From Unicorn Success To Turbulent Times! Does Mamaearth Really Have What It Takes To Compete With FMCG Giants?

In a country where the traditional consumer goods giants Hindustan Unilever (HUL) and Procter & Gamble (P&G) have ruled for decades, Mamaearth carved out an extraordinary niche for itself in India’s beauty and personal care (BPC) market. Having taken the position of toxin-free, sustainable, and millennial-friendly brand positioning, Mamaearth quickly took up consumer interest and more importantly, consumer trust. It has been a roller-coaster ride from early 2016 to becoming a unicorn in 2022. Recently, it has had financial blunders, operational inefficiency, and rising competition against which future prospects are being threatened.

Questions have been hovering around with regards to Mamaearth, which is negotiating this turbulent phase. Will it bounce back and set up shop as a long-term leader in India’s FMCG sector? Will it succumb to scalability, competition, and profitability pressures like so many others before it in the domain of D2C startups? 

The Origins of Mamaearth: A Millennial Solution to a Millennial Problem

Mamaearth’s birth was very personal and rooted in a very genuine need. Co-founders Varun and Ghazal Alagh were in the midst of their first time as parents, trying to find baby care products in the Indian market that were safe and pure enough. They found that most available products were filled with chemicals and harmful ingredients, which they did not want to expose their child to. This frustration led them to a defining moment: to build a brand that would cater to parents like themselves—people who wanted the best for their children and families without sacrificing safety or health.

Such is the personal story of the parental concern and looking for products that are in alignment with a set of values; so did Mamaearth. So quickly, it became the underpinning of Mamaearth’s story. Taking such an experience as a bed of parents, Alaghs shape their brand to ensure it does not just guarantee safety but also fits into the wider global move towards clean beauty, natural beauty. This authenticity in their story resonated with a large portion of the Indian market, particularly the millennial and Gen Z demographics, who were increasingly health-conscious and eco-aware.

At the center of Mamaearth’s value proposition was its promise of natural, toxin-free products. The brand marketed itself as a solution to the problems parents and families faced when choosing everyday products. Whether it was baby care, skin care, or hair care, Mamaearth was clear and communicated that all its products were free from harmful chemicals like parabens, sulfates, and phthalates.

This came as a boon in that age where the consumers become more knowledgeable and concerned regarding the ingredients used in the personal care products. Mamaearth focuses on clean beauty—products that are safe and effective. A stark contrast from the established, legacy brands, many of which were thought to use harsh chemicals.”

This eco-friendliness and sustainability focus added a further appeal to Mamaearth, particularly among the millennial and Gen Z consumer groups in urban India, which are increasingly driven by environmental and ethical considerations. The brand looked to add eco-friendly packaging and sustainability champions in its product lines. Mamaearth’s values based on authenticity and purpose differentiate it in a crowded marketplace and laid the foundation for what would become one of India’s fastest-growing D2C brands.

Some of the key factors that made Mamaearth an early success are as follows:

Mamaearth had several key strategies that made it disrupt India’s beauty and personal care market. It utilized the D2C model to its best advantage, capitalized on social media power, provided premium products at affordable prices, and increased its product offerings at a very fast rate. When put together, these strategies created an excellent growth storm, propelling Mamaearth to be considered a unicorn by the end of 2022, with a valuation worth over $1 billion.

D2C Model; direct access to consumers

The D2C model that Mamaearth adopted was revolutionary for the Indian beauty and personal care market. Mamaearth bypassed traditional retail distribution channels, which often involve intermediaries and large markups, by selling directly to customers through its website and through platforms like Amazon, Nykaa, and Flipkart. This allowed the brand to have control over the price, product messaging, and customer experience.

By cutting out the middleman, Mamaearth could thus offer competitive pricing while maintaining clear and consistent communication of branding and value propositions. A D2C model gave Mamaearth access to really valuable consumer data, enhancing the company’s understanding of customer preferences, purchasing behaviour, and product performance. This data-driven approach provided for rapid adaptation to change in market trends and consumer demand. Besides, the ease of buying from Mamaearth’s own platform and home delivery added to a seamless shopping experience that resonated with tech-savvy millennials and Gen Z customers.

Social Media Savvy: Influencer Marketing and Trust Creation

Based on this, Mamaearth developed the use of social media channels with perfect effectiveness. By accessing sites such as Instagram, YouTube, and Facebook for access to customers, Mamaearth was able to form a community that could associate themselves with authentic and truthful content. In working with almost every category of influencer from mommy bloggers to beauty influencers, the company reached out to the very people who should have the interest in buying their product. Such influencers have already established trust with their followers, acting as credible advocates for brand claims of toxins and natural products.

This strategy was a tremendous success in targeting the younger generation of customers who place emphasis on being transparent and authentic on behalf of a brand. With this partnership, it continued to showcase its stance for purity and being an eco-conscious brand while relating to these values among consumers. By doing this, it enabled Mamaearth to position itself as the one that values the customer’s preferences just like him. Affordable premium positioning means offering luxury items at affordable prices.

The other significant reason for Mamaearth’s success was its affordable premium positioning. Mamaearth priced its products at a level that appealed to the middle-class consumer and, therefore, made natural, toxin-free beauty products more accessible than those from traditional luxury brands.

Mamaearth’s products were pricier than mass-market versions, but they were more affordable than luxury or international organic brands. The company managed to find a happy medium, providing customers with the glamour of high-quality, premium products without the price tag that typically goes along with such products.

With an affordable premium image, Mamaearth was able to capture a larger market segment, specifically urban middle-class families who were conscious of the ingredients in the products they used but still wanted value for money. This positioning also enabled the brand to move beyond the organic products niche and attract a much broader audience who were searching for cleaner alternatives without luxury prices.

Fast Portfolio Development: Meeting the Needs of Varied Consumers

The other important aspect of its early success was that Mamaearth managed to accelerate its product portfolio in a great manner. Having begun with baby care, the brand rapidly diversified to include skincare, haircare, and wellness products as well, thus offering an expansive catalogue appealing to the maximum number of consumers. Entering these categories helped the brand capture a larger share of the growing beauty and personal care market, which became increasingly popular as more and more consumers began to get interested in skincare routines and wellness products.

With rapid expansion, Mamaearth reached all those consumer segments that consisted of young parents seeking safe baby care products and skincare enthusiasts looking for effective natural solutions. The variety of the products not only brought in more customers but also enabled cross-selling and up-selling opportunities, thus raising average order value.

The Unicorn Moment: Achieving Milestones at Lightning Speed

Reaching ₹2,000 crores in revenue in just eight years is nothing less than an extraordinary journey Mamaearth has undertaken to become the fastest-evolving in the beauty and personal care (BPC) markets. For instance, in order to achieve this exact revenue milestone within India, it took Hindustan Unilever—just one of India’s best multinational corporations—a whole 60 years. This stark contrast marks the speed at which Mamaearth has risen to fame and underlines the disruptive power of the D2C business model, relentless focus on innovation, consumer-centricity, and agility.

Key Drivers of Rapid Growth:

At the core of Mamaearth’s stellar growth was its ability to tap into consumer demands for safe, toxin-free, and sustainable beauty products. In a world so much concerned about health, wellness, and environmental impact, the promise of “no toxins” and “Made Safe” certifications from Mamaearth resonated very well among consumers, especially millennials and Gen Z, who started making purchase decisions based on brand transparency and ethical values. This shift in the behavior of consumers opened a door for Mamaearth to become one of India’s most trusted beauty brands very quickly, gaining a huge customer base.

The other significant factor working for Mamaearth was its strength in the digital space. As it followed a D2C model, the brand connected with customers directly on its website and through the Amazon, Flipkart, and Nykaa portals. It did not use any traditional brick-and-mortar retail channels, meaning it had complete control over customer experience, from pricing the products to the marketing message.

The brand managed to reach the younger audience with relatable content and partnerships with influencers through the help of social media platforms such as Instagram and YouTube. This further helped the brand to strengthen its position in the market.

Expansion beyond Mamaearth: The sub-brand rise

While Mamaearth was the flagship brand, sub-brands under Honasa Consumer Ltd. were slowly built through acquisitions and development to target specific markets. All these helped overall diversification and growth in terms of revenue for the company.

1. Dr. Sheth’s: The dermatologist-formulated brand specializing in premium skincare products met the growing demand for science- and expert-backed solutions. Dr. Sheth’s brand helped Mamaearth position itself as a premium player in the skincare market, where it could specialize in solutions for specific skin concerns for consumers.
2. The Derma Co.: Another very important acquisition is The Derma Co. It’s a skincare brand that operates on active ingredients like niacinamide, retinol, and salicylic acid to provide solutions for issues like acne, pigmentation, and the appearance of aging. So, it served a niche, ingredient-oriented market which opened up more avenues to Mamaearth’s audience toward a more medical or science-led skincare consumer.
3. Aqualogica: Taking inspiration from the K-Beauty movement, Aqualogica focuses on hydration-based skincare. The brand’s adherence to the emerging trend of skin hydration addressed a very specific consumer need that hinged on the importance of moisture and glow in any skincare regimen.
4. BBlunt: In 2022, Mamaearth acquired the professional haircare brand BBlunt. BBlunt is known for its style and salon-quality products and, therefore, the contribution to Mamaearth being able to reach a wide market by bringing it nearer to its quality-conscious consumers of hair care.

Diversification and Multi-Brand Strategy:

All these sub-brands enhance the product portfolio of Mamaearth and turn Honasa Consumer Ltd into a giant in multi-branding, as well. It could then diversify its revenue streams by catering to a variety of consumer needs-from affordable, toxin-free products under the Mamaearth umbrella to premium, science-backed skincare solutions with Dr. Sheth’s and The Derma Co. This multi-pronged approach allowed the company to effectively capture market share in multiple categories-from haircare and skincare to wellness, without spreading its focus too thin.

The diversification also was helpful in mitigating risks associated with market fluctuations because while Mamaearth continued being the major revenue driver for the company, brands such as Dr. Sheth and Aqualogica became growth levers in other market segments- allowing the parent company an easy ride in the vicissitudes of consumer changes. With a broad offering portfolio that catered for varied tastes, incomes and needs, Honasa Consumer placed itself as an agile group of consumer-focused brands holding robust market presence.

Downfall Starts: Financial Storm in 2024

Even though Mamaearth had shot to success overnight, the brand has indeed been through some serious financial storms in 2024 that have questioned its survival in the long run. Once touted as a poster child for India’s direct-to-consumer (D2C) ecosystem that was booming, Mamaearth now finds itself struggling with declining revenues, increasing costs, and a series of operational inefficiencies that challenge its momentum.

Declining Revenues and Profitability

The sharpest decline in revenues and a profitability reversal were among the most worrying developments for Mamaearth in 2024. In September 2024, the brand reported a loss of ₹19 crore, an almost dramatic swing from the ₹40 crore profit it had posted in the previous quarter.

A decline in profitability brought up red flags concerning the firm’s ability to sustain the growth trajectory that it had, at one point, experienced.

In addition, Mamaearth’s revenue declined by 7% year over year. This may signal a plateau in the company’s growth. In terms of a brand that has grown so rapidly, such financial setbacks are severe and alarming. The decreases are due to several reasons such as increased competition in BPC, changing consumer tastes, and issues in effective cost control of operations.

Inventory Write-Off and Supply Chain Issues

The financial disaster was compounded by an inventory write-off of ₹63 crore due to stock that had expired. This is not only a monetary loss but also a reputational loss, especially when one considers the brand of Mamaearth, which emphasizes being a sustainable and environmentally friendly brand.

The problem of the expired inventory is raising issues of failure in supply chain management by the brand, which brings the question of the efficiency of the brand’s operations. Such mishandling of the inventory, however, undermines its credibility drastically for a company focused on natural and safe ingredients, and raises the question regarding the brand promise.

Challenges of the D2C Model

Early success for Mamaearth was provided by the D2C model, but today, it has emerged as a double-edged sword. Over-reliance of the brand on digital platforms and an emphasis on online sales through websites and marketplaces have exposed it to several vulnerabilities.

1. High Customer Acquisition Costs (CAC): Due to increasing competition in the D2C space, the cost of customer acquisition has gone through the roof. The brand, therefore, in the beauty and personal care category, is competing with other brands on the likes of Instagram, Amazon, and Flipkart. Consequently, this increased the cost of digital advertisement and influencer tie-up. As a result, customer acquisition cost increased for Mamaearth and thus its margins came down.
2. Demand Volatility: Contrary to traditional FMCG brands that thrive on steady, predictable demand cycles, D2C brands such as Mamaearth face volatile demand. This can make forecasting sales challenging and keep cash flows from being steady. Consumer preferences change fast, and if the infrastructure cannot keep pace, then brands get left with excess inventory or inability to meet demand spikes.
3. Offline Presence: Mamaearth has tried to push into the offline retail space, but the brand still does not have an extensive offline retail presence, which limits its growth in a market where more than 70% of the beauty and personal care market in India is still brick-and-mortar stores. This is also a challenge as the brand cannot penetrate into a larger audience owing to its limited availability in the offline space, mainly in tier 2 and tier 3 cities, where online shopping penetration is low.

Offline expansion: A double-edged sword

Mamaearth realizes that its D2C model is limited and thus aggressively expanding its offline footprint. Mamaearth products can be bought from modern trade outlets and some standalone stores in India.

This decision, although very necessary to acquire a greater share of the market, has several critical disadvantages:

• High Capital Investment: Offline scale requires significant investment in supply chains, warehousing, and retail partnerships.
• Operational Complexity: Managing inventory across online and offline channels increases the risk of inefficiencies and stockouts.
• Competition with Legacy Players: In retail outlets, Mamaearth has to compete head-on with established giants like HUL, P&G, and ITC, which have decades of experience and deep-rooted distribution networks.

Despite these barriers, the parent company of Mamaearth seems hopeful. The potential that the brand has showcased to reach ₹2,000 crore in revenue within a mere eight years speaks about the brand’s success in an offline space if it can surmount operational inefficiencies.

What Mamaearth Needs to Take from Hindustan Unilever?

As Mamaearth started its journey through the competitive environment of India’s beauty and personal care (BPC) market, there are invaluable lessons that can be drawn from the FMCG giant Hindustan Unilever (HUL), which has ruled the Indian market for decades. HUL was established way back in 1933. Its success has been built on a foundation of scale, efficiency, and brand longevity, attributes which Mamaearth can learn as it seeks to sustain growth and overcome current challenges.

Distribution Network: A Cornerstone of Success Key Difference Between HUL and Mamaearth

One of the key strengths that HUL has is in its massive distribution network that cuts across the entire country. Because of a carefully constructed network of retailers, wholesalers, and distributors, the products of the company are there in every urban and rural corner of India. This extent of reach ensures that brands of HUL are able to reach a broad set of consumers, including in smaller towns and villages where online shopping penetration is yet low.

Mamaearth, which has been a success in the online D2C space, has taken its time to scale up its offline presence. The company has been trying to enter traditional retail channels, but it still needs to overcome significant barriers in expanding its footprint across the country, particularly in tier 2 and tier 3 cities. To replicate HUL success, Mamaearth will first have to build a solid off-line distribution chain, having strong partnerships with retail majors. This will bring good sales and brand awareness with an increase in consumer confidence in the brand.

Brand Trust: Building Loyalty Over Time

For decades, HUL brands have become synonymous with Dove, Lux, and Sunsilk across the Indian household. These brands have immense consumer trust due to quality products delivered over years of advertising and public relations efforts. The focus on maintaining brand consistency and delivering a high standard of products has helped HUL build an unshakeable connection with Indian consumers.

In comparison, Mamaearth is still in its early stages, having just entered into the market as a popular brand. Although the brand is certainly gaining much momentum, its products cannot match HUL’s decades of existence in the market. For that, Mamaearth must lay emphasis on brand longevity – it needs to constantly maintain high-quality, reliable, and trustworthy products with deeper emotional connections with consumers that will eventually build up their loyalty over time.

Operational Efficiency: Streamlining for Success

HUL beats Mamaearth in operational efficiency. HUL has perfected the art of supply chain management, getting products to the consumer quickly and at a reasonable cost, while minimizing wastage and maximizing profitability. Its ability to forecast demand, streamline the production process, and optimize distribution has enabled it to operate at a scale without any comparison and with a high level of profitability.

On the flip side, Mamaearth has been facing challenges here. For example, it recently reported a ₹63 crore inventory write-off because of the expiry of stock. There is inefficiency in the supply chain and inventory management systems of the company. For long-term success, Mamaearth needs to perfect the operational processes, streamline the supply chain, and invest in systems that would facilitate better forecasting and control over the inventory.

What Mamaearth Can Learn?

To emulate the success of Hindustan Unilever (HUL), Mamaearth needs to hone and fortify key areas that are critical for scaling a business to the size and longevity of a market leader. These are:

For sustainable growth, Mamaearth needs to create a distribution network rivaling those of legacy FMCG players such as HUL. HUL’s large distribution network enables it to reach consumers in the remotest corners of India, thus making its products available everywhere.

Mamaearth, which has relied on the D2C model, while very successful online, has limited its physical presence, which restricts its growth, especially in smaller towns and rural areas. Mamaearth should strengthen its offline presence, establish a nationwide distribution network, and ensure its presence both in urban and rural areas to compete with established brands.

Operational efficiency is of prime importance to control cost and maximize profitability. It was HUL’s efficient optimization of the supply chain without any wastage that remained a key factor in keeping the brand at the helm for such a long period. For Mamaearth, this latest inventory write-off, in light of expired stock, underlines the inefficiencies within inventory management and forecasting.

By investing in the technology of supply chain and, having more data-driven methods and improving the accuracy of demand forecasting, Mamaearth is likely to reduce waste, smoothen the flow of operations, and make the brand more profitable. This will be important to the long-term prospects if it is going to continue growing its business without compromising the health of its finances.

Mamaearth’s marketing strategies have been highly effective in creating brand awareness, especially among millennials and Gen Z, but building long-term consumer loyalty requires more than just influencer marketing. HUL’s brands, such as Dove and Lux, have built trust over decades through consistent brand messaging, quality products, and customer engagement.

While Mamaearth has successfully used influencer-driven campaigns to quickly establish itself, over-reliance on influencers might lead to consumer fatigue and skepticism. Mamaearth must invest in long-term brand-building initiatives, focusing on product quality, consistent messaging, and customer relationships. This will help it establish a deeper connection with consumers, which will create loyalty beyond the short-term marketing tactics.

Marketing: The Path of Success and Challenges for Mamaearth

The success of Mamaearth is largely attributed to its new marketing strategies, of which are influencer marketing. Its founders, Varun and Ghazal Alagh, actively participated in brand promotion; they became the face of Mamaearth, communicating that the company has a genuine and meaningful mission.

It embraced the micro-influencer community, which consists of parent bloggers, in its attempts to develop an intimate connection with its customers. Their partnerships have allowed the company to appear more relevant and credible to a target customer base, who now favor transparency and authenticity over product endorsements.

Yet, it still has drawbacks. It faces falling ROI on influencer marketing due to increased market demands. As more brands follow this strategy, competition for influencers and visibility on platforms like Instagram and YouTube has increased, pushing up prices. Consumer fatigue will also set in when influencers talk about too many products, and promotions begin to look unnatural. This will undermine the trust that Mamaearth worked so hard to build.

Mamaearth needs to draw a balance between the influencer and other means of brand-building that would really give a more meaningful, deeper connection with the consumer for it to continue to grow and maintain consumer trust.

The Need for Innovation

For the brand to remain at its best competitive edge, Mamaearth has to keep on changing the marketing and business approach. Though influencer-led campaigns have been key drivers in the rapid growth of the brand, reliance purely on digital marketing might not help sustain growth in the overcrowded market. This makes diversification in marketing very important to enhance deeper interaction with consumers.

Evidently, Mamaearth continues to evolve its marketing as well as business strategy by keeping up with competition at all times. With much of the brand’s rocketing success being from an influencer-driven campaign alone, relying on only online marketing may not work due to the increasing congestivity of the market, leading to a need to expand marketing efforts to enhance attachment to consumers.

Strategies such as community building, loyalty programs, and experiential marketing can provide more meaningful engagement with consumers. By giving the experience of community, Mamaearth can make a loyal customers’ base feel closer to that brand rather than mere business transactions.

Loyalty schemes can drive repeat purchase behaviour along with word-of-mouth marketing activities, while experiential marketing activities like pop-ups or interactive campaigns further entrench the brand’s persona and customer trust. These initiatives will not only boost brand equity but also help Mamaearth stand out among others, who solely focus on digital ads.

Future Prospects: Can Mamaearth Recover?

Mamaearth has many intrinsic strengths that place it well to recover from the recent setbacks:

Mamaearth continues to appeal to a growing segment of more eco-conscious consumers by focusing on sustainability and toxin-free products. These are key to clean beauty in the health-conscious, ethical, and increasingly conscious consumer.

The multi-brand approach under its parent company, Honasa Consumer, would mitigate the risks associated with over-reliance on a single product category. Expanding into different segments like skincare, haircare, and wellness would help Mamaearth buffer fluctuations in any category.

The major expansion area for Mamaearth remains the international market, primarily in the Gulf Cooperation Council (GCC). International market demand for products in natural and sustainable beauty categories is rapidly growing, which helps the company benefit due to the already established brand image in the market.

Opportunities to watch

Although there are those areas, there are significant risks also.

Market Saturation: The D2C beauty market is crowded with start-ups and legacy players embracing similar business models. Increasing competition will lead to pricing pressures and customer flight.

Profitability Pressure: Keeping the growth profitable has always been a challenging test, especially with the rise in cost to acquire customers as they build the brand’s physical stores.

Sustainability Concerns: The ₹63 crore inventory write-off poses questions for the green-conscious image of Mamaearth. Such events may have serious implications on consumer confidence if left unchecked.

A Tipping Point for Mamaearth

The journey of Mamaearth from startup to unicorn and then its struggles are symptomatic of the volatility in India’s D2C ecosystem. While all the ingredients of innovation, agility are based on the brand’s success, consumer-centricities, survival and growth depend on its sustainability and efficiency.

To maintain its long-term leadership position in the BPC market, Mamaearth needs to improve its operational inefficiencies, invest in offline scalability, and focus on long-term brand building. It has the potential to recover and thrive if it learns from established players like Hindustan Unilever and stays true to its purpose-driven ethos.

It remains to be seen whether it can overcome its current challenges to try and emulate the success stories of the legacy giants. As things stand, it constitutes an interesting case study about the challenges that exist in scaling a modern consumer business in India.