Honasa hikes prices to offset crude costs, turns to quick commerce and offline for margin gains

Rising crude-linked input costs are beginning to reflect in the price tags of beauty and personal care products, with Mamaearth parent Honasa Consumer taking selective price increases, particularly in its hair care portfolio, to protect margins. But the company is banking on strong volume growth and a changing distribution mix to absorb the pressure without compromising demand.

The company, which reported its highest quarterly growth since listing, clocked a 36% year-on-year increase in net sales in the September quarter of FY27, while underlying volume growth stood at 31.3%. Gross margins remained at 70%, despite crude-related cost pressures, supported by cost management and price increases.

"Even with the cost pressures of crude, we have been able to manage our gross margin profile at 70% by the right kind of cost management as well as price increase measures that we have taken," said Varun Alagh, co-founder and CEO of Honasa Consumer, during the company's earnings call.

Responding to a question on the divergence between value and volume growth, Alagh said some of the difference was attributable to MRP increases, particularly in hair care, where crude-related cost inflation had prompted price hikes. Channel and brand mix also contributed to the difference, though management said there was nothing of major concern.

Despite the pricing measures, Honasa is also seeing growth across its key categories. Face wash was its fastest-growing category in the quarter, followed by shampoo, sunscreen and moisturisers, with all four recording growth of more than 20%. Mamaearth gained 140 basis points in face wash market share and 50 basis points in shampoo, according to Nielsen data cited by the company.

Quick commerce and offline retail reshape channel economics

Alongside pricing, Honasa is increasingly relying on a more favourable channel mix to improve profitability. While e-commerce grew by more than 20% in the September quarter, general trade and modern trade expanded 40% each, highlighting stronger traction in physical retail.

This is also helping the company lower distribution-related costs. Asked whether a higher contribution from B2B quick commerce and offline retail was reducing commissions paid to third-party platforms, Alagh acknowledged that the change in channel mix was contributing to the improvement in other expenses.

Honasa's EBITDA doubled during the quarter, with margins at 12.7%. The company attributed 250-270 basis points of improvement to advertising and promotion efficiencies and a more favourable channel mix, while operating leverage contributed another 110-140 basis points.

Quick commerce is also emerging as a growth driver for specific product categories. BBlunt's hair styling portfolio, for instance, is seeing strong traction on these platforms as consumers increasingly turn to them for quick styling solutions. Its hair colour portfolio has grown more than 100% year-on-year following a relaunch last year.

The company, however, does not expect a significant overall shift towards offline at the expense of e-commerce. Alagh said both channels would continue to grow, with different brands and categories finding traction across platforms.

Honasa has set a medium-term target of achieving 15% EBITDA margins over the next four years. Alagh said the plan already factors in investments in younger brands, new categories and brand launches, although the pace of margin improvement could vary from year to year.