is not because of inventory levels, right? Our inventory levels are absolutely in the right range. I mean, going forward, that is not something that we see as a.
Got it. Got it. Yeah, that is all from me. Thank you and all the best.
Thank you.
Thank you. Before we take the next question, we would like to remind participants to press star and one to ask a question. Next question is from the line of Vivek M from Jefferies. Please go ahead.
Hi, good evening, Varun and team.
Hi, Vivek.
Hi. Am I audible?
Yes.
Okay. Perfect, Varun. Varun, continuing from the previous participant, in terms of journey, what we saw second quarter was probably the trough. What you answered, Percy, in terms of inventory levels are fine now.
Do you think, let's say, the second quarter marked the trough, things got better in third quarter, even got further better in fourth quarter? From here on, the cleanup bit is done, and now it's more around growth. Is that fair from your energy perspective, from management's time and bandwidth, t hat is where you will be spending time. The other way of putting it is, are there any areas which require serious attention, or it's more around growth that you'll be focusing on?
Vivek, I think the management bandwidth is now fully dedicated to getting our strategy into execution. Our strategy had two parts to it. The 1st part was where to play, which is identifying the right categories, and partitions in which we want to play. The 2nd was how to play.
I think the where to play piece of our strategy, we clearly have been able to arrive at, and that part is sort of done. The how to play part is where we believe we are 70% there. All the experiments, pilots, etc., that we were doing, most of them have clearly sort of delivered learnings. We are 70% there. I think over the next two to three months, we should further strengthen the how to play strategy and sharpen that. Then onwards, it's actually just pure execution of that, which we intend to do violently and make sure that we get to our long-term goals that we had set out for. That's how we're doing things.
Okay. That's good to know. In terms of FY 2026, both on growth as well as margins, Varun, what are your, let's say, expectations?
I would not say guidance, but what is it that you are thinking right now for FY 2026?
The plan would, of course, be that we deliver double-digit growth in FY 2026 in terms of value. We intend to continue to use every quarter to build that, sort of go from strength to strength in terms of our execution. Even in terms of EBITDA, of course, compared to last year, we will see significant improvement by about 250 basis points over last year, FY 2025. By the exit, we hope in terms of EBITDA profile, we should get back to our FY 2024 levels.
Interesting. Interesting. The other bit on TDC , where TDC is in its journey, this INR 100 crore ARR in the offline channel is way, probably ahead of, way, way ahead of where Mamaearth was.
Is my understanding correct that whatever measures you have taken on the distribution side on the offline bit has obviously helped or corrected Mamaearth, but it actually serves as a platform for, let's say, TDC now and then Aqualogica and other brands in future?
I would say absolutely the correct understanding, Vivek. That was the whole intent of making those fixes, going through that pain, and building out this distribution system as well. This is supposed to be pipeline for all of our brands in future. The healthier, cleaner, broader that pipeline, it'll be able to carry more business into the offline distribution channels, which we are already starting to see. Yes.
Okay. Got it.
Last question, Varun, is Mamaearth, when you say the focus categories, which is 70%, that has grown double-digit, is that you are talking about the basket as a whole, or you are talking about this on e-commerce and modern trade? This 70%.
This 70% on e-commerce and modern trade has grown in double digit. This was only in Q4, whereby February is when we really started executing our strategy. I would call it a good green shoot because these are the channels where the impact of whatever you do shows up earlier while other channels might have lags.
Understood. Understood. Thank you and wishing you all the best.
Thank you.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We'll take our next question from the line of Mehul Desai from JM Financial. Please go ahead.
Hi team.
Thanks for taking my question and congratulations on a good set of numbers. 1st question, Varun, just on the A&P spend side, how do you see your A&P spends going into FY 2026? What we have seen as a percentage to sales in Q4, do you think that is what will be maintained, or do you see leverage benefit coming in on the A&P side also in FY 2026, 2027? 2nd, apart, I mean, I understand that obviously Derma Co is doing fine. Other newer brands other than Derma Co, which are the, I mean, if you have to take any one or two names which you think that can see a journey like Derma Co in FY 2026, 2027, which would be that brand? These are the two questions from my side.
Yeah. Thanks, Mehul.
From our A&P perspective, like we have mentioned in the past, that's the bucket where we see potential leverage, and we will drive effectiveness to that end. If there is a bit of improvement that will happen, that will be one of the buckets which will add to that improvement. From a perspective of your 2nd question, which is the way Derma Co has performed, which other brand? I mean, honestly, our attempt will be all our brands move in that dimension over the next three to five years. We are very confident that the spaces that we have chosen are spaces that are very consumer-oriented, and our investment in these brands should also pay out with a similar kind of trajectory in these brands that Derma Co has seen. Attempt will be on all fronts. Let's see which horse sort of breaks through 1st.
Sure.
Just on Derma Co, if you can give some flavor on how was the margin trajectory for Derma Co. Last question would be on what are your targets on the distribution expansion on the offline side for FY 2026?
From a Derma Co perspective, last year was the year when the brand became EBITDA neutral. This year, the brand has become single-digit EBITDA positive. I think we'll continue to strengthen its EBITDA profile going into next year and the next. That's the trajectory that we want to see for the brand. Your 2nd question around, could you repeat that?
Yeah. Your target for the distribution.
In the coming year, we would like our GT channel to add at least 50,000 more outlets into our direct distribution from a 12-month unique coverage perspective.
We would want to see this number, which is 100,000 today, get to 150,000 as we exit the next year from our 12-month unique growth.
Got it. Thank you so much, and good luck for FY 2026.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We'll take our next question from the line of Neil Doshi, an individual investor. Please go ahead.
Hello. Am I audible? Yes. Please go ahead. Yes. Actually, I wanted to ask with regards to more direct-to-consumer Mamaearth stores and shops, which can be made open in malls, etc., high streets. What is the view regarding that, as well as export contribution with regards to Middle East and other regions that we export to?
Hi, Neil. We have an EBO channel. Mamaearth currently has over 100 stores across 20-plus cities in the country.
Most of the A-malls and prime mall locations, Mamaearth has EBO stores. These stores serve both the purpose of bringing our larger assortment and categories to life in the physical world, as well as the purpose of building imagery for the brand. We do not have significant plans on sort of using that as the core business or distribution channel. The expansion plans are fairly limited on that front. Our core distribution and business channels continue to be GT, MT, and online, which we focus on. Our international focus also, while it continues to be there as a business, is not a key management sort of focus and agenda. Our focus continues to be on India market and cracking that for Honasa overall and building brand for Indian Gen Z and millennials. That is what sort of will remain focused.
We do get demand from other markets, and we have a strong international team which services that demand. That is about it.
Okay. Okay. Thank you so much.
Thank you.
Thank you. We will take our next question from the line of Jitendra Arora from ICICI Prudential Life Insurance. Please go ahead.
Hi, Varun. Congratulations on the set of numbers you delivered this quarter. My question is more around understanding the construct of the growth, given that we have called out a top-line growth of 13%, whereas UVG growth is 20%. My own perception was the growth is getting driven by brands like Derma Co, Aqualogica, which, my perception was, are more premium in nature. I just want to understand this gap between UVG and top-line growth.
Yeah. Hi, Jitu. Thanks for asking the question.
There are actually two sort of core reasons of why this sort of growth is higher in terms of UVG versus one. We have two types of businesses, right? We have a B2C business, and we have a B2B business. Our business on marketplaces like Amazon, Flipkart, as well as our D2C business, falls in the basket of B2C businesses. The entire business of modern trade, quick commerce, GT, falls in the space of B2B businesses. Now, B2B businesses have lower realization on revenue compared to B2C businesses. For each unit sold, you make lesser revenue in B2B compared to B2C. The contribution of B2B businesses for us has been going up. Of course, in e-commerce, it is because of the quick commerce growth that has been happening.
That's the B2B business transition from e-commerce platforms that we've seen, as well as beauty platforms growing faster. That transition has also led to B2B to B2C. In offline side, again, because MT has grown well, as well as GT sequentially has done better. Those are contributing to a shift towards more B2B-driven growth, which is why UVG is higher than value.
Okay. Thank you. One more question would be, Varun, given that you called out that we are amongst the top five brands in shampoos, if I'm not mistaken.
Face washes. Face washes.
Face washes. Okay. Okay. Okay. We've also improved our market share in shampoos by around 20%.
Yes, sir. Yes.
Just want to understand, given that shampoo large volume and maybe slightly lower value will also be through low-unit packs, where perhaps we may not be participating as of now.
If we were to look at where we are participating, how would this share be?
Actually, the share that we mention is in bottles only. This share that we talk about actually is in bottles because LUPs is not an area that we participate in. That is a share that we do not even sort of talk about or subscribe to.
Thank you.
Thank you. We will take our next question from the line of Ishpreet Kaur from Relax Capital. Please go ahead.
Hi. I just wanted to understand the advertising number that you shared of INR 766 crore. Is it possible to get a breakup between the spends online and offline?
Hi. We do not share such breakups. Actually, there is no online or offline spends because these are A&P spends.
A large part of our spends are in the digital mediums and some, of course, with our customers. This is the sum of all of that that we talk about.
Does this also include the discounts or the offers that are there on the product?
Not really. The discounts and offers, etc., are net off from our revenue.
Net off from the revenue. How is this number likely to be going forward? Is it going to be in line with the revenue or lower growth?
Like I mentioned, this is a bucket from which we see leverage in the coming years. Hence, we want to drive effectiveness and make sure that as a percentage, it keeps going down over years.
Okay.
Is there a metric maybe for us to better understand as to the spends that we do on the digital marketing as to how much is the spend and how much is the kind of sales? Is there any metric for us to better understand this?
Not really. We are investing in brand building, which is a long-term investment to build these brands and awareness of these brands. That is the core investment in this business, and that is what we are doing across our brands.
Sure. Thank you.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We will take our next question from the line of Chockalingam from ICICI Prudential Asset Management. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Varun, how are you all thinking at the board level about dividends as a policy and how to balance?
Because you guys are generating a decent amount of cash flows. So how are you all thinking about it?
Hi. Hi, Chockalingam. So honestly, I don't have a definitive answer for you yet. At this point of time, we would love to also find opportunities of allocating this cash and investment towards more growth opportunities. Of course, in due time, given the company will continue to generate cash, we will come together and deliberate on this and share a view as it forms on how we would like to distribute that cash as dividends.
Okay. Thank you.
Thank you. We'll take our next question from the line of Manoj Menon from ICICI Securities. Please go ahead.
Hi, team. Three quick clarifications from my side. One, I'm sorry if I missed this in your earlier comment while I was listening.
The Mamaearth online-offline piece, particularly in the offline, wherever we currently and just on the Mamaearth piece because that's where we started off with, and the rest of the brands are Derma Co, etc., happening currently, or rather in the last year or so. Just the online-offline piece, some numbers I heard about, if I remember correctly, I think 70% is through dedicated distributors versus, I think, 30-odd percent earlier, etc. Just some of those journeys and how do we look at the milestones you have for the next 12 months on the offline distribution to begin with? That's the 1st one.
Hi, Manoj. From an offline distribution perspective, again, our focus will continue to be on the focus categories that we have called out on Mamaearth. In modern trade, these categories have already started showing good growth. Like we said, we are in double-digit growth in Q4 itself.
In GT, also sequentially, they are getting better. We will continue to track them sequentially and continue to build on them. Every quarter, the focus will be that we further enhance distribution of these focus categories in both GT as well as drive double-digit growth in MT.
Is it fair to, let's say, make a statement of hypothesis that the material part of incremental growth for Mamaearth will actually come from offline? Obviously, I'm not concerned too much about the one-offs for the next few quarters, maybe even for a year of the defocus, etc., that's a transition. Adjusting for that on a like-for-like basis, is it fair to say that for the Mamaearth as a brand in totality, let's say, a significant portion, if I'm to put a number there, let's say 80%, 90% of the incremental growth will come from the execution in offline, particularly in GT?
Again, like-for-like, without taking, let's say, a normalized growth for a GT, sorry, for an MT or an e-com?
To be honest, Manoj, our objective would be that our three channels of focus in terms of growth are e-commerce, GT, and MT. We would like the focus categories to grow in double-digit across these three channels, not only one. Like we had highlighted, the investment allocation piece would not only deliver healthy growth in offline but also help us deliver that growth in e-commerce, which is also a sizable channel for the brand. I do believe that apart from offline, e-commerce also the focus categories will deliver double-digit growth going forward.
Okay. Okay. Okay. Fair enough. Secondly, Varun, maybe just about a year back, you had, let's say, experimented with low-unit price packs at the price point, let's say, relevant for what Mamaearth stands for.
Let's say, I think it's close to 12 months now, if not longer. What's been the, let's say, learning from those experiments? Is it worth ramping up or it's not?
No, actually, very healthy learning, Manoj, and very relevant sort of question as well. For example, to give you a reference, in face washes, most of the brands which are bigger than us in terms of share today, the 50 ml to 100 ml ratio is skewed almost three times towards the 50 ml pack. While in our case, currently, the pack is actually smaller than 100 ml. In the last one year, we have seen a very good traction on our execution on that pack. Of course, it got a little disturbed because of our execution breaking down because of GT changes, etc. Now that we are back to that, early traction in PMF is actually established.
That's actually the core focus area in terms of growth in GT that we will be driving with because we clearly see a lot of headroom in those small packs that we have launched. We'll continue to double down on them.
Understood. Can I take a few more questions? Is that okay, or should I need to get back in the queue?
No, please, you can ask.
Okay. Varun, actually, let's say, take up, let's say, again, six to nine months back, there is one comment about, let's say, in the learning cycle, the necessity to increase the salience of hero products for Mamaearth in offline. Along with these segments you want to operate in, that's probably a marketing decision.
From a sales vector point of view, have you now, let's say, are you clear about these are the, let's say, hero SKUs for each of those segments in Mamaearth as we speak, or is it still in an iterative mode?
Manoj, like I mentioned, I think the where to play was the work that we were doing for the last six months. I think a lot of clarity has emerged right on that front. We are very clear about a few hero SKUs, be it in face wash, be it in shampoo, be it in baby, be it in moisturizers that we want to drive and build. Some of them are already scaled, and we are just doubling down in terms of growth and share on them. Some others are very young and new that we have sort of introduced to get into a certain partition.
Those will be build journeys. As well as within these categories, we have recognized a few partitions for the brand where the brand currently is either not present or very weak. Those are partitions where we will innovate with a winning mix and commit to building them over the next three to four years. That is how we see that chessboard shaping.
Okay. Last two questions or clarifications. Any changes to the customer acquisition cost which you had to make in the last 12 months? Again, on a like-for-like basis. How do you see that? The reason I'm asking is because the comment about, let's say, 4Q FY 2026 margins is where it should be similar to FY 2024. I believe that's all. You alluded to this because FY 2024 had one-offs. Adjusting for that, probably it's better.
I'm just trying to understand is given that, let's say, if you grow double-digit, there should be some leverage we should also kick in. Given that, let's say, within that, let's say, offline outpaces, let's say, the other channels, again, or rather GT is what I mean in offline, again, it should also add to margins. Is there any changes to the CAC, or let's say, there is a willingness probably to spend more on the newer brands? How do I think about the margin algorithm here linked to CAC?
Manoj, we do not honestly think in terms of CAC because we are a fairly multi-channel sort of brand strategy. We think more in terms of brand awareness, reach, and frequency for our brands and investing in brand growth.
Of course, the reality has been that the younger brands have been growing faster, and these are brands which do require higher A&P spends because they are young. They are three to four years old, and hence the awareness is low. That is something that we are investing in building, and we will continue to invest and build. Even from a channel perspective, while GT continues to get better, given our young brands are still 90% online, that growth is largely driven from online as a segment. There, the investment continues to be strong in terms of driving brand relevance. That is how I would suggest you see it. Yes, that is an area which we do see leverage arising out of as channel mix, brand mix, as well as effectiveness sort of comes into play over years.
Understood.
Lastly, creditable performance to the team for, let's say, improving working capital by about seven days, right? - 11 to - 18 is what I saw quickly after the results came before I got into the call. If we could just talk about, in fact, it's a very good performance given what has happened to the channel mix during the year and probably the other focus areas you might have as the top management. If you could help us understand what were those drivers, let's say, the unlocks which helped you achieve this, and let's say, how much more you could do to kick out in the medium term, probably two to three years?
Manoj, hi. I'm on this side. You're asking about working capital efficiency, right?
Yes, that's right.
Yeah.
Yeah, I think from a cash generation perspective, I think Q4 obviously has been a good quarter for us, both from a profit perspective and also working capital increment and generation. It's a mix of, of course, how our channels have scaled and also efficiencies from a receivable cycle and extending the payable cycle in some cases. I think that has been a consistent focus for the last three, four years, and I think we've had some directional improvements there. Hence, what I see is that this is probably a trend which would sort of, it will not probably be difficult to continue from here. We would want to retain the cash generation cycle at these levels as we move forward. Also, I think some of the inventory side has happened during the quarter, which has led to better working capital for us.
Sure. Sure.
Thanks, Manoj.
Thank you. We'll take our next question from the line of Nitin Gupta from MK. Please go ahead.
Yes, thanks a lot for the opportunity. Just one question. How are we going to go about around 30% of your non-focus categories under Mamaearth?
Nitin, I think strategically, we're just activating them, serving them, being tactically present wherever the sort of, be it in online or offline, these categories exist. We don't intend to invest marketing monies in them. That's how we see it in terms of that cluster size. Also, we want that contribution to reduce from 30%- 15% and contribution of focus categories to increase significantly over the next two to three years. I think new investment, tactical availability, is the only thing that we expect to do on those categories.
This means like a gradual sort of reduction in the portfolio rather than rollback of certain category offerings?
Yes, Nitin. In fact, it's not really rollback. I mean, to give you an example, a category like body lotions, which is a non-focus category. Now, in season, because the brand has natural traction and awareness, we have relationships with our modern trade accounts. There is demand that comes in for that category. We'll just serve that demand. I mean, it won't grow, right? It might even sort of decline or stay where it is, due to which if the brand grows and it stays where it is, the contribution will keep sort of going down. It is a category that will generate that gross margin, which we will invest back in the focus categories to win back share. I think that's how we see some of that.
Sure.
This is very clear. Thank you.
Thank you. We'll take our next question from the line of Mudit Minocha from M3 Investment. Please go ahead.
Hi. Great bounce back from last quarter. Just a few questions. Wanted to ask, what is your next year growth revenue and EBITDA guidance? Then I'll go to next one, two years.
Honestly, we're not sharing any guidance from our next year perspective.
Right. On the serum category, is the category still growing 30% a nd how is our share shaping up? And how do you feel about serum category in the next two, three, four years?
We're actually pretty bullish about that category. We have talked about that category in one of our presentations on IBP as well. We expect the category to grow close to those 30% kind of numbers in the next year as well.
We want to make sure as a company, we gain share in that category. We want to grow faster than that in the category. We will put all our sort of efforts. We have already launched a superior product portfolio to take on that category. Now it is more about communicating to the consumers and ensuring excellent execution to gain share in that category.
Right. In your presentation, you have said that your secondaries have been good, better than primaries. I just wanted to understand from the new set of distributors that you have enrolled, how many of them have placed repeat purchases, and how many of you are confident that these have built a decent franchise in the cities?
I think that is honestly a monthly exercise which sort of continues to happen.
The fact that our overdue is a mill, the fact that our secondaries continue to sort of climb, and GT distribution continues to climb from a direct perspective, are all signals that these new partners are fairly strong and stable in helping us deliver our execution agenda. From a perspective of quality, like we had sort of mentioned, I think 70%-80% of our sales are in green in terms of the scorecard and quality that we expect from our partners, and balance is work in progress that we will keep doing over the next few quarters.
Right. On quick commerce, if you are tracking your market share versus peers, is your market share in quick commerce per se better than the incumbents like the large ones?
To just directionally say that your presence in quick commerce is better or you're able to crack this channel better, any nuances that you have picked or your focus there?
Our actual goal as well as Northstar metric is more internal there because it's a new shaping channel. We wanted our shares to be higher than what our overall e-commerce shares are. That's the metric that we're choosing. In most of the categories as we speak, our shares in QC are actually higher than our overall e-commerce shares. That's a healthy sign because if the channel grows, our overall share will sort of grow faster. That's the metric that we are tracking.
Great.
If you could also elaborate about the few experiments that you were trying in different geographies, and any color that something is positively shaping up and that you want to take it to then in Japan country, just for our understanding. That is my last question.
Like I mentioned, I think there are so many of them that we tried. I will not be able to sort of share elaborate details. The fact that Mamaearth, where most of those were done, has seen certain green shoots in our core channels and focus categories points to the fact that these experiments have been showing positive results. Some of the experiments still continue to be on.
We will learn from them over the next two to three months based on which, like I said, we will have a holistic effective how-to-play playbook that we will deploy in coming quarters to continue winning in the market.
Congratulations. Thanks for it.
Thank you. Thank you.
As there are no further questions, I now hand over the conference to management for closing comments. Over to you, sir.
Thank you so much for all the interesting questions. Thank you.
Thank you. On behalf of JM Financial Institutional Securities Ltd, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.