Ladies and gentlemen, good day at Honasa Consumer Q2 FY26 earnings conference call. 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 and 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. Thank you, and over to you, ma'am.
Good evening, everybody. Welcome to the 2Q FY2026 earnings conference call of Honasa Consumer Limited. Today on call, we have Mr. Varun Alagh, Co-founder, Chairman, and Chief Executive Officer; Ms. Ghazal Alagh, Co-founder and Chief Innovation Officer; and Mr. Ramanpreet Sohi, Chief Financial Officer. I'll now hand over the call to Mr. Varun for his opening remarks. Over to you, sir.
Hi. Welcome, everybody, to the call for quarter two at H1 FY2026. We're going to take you through a few core agendas today. Yeah, starting with, again, crystal gazing the future of Indian beauty. We've been talking about different categories, and today we're going to talk about a very different category, which till now isn't considered exactly as beauty. As we see the developed markets, we're seeing the rise of oral beauty that is happening. Over the next decade, we expect this to shape in India as well. There's a lot of premiumization potential in this category. If you look at the bathroom shelves today, almost all categories, from skincare to haircare to fragrances, have premiumized significantly. Oral has not seen the same level of premiumization.
While this category started with functional hygiene as a stage one of growth, which is what almost 50 years of this category was all about, it moved on to targeted wellness, which is where sensitivity and freshness, etc., were the cohorts that got created. We believe over the next couple of decades, one of the strong partitions which will get created in this category is aesthetics and aesthetic expression, where your smile will be a core part of your beauty and how you take care of your smile through oral will be a play that can happen in beauty and personal care. It is not a small market. We believe this to be a $700 million opportunity by 2030 with the premiumization and rising aesthetic consciousness. That is a point of view that we wanted to bring to the table from a high beauty perspective.
Moving on to the financial snapshot, we have done well in quarter two with a 22.5% growth in revenues. Our gross profits are at an all-time high at about 71.9%. EBITDA continues to be stable at 8.4%, INR 48 crore EBITDA, leading to a PAT of INR 39 crore. Strong UVG at 16.7%. We continue to be in the negative working capital zone. While this is the like-for-like comparison in terms of what we have been showing you over the last six or quarters, there is one change in our financial reporting that has happened in this quarter, which is on account of a change from one of our key customers, which is the Flipkart Group. At a group level, Flipkart Group has changed its settlement process with vendors and sellers. We operate as a marketplace seller with the Flipkart Group.
Earlier, the way it used to operate was that we as sellers used to have a certain revenue, and we used to remove our discount, tax, and costs to arrive at our gross margins. Flipkart as a marketplace used to share with us an invoice for the logistics and fulfillment costs, which is what used to go in our costs. Now, the change that they have made since last quarter is that they are not sharing this cost with us as an invoice, but they are actually reducing that from the revenue itself and hence, in a way, charging that to the consumer, which is why the revenue recognition, the cost that used to be there. If you see the calculation that we have shown for a INR 100 product, there used to be INR 32 of logistics and fulfillment cost.
Now that INR 32 is being reduced from the revenue itself, while the rest of the things remain same. Sales commission cost, COGS, etc., remain same. While in value terms, the net contribution margin or EBITDA from the channel remains same, the revenue recognition denominator has reduced. In terms of actual financial impact, this has had a INR 28 crore revenue recognition impact in the quarter to us, but it has no effect on absolute profitability for the company. If we were to see from a like-to-like basis, which is what we have been showing as our results in the past, our basis 462, our deliveries 566, which is a 22.5% growth.
If we were to see this after Flipkart adjustment, our reported for Q2 FY2026 becomes INR 538 , while the like-for-like also for the last year's same quarter becomes INR 440 for comparison purposes, leading to a similar growth of about 22.4%. The profitability is being the same in terms of actual value terms. Of course, if you look at in terms of percentage, because the denominator goes down slightly, the percentage EBITDA will look slightly higher. That said, this is something that the customer has sort of taken a call on for all sellers that sell on Flipkart, and hence is something that is an impact on us as well. We will continue to share like-for-like based numbers for better understanding and correct comparisons in the future as well. At an H1 level, we have delivered 14.5% growth.
Gross profit has also improved by 112 basis points, EBITDA margin of about 8%, and INR 93 crore EBITDA, in fact, at about close to 7% is what we have delivered. From a highlights perspective, I think the good thing is that the core strategies that we had talked about at the beginning of the year continue to deliver well for us. I think the first core strategy was to focus on a few core categories and actually gain strongly in those categories. The growth in those core categories is actually much better than the overall growth of the company. The growth now in focus categories is across channels. E-commerce also is 20%+ , modern trade is also 20%+ , and GT also its double-digit secondary sales growth in core categories that we've seen. From a 70% contribution last year, the core categories are already contributing 75%.
That was always the plan that over the next four to six quarters, we intend to take this number itself to 84%-85%, which will lead to strong share ownerships within these categories as well. That continues to do well. The second thing that we had talked about and was a strong focus area for us was turning around Mamaearth. I'm happy to share that Mamaearth is back in green in terms of growth. With and without being based, both are strong sort of growth for Mamaearth. Now, across channels, again, earlier e-commerce and modern trade had started showing good growth profiles. Now, general trade is also on a growth trajectory in terms of secondary sales year- over- year. This is also visible in the share gain that we are seeing based on Nielsen, where we continue to gain YoY share.
We have also been able to build another hero SKU and ingredient for us in Rice Face Wash, which is our third face wash for the brand to enter the INR 100 crore+ ARR and continues to grow fairly strongly. That is something which is heartening for us. We are very confident that now moving forward, this growth in Mamaearth will actually only get better and towards the goal of double-digit growth that we want to get into. Young brands, again, continue to deliver well. 20% YoY growth is what we are seeing on the young brands portfolio. We continue to do the right kind of core category activation and innovation across BBlunt, Aqualogica, Dr. Sheth's, and Staze. The Derma Co, which is the larger brand after Mamaearth, is again touching newer heights.
The brand has delivered a INR 750 crore net sales ARR in the quarter with high single-digit EBITDA profile. Based on Euromonitor, it has become the number one sunscreen brand in the country for 2024. We are quite happy to see that. While we continue to strengthen our position in the core categories of face wash, face serum, and sun care, the brand is now looking to build moisturizers and shampoos as categories as it gets in the stage to get to a INR 1,000 crore+ kind of a brand over the next one to two years, which is how we see the brand shaping up as we move forward. We continue to strengthen our general trade distribution. This is another focus area that we have. We have seen sequentially growing secondary sales rate growth, 35% YoY increase in terms of direct outlet billing.
Based on Nielsen, now the brand is available in 250,000 plus retail outlets. Very importantly, last year, we had taken an initiative to move away from superstockists to direct distributors. Last year, same time, our superstockist contribution was two-thirds and direct distribution contribution was one-third. Happy to say that now, as we stand today, 80% of the business is actually coming from direct distributor contribution. That is a change which has been hard but necessary and forms a foundation of our growth of multiple brands in the future. I think we're quite happy with the progress that we've made in this market. R&D in product superiority is another area where we continue to develop new technologies and formulations. We developed deep penetration formula in The Derma Co, where we have found the right kind of actives and encapsulation technologies to enhance penetration of our active serums.
In Aqualogica, we have developed the first in vivo tested sunscreen with anti-pollution factor. The kind of pollution there is nowadays, consumers not only want sun protection, but something that can also provide protection to them from pollution. This is a formulation which is clinically tested to do that. We are happy that we have been able to crack such a technology, which is relevant for India. Premiumization is another area where we continue to work. We have collaborated with a lot of influencers, creators to launch more premium ranges. In BBlunt, we collaborated with Tarini. In Mamaearth, we have collaborated with a dermatologist couple, Dr. Sarins, to develop a Dermasoft range, which is developed by them in line with what they think is right for baby skin and launched together with them. We also continue to strengthen our prestige play within brands. In Dr.
Sheth's, we have launched multiple prestige serums now with new-to-India ingredients like Adrenaline, PDRN, etc. We continue to do that in the future as well. Overall, we continue to focus on core categories to find avenues to use innovation to gain share within those categories. Across the core categories, we've had relevant innovations which are helping us gain share within those categories. Now that we are feeling confident about the new playbooks, media mix development that we have been working on, we've also been now actively looking at further engines of growth from a long-term perspective as well, and hence actively looking at new brand or category opportunities. The first one that we've been working on for almost one and a half years now, and we have finally launched last week, is a brand called Luminéve
This is almost, in fact, in the morning, we were just searching and asking ChatGPT if there is any brand in the world that focuses only on nightcare. The only brand we talked about was Luminéve. We genuinely believe that this is probably a first-world innovation in terms of brand propositions, where a brand that specifically focuses on nightcare is what we have developed. Beauty sleep as a concept is a very relevant concept amongst consumers. There is actually deep science behind that concept as well. When you're sleeping, the cellular regeneration and skin repair is at its peak. This is the time when you, if you take the right kind of nightcare regimes, you can make the maximum impact on your skin health. That's the underlying science behind this brand.
We've launched this for six different skin types by working with Indian and global dermacs. This has currently been launched exclusively with Nykaa at NYKAALAND that happened to collaboratively work and capture the prestige market. We believe this is not just a brand which will take India sort of by surprise, but also probably help us in global expansion as well in the future. This is our first entry into prestige skincare, which is priced almost 2.5 times what our current products and categories are priced at. Apart from this, we've also made an investment in the future of oral beauty. Like we said, there is rise of oral beauty that we expect over the next decade. One of the things that we have been thinking about is the only inorganic play that we were actively doing was by participating with majority acquisitions.
We realized that while it is great for categories and portfolios which we want to get involved in high capacity right now, that also disallows us to participate in Horizon 2 kind of categories which could be additive to our business, but where the founders might not be looking to give away strategic control right now. That is an opportunity that we are looking at participating in by funding brands like Fang, which are at early stage level, taking a significant minority, helping the founders build the brand into something extremely meaningful. We see Fang to be clearly one of those brands which can become a prestige leader in the country from an oral care perspective. It is a beautiful set of products and a set of founders which come with extremely relevant experience.
This is a team that we would like to back, and we would like to support them with the playbooks that we have to build this brand into something larger. Of course, on our goodness initiatives, as our brands grow, our contribution to community continues to grow. Mamaearth has hit its goal of planting a million trees, which we had till 2025. We have taken a goal to plant another million trees over the next five years, and we are very confident that we will achieve that. This happens as the brand grows and as more consumers engage with us. All the other brands also continue to be on their journey of making the community impact as they grow. Thank you so much for your patient hearing. We would love to answer the questions that you might have. Thank you.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and one. You may also post your text questions on Webcast. Our first question comes from the line of Videesha Sheth from Ambit Capital. Please go ahead.
Yes, hi, good evening. My first question was on Mamaearth as a brand that while you've mentioned it's back in the green, that seems to be alluding to the secondary sales. From the primary growth or primary sales perspective, when do you expect growth to be back in the green?
Primary also is back in green.
Okay. All right. Going forward, if we were to talk about the next two years, the outlook is more of a mid-single-digit growth, high single-digit growth. If we can also double down on the initiatives that you've undertaken, a little bit more on the level side.
Yeah. From going forward, I think the first objective is that high single-digit growth in the next quarter and the objective to touch, get into double-digit growths by Q4 and then try to maintain that as we get into next year. From our perspective of strategies, I think it's actually been simplification, which is focusing on core categories, sufficiently funding them rather than diversifying our investments too broadly into multiple different sort of categories. Even within those categories, identifying certain hero SKUs and actually building them more deeper rather than, again, spreading ourselves thin across categories. I think focus is the one big change.
Second has been media mix modeling-based learnings that we did on the brand as to what is the best combination of media which works for the brand, which is a testing that we did over the four to five months and then deployed it this year. We are clearly seeing the results of that. I think we will continue executing those strategies going forward as well.
For sure. Second was on the margin side that given that first half has been better than expectations, are you looking to increase the guidance from the 7% range?
We believe that we will now stay at least at this range even in the coming quarters and then for the next year.
I have a couple more questions. I'll get back to you.
Thank you. Our next question comes from the line of Nitin from MK. Please go ahead.
Thanks a lot for taking my question. My first question pertains to like-to-like growth is at around 22%. When we talk about Mamaearth, it is moved into the growth path. Your younger brands have grown 20%. Somewhere I am unable to get to this 22.5% like-to-like growth. Can you please help?
Yeah. Nitin, so I think we've been also cognizant that last year, same quarter, we had the Neev piece. Actually, if you look at just on pure like-to-like basis, Mamaearth's growth will be high double digits. That is on account of the fact that there is a Neev return base which is all allocated to Mamaearth. Even if we were to take that base into account, it's still a positive growth for the brand, which is why we have kept the commentary more in line with the adjusted sort of base. Yes, you're right. If we were to sort of purely look at mathematically, then our growth for the quarter is actually in strong.
Sure. This is really helpful. With respect to our actions in terms of getting into the premium segments in the personal care side plus oral care, any thoughts you guys have around wellness as a category? Because some of the brands are sort of getting into wellness along with the personal care and that work as a regime. Any thoughts you can offer here?
Actually, a very interesting area of conversation. I think I will park that for probably more of a one-on-one conversation sometime. Honestly, you're right. We are observing the trend of wellness adoption, nutraceutical adoptions within the market. We are also observing the regimen trend happening within consumers. How we want to take on that? Do we want to take on that opportunity in the medium term? Yes, we would like to. How we want to take on that opportunity, will it be as part of our extensions of current brands, or do we need to sort of take it as a separate sort of play? Is not something that we have a strategic view on as we speak. As soon as we have a crafted view on the same, we will surely share with you.
It is a space which we are very closely watching, understanding, and building hypotheses around.
This is helpful. Lastly, around this oral care again, we have taken a 25% stake in this brand. Would you like to keep your exposure in oral care like this, or are you open for any further M&A in the oral care space?
Ideally, I don't think we would like to have multiple sort of brands of play in the space. We genuinely believe there are a few partition spaces, especially clean label and whitening, which are the core partition spaces which we believe will get built over the next decade. This brand already plays in that partition space. We would rather build this into a stronger outcome than get into multiple sort of brand plays because it's not like we are seeing multiple partitions actually take shape. This is in line with the hypothesis that we have. Hence, we would rather focus and build this into a much stronger outcome for the brand.
Sure. Just to follow up, as for the contract, is there any option we have down the line three or five years we can increase our stake in this company?
Yes, we have the right, but not an obligation. We would honestly love that if the brand does well and we are able to further partner with the brand by gaining more sort of ownership and investing into the company for it to grow stronger. I think that will be the ideal scenario.
Sure. This is helpful. Thanks a lot for taking my question. All the very best.
Thank you. Our next question comes from the line of Sucrit D. Patil from Eyesight Fintrade Private Limited. Please go ahead.
Good evening to the team. I have two specific questions. My first question is to Mrs. Ghazal. Just looking beyond the quarter number, what are the long-term plans for Honasa from an innovation point of view? As consumers' preferences shift towards more science-backed, sustainable, and premium products, how are you shaping the innovation pipeline to stay ahead of your competitors? Beyond just new launches, is there a deeper approach that you are building or you will be building in the future which will make the brand stronger and hard for your competitors to copy you? This is my first question. I'll ask my second question later.
Okay. Hi. I think on innovation, we've been talking about the focus that we have as a company on two, three areas. One is product superiority. Ensuring that across all of our focus categories, we have products measured through blind tests to be superior than the competition out there. That is something that we have showed in the past, we'll continue to show as we move forward. The second area of focus for us is to bring in newer concepts, newer ingredients, which are first to India. I think Varun also spoke about it briefly. For example, premium serums in Dr. Sheth's has brought in ingredients like PDRN or Argireline, which are first-to-India kind of ingredients and concepts.
We are also working on technologies like a deep penetration technology, which is our own trademark technology, which ensures the efficacy of the product increases and also is something new, which no other competitor has. I think on the third front, our focus is also on building a prestige portfolio, which you can see in The Derma Co, in Dr. Sheth's, and now with the launch of Luminéve. That also is something that Honasa will continue to focus on.
Thank you. My second question is to Mr. Ramanpreet. Again, a forward-looking one. When costs rise, whether it is marketing, distribution, or raw materials, how do you make sure the margins stay steady without the growth hampering? Is there any system you have built that may be like price discipline or smarter sourcing that is helping you keep the profits in line whenever things are getting unforeseen conditions may arise? Just want to hear your point of view on this particular point. Thank you.
Sure. Thank you so much for that. I think two, three things. Firstly, if you see a gross margin profile, like Varun mentioned, I think we have now averaging 71% plus gross margin consistently. A couple of factors are playing in our favor as we have scaled our business. Of course, given the scale, we are buying better. Our government efficiencies are showing. Our product mix, especially led by face categories and also with entry into prestige categories, is helping pump up our gross margin profile. As we move along, as we and our younger brands, especially The Derma Co, Aqualogica, Dr. Sheth's, all of them are face-driven brands, skin brands. Hence, our gross margin profile has been moving in the right direction given the mix of those brands. As the scale improves, we continue to move in the right direction.
Of course, as we've showcased in the first half, as the business continues to scale, we also continue to see operating leverage play out. A big lever for that has been our marketing efficiencies. As our younger brands continue to scale more, we will continue to see efficiencies across our marketing investments. We've indicated that every year, we target to unlock 50-100 bps of operating margin profile, which will be a mix of all these initiatives.
Thank you for the guidance. I wish the entire team best of luck for Q3.
Thank you.
Thank you. Our next question comes from the line of Nihal Mahesh Jham from HSBC. Please go ahead. Nihal, sir, your line is unmuted. Please proceed with your question.
Apologies for that. Am I audible now?
Yes, sir, you're audible.
Yes, yes. Hi, team. Good evening. I had three questions. First was on Mamaearth, would it be fair to say that the primary sales are similar to what we would have reported in Q2 2024, that now the brand is back to what it was delivering two years back, leaving apart the impact of last year?
Yeah. I mean, we will need to sort of look at that number and come back to you. Yes, over the last year base, it's now in the single-digit growth in primary and even adjusting for the basis one.
Sure. I'll check that separately. The second is, Varun, when you commented that you're looking at high-second digit growth for Mamaearth in the coming quarters, that adjusts for the Flipkart impact that will ensue in Q3 and Q4 also, or that's the organic growth ex of the Flipkart impact?
Honestly, the Flipkart impact cannot be seen without adjusting the Flipkart impact in base. If you only take the Flipkart impact in your numerator but not take it in denominator, things will look suppressed, which is why the financial sort of results will always sort of indicate that suppression. Given in the base, there will be no correction, but in future quarters, in general, there will be correction. I do not think you can sort of, we can say correction के बाद क्या होगा, क्योंकि correction के साथ आपको base में भी correction करके देखना पड़ेगा. If you look at that with base correction, yes, we are looking at sort of single digit growth.
Got it. Where I was coming from is that I think you're implying that the organic growth for Mamaearth should be high single digit, just that maybe on a reported basis for Mamaearth, it may optically look lower because of the fact that that adjustment right now doesn't sit in the base. So just wanted to clarify that.
Yes. Which is why I think we will continue to release sort of the comparable numbers and enunciate how it is based on the comparable numbers in future as well. The next three quarters till this base is sort of getting corrected.
Understood. One final question. When we speak of the focus categories, which is now at 75, what is the thought process of the other categories that Mamaearth has sort of entered into over the last seven years? Are they status quo, or is it that gradually we plan to sort of exit them and keep Mamaearth in these six, seven core categories and just three, four more ancillary categories? How do we think of Mamaearth over the next two to three years from the non-core categories, non-focus categories?
From our next few years, which is next two to three years perspective, the focus will be just to sort of completely focus on the six core categories and strongly grow them. Of course, the non-focus categories are declining, and their contribution hence will continue to go down. Once the brand reaches even stronger scale, let's say the next milestone is INR 1,500 crore, then there is INR 2,000 crore, and even the profitability further significantly improves. Hence, as the brand has more money to optimally invest in another focus category, then we will probably look to open one more and say, "Okay, let's open one more and optimally invest and build that category also." For now, these six are the core engines of growth from a next three years perspective.
Understood. Very good. Just a final follow-up that beyond the six category, which will be the seventh biggest category right now for Mamaearth, in case you plan to activate just for our awareness?
I would say body is the next biggest one, which is the body lotion, body wash kind of a category. From a size perspective, that's it.
Got it. Thank you so much. Wish you all the best.
Thank you. A reminder to all the participants, if you wish to register for a question, please press star and then one. Our next question comes from the line of Akshat Jain from Sixth Sense Ventures. Please go ahead.
Yeah. Hi, Varun and Ghazal. I'm just going to add a couple of questions. Firstly, in oral care, we mentioned that we project the market to touch around $700 million in the next six years. My question is that somehow in the past 10, 15 years, even though social media usage has gone through the roof and other forms of beauty have done very well, oral care somewhat has been left behind. How do you look at that going forward? Will this continue to be a very niche concept, or will it achieve that kind of scale?
Honestly, every category sort of and trend has its time. I think the last decade, there was a lot of skin and hair premiumization, which was already happening and which has taken shape very well. As well as the larger disruption from a channel perspective that happened was e-commerce. Now, e-commerce did great for categories where the AOVs were 200 and above. For categories which were 200 and less AOV, it did not make that much impact. Now, quick commerce coming in and scaling has actually created the right playground for categories which are sub-100 or sub-200 price points also to get disrupted with quick commerce. Also, clearly, if you look at the developed markets also, like the U.S., etc., oral disruption has lagged by 10-20 years compared to skin disruption in those markets.
Now there are multi-$100 million-$300 million brands in single partition spaces which have been built over the last five to seven years. We have been watching that space, and we think it is now the right time to get in and bring a brand in that space.
Sure, sure, sure. My second question is on Luminéve, what are revenue projections or plans for the next one or two years?
No projections. It's a young brand. It is right now in a build phase. We will build it slowly. We will build it right. Prestige brands need very strong foundations. They're not about explosive growth, but foundationally strong bonfire-type conversations. Of course, the opportunity size in prestige is very large. We believe over the next decade, prestige skincare itself will be like a $4 billion opportunity. As an organization, it's important that we participate in it as well as build capability in taking share in that market. Otherwise, that sort of opportunity will get missed out. That's the core objective. I think it's a decadal opportunity that we see.
Sure. Thank you.
Thank you. Participants, you may press star and then one to ask a question. Our next question comes from the line of Mudit Minocha from M3 Investment. Please go ahead.
Hi. Great set of numbers. Congrats for that. Wanted to understand what is the next leg of growth going to come for The Derma Co, given now it has reached to a stage where Mamaearth had become matured. Are you thinking to take it offline? How's the growth projection for that particular piece?
Hi. Thank you for asking. I think there is a lot of potential areas for growth for that brand. Firstly, even in the core categories, for example, it has got low single-digit share in face wash as a category. There is a lot of potential to grow in face washes. We also sort of are continuing to gain share in sunscreen and serums. There is potential to grow through that. We talked about building two new categories, which are moisturizers and hair, which in themselves are almost INR 10,000 crore as a category opportunity. There is opportunity to add delta by participating in those core categories. Like you rightly said, there is expansion in offline that is already starting to happen. Offline for The Derma Co is more than INR 100 crore business now and continues to grow well.
That's the other area where we will continue to sort of double down engagement.
Got it. The second question for me would be, what's the economics that's finally getting set for quick commerce business? Following to that would be, what's the percentage of sale that you ballpark or qualitative color on what's our share for quick commerce? Which categories do you think are poised for quick com in our portfolio?
I think let me go reverse. From a categories perspective, I think quick commerce has clearly surprised everyone. It sells all our focus categories from serums to lipsticks. Everything is sort of selling on quick commerce from small packs to large packs. Everything sort of is there. I think the category opportunity exists for all categories. Of course, it's skewed towards certain categories like giftings, etc., which do even better. Otherwise, all our core categories sell well on quick commerce. Quick commerce is now about 10% of our revenues already and is the fastest growing channel for us as we speak. From an economics perspective, it's got healthy economics. For us, compared to our marketplace business, it's actually relatively healthier economics. It's actually a good Delta addition that is happening to business.
Great. Could you also give us some update on that project that we were conducting? What's the distributor reach? I mean, you were to reach out to one lakh distribution points. Could you give some color on what went in last one year to turn around Mamaearth? How are things now looking going forward?
Yeah. Like we mentioned, I think that's been one of the strong focus areas. It's a combination of what we have done on brand pull and on our offline distribution execution, which has helped us turn around Mamaearth. Specifically on GT perspective, it was all about transitioning from a three-layer distribution system, which involved us selling through super stockists to a two-layered distribution system where at least in the top 100 cities, we wanted completely direct distribution. Now in the top 100 cities, we have completely moved direct. I think I would say about 85% of the clusters where we needed the right distributor, that job is done, 15% clusters, we are still, as we speak, building that strength. That should also happen over the next three to six months across the top of the cities that we've talked about.
That has, of course, helped us improve direct distribution. We talked about increase in our secondary direct distribution by 35%. We also talked about how our direct distribution is now 80% of our billing that is happening is actually happening through direct distributors. I think that effort is clearly visible in our numbers.
Great. If I could ask one more, Operator, if that's okay.
Sure.
I want to understand your thesis around getting into new brands. Even you said in, say, Mamaearth, you want to restrict it only in six categories because that brings focus and the right amount of investments for each category. Now, when it comes to new brands, we have seen that you have come up with two new brands. What's your approach to getting into new brands? If there are INR 150 crore brands, what's the continuum that you want to maintain in a business? I remember there was one Forest Essentials kind of a brand that you had cultivated and which was then discontinued. How is the management focus or bandwidth distributed for these new categories?
Yeah. I think firstly, we always look at new opportunities from the lens of consumer white spaces. When we look at that, I think we look at this category on three axes. One is the axis of category. For example, skincare is a category. Even within skincare, there could be moisturizers, sun care that are categories. Hair care is a category. Fragrance is a category. Oral is a category. The second axis is actually propositions, which is naturals is a proposition, actives is a proposition, hydration is a proposition, salon professionals is a proposition. The third axis is actually price. You could be a mass price brand, mass premium price brand, prestige priced, luxury priced.
If you look at some of the global beauty companies like L'Oréal, Estée Lauder, and look at their portfolio, you would clearly see how this combination of axis comes to life. They would have in the same category brands which are varied on price, in the same proposition brands which are varied on price, or in the same price brands which vary on proposition to capture the maximum share of wallet of the consumer. That is the strategy that we deploy when we think about new brand creation, which is when we see clearly a white space where we think that the current brand cannot capture that fully and it needs a separate brand chassis to get captured, which is what we felt being on the oral opportunity or being a nightcare expert proposition opportunity. We will look at answering that with a new brand.
If we can answer that same opportunity or white space under the current brand, that is, of course, a preferred route that we follow. From a management bandwidth perspective, one, internally, we have a function which is called brand factory where we specifically cultivate these brands and build them. That is a separate function which only focuses on the zero to one journeys of this brand. As well as where we accept that internal bandwidth might not be enough and is where we choose routes like what we have done with Fang, which is participation, or what we do with M&A where we acquire, but then we have three years of founders who are working in scaling that brand. Honestly, we believe this is a genuine strength that we have as a company.
There are rarely FMCGs out there which have been able to demonstrate building their own brands and scaling them. It has largely been an acquisition-based strategy, and we have demonstrated how we can actually craft and scale our own brands as well, which in the long term is far more capital efficient. We will continue to look for opportunities to serve consumers by building new brands in India. Next decade is going to be a mega brand creation opportunity in this country because a new generation of consumers is clearly looking for brands which delight them.
Thanks. Thanks for such candid answers. Thanks for this thoughtful process that you follow. Looking forward to meeting next call.
Thank you. Participants, you may press star and then one to ask a question. Next question comes from the line of Jitendra Arora from ICICI Prudential Life Insurance Company. Please go ahead.
Hi, Varun and team. Congratulations for a good set of numbers. I just have one question on your colored beauty brand, Staze, that how is it progressing, which you can throw some light on that, please?
Hi, Jitu. So honestly, the progression has been good. I think from a brand searches perspective, PMF perspective, the brand is growing triple digits over last year. I think that has been a good sign. It's a category which has been a learning for us. It's a complex supply chain that we have taken time to learn on. It's a shade-based supply chain. It's also a supply chain where there is some reliance on China supply chain for packaging and in some cases conversion perspective. That's been a learning curve in itself. Now we are feeling far more confident in terms of being on the better end of that learning curve where we can deploy consistently and make sure that the brand grows strongly.
Thank you, Varun.
Thank you.
Thank you.
Reminder to everyone, if you wish to register for a question, please press star and one now. If there are no further questions from participants, that concludes the conference for today. On behalf of Honasa Consumer, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.