Over the past four to five years, direct-to-consumer (D2C) beauty brands have grown at a remarkable pace, with startups like MamaEarth and Sugar Cosmetics dominating the market. While MamaEarth’s revenue grew 2x to Rs 950 crore in FY22, Sugar also managed to grow 75.6% to Rs 222 crore in the fiscal year ended March 2022.
Even though its top line grew, Sugar seems to have grown lost Estimated revenue of Rs 300 crore for FY22 with significant margins.
Total sales of cosmetic products increased by 75.6% to Rs 221.8 crore in FY22 from Rs 126.34 crore in FY21. The company collected Rs 3 million as export incentives. Apart from this, Sugar also recorded a non-operating income of Rs 2 crore, which includes interest on current investments.
Sugar sells its products on e-commerce marketplaces including Amazon, Nykaa and Myntra. It also sells through its website and mobile app, which facilitates sales outside India. In addition, the brand uses social media channels to reach its target audience through advertising campaigns, paid partnerships and influencer marketing programs. According to the company, lipsticks are one of the brand’s top sellers, accounting for about 60 percent of revenue, followed by face products. During fiscal year 22, it entered the hair section through this product education From ENN Beauty.
In terms of costs, advertising and sales promotion costs account for 32.5% of total costs. Expenditure in FY22 rose 2.8 times to Rs 97.54 crore from Rs 34.36 crore in FY21. The cost of procuring cosmetic products from manufacturers was another major expense, which increased by around 63% to Rs 66.35 crore during FY22.
Employee benefits expenses increased by 85% during the year from Rs 19.2 crore in FY21 to Rs 35.52 crore. Sugar also uses outsourced support and manpower for its supply chain operations and has spent Rs 43.61 crore on it. This expenditure increased by over 98% from Rs 22 crore in FY21.
The Vineeta Singh-led company incurred transport and packaging charges of Rs 13.25 crore in FY22, up 50.6% from Rs 8.8 crore booked in the previous fiscal (FY21). Outpacing revenue, the company’s total expenses rose to Rs 300 crore in FY22, almost doubling from Rs 149 crore in FY21.
On the expenses side, the company’s loss jumped 3.6 times to Rs 76.2 crore in FY22 as against Rs 21.1 crore during FY21. High liquidity led to a 4-fold increase in operating cash outflow to Rs 84 crore during FY2011 compared to Rs 20.6 crore in FY21.
Coming to the ratios, EBITDA and ROCE margin decreased to -30.19% and -78.75% for the year. At the unit level, the Mumbai-based company spent Rs 1.35 crore to earn one rupee of operating income in FY22.
In May, sugar increased 50 million dollars In the round of series D led L Catterton in partnership with existing investors such as A91 Partners, Elevation Capital and India Quotient. During the fundraiser, Inc claimed whose current annual revenue rate is around Rs 500 crore and expects to reach Rs 2,000 crore in the next 24-36 months.
Although the company fell short of its target, it appears to have grown well in FY22 with more customers switching to domestic D2C brands. That said, most D2C companies see their growth spike at some point due to reasons such as high customer acquisition costs and others. And with inflation on the rise, consumers may not spend as much on non-essential items like cosmetics, which could perhaps be reflected in Sugar Cosmetics’ financial position in the current fiscal period.