The beauty and skincare segment took a hit over the course of 2020 due to disruptions due to COVID 19 as shopping preferences shifted to essential products and conventional supply chains for the segment took a hit. upheaval.
D2C-centric brands have felt the heat of nationwide lockdowns that took some of the vigor out of their growth numbers during the first half of last fiscal year. Sugar Cosmetics is bucking the trend as it managed 22% growth in its operating revenues during the last fiscal year.
The Vineeta Singh-led company reported operating revenues of Rs 126.4 crore in fiscal year 21 compared to Rs 103.71 crore earned in fiscal 2020, according to the company’s annual report.
The cosmetics startup positions itself as an omnichannel brand, with a presence in over 10,000 retail stores and also selling its products on e-commerce markets including Amazon, Nykaa and Myntra. Sugar Cosmetics also retails via its website and mobile app, facilitating sales outside India as well.
The nine-year-old company made 93.1% of its sales in India with domestic collections increasing 34.1% to Rs 117.61 crore during fiscal 21 from Rs 87.7 crore collected in fiscal year 2020. Export sales took the brunt of travel and freight disruptions, falling 45.4% from Rs 16 crore to just over Rs 8.7 crore during fiscal year 21.
Sugar buys cosmetic products from manufacturers in India and overseas, and the cost of commercial inventory (including testers and consumables) is the largest cost center for the company, accounting for 28.6% of its annual expenses. This cost remained relatively flat due to slowing demand and procurement roadblocks, amounting to Rs 42.6 crore during fiscal year 21 (including imports of Rs 25.9 crore).
Shipping and packaging expenses grew in line with order volume, increasing nearly 24% to Rs 8.8 crore in FY21 from Rs 7.1 crore during AF20. Importantly, Sugar managed to locate all of its packaging purchases in India in fiscal year 21 compared to fiscal year 2020 during which it imported packaging valued at Rs 53.5 lakh.
The D2C brand leverages social media channels to reach its target audience through advertising campaigns, paid partnerships, and influencer marketing programs. This makes advertising and promotional expenses the second largest cost on the company’s expense report, making up 23.1% of its annual costs. Those expenses grew approximately 21% to Rs 34.36 crore in FY21 from Rs 28.43 crore spent during FY20.
Additionally, Sugar Cosmetics pays commissions on sales to retailers and online marketplaces, and these payments increased 129% year-on-year to Rs 3.5 crore during fiscal year 21 as buyers preferred these established sellers including Amazon and Nykaa. .
The start of the growth phase has also increased its employee base during the last fiscal year with employee benefit payments accounting for nearly 13% of its annual costs. These payments grew 51.2% from Rs 12.7 crore to Rs 19.2 crore (including ESOP related costs of Rs 4.61 lakh).
Sugar Cosmetics also employs outsourced support and labor for its supply chain operations and spent Rs 22 crore for the same, while information technology costs amounted to Rs 1.6 crore during fiscal year 21. .
Rents and utilities of Rs 4.3 crore pushed annual spending to around Rs 149 crore in fiscal year 21, which grew 18.2% from Rs 126 crore spent in total during fiscal 2020. Sugar Cosmetics spent Rs 1.18 to earn a single rupee of operating revenue during fiscal year 21.
While there has been a slowdown in growth due to strangers factors, the company managed to improve EBITDA margins by 240 BPS to -11.98%. Improved margins, coupled with 22% scale growth, helped the company reduce its annual losses by 25.3% to Rs 21.1 crore compared to Rs 28.23 crore lost in the year. tax 2020.
Following the claims of the CEO, Sugar Cosmetics is likely to increase its top line by more than 2 times to exceed Rs 300 crore in revenue in the current fiscal year (FY22).
The relative strength of Sugar Cosmetics in tier I and II cities with “tropicalized” products for local conditions both in terms of price and features has kept it in a good position so far. However, just as digital media has enabled its growth, it will also launch its biggest growth challenges, especially on the branding side, where “platforms” like Nykaa seek to dominate, even as specific brands carve out their own niches. He will continue to be challenged by marketing costs for some time to come, and if he reaches the Rs 300 crore milestone in 2022, expect him to rework his strategy in a big way to maintain momentum. Be it new products, channels or approaches to selling.