The All India Consumer Products Distributors Federation (AICPDF) has flagged Honasa Consumer, the parent company of D2C unicorn Mamaearth, for its large unsold inventory lying with distributors and retailers, causing a financial burden of INR 300 crore.
Honasa Consumer’s unsettled INR 50 Cr disrupts distribution
According to the AICPDF, besides the issue of “unsold stocks nearing expiry,” credit notes of about INR 50 crore are unsettled, creating cash flow challenges and threatening the stability of the entire distribution network.
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While talking to Inc42, one of the distributors said that Honasa’s practices were causing significant challenges with inventory management. “The company was dumping products in our warehouse. While our monthly sales were around INR 15 lakh, we were holding stocks worth INR 85 lakh.”
The distributors’ body alleged that Mamaearth has been offloading excessive stocks to distributors without considering market demand, damaging the distribution and retail ecosystem and eroding trust. “The unethical stock-dumping practices by Mamaearth have created a crisis of trust and financial viability for distributors,” AICPDF’s national president Dhairyashil Patil said.
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Strongly deny allegations made by AICPDF – Honasa
However, Honasa rubbished the allegations, stating that it has been actively working with channel partners to clear unsold stocks. “We strongly deny the allegations made by AICPDF. The figures mentioned are inconsistent with the sales driven through this channel,” the company said.
Further the company added that it made significant progress in removing stocks worth INR 63 crore from its distribution system as part of Project Neev, its initiative to transition away from super stockists to a direct distribution model. The company posted a net loss of INR 18.6 crore in the September quarter of 2024, compared to a net profit of INR 29.4 crore in the year-ago period.
Meanwhile, Honasa’s distribution woes and decline in top line have also shaken investors, with its shares tanking 20% on the BSE after releasing its Q2 numbers and another 12% the following day, closing at INR 263.75, 18% below its IPO issue price of INR 324.
