 Hello and welcome to E4M D2C Revolution. We have with us today a very special guest, Kaushik Mukherjee, the co-founder and Chief Operating Officer of Sugar Cosmetics. Hi Kaushik, thank you for joining us. Thank you for having me. I've been looking forward to this interaction and we've spoken earlier of course so thank you. Great and first of all congratulations for eight years of sugar. I've been quite a journey I guess. I have to finish myself at times but you know we're very grateful. I think when you start creating something you know you don't really think about scale, valuation, money. You just think people are going to be really excited and love what you're building and fortunately we've had that in sugar. There are a lot of our consumers who just come back to us over and over again. We've chosen over brands with far bigger marketing budgets and more bigger legacy. So yeah, I'm nothing to complain. Very happy. Super. Can you like give us a quick throwback into, so 2015 sugar started off as a plain D2C brand. 2017 we know it went on the channel and today it stands with global aspirations. Can we have like a quick throwback into what has it been like for you? So honest throwback right. So honest throwback is 2015 sugar was born out of the conviction and hard desperation to stay alive as a company. We spent three years in the beauty space and it just seemed that beauty space and especially the color cosmetic space within the beauty space was right for disruption. And I'll tell you why because historically skincare is a much larger market. So every folks on skincare is larger, it's bigger, the opportunity is there. But when you see the products on your digital screens, maybe your mobile skincare at the end of the day dissolves in your skin. Whereas makeup, it engages consumers in a different way. I mean it just lights up pixels on your screen. So we saw that excitement in the audience. And we also felt that the awareness about products was increasingly leaps and bounds. People wanted to know what beyond the legacy brands who were at a mass market price point, what did they spend a bit more? Can they get better products? And I think that's what we just narrowed down, we hunkered down and said let's just build a better crayon lipstick. Let's just build a better liquid lipstick. And that played in our favor. So yeah, that's how it started. And somewhere along the line, our board asked us that you have to decide what you want to be. I mean obviously your consumers seem to love you but do you want to be a large online brand or do you want to be a large beauty brand? And I think you were just very high on adrenaline and we said that we want to be a large, large beauty brand in India. And we didn't really know much about the offline space. Neither did we end up doing what a lot of people do to support somebody senior who can lead completely different verticals. We sort of tried doing it ourselves. So it took time but today slightly more than half of the revenues of the company come from offline retail. So it's a big shift from what we started as but I think it's for the best because we have to win both online and offline to end up challenging the bigger brands. Great and you know the cosmetic space, the skincare space has a lot of players. What are your plans as a leader in this space to break through this clutter? Not a leader, getting there hopefully. But I think one of the leaders we may say. So I think you make a very fair point. There is so much clutter right now. Everybody just thinks that I have a joke which I cracked. Wake up in the morning, brush your teeth, go to Asan's house, come back with nail paint with your name on it and boom, that's a brand. It's actually, you know, people say that when everybody is digging for gold, the person who sells shovels makes the most money. I think the people are making these products are making a lot of money. But no, I think it's important to not start with the product. I think it's important to start with the things you want. I think a lot of us, a lot of the brands today, new brands, they start with the product. They say, you know what, what's easiest to make in my budget with a lower minimum order quantity requirement? Nail paints, great. Let's do that. Car gels, great. Let's do that. If I were to launch a brand today, I would ask myself that in a market which is so saturated with like two very, very popular car gels, how would I ever make a name? I can make a name when there is space to make a name. And I think that's what our learning from sugar has been. Liquid lipsticks as a category is very popular today. Back then in 2015, 16, 17, it was not even there. But because we managed to play in that category, there was superior traction and interest. Today, everybody has one. So it's important to figure out where you want to create and that where has to be a space. It's not a price point. Because price point, if you start, if your value proposition is price point in a desired category, it's not a need category. It's a want category. Then you will eventually keep, you know, you want to hold on to the price point. Somebody else will come and operate some cheaper. So product has a massive play in this. And I would just focus on product 10 out of 10 times if I were to launch a brand at different times. Okay. So also, you know, I just came across this news of sugar collaborating with Amazon Prime Video for Made in Heaven. Where did this strategy come from? Or why did this collaboration sort of, where did this idea come from? You know, I'm so happy that my answer is the same as my previous questions. So it came exactly from our customers because when we mind a lot of what our consumers' interests were, you know, yes, marriage as a theme plays across a large part of our target audience, but we saw something different here. It was marriage, but not the traditional understanding and acceptance of what a marriage can and ought to be. So Made in Heaven just fit there in the slot very well. And when we worked with the team and discussed the idea, they were super interested about how we could amplify what their efforts were. I think it fits in, you know, very well. We also have invested and dabbled in this space earlier. We had a property called Sugar Brides, which we ran for a couple of years. And this is another extension of our interest in this space. And I think we're going to continue to build on this. So hopefully in five, six years, sugar as a brand would be very inextricably associated with the whole wedding space. Because I don't know, it's just a lot of colors and joints. It's pretty why not sugar should be. And okay, let's talk on the broader perspective. Like we spoke, there are a lot of players in the cosmetics and skincare space. What are you perceiving the entire space right now as where is it going? How much you need to put in more effort, et cetera. Where is the cosmetic space going and skincare, of course? So I think there are two factors that are affecting our industry. One is there's premiumization. People are trading out. Now, when they trade out, usually you would expect a lesser known discerning consumer to say, I'm trading out just because I'm getting a perceived larger brand. I mean, I think that's not enough today. People who are trading out want to know why, what they're getting. Is it, you know, more responsibly sourced ingredients? Or is it just better packaging? Or is it just a better product formulation? They need to know, which is why you'll find call outs and skincare very common, not so much in makeup. Now there are significantly popular call outs in makeup categories as well. I mean, we call out long-lasting makeup because we really feel you want to stand up for that given India's better conditions and everything. So yeah, I think that's one thing. The second is a lot of branding also happening for the unorganized market. So earlier people would buy maybe a car jewel or nail paints from many unknown categories. People are more aspiring right now. They want to use the brand they also others use. So while a mass user goes to a mass stage, mass stage goes to prestige and prestige goes to premium, unbranded will also go to mass. So there's a massive play over there. It's not a market which we play very actively, but there's a huge opportunity for that. What about the tier two, tier three markets? Do you see any untapped potential in those markets as well? If you've been born and brought up in a metro, unfortunately, you live with the bias that tier two, tier three is not where the money lies. That is such a joke. When you look at data of the basket size of tier two, tier three, you realize that they see the same shows as people in tier one metros. They aspire for the same thing. They get influenced by the same K-pop or western trends as the person living in the metros. So the only thing left is access. Internet calls for access. That's why when e-commerce players have sales, the basket size is pretty much similar across countries. When we opened some of our stores in tier two, tier three cities, we were shocked and surprised. I'll give you an example. We have 200 stores. Can you random guess which is the number one? I'll give you four choices. There's the number one most selling store in the city, which city is in which city? So there's Mumbai, there's Delhi, there's Surat, then there's Bangalore. What would you choose? Mumbai, most likely. That's what I would have chosen. It will blow your mind out if it's Surat. Damn, isn't it? Exactly, right? So we're also learning and we have to keep learning because the consumers change it very rapidly. The divide is very, very fine. And what about the digital side of it? When D2C brands, they're all big on digital and everything. What is sugar's digital strategy or the mantra to bang on digital strategy? Do you have one mantra or can you give us another one? I do. It's not a very popular mantra. I tell the team, look, try to educate, try to entertain, don't try to sell. Because the minute they're selling, our category people buy when they like to buy. And when they feel happy making a purchase. It's not like you're at home and you need toothpaste and it's getting over and you're just refilling. It's an emotional purchase. So our responsibility does not lie in pushing discount coupons on sale, sale banners. I mean, I can't even commoditize such a beautiful industry. Which is why I think my mantra and our team's mantra, actually my team does that always, but I try to convince them that let's not commoditize what we are building so carefully and so consciously. Let's just try to educate and engage the consumer with a lot of content about what you can do with the products. Stories behind the products. And when the consumer wants to buy, then we will be in their consideration set and then sales will happen. The only other thing I'd like to do is that there is a market that wants to touch and feel the product of offline. It is foolish to say that they are going to disappear and they will all start shopping online. They will be shopping offline. So we have to give the person the freedom to shop from wherever they want to. If they're more comfortable going to the store, it is fine. If they want our store, it is fine. They want to shop on Ika, well and good. It doesn't matter. It's just that they have to buy us. They have to choose us. That's all that matters. It doesn't matter. You bring up an interesting point. The entire omni-channel aspect for brands, right? You went and we went only channel in 2017. Yes. Yes. Can you just start with why back then did you decide to go omni-channel and what was the consumer response you saw post-pandemic? So today and the reasons for being omni-channel today and 2017 are very different. So 2017, it seemed like there was a divide. There was almost like a class distinction whether you are a legit beauty brand or whether you are an online brand. I mean, we used to go talk to a lot of industry people and there was this phrase, a child online brand. It was like the sticker. There was this moniker. They were put on using that, oh, you are this one of these, discounted online brands that sell and then disappear. And then we realized that people don't give you that space and respect at least in India of 2017 unless they see you. And that is actually at the core of brand-building in India. India is a brand-star market, but trust is very important. People need to see you once, twice, twice and see you for one, two, three, four years, not a fly-by-night operator to believe that yes, I can trust and buy from these people and buy from these folks. So I think that was a big push for us. One, secondly, after we reached the point wherein we knew advertising, we had done social media, we had done performance marketing, we needed to go on television. Television does not work well unless you have distribution and space. So which is why we said, okay, if I'm spraying and spraying like television, I need to have distribution sorted. So if people see, they get reminded saying, oh, yes, I saw the ad and I can purchase something over here. So that, and I think overall, if you look at the market leader, they are also now making a strong claim which they are trying to. So I can't sit here and say that, you know, online is my territory because I'm going to come and try to eat my territory. So I have to do the same, return the favor, offline and try to make a play over there. So these are the couple of things which helped us decide that, okay, yes, we want to play this game. And post the pandemic, a lot of brands in this space, they started, you know, probably not, you know, shutting their offline stores, etc. Yeah, so what kept you going? And, you know, you have 200 stores now across India, right? What kept you going? So our first 100 stores were textbook stores. I think the team put in a lot of thought and, so you know what I'll tell you, the fact is first 100 stores, we were scared. And because when you're scared, you double-check, triple-check everything. And the team double-check, triple-checked everything to ensure that the store, let's say the rent record, because rent impacts your PNL, the zoning we got, like who's next to us? You are very, very, very thorough with that, which is why the first 100, the report card after first 100 was very good. Our stores were operationally breaking even in about four months. Everyone was happening in about 15 months. So then we said, okay, this is great. Let's expand again. Now with 200 stores, we know that, okay, the cream of the stores I think they're already at. So we now need to be a bit more discerning. But the tailwinds are there. We know that we are able to get walk-ins. Once a person walks in, there is a 20-minute slot wherein we can engage the consumer, delight the consumer. So we want to play that game. And we are also very cognizant of the fact that the two brands which sell more make-up in the country than us, both of them don't have their own stores. So it's almost like a separate channel for the third hand for us to try and win the race. So yeah, let's see. And what does the share look like? So D2C versus marketplaces versus offline store. Can you give me some data or statistics around the share you get? So offline, actually a lot of people may not know this, but offline contributes to a bit more than has shifted over past the half-way mark. So if I look at last year's numbers, then around about 55% of our overall complete turnover would be from retail offline. And off the remaining 45, maybe a 20-25 mix between our D2C website and our marketplaces, SBU. So an offline, we are just getting started. I know there are so many stores that we are still not present. So I see some headroom there. At the same time, I think we'll be far higher than industry when it comes to digital revenue contribution. So if the online revenue contribution for trade across categories in India is single-legit, 8%, 9%. UTN in industrial living somewhere is about 15%. I think we easily want to be double of that even if you look at four, five years from now. That's where I see this going. Yeah. And I read up financially at 2023 has been quite encouraging for you. What do you think you did right or better than previous years? You talk about the FY that just went by, right? Yes. I think a lot of pieces came together. We had that the whole television campaign that we did with Ranveer Thamana really paid off. There was a lot of talk and awareness about it. Shark Tank contributed to some awareness overall. And I think our distribution was hitting that tipping point where people could see and add in the next three days, CR stores somewhere. So I think that is one thing we did well. The other thing is we've been trying to see where the brand can extend into different price points. So some of those bets wherein we've tactically launched a few SKUs at a different price point on a very different platform. For example, there are some retailers where we could never go because of their, let's say, price expectations. By bundling together maybe two kids, we've created exclusive combos which sell on a particular channel, not overall in the market. I think we are getting a bit more nuanced on which product to place in which channel and that's helping us. Let's talk about a different aspect. Let's talk about your consumer demographics right now. Which demographics say age group-wise? Let me get there. Gen Zs are always up for experimentations. The millennial gang and the older gang, they are more to what I like. I'll continue with that. What is the trend you're seeing right now? Is this going on or have you seen any sort of change there? We are figuring out Gen Z as with most brands and most parents and everybody else as to where they're just live because it's amazing because I think Gen Z pushes all brands to be more responsible and true because I think we grow up in a very aspiring or aspirational generation where we already were told what good brands are. Gen Z is making up their own mind about what are good brands. Which is why the scary part is like millennials are very, very close to sugar. Gen Z they are, but we have to take more effort into proving ourselves to Gen Z. The good part is that suddenly the gap between our new challenger brand like us and our legacy brand disappears because a Gen Z audience doesn't care about whether you've been advertising on TV for 20 years. They will tell you, ask you to take Ketchup if you are asking me to pay 500 rupees for this product. Why this over that? Which is where accommodating their thing with their passionate about. For example, there's a foundation stick that we sell. The nearest I know is a competitor who sells 14 different shades amongst Indian brands of that. We have that in 22 different shades. We talk openly about it. From deep skin tone, medium to light skin tone it's there across the spectrum. I think that has, we've seen a lot of people in fact face as a category today is almost the same as lips for us which was not the case pre-pandemic. Pre-pandemic it was maybe one third that of lips. So people are trusting us with more, I think higher priced, more sensitive purchases and I think it's good for the brand. It's a direction we want to take. And gender-wise, do you see a lot of male consumers? No, I would love to say that we know we are the all sexes brand but we do have the occasional frantic shopper who does reverse blood on the case for a gift. But as a brand, we've also not communicated to that audience to say that there's sugar can play for a makeup for men as well. And I know that things like concealers which are not very overtly discernible makeup are on the rise in the male audience, maybe someday. But today I don't think it's a focus area for us guys. Okay, okay. Fair, maybe someday again males will take note of that. Can you give me a look at the brand's media mix right now for your upcoming campaigns or the campaigns you've done recently? What does the media mix look like and the spends upcoming, with the upcoming festive season of course, are we expecting to see a rise in your marketing spends? So this year definitely no, but we are going to maintain the same spends as last year. Last year I think we spent a lot. But the thing is let's see when you spend, let's say 45, 40% of your revenue in marketing on a year wherein you know you are investing ahead of time. Next year when your revenue is doubled, I mean, what we expect in this year, is that your marketing has 20, 22% of your overall sales. So which is fine, which is manageable. So if you look at our mix, a large part of it is about one third of it is on television. And after remaining, there is a good one third that's on digital, which includes performance marketing for our digital website and also on partner portal like Amazon and others. The remaining one third is purely invested in retail. I mean, we continue to believe that in the most crowded of markets, you unfortunately need that below sign board, need that standing, need that call out to keep reminding people that you know, you know, sugar is over there, you keep telling people that. And it's, I don't think it's very aggressive. And because the overall company is moving towards profitability and this year is going to be another big swing towards that. I don't see us taking more aggressive bets on this. There's a lot of focus on repeat consumers and getting people to come back to the store for a refill purchase or a walking purchase. We are spending effort on that in preference to, let's say brute force marketing and more retail marketing. So how exactly are you doing that? The repeat customers are getting them back. How exactly are you doing that? So we've internally, you know, we're trying to test the hypothesis to say that in case there's discovery of product that needs to happen, it is more likely that the audience will want to go to a store. So our duty then is not to push up one code for the app, is to give the nearest location to the person and say, you know what, hey, you can be there in, you know, 15 minutes right now, this is your nearest store and go check out our product. Whereas once a person shops with you, we do of course can contact them because we have their details. The replacement purchase we are trying to write through the app. So if a person shop for a mascara, and you know that mascara once you open it, six months he'll try and post that. So there is a user journey which we are building. In some categories, it is already prevalent which says that, okay, I know your usage pattern is for nine month period or three month period. This is how I communicate with you to talk it up before you drift off to another brand or forget about it. So a lot of these things are yet to play out, but still directionally we want to move towards that. I think that was quite an interesting and insightful chat. Thank you so much. Thank you so much for joining us here today at E4M D2C Revolution. And all the best for all your journey and all your lined up activities. Thank you. Thanks for any. Thank you.