Honasa Sues Hindustan Unilever Over Lakme Ad: Report

Honasa Consumer, the company behind Mamaearth and The Derma Co., has reportedly sued Hindustan Unilever (HUL) over a Lakme advertisement that it claims to be “disparaging” and “misleading”.

According to a CNBC report, in the lawsuit filed before the Delhi High Court, Honasa alleged that a recent Lakme campaign titled “SPF Lie Detector Test” unfairly undermines competing products, including one that closely resembles a sunscreen from The Derma Co.

The matter is expected to be heard next on April 17, when both parties will present their arguments, the report added.

Recently, Lakme launched an ad campaign for its Sun Expert SPF 50 sunscreen. The ad allegedly claims that many digital-first sunscreen brands falsely advertise SPF 50 protection but provide much lower protection, sometimes as low as SPF 20.

But for its testimony, the ad cited Lakme’s use of in-vivo testing (testing on humans), which is considered a global gold standard for verifying sunscreen effectiveness. 

To this, Honasa (which also does an in-vivo testing for its SPF 50 sunscreens) alleged that the Lakme ad disparages The Derma Co by implying it as a brand that provides misleading protection claims.

Justice Amit Bansal, who is presiding over the initial hearing on this case, remarked, ‘This advertisement, on the face of it, is disparaging.’ The court has also sought a response from HUL on this. 

Earlier in a LinkedIn post, Honasa cofounder Ghazal Alagh took a playful jab at Lakmé, welcoming the brand to the “SPF 50 club” while also criticising HUL for being slow to adapt in the fast-moving consumer goods (FMCG) space.

She claimed that Lakme’s 9 to 5 Sun Expert sunscreen had copied The Derma Co.’s formula and packaging, although this post was later deleted.

Adding to the drama, Honasa also put up a bold billboard next to a Lakmé ad that said, “Hey Lakme, congratulations on finally getting SPF 50 in-vivo tested. Welcome to The Derma Co. standard.”

This comes a few weeks after the company got relief in a yearlong legal tussle in Dubai court with its distributor RSM General Trading LLC. 

Dubai’s top court, the Court of Cassation, overturned the Appeal Court’s decision that mandated Honasa to pay AED 25 Mn (around INR 56 Cr) in compensation to its distributor. 

Moreover, the same matter was also disputed in India, and the Delhi HC has already asked RSM to revoke its execution proceedings in Dubai against Honasa. 

Gazal, while backing the claims made by the company, pointed out that the FMCG segment has for a long time been devoid of good competition, leading to large traditional brands becoming complacent. 

However, HUL’s recent acquisition of Minamilist to consolidate its BPC play and its CEO’s latest comment that quick commerce will contribute 10%-15% to HUL’s revenue in a few years, suggests a different story. 

While the Minimalist buyout is a move towards staying competitive in India’s evolving FMCG landscape, the cumulative revenue of nearly $1 Bn for FY24 of the top 3 QC players reflects the huge opportunity HUL is looking to tap into. 

Honasa, on the other hand, seems to be battling the issues created as a part of its transition into the distribution model from the super stockist model. 

This change, created as part of ‘Project Neev’ in Q2 FY25, allegedly resulted in the unsold inventory for Honasa lying with distributors and retailers.

The industry body, All India Consumer Products Distributors Federation (AICPDF) also pointed out that the company has large insolvent inventories, causing a financial burden of INR 300 Cr for Honasa. 

Adding to its woes are the dwindling stock prices and subdued financial results for the company. The company’s stock slumped over 8% on a year-to-date basis, far surpassing the Nifty FMCG index fall of 0.8% for the given period. 

While the result for Q4 FY25 isn’t out yet, Honasa reported a flat consolidated net profit of INR 26.02 Cr in Q3 FY25 from INR 25.90 Cr in the year-ago quarter, while its operating revenue grew 6% to INR 517.51 Cr during the quarter from INR 488.22 Cr in Q3 FY24.

The company competes against Nykaa, Plum, Pilgrim, and Minimalist in the online beauty and personal care market.