Ananth Narayanan, Founder Mensa Brands chats with Shripati Acharya, Managing Partner Prime Venture Partners.

Listen to the podcast to learn about

03:45 - Productising All Elements of Brand Building

09:00 - Why is Brand Building Expensive

12:30 - Why Founders Choose Mensa Brands

18:00 - From Unbranded to Branded

25:30 - Finding PMF in the D2C world

Read the complete transcript below

Shripati Acharya 01:00

Welcome to Prime Podcast. My guest today is Ananth Narayanan, founder and CEO at Mensa Brands. Ananth, welcome to the show.

Ananth Narayanan 01:10

Thank you for having me.

Shripati Acharya 01:12

Absolutely. So Ananth maybe we could spend just a couple of minutes tracing your background and starting off through your various journeys and how it ended up at Mensa.

Ananth Narayanan 01:20

So I don’t think I’ve had a usual path. I guess, many people don’t. But I started off as a consultant. I worked at McKinsey & Company for about 15 years. I did mostly automotive and supply chain work across the US. I lived in China for a few years and then finally in Chennai. I think then the startup journey started after McKinsey, where I joined Myntra as the CEO.

This was right after Flipkart acquired Myntra. And I think Mukesh had gone on to work on the Flipkart platform. So Sachin and Binny were looking for someone to come run Myntra. And so I joined Myntra as the CEO in 2015. I was there for almost four years. That was sort of the initiation to the startup world. It’s as you guys know. It’s a cool platform and the business almost grew four, 5X, and we got to almost profitability.

But I think more interestingly, I think, we did some both a combination of interesting business model and commercial and technical work that made it an interesting browse platform as opposed to a search platform, which is what most e-commerce players are. And fashion is a browse category inherently. So it was interesting to do that.

After the sale to Walmart, I thought I would do something more entrepreneurial. So I actually invested into a company called Medlife, which is an e-pharmacy business and joined as a co-founder and CEO. And then I think that business, we sort of grew and scaled, went through good times, went through difficult times. We eventually sold to the number one player in the industry which was PharmEasy. And that’s gone well.

PharmEasy consolidated its market leadership and hopefully will go public soon. But 12 months ago, I started Mensa after the sale to PharmEasy. Mensa actually means constellation. We are trying to build a constellation of stars. Each of our brands is a star. The mission is really how do we build a global tech-led house of brands out of it? The idea was actually quite simple. It was basically saying brands are going to be built very differently the next 50 years than they were built the last 50 years because distribution’s democratized.

And the way brands get built are done much more on social media and through conversations as opposed to the brand talking to the customer. So felt like both those were different and therefore we could do it differently. And we’ve sort of since then started off. We’ve had a good start. We are focused on fashion, beauty and home brands. We have about 25 brands in our portfolio across these three segments. We sell not just in India, but in the US, in the Middle East and in Europe.

And it’s an interesting mix where we have tried to productize every element of brand building, right? So if you’re going to run 25 brands, you have to think product first and you have to sort of think about pricing, visibility, brand analytics, supply-chain operation. So each of these, we sort of take every element of the P&L of a brand and say, how can we actually build a product around it? And that allows us to manage a portfolio more effectively and efficiently and really scale.

And I think the goal five years from now is if we can have 10 household names that come out of here, that would be quite interesting. I mean, one factoid for people who are watching, there are less than 30 brands that are north of a $100 million each in fashion, beauty and home across a country the size of India with 1.35 billion people, right? So there’s a huge and massive opportunity. And I think that’s what we’re trying to do.

Shripati Acharya 04:35

Well, I can’t help commenting about one thing on your background, starting with the University of Madras, Michigan, McKinsey, Myntra, Medlife and Mensa. Is there a…

Ananth Narayanan 04:46

There is a pattern to this, not conscious, but it looks like I can’t avoid the M-word.

Shripati Acharya 04:54

Well, I just couldn’t help noticing that. Do you think that the motivation behind Mensa, right? So what is it that you observed perhaps in Myntra that led you to say that the macro factors are such that something like this might make sense. Because this didn’t exist. I mean, this entire concept wouldn’t have been viable maybe even five years ago.

Ananth Narayanan 05:22

Yeah. No, no great question. I think three big factors. The first is, I think, India, so fashion, beauty and home are a 120 billion-plus market in India, but 80-plus percent of that is unbranded. So there’s a vacuum of brands in India. And what happens in most economies is as the GDP per capita goes up, people want brands because brands have meaning and purpose. So they just don’t want utility, they want brands of meaning and purpose.

So I think the first mega factor is I think there’ll be more brands that get built in India in this space, right? I think that’s one. The second is look, if you take Unilever, if you take Inditex, if you take any of these larger companies that have built brands, the moats have historically been the following; one is distribution, which is you have a multi-step distribution and you have therefore the reach to the kirana store or the retailer in the end.

And you’re able to manage that process. The second is because the moat was distribution, you do few SKUs and you sort of talk about the brand loudly through ATR(Awareness-trial-repeat), which is how brands were built, right? And I think what’s changed in the last five years is that there are now rails built by Flipkart, Myntra, Amazon, Nykaa, AJIO et cetera, where you can reach 26,000 pin codes in this country in less than three days at less than ₹140, right? I mean, that’s a massive change. That’s number one.

Number two is you have now 120, 130 million transacting customers online, right? Who basically, whether they buy, I mean, more product online or not certainly research the product online. So brand building certainly happens very differently, right? So if you look at, if you sort of plot TV advertising revenues versus Amazon, that’s an interesting chart, I’m sure you’ve seen it.

But it’s interesting now that more and more and more brand building happens online because data is relatively free in this country. It’s one of the lowest costs globally. So this combination of… So the first factor is there are no brands. The second factor is, I think, distribution and brand building, which are the two moats are being done very differently now than they were five years ago. Because the rails have been built and now you can do many things on top of them.

I think that’s the second thing that I think is very different. The third is actually a uniquely Indian factor, which is India has always been very good at manufacturing. I mean, if you look at ZARA, you look at half the brands globally, they’re all made in India, right? India, Bangladesh, Sri Lanka, at least on the fashion side and increasingly more on home and beauty, right? Fashion and home, for sure. But we have never built brands globally, right?

So therefore, I sort of looked at all of these and said, “Look, I mean, the next 10 years, could we build brands from India that actually become household names and go global?” And I think it’s a unique opportunity. And I think it’s a decade-long opportunity. I think the next 10 years are the best 10 years to build brands out of India because of the reasons that I outlined. And I think that’s what makes it quite exciting because I don’t think we’ve been able to build brands from India for the globe before. Because we’ve never been able to get the critical scale and critical size.

Shripati Acharya 08:33

I understand your point that we are mostly unbranded as a country in terms of our purchases. But I also thought that that was primarily because we are extremely, extremely value-conscious as a society. And of course, our GDP is not that high to warrant the brands. And brands require expense to actually be built. So how should we actually think about this trend, which you talked about, which is your point number one?

Ananth Narayanan 09:00

Yeah, no, I think great question. So look, firstly, by the way, why is brand building expensive? It’s because by the way, we have first-world real estate prices, but actually we have India-like purchasing power parity, right? So what happens is the investment in modern retail really is very under-penetrated in India. And it’s actually exorbitantly expensive to do, which is where I think e-commerce and digital sales in brand building come in.

I think you’ve taken away the expense of the real estate, and you’re still able to display your products in a very interesting manner. Which is what I was telling you about the browse versus the search platform because the ability to actually display a brand is very different. And you also have infinite retail capacity because you are able to give people much more choice, right?

So I think that is very different because you’ve taken away a dramatic cost to brand building in the form of, I would say, first world retail prices, I think that’s number one. Number two is I think since modern retail hasn’t been built. It becomes progressively more expensive to build modern retail to display a brand as you go more and more from tier-one cities into tier two, into tier three, into tier four, right?

Because by definition, it’s harder to build. However, the demand is coming from all of these places because now you have e-commerce access. And by the way, they have an equal need for brands, but they’re actually not able to get to and see a physical brand representation. So I think one thing that’s different in, even though we are a value-conscious market, right? I think you can build value-conscious brands, right?

You have to make the economics of the value-conscious brand work in which case digital-first channels become the right way to sort of do it, right? So I think that’s one thing that’s different. I think the second thing that’s different is the average customer between 20 and 35 is starting to look for more meaning and purpose in brands than what, I think, happened earlier, right?

I think the value consciousness to purpose and value is slowly but steadily happening as a new demographic of customers come and start to consume. And I think that, by the way, also becomes easier. Storytelling and content become easier online, or at least less expensive online to be able to display and to explain to customers and to reach customers. They’re a classic distribution model.

Shripati Acharya 11:20

So I can see that the brands will be still something which even a tier-two or tier-three customer would want is what you’re saying. And if you make it more cost effective and in tune with the new medium, I guess we can build brands. So if I were starting a D2C brand today, and let’s say, I am starting something in clothing and maybe it’s traditional Indian clothing, so what would be the value proposition which Mensa would have for me? I mean, because I might also say that we’re putting it on Shopify, I already have these channels, so how does that work?

Ananth Narayanan 11:55

Yeah, I think it’s a great question again. So look, I think the cost of starting a brand has come down dramatically. You need two people and a computer and a little bit of working capital to be able to start a brand. However, I think the cost and the degree of complexity of scaling a brand are very different. So what it takes to build a 20-crore brand is very different than what it takes to build a 200-crore brand, which is very different than what it takes to build a 1,000-crore brand.

Because I think they’re all three very different stages. So why do founders come to Mensa? I think the first actually is expertise. Which is we have a bunch of people who have grown and scaled brands. The largest brand in Myntra was a brand called Roadster, which is now north of 1,400 crores in revenue and continuing to grow and is very profitable. So they come for expertise.

The second is actually, by the way, they come for talent. It’s very hard as a small brand to be able to attract the kind of talent that you need, whether it’s product and technology, whether it’s operations et cetera, right? So you actually need talent. And the third of course is capital. I mean, the venture capital world covers 1% of the Indian ecosystem. I have, by the way, in the last, I would say 13, 14 months, I must have met 700 founders.

Right? And so, I think it’s quite interesting because there’s a whole set of founders that you don’t normally meet. I can give you examples. We have a founder of PrettyKrafts, Prateek, who lives in Indore and has built a fantastic business. We have Mobashir who lives in Kolkata and has built Estalon, which is a leather brand into a 20, 30-crore brand. We have Pallavi who lives in Pune and has built a sari brand, right? I mean, these are things that you don’t see.

And these are all 20, 30, 40, and bootstrapped and profitable. And really the reason they come to you is, I mean, I think the third is capital, but it’s the third reason. The first two are how can Mensa help the brand become a household name? And I think that’s the exciting part for a brand in my mind, right? I think most founders in India, especially. So in the US, by the way, there are many aggregator models, as you know. And I think the aggregator models are a lot more transactional because look, you’re looking for an exit.

You are in your late 40s, early 50s. You want to sell and sort of settle down. Here, by the way, I would say of the 20-plus brands that we have, 16 of the founders are folks that I would have hired into Myntra or Medlife, right? And they’re between 20 and 35. They want their brand to be a household name. They want to learn, so it’s very different. And second is, by the way, from our standpoint, all the founders stay with us for a long period of time, right?

They are part of the Mensa family. They continue to hold some level of equity. And it actually, by the way, becomes a very symbiotic relationship because you bring complimentary skills. Most founders are very good at sourcing and design. We are very good at marketing, branding, growth hacking and operations and all of this boring stuff around finance and HR, all of which are needed to go from 20 to 200 crores and more.

Shripati Acharya 14:45

Would you ever come across a situation Ananth, I’m a founder who came and had a beautiful sari brand. And you said, “You know what? Great idea, but you should really merge with Pallavi’s brand and we could actually make it bigger.” And does that kind of conversation occur because brands are as much labor of love as much as they are about money, correct?

Ananth Narayanan 15:05

Correct. No, so they haven’t occurred yet. I think so far, what we’ve done is we’ve picked a brand in a category.

So for example, what we do is we pick one in ethnic. And I mean, there could be a different, sari brand and an ethnic wear brand, but we wouldn’t have two brands in the same price point competing for the same thing, right? So far it hasn’t happened because we’ve sort of top-down said we don’t want competing brands because you’re trying to build brands, right? And brands take five years to build. So you have to bet on a founder, you have to bet on a brand.

Shripati Acharya 15:40

Oh, got it. So ultimately five years out, how many brands will Mensa have then? I mean, there’s a limit to this, right?

Ananth Narayanan 15:45

Well, do you know how many brands Unilever has?

Shripati Acharya 15:49

No, I don’t.

Ananth Narayanan 15:50

It’s a little over 1,000. So I mean, not obviously all of them are equally large et cetera. So I think if you take a five-year view, I would like to say we would have maybe 100 brands out of which I would say 10 are breakout brands that really are growing in triple digits, are category leaders, are global, and become hopefully, what I call household names, right?

Which is you recognize the brand when you walk into a room. So that’s what we want to do. So there’ll be a distribution for sure. Not as much as maybe the venture capital world, but I think all our brands I think we hope will be successful. But I think the top 10% maybe will hold 40%, 50% of our total revenue, right? And we’ll have 100 brands across these three categories.

Shripati Acharya 16:30

Okay. Got it. So then coming back to the original question here, you might actually use these brands to consolidate over a period of time.

Ananth Narayanan 16:35

We might. It could happen, but so it is the way I see it, right? We have 20 brands now. I can see four or five brands clearly breaking out already, right? And I can see them being north of $100 million. We have a brand called Dennis Lingo, which I’m very excited by. It’s casual wear. You go search for casual shirts on any platform. Apart from the couple of sponsored ads, Dennis Lingo will always be on top, which is the growth hacking and the product and tech piece of it, right? But it’s interesting. It was a 30-crore run-rate business when we partnered up with Romil and now it’s north of 110 crores, right?

Shripati Acharya 17:10

And over what period of time?

Ananth Narayanan 17:11

Over seven months.

Shripati Acharya 17:13

Oh wow! And all driven domestically?

Ananth Narayanan 17:17

All driven domestically. I mean, we’ve increased the number of channels they sell to, which is another unique, interesting thing about India, right? See, I think if you do this in the US, your primarily Amazon is a channel with a little bit of Walmart, right? Here, I mean across Flipkart, Myntra, Amazon, Nykaa, AJIO, Meesho. I mean the distribution is quite democratic, right?

Which actually is why it makes it interesting to be a brand. In India, you need to be in supply. I think in the US, I think you’re better off being a platform, right? So I think it’s quite an interesting dynamic. But it’s sort of grown north of 3X in seven months. And it’s an EBITDA-profitable business, right?

We’re not burning money to grow. We’re not burning money on customer acquisitions. I mean, of course, we’re spending money on customer acquisitions, but the value of the acquisitions far outweigh the cost of acquiring them, which is what a regular business does, right? So it’s been very interesting. And a lot of it is driven through tech. The new products, for example, how do we introduce new shirts?

We’ve gone from shirts to T-shirts to trousers. And we use a lot of tech and a lot of visual tech to understand what is actually trending, what is not? How do we actually pick up patterns and colors so we make less errors, right? That’s one. Second is we actually understand the algorithms and what each of the platforms look for. So is delivery speed important?

Is sales velocity over the last week important? Are reviews and ratings important? I mean, of course, they’re all important, but which one matters more for which platform? The equivalent of real estate, when you go into a mall, you want to be on the ground floor. When you go into Amazon, you want to be on the first three swipes. The question is, how do you get on the first three swipes without paying a lot of tax, right? And I think that’s the core of the growth hacking that we do.

Shripati Acharya 18:55

So is there no physical element at all Ananth will any of these brands have a shop?

Ananth Narayanan 19:00

Great question. We absolutely have a physical element. I believe that to build brands in India, you need to be present wherever the customer wants it. So very much a believer in offline. I’ll give you another example. We have a brand called Villain. Villain, by the way, does perfumes. It’s men’s fragrances.

It’s sort of the bad boy image and your original self and all of the rest, right? But by the way, 30% of the sales happen offline through general trade. I mean, we are present at 600 pharmacies and it sells very well. And it’s an equally profitable channel and we have many other brands that have offline presence. So I don’t think you can build a $100 million brand in India without offline.

Shripati Acharya 19:35

So your expertise is not just in digital. It’ll also be on the physical setup.

Ananth Narayanan 19:40

That’s right. And I think even the offline can be very tech-enabled. I would say the common theme across all this is how can you tech-enable it?

Shripati Acharya 19:50

So you mentioned global, so that seems to be like a different kettle of fish, right? So how would, because one of the things which I’ve heard about brands and the difficulty they have going global starts off with knowing what are the sensibilities of audiences abroad as well as the quality requirements or the SLA requirements and predictability of delivery and so on and so forth. So how should brands think about it and how do you enable that?

Ananth Narayanan 20:15

So firstly, by the way, I don’t think it’s easy to do. I think it’s hard to do. I don’t think it’s just opening up the Amazon tap-and-order sort of flow-through. I wish that was so, but I don’t think that’s the case. So I’ll give you an example, right? So for example, Karagiri, which is a sari brand. We have opened up to the US and it’s now starting to sell. About 20% of the sales come from the US, which has been interesting because it’s obviously indiaspora which is buying it. But they’re looking for fashionable, affordable saris and the Google and Facebook growth hacking remains the same. Obviously, the audience targeting is different. And logistics and pipes for logistics have been solved by DHL and FedEx, quite effectively. So, that’s one example.

But the other interesting example is by the way, we have a brand which is very interesting called Folkulture. Folkulture is a bohemian home decor brand. It sells in India. It sells in the US. It sells in Europe. And there, the common theme is it’s not size-specific so it’s easier to sell globally. But what the common skill and capability that you build is how you actually do Amazon growth hacking.

And if you sort out Amazon growth hacking, you can actually make that happen whether it’s in the US, whether it’s in Germany, whether it’s in Canada or whether it’s in India, right? And I think the reviews and ratings carry over. So what’s been interesting is it’s a brand that’s built here, has built its reviews and ratings more here in India. And you’re using that to actually grow and scale the brand globally.

Shripati Acharya 21:45

Got it. Do you think that the platforms themselves want to move up in this direction also? In the sense that, is there some… I’m just looking at the competitive elements here, but if I’m Amazon, how do I think about it?

Ananth Narayanan 21:55

No. I mean, if you look at Amazon’s public statements over the last four years, right? 1P versus 3P, I think 3P has always gone faster, right? I think that’s number one. I mean, I’ve been part of a platform before in Myntra where we started private brands. And Myntra private brands did incredibly well. But it can’t be more than 30%, 40%, right? The remaining 60%, 70% will still be marketplace brands, right?

So I think, yes, they will do some part of it. But I actually think there’s always room for brands, number one. Number two is I refer back a little bit to the earlier one, which is we’re mostly an unbranded market. I think we’re not fighting for share. I think all of us are converting unbranded to branded, which is the large market that we’re really going after.

Shripati Acharya 22:35

Fair enough. So if I’m a new, budding D2C entrepreneur, what is one of the more non-obvious things about building a brand I should know which I might… But put it differently, what are some of the most common traps?

Ananth Narayanan 22:50

First, I mean, maybe some of these are obvious, but I’ll state them anyway. I think the first is I think customer love matters. Sometimes people forget it. I mean you can do all the Amazon-spend optimization you want, or the SEO that you want, but if the product is not good and the reviews and ratings are not good, repeats are not going to happen.

So I think getting your product quality right for the price point that you’re operating in seems like a very basic thing, but actually many brands get it wrong because you’re focusing on all the peripherals. You can always grow a brand through subsidy, right? Always. I mean, at some price point, everything will sell, right? And so the question is, can you actually figure out unit economics and consumer value proposition? And can you get that right?

Which is the right product quality that I can sell at a premium and make money? I mean, seems very obvious, but actually by the way, many brands don’t get that right. Instead, they focus on revenue, GMV as a metric, all of these things, which I think are all outcomes, but the reality is you’re selling a great product, right?

So I think focusing on that, I think is important. The second is I think, being present across channels is important. And what I mean by that is as an independent brand, being platform neutral, and being able to crack more than one channel early on is important. One of the things, as I told you, I’ve met 700 founders, right? One of the things that was quite striking to me is most of them are very good at one thing. So for example, somebody has cracked Amazon-spend optimization.

Somebody has cracked how to work with Flipkart in the FBA model, right? So it’s important to sort of go beyond a channel and make sure that you’re able to crack more than one channel as you grow because that leads to healthy growth, some control on your end outcomes, as opposed to the platforms having all of the control. And I think it’s important to establish that. I think that’s the second thing that I think is important.

I think the third is to have a healthy mix between D2C, offline and platform. All three channels have very different dynamics. And I think all three bring different things to the table. I think the platform gives you your initial product market fit. It gives you growth momentum. It gives you reviews and ratings. It’s the easiest, and I would say, most economically profitable way to grow, but least defensible over time.

I think offline is important because it makes your brand real, right? And D2C is important because you have a continuous consumer connect. So getting the balance right between those three as you scale in your first 18, 24 months is important. You do too much of one or too little of the other, they’re all problematic.

Shripati Acharya 25:30

That’s a great point. I never thought about it that way. So is there a notion of PMF in the D2C world? I mean, we talk about product market fit in the tech world. So how long does it take to do that?

Ananth Narayanan 25:45

I think there is. And I think in my mind, it’s a two to three-year journey. I hadn’t thought about this PMF either, so it’s a great question. So I think PMF in my mind is the ability to have unit economics with the right reviews and ratings, and the product quality. I think PMF for me is being able to be successful at more than one channel.

And I think that’s really important to be able to do. And PMF is to be able to generate enough economic surplus for me to be able to invest in branding, right? I think all these three, I think take two years in my mind minimum, right? I mean, if you’re in fashion, of course, you need to go through a couple of spring summers and a couple of autumn winters, right?

In beauty, you need to, for example, do this not for four hero SKUs, but do it for three categories across 40, 50 SKUs. If you’re home, you need to be able to do it. You can’t be a one hit one wonder with one SKU product that’s successful with a lot of reviews. As you think about a brand, you need to think about how can you actually build this across at least two, maybe three categories.

Shripati Acharya 26:50

So do you think that we will see a Mensa brand in Bloomingdale’s or Macy’s on Nordstroms some of these days?

Ananth Narayanan 26:55

Why would you not? I mean, I think by the way, we should be in modern retail globally. I think we’ll definitely see some of the Mensa brands globally and offline. I think there’s no reason not to. I think we are playing more in the mass premium segment, so maybe less Nordstrom, more Macy’s, more Costco, more Walmart, more Target. But I think certainly, I feel like this can actually be global and spread across and it should be available in both offline and online retail globally.

Shripati Acharya 27:20

Oh, wonderful. It has been absolutely terrific talking to you Ananth. And in case our listeners would like to get in touch with you, how would they do that?

Ananth Narayanan 27:28

Yeah, the easiest way is to email me. It’s ananth, A-N-A-N-T-H, @mensabrands.com, M-E-N-S-A B-R-A-N-D-S.com. I’m always happy to chat about D2C, building great brands in India and tech.

Shripati Acharya 27:42

Wonderful. Thanks, Ananth, for being with us on Prime podcast.

Ananth Narayanan 27:45

Thank you.

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