Most founders believe that the key to expansion is to target a wide and varied target audience. That’s the absolute death knell for a new brand. When you are narrowly focused on one consumer segment, with a product that solves that segment’s specific problem, then you stand for something. In a super fun chat, Vani sits down to dissect and understand this with real examples from different brands, with Dhruv and Dhruv (yes, into two!) of Arata!
05:00 -Why have a core target offering?
19:23 – Why sharpen brand proposition?
20:25 – Should revenue share decide brand positioning?
24:58 – Benefits of having seasoned investors
Read the complete transcript below:-
Thank you so much for being here on this show. I wanna first start by asking you, what is this name, Arata? What is the correct pronunciation and how did it come about to be? Tell me about that.
Dhruv Madhok 01:29
Bhasin, do you wanna take that?
Dhruv Bhasin 01:29
Sure. So first of all, thank you so much for having us. And I think you pronounced it absolutely correct. It’s pronounced as Arata. And Arata means something fresh, something that’s fresh and new, in Japanese. So our kind of fit very well with what we were trying to do. We were trying to introduce a fresh and new twist to hair care specifically because we hypothesize that there’s a lot of innovation going on in our head but we are not seeing any of that in India. So that’s where the name comes from. It’s a Japanese word meaning fresh and new, which we actually later found out. In Italian it means to sow, like to sow a seed. So ended up having a beautiful double meaning.
Dhruv Madhok 02:07
And, apart from just the fresh and new perspective that we were bringing to haircare this was about four years ago when we started the company. And at that time, D2C wasn’t really a buzzword. It wasn’t as popular as it is today. And at that time it was quite pioneering and cutting edge to launch a brand on the internet and just to sell directly to the customer and bypass a lot of the middlemen and the modern trade stores and general trade stores. So it was not only a new and fresh and new perspective on haircare and skincare, but it was also a fresh and new perspective on how to make small batch fresh products and get them to the customer as soon as possible
Wow, that’s fantastic. And did you ever think that might come in the way of scalability?
Dhruv Bhasin 02:44
I was just gonna say, we initially did have that concern that if we want to ensure that we never compromise on the integrity of our ingredients, with that hamper us from extending our product offering or with that hamper NBD. But I think we quickly found out that no hasn’t hampered us, thus.
Dhruv Madhok 03:01
And we started with contract manufacturing, where we’d have our own unique formulations but we were working with different contract manufacturers throughout the country. That’s where we were sourcing from and we were distributing over the internet. And there weren’t any supply chain or any other kind of bottlenecks or constraints that we had to work within. So scalability was never an issue. We always made sure we partnered with manufacturers and suppliers who could scale up with us and also made sure we sell on platforms like our own website and different marketplaces that could continue to drive business for us, as we scale.
That’s fantastic. So you are saying you’ve been able to scale while manufacturing with several different suppliers and you’ve been able to keep quality consistent despite that.
Dhruv Bhasin 03:44
Okay. So tell me how you got to hundred crores? I’ve seen this number hundred crores. You’re so young, you are so young into the business. How does one hit hundred crores?
Dhruv Madhok 03:54
Yeah, so there’s a clarification there. So the hundred crores is actually the most recent evaluation. Hundred crores is not actually the run rate just yet. In terms of a run rate, we’re still around the 25 to 30 crore mark. So we have rapidly scaled up over the last four years and I think one of the reasons why we’ve been able to ramp up and scale up so aggressively is, one is, I think we found very specific niches by addressing opportunities that are unmet and unserved or underserved rather. So long as you find a niche and you build a product, number one and two, raise enough capital and build enough infrastructure to bridge the gap between the demand and supply. Scaling up in this day and age, it’s really not as hard as it used to be because we have access to distribution on the internet and we have access to data from performance marketing and specifically targeted marketing. We have great access to marketplaces. People are discovering brands that are open to trying brands on social media. So I feel like I’ve gone back to the days where one used to have a ton of cash and, you know, how it used to be in the old economy days to build a consumer brand and scale up. And even though we haven’t got to a hundred crores, we know of many brands that have been able to, in less than a five year period, get to a hundred crore kind of run rate mark.
Dhruv Bhasin 05:01
I’d also just like to add that, it’s also not easy, we’ve been on this journey for about four years. Entrepreneurship and the startup life is very difficult. It’s also because you start out as in most cases, of course you have a lot of hypothetically technical experts who are founders as well but for Madhok and I, that wasn’t the case. We started out as generalists, which seems to be quite common amongst a lot of other startup founders. And we slowly had to start making that move from understanding that, okay, look, these are the tasks that we do personally as generalists. We then moved on to hiring team members who are also generalists and now, slowly we found that the next stage of growth is gonna come through specialists. But this journey has been a very difficult one, a very challenging one but a very rewarding one as well. So again, the scale part is relative, like Madhok mentioned. Of course, even getting to, you know, around the 25, 30 crore number that we’re at right now is, let’s put it this way, we have far more opportunities to get there now than we ever did before. But I also wouldn’t want our viewers to think that, oh, getting to 30 crores or 50 crores or a hundred crores or more is something that’s very simple and easy. It’s taken a lot of trial and error, a lot of experimentation and above all, a massive amount of failures but what we like to call learnings. So we’re there, we’ve learned the hard way many times and during the course of how a chat today would even like to tell you, what those learnings were and how we meandered away from what our core offering and our core proposition was and how we’ve circled around and come right back.
So tell me about exactly this group, what our core offering is. Tell us a little about your product and who is the core consumer you are targeting this product at? So talk to us about the product and the consumer.
Dhruv Bhasin 06:37
So essentially what our brand mission is that Arata is a plant-based hair care brand with advanced solutions for all hair types. This is something that we’ve embodied now. Our core offering when we started was specifically hair styling products and specifically hair styling gel and hair styling cream when we first started out. We always started out as a unisex brand, so we wanted the demographic to be equally, we wanted to be an inclusive brand, which type women, men, and others. And we found haircare solutions and styling solutions that could be offered to both. But when we first launched our thought process was that, by default, this will probably be highly skewed to men because men would have a much higher use case for this thing. Very soon after launching, we very quickly, and not by design our hair gel specifically very quickly got accepted into the curly head women community into what we call the CG method, which is the Curly Girl method.
So we were very pleasantly surprised and this is actually what really helped us take off. The curly community has really, really helped us get to where we have and we quickly, very quickly realized that we were filling a very big gap that existed in, specifically for curly haired women. We found that curly haired women were actually using Brylcreem and generally men’s styling products are styling their head and when we launched our first two products, which even today are top selling products. It was very quickly taken in by the Curly community and they started using it. They started loving it, they started posting about it and very quickly we started scaling up these two products. And when that started happening, we said, okay fine, here we found a product market fit specifically over here where a large gap existed. And post that I think is where we, maybe into this, the one and a half year or two year, meander saying, okay wow, we started looking a little externally instead of internally. We started looking around saying, oh wow, there’s so many skin care brands. There are Vitamin C creams that are working. There are green tea serums that are working. There are, you know, hyaluronic acid products that are working. And we started looking a little bit outwards and saying, wow, there’s such a large market there in skincare.
Let’s start developing with the same brand philosophy we have. Let’s start developing products in skincare. And then we started with that for almost a year and we discovered that Arata disposal was known in the market and we weren’t loved by our customers for our skincare. We were known and loved for our haircare
How long were you into the hair journey before you ventured into skin?
Dhruv Bhasin 08:51
I would say about a year and a half, two years. So for about a year and a half to two years is when we were focusing more on hair. And then there was about a year in the middle last year where we said, you know what, let’s further expand the portfolio because we have a great philosophy as far as the ingredients and our grand pillars are concerned. We can totally extend this into skincare.
Dhruv Madhok 09:11
To be fair as well, when we started, we had a portfolio of products in various categories. We started with a lip balm, a face wash, a shampoo conditioner, and a body wash. So we had a presence across multiple categories right from the beginning. As luck would have it, and as the scale came organically, we saw a larger uptake in hair care as Bhasin mentioned, but then we made a purposeful and deliberate plan to expand our skincare portfolio. As Bhasin mentioned, seeing the wave of Vitamin C and all these different opportunities that were opening up in the market. But despite doing that we did see an increment in sales. We did see a little bit of increase in trial by our existing and new customers for our skincare products. But to date, the hair care products still remain to be the best sellers. And that’s made us understand that, you know what, there are diamond dozen skincare brands. But what seems to be really working well for us is hair. And an interesting insight is that we’ve discovered is that, people know when something works for the hair almost instantly, as opposed to with skin, where you have to try something for months or end to understand whether it has high efficacy, with hair you use a product, it works, you know it immediately and if it doesn’t work, you also know it immediately. And that’s been, one of the reasons why we’ve decided go after this haircare space, because we’re seeing that if people are using our haircare products and it’s working for them, then that’s a significant advantage that we have that potentially other brands don’t because we’ve understood a lot of brands are trying to move away from or not move away from skincare, but also to beef up their hair care portfolio and hair care as a market is significantly larger than that of skincare. So it has all worked out well for us, to bring us to this point where we have the hypothesis today that hair care is who we are, it’s where we want to be and you know what our strengths are and that’s what we wanna double down on.
Wow. Madhok, this was really insightful and useful, but I have two big questions coming from what you’ve just said. Number one, did you not think that now that we’ve ventured into skin and we may not be getting the kind of numbers that we’d expected in skin, but skin is such a large category, why would I not want to just participate in skin and have revenue coming in, even if it is a drip, drip revenue. But even if I wanna choose to continue playing hair and hair is what I focus on. And skin, I’m not gonna specifically advertise. I’m not going to really focus my energies on skin, but participate in that market right at the fringes. And even if I’m a decimal, fifth decimal, 10th decimal player and I get in some revenue, then what’s wrong with that? Let me keep that. That’s number one. You didn’t think of doing that. You chose to move away from skin. So my first question is, why did you not or how come you didn’t consider the possibility of allowing skin being a revenue generator for you, knowing that skin mein ab kuch toh hai, you know, kuch toh product he, we’ve made the effort of launching some stuff over here while retract. That’s number one. Number two, how did you come to this realization? Did you actually do consumer research? How did you figure that women who buy or let’s say consumers who buy my hair products are actually finding, hey, this works. Hey, I seem to be able to settle with this brand. How did you come to find that out?
Dhruv Madhok 12:22
So we actually did not, actually kill our skincare offering, but we’d rather shifted focus. So we continue marketing and positioning ourselves as a haircare brand and in fact, our entire new product development cycle or a new product development pipeline for the year of 2022 and for the most part of 2023 is all haircare focused. So we didn’t actually go out and say, we wanna pull back from the skincare market because, in and we have access to say, maybe a few lack customers across the country. And there are a few early adopters, but that’s not to say that we won’t be able to build a sizable offering in the skincare space because like you rightly said, it’s a large opportunity and there’s no harm with revenues coming in from there. We’ve simply just shifted focus and realize that what’s working for us is what we need to double down on. We can under index on the new product development pipeline for skincare. We can continue serving those customers and products that are currently doing well in the skincare space but we need to really double down and leverage what we have going for us in haircare. We haven’t actually gone and withdrawn from skincare. We’ve just simply dialed up our haircare offering and marketing and positioning.
Dhruv Bhasin 13:24
I just wanted to also add that, we also saw that the data was telling us that more than 75% of our revenue was coming from haircare. Essentially, moving focus, not moving focus, adding to that focus the skincare category also meant that having to divide budgets, having to mix the communication and advertising focus also towards skincare eventually meant that we were moving focus away from what our core market was. The impression that we got was that eventually it was turning out to be a situation where a customer would land on our website and say, oh, these guys are good at everything, but they don’t seem to be experts at anything. So when you come onto and this would, I would just say this generally for all brands, that if I as a consumer would come onto your website and not understand what your core value proposition is, that what is that one problem you’re looking to solve in my life. But what you’re saying is, oh, everything on my website is amazing and it’s gonna solve all aspects of your life, as a consumer I will not believe that. So that’s why we also strongly from a proposition point of view, we decided that, look, the data is screaming at us, 75 to 80% of our revenues coming from haircare, we are loved for our haircare. So therefore, it was both qualitative and quantitative. We need to ensure that we now build out the business as the haircare experts of India and we need to ensure that our creatives, copy, coms, everything is in that direction as well and not diluted.
Fabulous Bhasin. I’m gonna take the liberty of calling you Bhasin and Madhok for my own and for the clarity of the listeners as well. So what was spoken in the last few minutes was absolute gold. I just want to say this, add my own point of view also to this conversation, which is that, you know, most founders believe that the key to expansion is to expand the product range, expand geographies, expand channels, have different propositions, different brand propositions for different product lines, so as to be able to appeal to a very wide audience. But the reality is, the fact is that actually covering many different segments of consumers is counterproductive. It goes against the principles of marketing. The fact is that when you are narrowly focused on a specific consumer segment with a product range that specifically solves for the consumer’s stated problem, like you said, people must come on my website and know exactly what I’m solving for, then you create a space, you own a space in the consumer’s mind and that then becomes your stronghold in the consumer’s mind. The reason why consumers come to you, once they know why they come to you, then they can also discover blah, blah, blah, blah, blah, and may also want to buy the blah, blah, blah, blah, blah from you. But there has to be a central hero on the back of which the brand is built. So this is fantastic.
Dhruv Madhok 16:04
You know, I completely agree with you, we do see some exceptions to the norm. We do see some brands that have really gone into hundreds of SKUs across multiple categories. Hair, skin, color, leave ins, rinse offs. It seems to be working well for them. In your opinion, do you think that there’s a tipping point beyond which, you know, is it a revenue threshold or is it a more softer aspect beyond which, one can venture out into multiple categories because this is a debate that Bhasin and I keep having internally as well.
For me the answer is in the stage of the lifecycle of the brand like I said earlier, see at the end of the day, the consumer’s mind is extremely cluttered. She’s receiving a zillion messages and advertising, not just advertising in your own category, but advertising across, so there’s some crazy number, which is the number of messages on an average by various brands across the day that we are exposed to without even consciously registering, are over a thousand branded messages of various kinds that we are exposed. Now in all of this clutter, I as a marketer, I as a founder of a business, have to make sure that my brand goes into the consumer’s head and she’s going to remember me when she has to buy this category. And the answer to that question Dhruv is basically, if I’m not able to first occupy a space in the consumer’s mind, then there’s, the more I dilute the messaging, the more messages I give, the more confusion I create in her head. Lesser the chance of me being picked up lesser, the chance of me being able to build muscle. Actually, all brands are built on one hero product, on one hero brand, on one hero offering, or one hero service that I know. For example, if it’s a Clinic all clear, Clinic all clear is a dandruff shampoo. Now they may eventually have variants which are called Shine. There are variants which are called daily clean, for example, I don’t know if there is a daily clean, but I’m saying that cannot be the core. They’ve gone into various such segments in order to participate. Let’s say there’s a shiny market. They’ve gone to participate in the shine market. Fundamentally, the brand stands for dandruff. I go to Clinic all clear for dandruff and even Shine, actually, they will deliver in the context of dandruff.
Dhruv Madhok 18:22
It won’t be the shiniest of shining shampoos. It’ll just be the shiniest or dandruff shampoos.
Exactly. So I’m saying it’s more important to be able to own a space in the consumer’s mind. Once, I’m able to draw the consumer to me for something specific then for her to trust me on various other offerings is a lot easier. It’s like Zivame: you went to Zivame to buy bras and tomorrow if Zivame were to also start, which they actually have now, they’re doing petticoats and they’re doing a whole lot of other ancillary products. In fact, if Zivame were to tomorrow start doing jewelry and I’m there browsing through bras and I happen to discover some cosmetic jewelry and I suddenly see a pair of earrings. They say, yeah, this looks nice. Let me buy that as well. But if Zivame started to say, hey, I do bras and I do jewelry and I do makeup, and I do you know, mattresses and I do whatever else. Then say, I don’t know who the F are you and I don’t know why I should come to you.
Dhruv Bhasin 19:23
I think I’m in full agreement with that because even at our end, this is a discussion we have almost every single day about how to continuously keep sharpening what our proposition truly is. And I think that’s also a dynamic process. It’s not something, I mean, very often you have clarity on right from the start because there’s a lot of moving parts to it till you understand, okay, where exactly is my product market fit? So even for us, when we say we’re looking to build ourselves out as the haircare experts of India, that’s a 25,000 crore market. We can’t be experts at haircare in general. That can’t be the brand positioning, so we’re continuously now through all our learnings to say that, okay, within haircare, like you mentioned dandruff, within haircare there’s the dandruff experts within haircare now, where does Arata stand? What does Arata stand for? And what is that exact value proposition? So now that’s the next part of how we’re trying to flesh this out and build out exactly what the brand proposition is?
Dhruv Madhok 20:16
Yeah. And we have to look at our portfolio and see and evaluate which SKUs are here for the play to play strategy and which SKUs are here for the play to win strategy and then build it like that.
Very nice. I love the words used play to play and play to win. Absolutely. I’ll give you a parallel example from my hair days at Unilever. I launched a range of hair care products in 10 countries, Southeast Asian, South Asia for colored hair. Now our proposition was haircare products for colored hair, which is fashion out. Color is, you color your hair to cover grays and then you cover your hair to make a fashion statement. And our proposition was to this young college goer, a young working executive who’s out there, walking with a bounce in her step and she’s looking to make a fashion statement with her hair. And of course, like both of you also earlier said in different words, hair is a tool of instant transformation, right? I can style my hair, I can color it, I can do stuff with my hair to instantly make a statement about myself which I can’t do with skin. Now because our proposition was haircare for colored hair fashion out. We realized that actually the covering grays market is about 50 X of the fashion market. And the fashion market is far bigger in countries like Vietnam or Singapore and most other countries where the market is very large. It’s all covering grays only. So we said now, again, it was this classic question, how do I make sure that I’m participating in a large enough category? How do I make sure that I’m not limiting my growth potential? And so we did launch a Black Shine, we launched a Black Shine and that Black Shine was different from the other Black Shine that Sunsilk had, of course, we didn’t call it Black Shine. I don’t remember. We used to call it black something else, but that was just smart marketing and that black was the play to play versus the burgundy and the light browns, et cetera, which were play to win. The black was play to play, but that play to play, that black the market we were competing in or playing in rather or participating in, was so large that we said, yaha se danda aa raha hai to, aane do na. Even if that volume contributor of mine is much, much bigger than the segment that I’m advertising. It doesn’t matter. So I’m advertising a burgundy and I have less than 10% share of my revenue coming from burgundy. Majority of it is actually coming from black and deep brown, but that’s just fine, so long as my brand is built around fashion and that’s what’s actually drawing people in. I’m all right with the revenue split, with not in Synchrony with what I’m advertising, but then at least my brand occupies a sharp enough position in the consumer’s mind.
Dhruv Madhok 23:06
Makes sense. And as a consumer we probably subconsciously behave exactly the same way. So if we, regularly, visit a restaurant because we love the pizza there, we’ll probably end up ordering a salad and a dessert and maybe a garlic bread on the side as well. So for it to be a wholesome experience, the brand has to ensure that there is something, there’s some supporting cast to the Oscar winner as well.
And tell me, did you ever have a lot of pressure from your investors? Did your investors say, are! what are you doing, you are playing in such a small category, this is not worth investing in.
Dhruv Bhasin 23:37
I think it was actually quite the opposite. Our investors had just to put it out there, we have some really fantastic gold standard investors and from the very beginning they were just trying to encourage us to say, look find a, not even necessarily a niche, but just find a core value proposition and stick to that. And in the early days, like I had mentioned earlier, I think we were a little bit all over the place as far as that was concerned but I think that’s probably a part of understanding and exploring and figuring out what exactly the value proposition is. What is the part of the consumer’s requirement that you want to play ? And they actually encouraged us to just, find a niche, find a sub-category to really focus and put all our energy towards that. Because they said, look, once you find those earlier adopters, once you find that very strong product market fit, even in the smallest niche, they become your rabid loyalist and you can then start moving into the larger category within which that sub-category exists. You can always start upselling from there. Don’t be afraid that the market is too small to begin with. Just focus, try and get as much of that very small niche as you can. Become an expert within that niche and then slowly start flashing it out more and more. That is the best strategy to go after. So we actually never got investor pressure that the market is too small.
Dhruv Madhok 24:58
Yeah, we, and if there’s always investor pressure that we have to scale up and outperform which is understandable because, as an asset class, venture capital investing is about higher returns and correspondingly higher risk. So we have to outperform as opposed to a lifestyle business that’s growing organically. But I think we were also fortunate enough to have investors who are seasoned in investing in consumers and they understand that consumer brands aren’t usually built the way tech companies are where it’s going boom or bust. And there’s a rhythm to business and there’s a certain time that you know that brands take to build and mature. So we don’t have any rush or pressure, we’re playing into a smaller category or you know, we’re not growing fast enough. I think a seasoned consumer brand investor will understand that, it takes time to build credibility and the returns from the credibility built over time or exponential. So a brand that’s five years old is gonna be far more credible than a brand that’s, say, two years old. So lucky to have good investors who understand the consumer space that way.
Yeah, I think that is so precious, isn’t it? To be able to have investors who share your vision and who are not, I mean, who is on your side for doing business the right way rather than have this undue pressure to expand and get more business at any cost.
Dhruv Madhok 26:07
Yeah it’s essentially the difference between looking to build out to begin with a sustainable business that can scale or just essentially having a mandate of boom or bust that puts everything behind it. And then you’re just, you’re playing against very, very difficult odds.
Fantastic. Thank you so much guys.
Dhruv Madhok 26:25
Dhruv Bhasin 26:26
Thank you. Thank you for having us.
Dhruv Madhok 26:27
Thank you so much.
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