Over the past four to five years, direct-to-consumer (D2C) beauty brands have grown into a hot and attractive role such as MamaEarth and Sugar Cosmetics. is dominating the market. While MamaEarth’s revenue has grown 2X to reach the Rs 950 crore mark in FY22, Sugar has also managed to grow its top line to 75.6%. to Rs 222 crore in the financial year ending March 2022.
Even though its top line is growing, it looks like Sugar miss its estimated revenue is Rs 300 crore for FY22 on a profit basis.
The collection from the sale of jewelery and beauty products increased by 75.6% to Rs 221.8 crore in FY22 from Rs 126.34 crore in FY21. The company collected Rs 3 lakh as an external incentive. Apart from this, Sugar also booked a non-operating income of Rs 2 crore which includes interest earned on current investments.
Sugar sells its products on e-commerce marketplaces including Amazon, Nykaa, and Myntra. It also sells through its own website and mobile app stores outside India. In addition, the brand uses social media to reach its target audience through advertising campaigns, paid partnerships, and marketing programs. According to the company, lipsticks are a big seller for the brand, accounting for 60% of revenue followed by eye products. During FY22, it also entered the hair segment through the received of ENN Beautiful.
On the expenses front, advertising and marketing costs accounted for 32.5% of total expenses. The cost increased by 2.8X to Rs 97.54 crore in FY22 from Rs 34.36 crore in FY21. The cost of buying cosmetics from factories is another major cost and it increased by about 63% to Rs 66.35 crore in the year FY22.
Expenditure on employee benefits increased by 85% to Rs 35.52 crore during the year from Rs 19.2 crore in FY21. Sugar is also hiring external support and staff for its supply chain operations and has spent Rs 43.61 crore on the same. This cost increased by over 98% from Rs 22 crore in FY21.
The Vineeta Singh-led company posted freight and packaging revenue of Rs 13.25 crore in FY22 which was a 50.6% increase from Rs 8.8 crore recorded in the previous year. previous financial year (FY21). On top of the revenue, the company’s total expenses rose to Rs 300 crore in FY22 almost double from Rs 149 crore in FY21.
On the lines of expenses, the company’s net loss jumped 3.6X to Rs 76.2 crore in FY22 compared to Rs 21.1 crore recorded in FY21. The huge cash burn led to a 4X increase in operating cash outflows to Rs 84 crore in the last financial year as compared to Rs 20.6 crore in FY21.
As for rates, EBITDA margin and ROCE decreased by -30.19% and -78.75% year-on-year. On a unit basis, the Mumbai-based company spent Rs 1.35 per rupee of operating profit in FY22.
In May, Sugar smoked $50 million in the Series D round led by L Catterton with participation from existing investors such as A91 Partners, Elevation Capital, and India Quotient. During the fundraising, the company said its current annual turnover is around Rs 500 crore and is expected to reach Rs 2,000 crore in the next 24-36 months.
Although the company did not meet its own target, it seems to have grown well in FY22 with more customers turning to D2C brands. That being said, many D2C companies witness their growth on some occasions for reasons such as high sales prices, etc. And with rising prices, consumers may not spend as much on non-essential items like cosmetics, which could be reflected in Sugar Cosmetics’ earnings at the continuity of funds.
