Mensa Brands, the profitable startup unicorn led by ex Myntra CEO Ananth Narayanan which is stitching a 'house of brands' play is betting on local companies that operate in the fashion, beauty and personal care (BPC) and home categories which together make up a $180 billion market in India today.
The house of brands play is largely along the lines of Thrasio-style model that is built around the acquisition of online brands and scaling them up. The concept first emerged in the West and was introduced by US-based Thrasio Holdings.
GlobalBees, UpScalio are among brands that are competing with Mensa Brands in the space. Interestingly, Thrasio last month announced its foray into India with an investment commitment of $500 million. Thrasio, which has acquired more than 200 brands globally and raised over $3.4 billion in funding, stands to find a lucrative market in India with its rich base of over 750,000 sellers. "India is one of the fastest growing regions for Amazon's third-party marketplace, making it enticing for aggregators," the company had said.
Mensa aims to acquire mid sized digital-first brands in the space that make anywhere between ₹10 crore and ₹200 crore in annual revenues and build on their growth. Being a largely unbranded and fragmented market, the segment provides enough thriving room for the creation of digital first Indian brands for the globe, says Narayanan. "Online currently forms only 6% of the total home, BPC and fashion market. And online is obviously growing faster than offline. In India, modern retail contributes only about 20% of total sales. Before malls evolved, e-commerce took off. It is the right opportunity over the next ten years," Narayanan, founder of Mensa Brands, tells Fortune India in an interview.
The house of brands idea seems to have found resonance in the local market which has of late been teeming with brands that follow a similar business model. And there are reasons to believe why it may pan out well in the country: for one, the emergence of varied e-commerce platforms like Amazon, Flipkart, Myntra, and Nykaa has democratised distribution, making it easy for brands to reach customers across the country. Cheap data has only fuelled growth of digital brands; it has enabled mass consumption of content, something that companies leverage to tap into potential users. "What we are trying to do is build a digital, global, tech-led house of brands from India," says Narayanan.
Mensa Brands looks to acquire 20 brands in the next financial year. The company has adequate capital, claims Narayanan. The startup has raised about $300 million in a mix of equity and debt funding since its launch in May 2021, earning the tag of the fastest Indian unicorn in the process. The firm is positioning itself as a house of mass, premium brands. The brands appeal across metros and smaller cities although tier two and three regions are outpacing the bigger cities in terms of growth.
Mensa Brands has already acquired 16 brands since its inception. Narayanan says that the portfolio of brands are growing at a scorching pace; for instance fragrance brand Villain has doubled its rate of growth post its acquisition by Mensa Brands in September 2021 while D2C saree brand Karagiri is growing north of 100%. "On an average, the portfolio is growing at two to three times of the market," claims Narayanan. Six of the 16 brands have also started selling in the US, UK and Germany. Narayanan explains that Mensa Brands has been able to scale these brands up by tapping into its expertise of digital branding and marketing, something Narayanan and his team has been doing for long. Besides, the startup understands the metrics that brands should work on to gain better visibility on e-commerce platforms. For instance, a brand gets well positioned on the search result of Amazon marketplace if it has been able to deliver products on time and has good ratings and reviews to its credit. For a platform like Myntra, freshness of the product matters, says Narayanan. "I think we are able to optimise for each of these and we are able to sort of really grow and scale the brand. They are being grown profitably. We are not burning money," says Narayanan.
The company's ambition is to create at least 10 brands worth $100 million in the next three to four years. "It will be across beauty, fashion and home. We want to have market leading brands in each segment of fashion, beauty and home," says Narayanan. India has less than 30 brands worth $100 million in the fashion, beauty and home categories at present. "Another twenty, thirty, forty, fifty will be easy to do. We want to be able to do that," says Narayanan.
Narayanan says that the idea is to eventually "IPO (initial public offering) the business." There is, however, no timeline yet.