Bootstrapped Lotus Herbals is not afraid of MNC invasions. Here's why (Left)Nitin Passi, Chairman and MD, Lotus Herbal plus Dipin Passi, Joint MD, Lotus Herbal
Image: Amit Verma

T he young grad was about to learn two priceless lessons from his mentor. “Don’t let them get under your skin, ” Kamal Passi counselled his son, Nitin, who was getting bogged down by his wily opponents. Nitin completed their MBA in corporate strategy and finance from Katz Graduate School of Business, University of Pittsburgh, in 2000. After a two-year stint with Deloitte, the third-generation entrepreneur returned to Indian and joined the family business associated with natural skincare and beauty care products within December 2003. His father, an electrical engineer, was set to impart practical knowledge, which are either missed in B-schools’ curriculum or don’t find a mention in management books.

Started simply by Passi inside 1993, That lotus Herbals emerged as a strong regional player in the natural beauty care space across north Of india over a decade later. Though small in revenue—₹7. 8 crore in 2003—the challenger brand managed to give the jitters to the clutch of MNC biggies who started feeling threatened. The result has been ‘unwanted’ attention and attempts to not really let the Lotus bloom.  
 
Nitin, meanwhile, was vexed with the games played by deep-pocketed rivals. A battery of frivolous legal cases were slapped, Lotus Herbals was dragged to court, and one of the big players flexed its financial muscle in order to restrict contractors from supplying ingredients to Lotus Herbals. “I could see how big companies were trying to kill a small fish, ” recalls Nitin, who had been itching to take on the might associated with the Goliaths. Now came the second advice from Passi. “Don’t take on the particular MNCs head-on, ” were the words of caution through a seasoned entrepreneur whose father ran a cosmetics factory within Jalandhar and sold products under the Pamilla Perfumery brand in the 1970s.
Bootstrapped Lotus Herbals is not afraid of MNC invasions. Here's why Back in Delhi, the particular young entrepreneur was not ready to submit meekly. His arguments carried weight. Products of That lotus Herbals plus rival foreign brands had been sharing the same shelf of retail stores and targeting the same set of customers. “Ultimately, we are competing against all of them, ” argued Nitin, who was also mindful of respecting and obeying his tutor. So, the particular young lad thought associated with a strategy which could kill two birds with 1 stone. The plan was simple. First, Lotus Herbals would not fight with competitors by contending with their core items. Second, Nitin decided to create his own little kingdoms—segments where Lotus Herbals could rule with its blockbuster products such as sunscreen and sunblock. “If they want to fight, they have to come on our turf, ” this individual says.

A few years later on, in 2013-14, the bootstrapped Lotus Herbals decided in order to rope within a strategic partner. The idea was to infuse capital to expand operations, beef up marketing and advertising, and develop a war chest in order to stand firmly against the big boys. The company was in the final stages of talks with a listed Japanese entity who proposed either a 50 percent buyout or a 49 percent stake. However, closer to the particular deal being signed, Lotus Herbals has been asked to become a junior partner by selling 51 %, which would eventually end in 100 percent acquisition. The offer was too tempting to resist. The family was given a blank cheque. “My father declined. He wanted a partner, not a new owner, ” recounts Nitin. After the nixed deal, the family chose to continue using its bootstrapped hustle and journey.

Bootstrapped Lotus Herbals is not afraid of MNC invasions. Here's why

  Two decades later, Nitin has built a formidable kingdom. “Lotus Herbals Safe Sun is the biggest sunscreen brand in the particular country, ” claims Nitin, who now runs the business with his brother Dipin Kamal Passi. The company, which usually saw its revenue from operations tumble from ₹483. 02 crore in FY20 to ₹369. 28 crore in FY21, has staged a rebound by clocking ₹552. 42 crore in FY22. The particular profitable growth from the company, which has a presence in 700 cities and towns through 1, 000 distributors plus 1 . 5 lakh retail outlets, has happened on the back of the strategy of building strong moats around the kingdom.

The first robust lever is the way the professional elegance division offers scaled. That lotus Professional is now spread throughout 15, 500 salons and spas in the country. The second has been the particular evolution of the Lotus Makeup range of products plus Ikkai, which was rolled out within 2018 in order to cater to the needs associated with millennials. Then there was the move to tackle the pandemic challenge. The particular offline retail-heavy company folded out its digital-first brand name Lotus Botanicals last year. The fourth development engine has been a spate of acquisitions over the last two years. Lotus Herbals ventured into the luxury ayurvedic holistic beauty and wellness category by acquiring SoulTree inside September 2020. It bought a 32 percent stake in dermaceuticals maker Fixderma last October, which beefed up its play in premium skincare plus haircare products.

Bootstrapped Lotus Herbals is not afraid of MNC invasions. Here's why Kamal Passi during market visits and dealer meets in the particular late 1990s
Image: Courtesy Lotus Natural

The purchase juggernaut, interestingly, continued in order to roll this year. In January, That lotus bought a 25 percent stake in Conscious Chemist, a new-age, clean attractiveness D2C brand having the functional skin care range across categories spanning face treatment, eye care and body care. It also purchased a 10 % stake within French luxurious brand Lili Margo Paris, which gets a dominant share associated with sales through China. “We can’t do everything alone, ” says Nitin, chairman and managing director of Lotus Herbals.

Lotus Herbals, reckon advertising and branding experts, has finally started to bloom. What differentiates Lotus Herbals from the others in an overly-cluttered market is the focus on functionality, contends Harish Bijoor, who runs an eponymous brand consulting firm. In a country where brands prefix plus suffix ‘herbals’ loosely, he or she underlines, That lotus Herbals has done extremely well by focusing on functionality and living up to the name. Though he lauds the move in order to diversify the particular business simply by entering multiple categories and acquiring a bunch of different players, Bijoor sounds a word of caution for the family-led business. “Focus might become a causality, ” this individual says.

Bootstrapped Lotus Herbals is not afraid of MNC invasions. Here's why

Bijoor explains. At times, brands try to expand their own basket in their zeal to grow at a fast pace. While rolling out D2C brands makes sense, what one must be wary of is inadvertently cluttering the particular space. Lotus Herbals, he or she stresses, must remember what it stands for. “It should mean something to some people rather than everything to everybody, ” he cautions. Though the company has successfully warded off threats from your big males in the cosmetics plus beauty space so far, the particular threat, and the challenge, remain. “It can’t drop its guard, ” he says.

Nitin, for their part, will be enjoying the bootstrapped trip. He tells us the perks of sailing the ship without private equity (PE) or venture capital (VC). “The biggest plus is freedom, ” this individual stresses. “We are not answerable to anybody, nobody is sitting upon your head, and there is freedom to experiment, ” he says. Lotus Herbals, he underlines, was in losses for the first nine many years. “Can you imagine the VC- or even PE-backed venture to stay in loss for so long? ” he asks. The fact that the company continued to operate underlines the particular commitment plus vision from the founder within the long-term story. The second advantage is usually staying frugal, which means experimenting, taking calculated risks and measured bets. “If anything fails, it’s okay, but the loss is also ours, ” he admits that. The particular third positive is building a brand, which is a painstakingly slow process. “A lot associated with D2C startups have constructed labels. We have built a brand, ” he or she smiles. That lotus, Nitin points out, has never been a discount brand. Deep discounting and offers, he avers, is like artificial oxygen. The moment your remove the o2 mask, the sales dip and the company bleeds.

Bootstrapped Lotus Herbals is not afraid of MNC invasions. Here's why

Is he not really tempted in order to scale aggressively like some of the particular D2C unicorns during the last year or so? Nitin quotes Charlie Munger. The American billionaire-investor plus entrepreneur once talked about the edge that he has over others. “It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of wanting to be very intelligent, ” he said. Nitin wants to follow his American idol. “Let’s not really do stupid things. Let’s stick to the fundamentals of business, ” he says, adding that if an entrepreneur is clear about the long-term vision, everything else is noise. “Don’t forget that Lotus blooms in muddy waters, ” he smiles.

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(This tale appears in the 12 August, 2022 issue of Forbes India. To visit our Archives, click here. )

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