Feature: The fall of Mamaearth has raised questions about the sustainability of several Indian startups, despite the country boasting 114 unicorns and ranking among the top three globally, following the USA and China. However, only 80 out of these 114 startups share their data, and a mere 14 are in profit. This discrepancy prompts an analysis of Mamaearth’s case.
Mamaearth—a once-billion-dollar company that witnessed a decline, repelling investors and stakeholders. Despite gaining immense popularity for its all-natural products, Mamaearth faced a downturn, even leading its brand ambassador, Shilpa Shetty Kundra, to distance herself. Was it due to high-priced products, insufficient investment, poor sales, or lack of publicity?
In its heyday, Mamaearth garnered widespread attention, aided by Shilpa Shetty’s endorsement. The company invested 390 crores in marketing and engaged 3958 influencers for product promotion. The question arises: could Mamaearth afford such expenditures, or were they sustained by actual profits?
Let’s scrutinize some data: In 2020, Mamaearth made sales of 114 crores but incurred a loss of 442 crores. The next year, sales surged to 472 crores, but losses deepened to 1332 crores. In 2022, sales remained at 964 crores, with a meager profit of 14 crores.
Adding to the concern, Mamaearth’s Return on Ad Spending (ROAS) has stagnated at 2.6 for several years. ROAS reflects the profit a company generates from its advertising expenditure. While Unilever’s ROAS is nearly 10, dynamic companies experience fluctuating and growing ROAS figures. For Mamaearth, a constant ROAS suggests stagnant growth or potential issues with customer retention or product appeal.
Another issue emerges regarding Mamaearth’s dependency on e-commerce, with Amazon charging 14-15% of profits. Remarkably, Mamaearth secured a 10% discount from Amazon, resulting in a meager 4% charge. However, relying on this discount raises concerns about Mamaearth’s sustainability if Amazon alters its terms.
Furthermore, Mamaearth lacks a manufacturing unit or a setup, relying entirely on contractual manufacturers. The risk of these manufacturers facing financial troubles or securing better deals elsewhere poses a significant threat. This raises questions about where Mamaearth would find investment and who would manufacture their products, not to mention concerns about influencer payments.
In essence, Mamaearth lacks a company, products, manufacturing unit, and financial independence. Depending on third parties for products, manufacturing, and investment places them in a precarious position.
The final blow is their pricing strategy, restricting their market to a few upper-class consumers, turning India’s significant market potential into a weakness.
Suparjya Swain
