What Mamaearth’s plateau teaches businesses

Mamaearth, once celebrated as a fast-growing D2C brand, found itself at a critical crossroads. After achieving unicorn status, the parent company, Honasa Consumer, made a major shift in its supply chain strategy. The goal was clear: cut costs and improve margins. But the move came with consequences that have put its growth story under pressure.

Let’s break down what happened and what business owners and operators can learn from it.

From Super Stockists to Direct Distribution: A Bold Bet

At the heart of this shift was a supply chain overhaul.

Previously, Mamaearth relied on super stockists, intermediaries who helped bridge the gap between the company and its network of retailers. This model was standard for many FMCG players. But Honasa Consumer wanted to increase control, reduce distribution costs, and improve profit margins.

So, the company decided to bypass super stockists and supply directly to distributors. On paper, this sounds efficient. In practice, the transition introduced new challenges.

The Side Effects: Inventory Trouble and Profit Pressures

While the change reduced one layer of distribution cost, it came at a price:

• Inventory write-offs: The direct distribution model created misalignment in forecasting and stocking. The result? Excess inventory that couldn’t move fast enough and had to be written off.

• Offline channel friction: Mamaearth has been working to grow its offline retail presence. But shifting to a new distribution model while building a strong retail footprint created coordination issues.

• Cash flow strain: Write-offs and slower movement of goods hit the bottom line, especially problematic for a listed company under pressure to show quarterly performance improvements.

• Consumer behavior shifts: As quick commerce (like Blinkit, Zepto) gained ground, buying patterns changed. Traditional distributors weren’t always set up to meet these new expectations.

Could Mamaearth Lose Its Unicorn Tag?

There’s been speculation that the company's valuation and its coveted unicorn status could take a hit. While valuations fluctuate for many reasons, this operational transition clearly impacted short-term financials.

For Honasa, this isn’t just about revenue. It's about profitability, brand agility, and how quickly the business can adapt to a maturing market and changing consumer habits.

What Founders and Operators Can Learn

1. Every cost cut has an operational consequence. Removing a supply chain layer may save money, but it also changes the rhythm of how goods move. Plan for transition friction.

2. Inventory is not just stock — it’s capital at risk. Poor forecasting or misaligned distribution can turn products into losses. This is especially true when demand shifts fast, like in beauty or FMCG.

3. Offline scale needs deep groundwork. Moving into retail shelves requires more than distribution—it needs strong relationships, retail marketing support, and shelf management.

4. Digital-first brands need hybrid agility. Mamaearth’s rise came through online D2C success. As it scales offline, the brand must manage complexity without losing its lean, agile DNA.

Final Thoughts

Mamaearth’s story is still unfolding, and Honasa Consumer has made strategic bets that could pay off in the long term. But the current turbulence shows how operational decisions — even when logical — can temporarily derail momentum.

For any growing company, especially those shifting from startup to scale-up mode, this is a timely reminder: operational execution is as critical as strategy.

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Update: Signs of a Turnaround

Despite the turbulence, Mamaearth is showing early signs of a rebound. In Q3 FY25, parent company Honasa Consumer posted a net profit of ₹26 crore, recovering from a net loss of ₹18.58 crore in Q2 FY25. This turnaround was largely driven by revenue growth and stronger gross margins — a positive signal that the operational reset may be starting to yield results.

For founders and CXOs, this underscores a key lesson: short-term losses during structural transitions aren’t uncommon. What matters is how quickly and effectively a company adapts — and whether it can rebuild profitability without losing strategic momentum.