Why Mamaearth is stuck with dead stock and mounting losses

In the June quarter of 2024, Honasa Consumer, the maker of Mamaearth, decided to launch this new project called Project Neev. The idea was to bring about a foundational change in the way the company operates, especially distribution.

For context, Mamaearth hit the bourses in October last year when everyone else who had IPO plans had decided to hold them off for a bit. But Varun Alagh, the CEO and co-founder of Mamaearth, was of the firm opinion that the timing was perfectly ripe.

Things seemed to be going alright until this month when Honasa Consumer reported its first loss ever since it went public. Everything points to the massive change in the company’s distribution strategy. It decided to dump all its super-stockists or distributors for an in-house sales team that would take care of it. Basically, all the middlemen were kicked out.

The company estimated a one-time hit of Rs 50 crore in inventory losses because of this shift. But Alagh himself admitted in an interview  with The Economic Times that the real damage was closer to Rs 70 crore. 

And former distributors allege that the real picture is much worse. They estimate that there are stocks worth Rs 300 crores lying unsold and unclaimed.

In today’s episode, we’ll delve deeper into what this change in distribution strategy has led to for Mamaearth and its former stockists. 

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