Sugar Cosmetics reports Rs 222 Cr in revenue but 3.6X more losses in FY22
- ByStartupStory | December 6, 2022
Direct-to-consumer (D2C) beauty firms have expanded at a blistering rate over the previous four to five years, with startups like MamaEarth and Sugar Cosmetics dominating the market. Sugar managed to grow its topline by 75.6% to Rs 222 crore during the fiscal year ending March 2022, while MamaEarth’s income increased 2X and reached Rs 950 crore.
Although Sugar’s top line increased, it appears that it significantly undershot its FY22 revenue projection of Rs 300 crore. Sales of cosmetic and beauty items generated a 75.6% increase in revenue to Rs 221.8 crore in FY22 from Rs 126.34 crore in FY21. 3 lakh rupees were received by the corporation as export incentives. In addition to this, Sugar reported a non-operating income of Rs 2 crore, which comprises interest on recent investments.
Products from Sugar are offered for sale on online stores like Amazon, Nykaa, and Myntra. Additionally, it facilitates sales outside of India through its own website and mobile app for retail. The brand also uses social media platforms to advertise to its target audiences and engage them through paid partnerships and influencer marketing initiatives. Lipsticks, which account for about 60% of the brand’s revenue, are a top seller, according to the company, followed by face products. It also entered the hair category in FY22 through the purchase of ENN Beauty.
Advertising and sales promotion costs made up 32.5% of the overall budget for spending. From Rs 34.36 crore in FY21 to Rs 97.54 crore in FY22, the cost grew by 2.8X. Another significant expense during FY22 was the cost of purchasing cosmetics from manufacturers, which increased by around 63% to Rs 66.35 crore.
From Rs 19.2 crore in FY21 to Rs 35.52 crore throughout the year, employee benefit spending jumped by 85%. For its supply chain activities, Sugar also uses outsourced labour and support, spending Rs 43.61 crore on it. From Rs 22 crore in FY21, this expenditure increased by more than 98%.. Freight and packaging costs for the Vineeta Singh-led business reached Rs 13.25 crore in FY22, up 50.6% from Rs 8.8 crore booked in the prior fiscal year. The company’s total expenses increased more than its revenue, nearly doubling from Rs 149 crore in FY21 to Rs 300 crore in FY22.
In terms of expenses, the company’s losses increased 3.6X to Rs 76.2 crore in FY22 from Rs 21.1 crore in FY21. Operating cash outflows increased by 4X to Rs 84 crore during the most recent fiscal year compared to Rs 20.6 crore in FY21 due to high cash burn.
In terms of ratios, during the year, the EBITDA margin and ROCE declined to -30.19% and -78.75%, respectively. A rupee of operating revenue cost the Mumbai-based company Rs 1.35 to produce per unit in FY22.
In a Series D round led by L Catterton and including previous backers A91 Partners, Elevation Capital, and India Quotient in May, Sugar secured $50 million. The company stated during the fund-raise that its current annualised revenue run rate is approximately Rs. 500 crores and that it anticipates reaching Rs. 2,000 crores over the following 24-36 months. Even though the business missed its own goals, it appears to have made progress in FY22 as more consumers chose domestic D2C brands. However, the majority of direct-to-consumer businesses eventually experience a growth plateau due to factors like high customer acquisition costs, among others. Additionally, consumers might spend less on non-essentials like cosmetics as a result of rising inflation, which might have an impact on Sugar Cosmetics’ financial performance in the current fiscal year.
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