In this episode, we sit down with Sam Bedi, the Executive Director of Forest Essentials, to explore the incredible journey of transforming a small passion project into a global luxury Ayurveda brand.

Sam shares his insights on everything from navigating early challenges to building a distinctive brand identity and setting up their own manufacturing facilities. He discusses the significance of maintaining uncompromised quality, the evolution of retail strategies, and the importance of thoughtful store expansion. With 175 stores and plans to expand further, Sam reveals how patience, focus, and hard work have been the cornerstones of their growth.

Tune in to hear about the company’s journey from its first store launch at Khan Market to its global aspirations, and learn valuable lessons for anyone looking to build a legacy brand.

Key topics covered:

• Building a Brand from Scratch: How a small project started in a garage without a business plan turned into an iconic luxury brand.
• Strategic Growth & Store Expansion: Why patience and strategic planning are essential in store rollouts and how Forest Essentials scaled to 175 stores while maintaining quality and profitability.
• Challenges of a Luxury Ayurveda Brand: Overcoming price sensitivity through product and retail experience to establish a new category in the Indian beauty market.
• The Importance of Product Differentiation: Why sticking to uncompromised quality and unique formulations is crucial in a crowded beauty space.
• Navigating Retail Trends: The evolution of retail strategies from high streets to malls and back, and insights into selecting the right locations for store openings.
• Global Vision & Long-term Goals: Sam’s vision of positioning Forest Essentials as a global brand, rivaling international names like L’Occitane and The Body Shop.
• Key Advice for Founders: Patience, focus, and the role of hard work in building a long-lasting, impactful brand.

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Full Transcript

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Hari Premkumar: Hi listeners, we have Sam Bedi, the managing director of Forest Essentials, one of the most iconic brands in India with us in this edition of Brick by Brick. So Sam, thank you for being here. We'll start with the origin story of the brand. Your mother started out more than 20 years back wanting to build a luxury Ayurveda brand. Luxury Ayurveda almost sounds like, and oxymoron. So please, you know, take us through the initial days, how the journey began, and we'll take it from there.

Sam Bedi: Thank you, Hari, for having me on the show. It's a pleasure being here. For the story, Hari, it's a very, well, it's a mixed story because it started from a garage, like, as you know, a lot of entrepreneurial endeavors which have started from a basement or from a garage. That is one common twist in the story. But what is uncommon is it was started completely without a business plan.

Sam Bedi: It was started without actually viewing it as a business. It was more of a project and it was something that, you know, that she started because she felt and as a lot of companies have started, I felt a need in the market to understand why there wasn't a high quality Indian beauty product given, you know, everything that we have in the country, both, traditionally in terms of ingredients, in terms of our history, heritage. So to understand why, you know, we as Indians were so enamored with using foreign products when you had so much at home.

Sam Bedi: So I think that quest actually started as a hobby where she started to find out how to extract oils, how to start making soaps. And I think that led on to something that her friends and family liked. Again, another story where you basically sample it out and then there's great feedback. And that's what really led to For Essentials being created.

Hari Premkumar: And how long did this passion project phase last, Sam? How many years did your mother work on it as a passion project before you realized that there was a real business in this?

Sam Bedi: Hari, it's funny, she still treats it as a passion project. I'm the one who has to make it a business project. you know, everything is shot from the hip. Everything is gut instinct. Everything is still as she would have done it 20 years ago. I have come in primarily to try and, you know, focus that instinct, focus that need and make sure that we actually run it as a business. But to answer your question, I think it really started getting a little more of understanding the potential was possibly in about 2004. We started the business in 2001. I joined in 2002. I was actually banking in New York in Standard Chartered Bank at the World Trade Center. And I came back in 2000 just before the buildings came down. And while I was looking for a job, I saw that she was doing this project. And while I actually had no interest in the project, I said, let me help you. You know, I'll set up the admin, I'll put up the computers, the accounting, stuff like that.

Sam Bedi: And then I started to find it interesting, and we both started working. And then I said, is it ok if I start working with you? Which was one of the best, but also one of the worst decisions I've ever taken. So, you know, when you put two family members together and when you start working, it's a difficult and a learning process because it's something completely new. But again, it was built again on passion. I started to understand why she was being so passionate about it. And I think, you know, we started in a very old-fashioned way.

Sam Bedi: So gave it to stores who would take us on consignment. We gave it where we could fit the product in. We took a hotel order without having any capacity. The classic story of an entrepreneurial kind of zeal to make sure we grow this business and make sure it happens. So with very little resources, I don't know if you've read in the past, you know, it was literally started with 50 ,000 rupees. So we didn't have, you know, all the PE and VC money floating around today. But we started with that.

Sam Bedi: And the turning point came when we were offered a store in Khan Market in Delhi, is our fifth avenue, so as to speak. at that time, was very difficult. This was in 2004, our very first store, which still exists, by the way, 20 years down the line, we still have that store. It was a turning point because I think the rent was much more than our turnover. So this was a situation where we said, listen, are we going to be able to afford this?

Sam Bedi: Then I said, you know what, let's negotiate with the landlord. And the landlord was like, are you joking? Nobody negotiates in Khan Market. In fact, I've got five people waiting. It's a personal favor that I'm actually even meeting you. So instead of us quizzing him, he quizzed us and asked us about finance. Luckily, we were vouched for by family. And we took the store. I think, again, store design on the fly, inventory on the fly, planogram on the fly, all the things that we all know today was completely alien to us.

Sam Bedi: But the good part was the first day we were going to open and again, no store launch event, no social media, nothing. We just opened the shutters and the number of people who came in and started asking questions and started selling. In fact, I think we ran out of products in two days. We had an empty shop for two days after that. so, but it was a turning point to understand the potential.

And we also then took two important decisions.

Sam Bedi: One was very clearly to create our own distribution because after working with number of retailers, smaller retailers, working on consignment, one was that we would do our distribution– which we said is an old way and a very expensive way.  Because to build out stores in those days, I'm talking 20 years ago, there weren't very many malls, there wasn't very many high streets to identify because we didn't have the power of Google or social media. But we did know that this product was not a product just to be sold off the shelf. It was a lifestyle. It had to be explained. It had to be serviced. It had to be giving a kind of experience to the consumer. So that's where we took that call. It was a very early call and an expensive call, because we had no idea that opening stores are going to be such an expensive proposition. The second was quality. We said that we will make sure no matter how small we remain or how big we get, that that quality is never going to be a compromise. So that was, I think, a very big turning point for us.

Hari Premkumar: Interesting and you know when you launched, your price point was almost like 5x that of mainstream brands. How did you know, what were like the key communication strategies that worked for you? It was a huge markup. It was a luxury brand the end of the day

Sam Bedi: So I think there were two, three factors in this. One is my mother has a very Steve Jobs approach. She said, you know what, build it correctly and someone's going to buy it. So she said, the point is that you shouldn't be ashamed of what you're selling because the product that we're trying to make is expensive. So in fact, in most cases, all the products, even today, it costs us more to actually make the product that the MRP of certain products that sell in our vertical. So when we started using pure sesame oil, pure mustard oil, know, stuff like that with proper essential oils. The cost was so high, right? And of course we didn't work on GPs and margins and cogs and so on and so forth, know, terms that all your listeners are probably familiar with. But we did understand, said, listen, by the time we actually put the product to market, by the time we pay for our store, by the time we start, you know, looking at how these overheads are going to work, you're right, know, soaps were either selling at 10 rupees or you had an imported soap from Yardley or you had some very expensive soaps coming at, you know, whatever.

So we set a new price point. And again, it might have been the lack of experience and knowledge that drove it forward because, you know, maybe knowing everything we know, maybe we would have done a lot more consumer studies and understood that, but it was a natural instinct and as well as, you know, driven by the fact that we were going to give quality.

Hari Premkumar: But just double clicking on the price point you said, was it just like the typical you need a certain gross margin and you arrived at the price point or was it you know as you said there were imported products so did you peg it at a certain markup or markdown to them?

Sam Bedi: We didn't peg it. We actually did it in terms of what we thought would be a margin to cover everything that we had. And it was my mother's very housewife thinking that, you know, we got to make sure that we are doing something that is going to sustain us for a while. It's not, you know, a lot of trends that I see today, which I still don't understand about growing the market and then, you know, making it profitable down the line. Sometimes it works, sometimes it doesn't.

Hari Premkumar: And given you had a more analytical approach to business then and now, when you decided to join, it was her passion project but would be great to understand how you thought about it in terms of business potential, et cetera, at the time you joined the business.

Sam Bedi: When I was doing the corporate banking in Stan Chart, for me, I was okay with the business. I don't want to say boring because that would be rude, but I mean, it was very run of the mill. It was coming into the office, working through the files, know, looking through the corporate accounts, dealing with... When I came back, I had a certain passion and a dream. You know, my father came from an entrepreneurial family. was to have something that I could have called my own, something that I could do. Where I could really put in that sweat and blood to actually make it move forward.

So when she did this, at first I was very skeptical. I said, you know, candles, soaps, I mean, really, where is this going to go? And then the kind of work that came in, and like I said, you know, I stepped in, I spent a few hours while looking for another job. And then finally, I just said, this is going to be a hell of a lot better than going and sitting on a nine to five job and sitting at a desk. So I took it on, not knowing the potential fully, but took it on because I thought it was a better choice at that time.

Hari Premkumar: Interesting. Sometimes the best decisions in life are the ones where you don't overthink it. Now coming to the retail channel being the first one, you spoke about the store that you open. How did you sort of decide on retail being the primary channel for the business? And today I think you have more than 100 stores in the country. I can't think of many personal care brands that had their own stores back in the day, in the early 2000s. So were there any brands outside India that you got inspired by? The context here, Sam, is, a lot of our founders are thinking about channels and thinking about disruptive channels in their categories. So it'll be useful to just lay out how you thought through that.

Sam Bedi: So in the beginning, Hari, there was no benchmarking. There was no competitors that we thought of. There was not even understanding what most of the international brands existed outside. Because again, like I told you, it was 2004. Even traveling to Bombay was a big deal at that point. Between travel, communication, there was no internet, really soto speak.

And in terms of actually during a situation where you thought that whether this is the right decision or not, even distribution. mean, literally at that time, if you were to look at a shopper stop, everything was more masstige. Everything was actually, at that point, any department store that existed was either a big hyper grocery store or was Kiranas. So, for us, if you wanted a price, when our present soap was 10 rupees, to price it at a hundred rupees, you needed to have a certain atmosphere, like I said, ambiance around it. And that store,from that one store, we understood that this was the way forward.

Now, like you said, there were not many brands who had stores and especially not in the, I don't think anyone in the beauty segment had it for that matter. At that point, no one really had their own store as such, right? Everybody was using distributors, everybody wanted volumes, everybody wanted to, know, it wasn't so much on the intangibles, everything was just basically based on volume and size.

So we kind of came in with a very different approach because we understood luxury. My mother understood luxury very well, right? Not from just a fact of brand names, but understanding what luxury meant, what luxury could mean to a consumer in terms of all the intangibles that I'm talking about. So from there, we started looking at it and we said that there is nobody who I would put my hundred rupee soap into presently. Yes, we had some boutiques, but like I told you. Those boutiques were just personal endeavors that were being run and wasn't a very professional job. So was difficult to even put the product, get the money out, all of that. So we said this is the better way to go.

Hari Premkumar: Great. And how did the store rollout eventually pan out? So the first store was back in 04, and today you have around 120 stores, if I'm not mistaken.

Sam Bedi: We have 175 stores. We're opening about 20, 25 stores a year.

Hari Premkumar: OK, so you are currently at a store opening.

Sam Bedi: Till we run out of space because we got to keep it we got to keep pace with the infrastructure in India.

Hari Premkumar: Yeah, yeah, no, that I completely agree. But would be great to understand how it was in the initial years, right? Because these days you do, you know, see a lot of opening stores, you know, like opening hundreds of stores, in fact, in the first few years, and I'm always, you know, wondering how it would end. So it'll be great to, you know, share lessons in terms of, you know, how people should think about the right pace of store rollouts in the initial year, you know, when do you sort of optimize that before you get to even like a 25 store opening a year. That to me is quite a lot already

Sam Bedi: Hari, I think you've actually put the right perspective on it because we opened our first store in 2004 and I think we ventured into Bombay for our second store in maybe 2005, 2006. In 2008, we had maybe four stores, right? For the first four years. I want to talk about store rollouts because I think it's very important because in terms of whether it's...It's for media consumption to say, you know, we're going to open 500 stores in the next three years. It doesn't work like that because I think the worst thing to do is to open a store and then shut it because not only are you harming your own reputation, but also livelihoods around you. It's not good planning. So I don't think speed is the name of the game, especially in a country like India. India is not one country. In India, to even become a regional player, is hard, because you got to find the right infrastructure, you got to find it and then go from region to region, know, north to west or west to south or then to the east is not an easy game because you are catering to very different cultures, crowds, and there's no certainty that if you make it well in one region that it's going to happen, you know, pan India. So I think this, I think being very sure footed, being patient. Today, of course, times have changed, there are cycles for P .E. money, B .C. money, plus you've got hundreds of brands coming in, everybody's buying for the same space. So, I get there is pressure, but I must tell you that I think slow and steady does still win the race. You have to make sure A, that you're very, sure about what you're opening and B, you need to make sure it is profitable. Otherwise, know, opening the stores for show is not a good idea.

Hari Premkumar: And is there any thumb rule that you can share with founders in terms of the first few years of their offline rollout? What should be the number of stores, number of cities they should be in and define the playbook before getting to the 20 plus stores a year sort of velocity?

Sam Bedi: So Hari, think obviously it depends on vertical to vertical, but I will give you my examples. For me, I think what was very important was that you do things you can control. And when I say control, that is something that's right in front of you. So if I was to actually do a store rollout and say my headquarters or my base is in Delhi, I would saturate Delhi. I would saturate the regions near Delhi, right? And then make it a hub and spoke model and then move out. Because if I was to move from Delhi to Bombay and keep five stores here and five stores in Bombay,

For me, it would be difficult. But again, I'm talking about when I did it in my time. Obviously today between communication, logistics, it has become easier. But I still think the hub and spoke model works well. So if you have more resources, then start Delhi -Bombay, work around Bombay, Pune, all of that kind of region, work around Delhi -Chandigarh, all of that kind of region, and then start expanding. Keep it as regional as possible, which is what I would suggest. But again, like I said, it depends on business to business.

Hari Premkumar: And in terms of the pace of rollout, Sam, was it like once a quarter and then you amped it up, there like, you know, just trying to understand the step function, right? From opening one a year to 25 a year, what were like the step jumps you took?

Sam Bedi: See 25 a year is almost opening a store every month. Your infrastructure has to be solid. Your confidence has to be solid. You need to make sure you know that what you're opening at least 90 % are going to bring money back to the table because I mean opening 20, 25 stores a year and then half of even half of it not working is a big deal. Right. So I think in terms of rollout, it's your surety. It's your brand. It's what you're basically doing. So if I was to look at it as a brand new business today, right. I wouldn't look at maybe more than four stores a year. would maximum keep it to one a quarter, even under pressure, would keep it under one a quarter. I'd see how they perform and then maybe next year I'd add another two or maybe doubling at most. But that's the way I'd hold. wouldn't go to 25 stores a year one. It's a very hard proposition.

Hari Premkumar: We have the same thought process. We typically suggest that it's better not to open more than one a quarter. But assuming someone's staying at that pace, what are the early proof points founders should be looking out for, like store payback, rent to revenue, et cetera? First 12 to 18 months of a store opening, how do you think about the key metrics that one should be looking at?

Sam Bedi: I think given today what it costs to open a store, because you must remember that the rents, the revenue shares, the cost of construction, the deposits, in some cases there's CAM, mean there's a whole lot of things that end up. I mean in certain situations they even make you pay for your POS and for your, in terms of your IT services if you're in a mall or if you're in an airport, which are expensive propositions. So I say, if you can, within 24 to 36 months, if you are looking at your break even, depending on, of course, your cost. 18 to 24 is ideal. In some situations it might extend a little more but anything more than that then you got your P &L wrong. As far as costs are concerned, I think the biggest cost of course is rent. And if you start slipping over 20 % of your P &L in rent then you've got a problem on your hands. I know people are paying 30 -35 % then you're literally making money for your landlord, you are not making money for the brand.

Hari Premkumar: And is there any sort of thumb rule for payback that you have, the initial investment in a store by when you should be able to recover it?

Sam Bedi: I would say we, because we built the brand today, I would not give it more than 24 months. should be, we should be within 18 to 24 months, we should be open.

Hari Premkumar: And you mentioned that the first store is older than 20 years now. The other challenge that we've seen retail businesses run into is, once you hit steady state after the 10 -year mark, you know, your costs are increasing at a certain pace, but your revenue isn't. And then you are, you know, just figuring out the next phase of growth.

Hari Premkumar: Have you seen it in your older stores, right? Past the 10 -year mark, what are the levers you've been able to use to ensure that the growth continues at a store level?

Sam Bedi: I think after a 10 -year mark, unless there's an explosion in the market where new brands come in or it's reinvented itself, it's a steady pace of growth. And usually it's determined by inflation. So we price according to inflation. You'll have to look at inflation every year. You cannot avoid it. In some cases, I know that there is a price sensitivity. But if you want to keep pace with rent, you want to keep pace with overheads, you want to keep pace with your salaries, you'll have to look at inflation with maybe a couple of points here and there.

Sam Bedi: So that's one part of growth that happens. Everything else is determined by brand recall, marketing, new launches, bringing in the consumer to buy more, cross -selling it. So, the usual tricks of the trade, but having said that, a certain service, like I have Khan Market consumers who have come in from 2004 and who are still coming in in 2024. And they even know where my product on the shelf is. They know the staff very well. You have to keep them, actually it's a second home in a sort of a way.

Hari Premkumar: And do you also track the number of times a customer purchases from a store in a year? Are those metrics that are important that you track?

Sam Bedi: Typically in our industry, Hari, you look at maybe four to six times a year. the products last maybe two two months at a go. But because we have a lot of gifting, we have a lot of things. So typically, we see more six to eight visits a year. It's not only for personal consumption, but in terms of gifting or for giving out or stuff like that. We have people who come in just for consultations and a cup of tea. So, I won't even count those, but I'm talking about an actual buying habit.

Hari Premkumar: And now we have the benefit of online digital platforms, et cetera, but in your initial, largely offline world, how were you able to collect customer feedback and incorporate it in product development, et cetera? It would be great to understand that.

Sam Bedi: You know, it was a tough one because A) most of the customers in the prestige segment are always wary about giving out their numbers or emails because you know, it's just a little more privacy for them. We used to have the old fashioned, I remember going abroad and buying those books where you fill in the phone number and the email and the address, you know, those visitors books. I used to buy them by the dozens and put them in each of the stores and I then, but then it was an oxymoron because we tell the staff, don't pester anyone. Don't say, you know, if you'd like to please leave it.

So data collection at that point was very, very difficult. It took a long time to put together. But like I said, you know, a lot of the customers and even today and from those days, they have such a comfort. My staff attrition is very low. So we've had people for many, many years. So whenever something new comes in the store or when they know that they're running out product, it's just literally a phone call. So these are all community stores. We literally build our stores because see ultimately after a certain size, right? You serve certain pin codes, you serve certain geographies, but then you want to make your store strong in that very community. So it becomes a kind of a person who's it's almost like a commodity if nothing else, right? Ma 'am, your shower gel must have run out by now. Would you like to clean? I've got a brand new exciting flavor. So stuff like that. But you're right. Data analysis, data collection at that point was nowhere near what it's today. Absolutely not.

Hari Premkumar: And it's interesting that you're saying that the attrition is low because that's like, again, a big, big challenge for all the retail businesses. Anything you've done differently that's helped you retain people longer.

Sam Bedi: I think number one, I think we are the bullseye for anyone because we have a very good service level. We have great staff in terms of what we've got. I think the two, three things are one is a very strong loyalty to the company. We really incorporate them, treat them as family. I think it's very important that they feel part of what you're doing. We, in fact, a lot of them understand, it's not what we sell is what we actually do. So it's not like we make it in some sweatshop and then say, it's made in the Himalayas.

It's with the community and ferment it in a certain way, they actually see what we do. They use the product, they know the product. Training is still done by my mother, Mrs. Kulkarni, even today, which is a very strong aspect for us. And of course, there is the money aspect, they're paid well, they’re incentivized well, so nobody's gonna move for a few bucks. If it moves, if they do move, it's gonna be for a lot higher, but then I can assure you those pay scales are not really attainable for anyone in the FMCG trade. So there is a trade -off for us.

Hari Premkumar: Right. No, and training plays a big role. So and if your mother continues to do it, I can see the difference. Yeah.

Sam Bedi: Even today, this is our number one priority in terms of service.

Hari Premkumar: No, that's amazing. Now looking at your current store footprint of the 175 stores, how many of them are outside the top six cities?

Sam Bedi: So I'll take six metros, so maybe half.

Hari Premkumar: Now that gives a clear sense of, you know, the purchasing power that's available beyond metros in this country.

Sam Bedi: Hari, you won't be shocked. You are very good at your business, so you know this. I'm just saying in terms of... See, think there's... Let me put a little bit of clarity there. Consumption power in this country has never been an issue. It's never been... It's not a fallacy. It doesn't mean that someone in Muradabad or someone in Vishakhapatnam doesn't have the money. do. It's just the spending patterns, the exposure and of course, understanding what evolution they are in life. Because if you really look at it...

When people make money, what is the first thing you do? You put a roof over your head, then you want to impress the neighbor with a car, then you buy the watch, then you save money for the the jewelry and the wedding, right? And then once you got past all of those stages, you start looking at self -consumption. So whether it's in terms of food, whether it's in terms of health, whether it's in terms of pampering yourself, stuff that maybe someone else can't see, but makes you feel good, right? These towns are now going through this evolution.

So when I opened, I've got two stores in Dehradun. I studied in Dehradun for seven years and I never dreamt that I would even have a store today in Dehradun. I have two stores in Dehradun and they're doing very well. So the money is there, the exposure is now coming in and the consumption patterns are changing. That's very, important. If I had opened in Dehradun 10 years ago, nobody would have paid 400 bucks or 300 bucks for a soap. There's no way in hell. Today, they understand quality. Like I said, Google's there, everybody's traveled abroad, everyone's got exposure. So the market has evolved.

Hari Premkumar: Yeah, it is amazing. And as you said, it's like that steady climb up the Maslow’s hierarchy. And I think it's the self actualized people that, you know, that are your primary audience. And how do you think about, you know, which towns to go after? Right after this conversation, I am going to be speaking to a lot of our founders on following Forest Essentials, you know, beyond top six. But for you, given, you know, you're sort of pushing the envelope. How do you think about which town is ready?

Sam Bedi: Hahaha. Hari, think there's a lot of now we do data, we do analysis, we understand. We also use our online sales as a barometer in terms of understanding where the patterns are coming from. Where is that thing? We're looking at population sizes. We're looking at where the new model infrastructures are coming up. So we'll take a very, very macro view of it. Then I send in a couple of teams to study.

Sam Bedi: I want to go see what brands are there. I want to go see what they're buying. How much are these stores doing? So we do a lot of marketing tell as well. If there's if there's say for an argument, say a Westside or a Marks and Spencer's or a Starbucks or or fellow brand, you know, going there, what are they doing? And we know now over the years what our patterns are, what we would compare to sales in terms of these other brands. And then we take a call. Then we do a little bit of a PNL study. What's the rent looking like? You know, how would that work? What is the footfall? What is the demographics around that?

It's a lot more scientific now because like I said, it's very easy to open the first hundred stores because you know exactly where to go, right? You can say, I got Delhi, Bangalore, Chennai, and then for the next hundred stores and then the hundred stores that are going to come even after that, the decisions have to be right because these are long -term decisions. Landlords now are not letting you just walk in and walk out. know, whether it's through your deposit, whether it's the lock -in period, whether it's your furniture going in, you cannot take light decisions after your first couple of hundred stores.

Hari Premkumar: That's true. And how does, are there any nuances in terms of store performance, top six and beyond, or is it similar?

Sam Bedi: It was always, it was always Delhi for us for a long time. And then, you know, I noticed that as the brand grew and the trust factor grew, the West started overtaking the North and the West is a very different demographic, right? They are, they are very exposed, very sharp, very well traveled. And it takes a long time to get that trust. But when you get that trust, then they're good loyalists to have. I think the West was that. South took us a while.

Sam Bedi: But if I tell you stories of how retail has gone, even in the South, it's amazing. And it's so many idiosyncrasies and so many cities that you work with. In Lucknow, we have a lot of consumers, but the consumers send their drivers, they send their maids, they send the guys to pick up the stuff. We know because from the loyalty programs, we can understand the patterns and all that. In the South, we have a lot of Tollywood, we have a lot of politicians. It's very interesting patterns that emerge, but very strong. I mean, in our loyalty, I think maybe we have almost a 70 -72 % loyalty sales, which is very, very strong.

Hari Premkumar: Thanks. And do you have a preference between high street and malls or are you neutral?

Sam Bedi: You know, it was, it's an evolution. This is a complete evolution because when we started, there was like I said, high streets, you picked up the iconic high streets, whether you called it breach candy in Bombay or whether you would like to call it, you know, Khan market in Delhi, right? So there was, sorry.

Hari Premkumar: You didn't have many malls also at that time.

Sam Bedi: You don't have many malls exactly, right? And then malls really took off. So when the Saket came into play, when all of these promenades, when Emporio, when all these came into play, then obviously we said, you know, malls make sense. Our high street's going to die. And in terms of malls, you know, again, negotiating, trying to get to the ground floor, it's become a very tough business now because it's the landlord's world today. There's been cycles, right? There's cycles when the brands rule, there's cycles when the landlords rule. Unfortunately, today the landlords are ruling.

But I think in terms of we went very strongly to the mall and then we hit a point where we came back to the high streets. And I think that high street situation happened just before COVID. We started to understand that not everyone is going to a mall because first it made sense. You go to the mall, you shop, you eat, you watch a movie, everything, parking, all taken care of. But not everyone is going to go and get stuck by thousands of people around you. So maybe they want a little more privacy. They prefer the high street. Like I said, community store, a different shopping experience. So after COVID, we went right back to high street. We picked up a lot of high streets. Plus, as you go into smaller towns, even despite having a mall, a lot of people do still love their high streets. So we've taken combinations of high street malls in certain situations.

Hari Premkumar: Got it. And now, switching gears, you not only own your own channel, your stores, but you also have your own manufacturing. And could you just talk us through the decision to go with your own manufacturing? And a lot of our founders operate their own manufacturing setups as a fund. are big fans of founders that run facilities. However, the counter argument always is...comes in the way of scaling, et cetera, and do you want to take on the headache? So it would be great to understand the decision to initially start off and then why you're sticking to it, right, even today.

Sam Bedi:

I think there are two, three things. One is also depends on what stage you're in your life or in your business, right? If you really look at it, to invest into a manufacturing facility at the very start might be an expensive proposition because today it's not as easy as just putting up a plant, throwing machine in there and you start working. There's a lot of scrutiny, there's a lot of regulations, you know, there's, and if you want to make a quality product, the kind of investment you have to make today is enormous. I mean, even to keep it up to GMP standards, to pass your ISI, to do all of that stuff, it's an expensive process. a lot of people don't want, and also running it is a big headache. So I'm not even just talking about the investment side of things, but making sure you have the right team to make sure that you keep your QC, your R &D, your microbiology, your operations, it's not an easy process. When we started, we had to outsource at the beginning, but we realized over time that, and I told you when we took those fateful decisions of opening our own stores and keeping our own quality, we realized that until you control every aspect of this chain, you will not get what you want. You must have your own formula.

See today, a lot of, you know, our business rivals, a lot of people in the vertical, they pick up mundane formulations and just make a scent difference. So it says, I brought a new soap, but it's orange and, and, and lavender. But that's not really bringing skin into the game because what is making your soap or your oil or your shampoo or your product any different from anywhere else? Right? Now there are some people who have done a good job of it. So I don't want to put it down as a generalization because I have seen some brands who come up with good quality products for, but for most it's picking up what's available because they don't invest the time or knowledge into R and D. They don't have the team. So a lot of, depends on what kind of person you are also, right? Are you a scientist coming to bring a product in? Or are you a marketing person who's come to bring a product in? Who are you and what other roles do you have to fulfill in order to make it a complete rounded product? So I think it's difficult question for me to answer, but I think if the brand takes off and yes, if you can control everything from start to finish and you have the ability to do it, I think it's important because quality has to be done very, very carefully.

Hari Premkumar: Right. And, know, just staying on advice for founders, the other trend that we've seen in beauty and personal care is it almost mimics fast fashion now in terms of just product life cycles. What's sold last year, you have to launch new products and, you know, it's almost like you're on a treadmill. So how would you, you know, what would your sort of advice be for founders starting out in beauty and personal care, right?

Sam Bedi: With the onset of online and like you said, data, and we talked about trends, we talked about, you know, consumers preferences changing so quickly. I do want to say that you can't make a product in two months and sell it just because it's the fad of the season. It's not something, you know, it's run of the mill. Like I've seen stuff like onion oils, Moringa oils, stuff come out, come out, become a fad and digest just as quickly. Right?

At the end of the day, a product, if you want a serious player, and especially if you're in skincare. You need to really put in that kind of time, effort, ingredients, research, and really go through the clinical trials of putting a product out there. There will be trends. Sure, there will be players who capitalize on trends. But if you are a serious person and in terms of a serious business and long -term, again, what is the intention for your business? Because when you start a business, you have to be very aligned with the fact of what you're planning to do. Are you planning to quickly make money and sell it out? Not that anything is wrong. Every single thing is fine. It's just about what you want.

Or are you there to build a legacy? Are you there to build a business to make products for skincare? Are you going to go buy fads? Are you going to be trendy? You know, all of that determines your decision. But I do want to say that I think, you know, your product is what will speak at the end of the day. So if you get that wrong, it doesn't matter how nicely you package it, no matter what price point you sell it. So, you know, to answer your question to throw out marketing money and get a ROAS of one does not make sense. That is basically you're just trying to bill volume, but there's no loyalty and there's obviously no love of the product.

Hari Premkumar: And today, given the stage and scale, Forest Essentials is at, how many new products do you launch every year? And again, what is the typical product life cycle of your hero products?

Sam Bedi: Our hero products have remained hero products all throughout. Ultimately, it's like when we talk about even the bigger brands like Estee Lauder’s Advanced Night Repair has been there for 50 years. It's a classic product. So I think for us, in terms of launches, when we do a brand new launch in a brand new category of something that we don't have, I think that would be limited to about two a year because it takes us almost 18 to 24 months to actually formulate, get it right and put that together. In terms of brand extensions, we can do that maybe four times a year. You know, it's a new scent, maybe brand extensions, stuff like that, that happens. So an overall of about six, but classified by maybe one or two very, very important launches. In fact, we have one coming up in November. So we do that twice a year for the product.

We also see cycles, right? So some product as a category, you know, start diminishing along the way. So for an example, as lifestyles have changed, evolved, time has become less, know, stress has increased, stuff like having a bath with a lovely bar of soap for a long time, you know, a bath and shower oil, or a body scrub where you could sit and get a massage for two hours. You know, those are starting to be replaced by shower gels, by things that is of course still a market for it because at the end of the day, the same person who's stressed and, you know, wants to do everything on time. Also need two hours of that bath time and also needs two hours of that candle and also needs... So it's a cycle but I'm seeing a lot of evolution along the way.

Hari Premkumar: And, you know, it would be great to also walk the listeners through how your product portfolio has evolved since launch. I think when you started, it was largely the soaps and oils, right? Again, context here is, you know, there's a lot of founders always have the pressure, temptation to launch new categories, you know, typically way sooner than we would typically like. So I think to start off and set context, it will help to capture your journey. And then we can talk about how to think through when to launch new categories, et cetera.

Sam Bedi:

You know, for me, being conservative always works better. I think, you know, rather than launching a slew of stuff or trying to do too much at one go, think starting small, focusing, making it work, seeing what doesn't work, and then adding or then, you know, moving the range around makes sense. You know, we started obviously with body care because that is the easiest segment, you know, in terms of whether you make commodities like soaps or shower gels or stuff like that. I think from there, we went on to skincare, which is the most difficult.

So to have a consumer take a skincare product and put it in their face is the ultimate sense of credibility and trust. Not many people use Indian products on their faces on a prestige segment because everyone thinks that the processes, the manufacturing, the things would be better from a company outside that's certified by say an EU regulation or US regulation. But today, I can proudly say that almost 65 % of our sales comes from skincare. And this is serious skincare on a pricing range which could rival any international brand, but we still have value for money. women pay 12, 15 ,000 rupees for a jar of cream. You know, we sell that at 7-8 ,000 and they get the same results. They get the same trust and the same credibility doing that.

We also have a haircare segment, which I think is a very strong going segment. Again, you know, with the new Gen Z and with the millennials, I think hair is becoming very, very important. and not just about shampooing your hair, but whether we talk about all the additional stuff that we do with masks, with hair thickeners, with all of the stuff, know, the stress is causing lots of hair problems going forward. But I mean, I think haircare is a very strong category and that's where we stand. Body care is always interesting, but it's highly commoditized now because everyone's got all kinds of oils and essential oils and soaps and you know, all that stuff, but still. You can still differentiate by quality. can still differentiate by fragrance. So there is still a little bit of differentiation.

Hari Premkumar: Now coming to the second question that I had, is in terms of, you know, what are the mental models, frameworks founders can use on when they should expand to another category? Like, you went from body care to face care and then hair care. How, you know, how would you encourage them to think through it? Because if you do too many things too soon, you don't stand for anything. You run the risk of diluting the brand.

Sam Bedi: Hari, think that's a very important point because I think what you said is right. I think first build credibility and build trust in what you've actually set to launch out. So for example, if you've launched with say two products or four products or five products, build that credibility. You are not going to increase a sale by making those five products, 10 products and suddenly thinking that now my sale is going to double until you actually build a credibility factor with your consumers. They know what you stand for. And then you build extensions. and slowly build those extensions because you also don't want to dilute and say, you today I'm known for my shampoo, but tomorrow I'm suddenly doing, you know, a soap or I'm going to do an oil, right? You can, there's no doubt that you can get into those universes, but you have to be patient. have to make sure that you've got that entire trust factor credibility and the time, right. And then start launching. And like I said, very to be conservative because you launch a hundred things and you shut down 50 things, your brand is finished forever.

Hari Premkumar: The last part of the conversation, Sam, I want to focus on how you thought about the business growth and both historical and the projections, your ambitions from here. So it would be useful to know how long did it take for, given you operate at the very premium end of the pricing spectrum, how long did it take for the business to get to the 10 crore mark? 100 crore mark? And also if you can give a sense of the capital that was needed to get there, that'll be very useful.

Sam Bedi: So I think we hit the 10 crore mark in about 2009. So maybe about eight years after we started, because things were starting to open up. The capital needs was 50 ,000 rupees which we put in till 2009. And like I said, we were very conservative. Even today, we have no debt. We don't have, we don't even have a term working loan. My bank is after my life. You guys need to take a loan, but we don't have one. We don't have a term loan, don't have working limits. We don't have anything of any kind. I think we reached the 100 -crore mark in about 2015, if I'm not wrong, somewhere around that region. And that was when Estee Lauder invested into us in 2008. But that money we used for building our own production facilities and so on and so forth. What I said for me, and I hate to repeat this, but it's cash is king. I mean, you have to make sure your cash flow, everything runs perfectly.

Sam Bedi: That's my other advice to give you. Be very careful on how you deploy the capital and be very, very careful on how you're going to use it because there is no quick fix. There is no speedy way of doing things. But if you build the base correctly and you reach a certain stage and you have that foundation, then exponentially will automatically grow. So that's something that happened to us as well. We just didn't start building 25 stores in the first thing, but now it's automatic for us. Like I said, the data, all the infrastructure is in place so we can open. And if I want to move from 25 stores that the country allows me, I'll move to 40 stores a year. But I'll do so with confidence and I'll have that foundation in place.

Hari Premkumar: No, absolutely. Fully, fully aligned on that. And I also read somewhere that you did not spend anything on advertising at all in the first 10 years.

Sam Bedi: I don't spend anything in the first 15 years really speaking. But I mean, and we made our first TV advert in I think 2012. And that was after Star TV chased me and chased me and I said, listen, guys, we don't even have the money to buy your TV. I don't know what you're talking about putting an ad on the TV. But then that's when HDTV came in and they had the HDTVs and they basically started really focusing on smaller audiences and more niche audiences. So we took the call.

And I think that's where we started really to look at making the brand Pan India. Because it's also where the consumer turns around and says, you know, if they've got the money to put up a beautiful ad on TV, then they must be doing well, right? That brand must be having something behind it. And then we started to really, but yes, the first 10 years was all word of mouth. Our beauty advisors and our consumers were ambassadors.

Hari Premkumar:  And as you think about brand marketing, since you started investing in brand, how do you think about budget allocations to brand marketing and the key messages that you want to deliver through your brand campaigns?

Sam Bedi: So Hari, think again, it's a stage, it's a life cycle. You obviously have to have a slightly larger percentage of your sales going into marketing as you start, which is a natural way to start, right? In some cases, 40 % if it requires it. But I think what's important is that today advertising, whether you'd like to call it social media, whether you'd like to call it online, whether you'd like to call it offline, has become an extremely expensive process, right?

You know, a lot of thought has to go in on how you're going to build your brand because it can be a never-ending black hole. I mean offline, you can't even measure any ROI to tell you the truth. Online, when you measure ROI and you think about all the money that Meta and Google are making, there's really no money left in the till because it's become so expensive, right? To even boost, to even look at what advertising you put in terms of how you're going to reach people. But having said all of that, if you deploy your money very, very smartly, very correctly, and again, build it on the product. That is, again, I'm coming back to it, it has to be product. So you'll have to be very innovative how you do it. In a more mature cycle, I still think anything less than 15 to 20 % is still less because you're still growing. For us, even now, I would put 15-18 % as a bare minimum, and I'd put some exception of another 2 % there if I need to. But I think...anything under that, you will not continue to grow. You have to invest money back in. There's no doubt.

Hari Premkumar: And what is the share of online and the business today, Sam?

Sam Bedi:

I think we're trending at about at about 23-24%. I must tell you it's been a life cycle, just so you know, I know we're getting to the end of this, but I just want to tell you that as I saw the online grow and as everybody went with the potential. We had, in fact, in the last four years, we had must have had 300-400 brands in my vertical who launched online. And the fact that they're coming offline tells you a story because really truly, I think while we tout these figures of 500 million people online, your total addressable market even on a luxury level today is 5 million. And if you really look at it and you're going into a masstige level. Maybe three-four times that but at the end of the day everyone's chasing the same consumer and chasing that same consumer is becoming more expensive, bombarding them and it's not as rosy as everyone thinks that this online is just suddenly going to take off. It's going to take time.

And so also the market has been built by the Amazons, the Flipkarts, the Nykaas. It's on a very strong discounting model. So today the consumer is looking for the best deal online. The consumer is still flipping from website to website, brand to brand. And so there's no strong loyalty online. So you have to be very careful of not diluting yourself or going down that path where you suddenly think you're going to make a quick buck, but then you are going to be tampering with the brand legacy. India is still very driven by offline. I think that's still a very important segment. And I think it will be for the time.

Hari Premkumar: And it will be useful to define the prestige segment the way you define it. Is it based on price point or income level?

Sam Bedi: Prestige for us is a bridge to luxury. So, you know, when we talk about bridge to luxury, how do I put demographics? I think upper middle class, but you know what? In my beauty segment, Hari, I'll tell you, there are many people who save up. It's almost like the story of someone who might be in a 50,000 rupee job is saving up to buy an LV bag, right?

Hari Premkumar: No, that's why I asked you whether you define it more on price points or income groups.

Sam Bedi: We do more price points because income groups went and the loyalty in this segment is so strong that if someone feels they will actually give up something else to buy a jar of cream that suits them, even if it's beyond their budget, right? To buy it. So yes, I think for me, demographics is very mixed, but I think in terms of price points, so you lie over, so there's mass, there's masstige, then there's prestige and then there's luxury, right? So it's defined by saying, I mean, I'm just taking random numbers. 30 % below luxury, 30 % above masstige. You know, you can define it by price points.

Hari Premkumar: Right, right. And from the scale that you are at, you know, for the business, how do you think about the growth targets? You know, you've been very sort of conservative, patient in the way you've built it and you are in that compounding zone. But what sort of, you know, growth ambitions do you have? You know, I don't know what your planning horizon is.

Sam Bedi:

My planning is dependent on a lot of factors. So obviously the government is now spending a lot on infrastructure, which is very encouraging. All the mall developers are upping their game. There's a lot more coming in terms of, like I said, airports. Everything determines it because all these towns are going to grow. All these satellite towns are going to go through roads. They're going to go through airports. They're going to go through metro stations. So as and when those go, like if you'd asked me even 10 years ago, I would have said, listen, I can't name you more than 30 cities. You asked me five years ago, I would have said 60 cities. Today, I'll tell you 100 cities. Tomorrow, in the next three years, I'm hoping that the cities will double. So I will grow in pace with this and I'm hoping by, say for an argument's sake, in three years, I'd like to the store count, if not at least get to the 300 mark. So, because I think over the next five years, having anything less than 500 stores would have been a waste of my effort for all these 20 years.

Hari Premkumar: Right. And you know, in your journey till date, did you ever have the temptation to launch a brand in the lower price segment or, you know, given just the delta and market size between the segment you operate and the couple that are below? Would be great to understand your thought process, why you decided against it.

Sam Bedi:

So, we do have a second brand, but we use that for the institutional segment, which looks after a slightly lower than the five star plus, you know, so that, know, because those are still very good segments to serve. And I often thought of taking that and moving it down to a retail line. You know, I even had the branding ready. I had the USP ready. I pretty much even had a product line ready, but you know, staying on top of my game, keeping my head down. And with the onslaught of so much competition coming in, I think competition is actually good because we're still serving a very small market. It's still very small addressable market. So I think more competition comes in, it just opens up the game. But I still have to stay ahead of the competition because remember another thing is you've got a big target pinned to your back. like what I talked about, whether it was staffing, whether I talked about product line, whether I talked about our campaigns, a lot of it then gets picked up along the way. So it's taken up 24 hours of my day, seven days a week of keeping this in front of the race.

But I will tell you Hari that this is something that I will take to fruition. So whether I do it in -house or I buy someone and then grow the market on a masstige level, I think what you're saying is making a lot of sense and I do believe that will happen.

Hari Premkumar: Yeah, it was more a question to understand, you know, your thought process. And, you know, what's like the long term vision? I know there's the partnership with Estee Lauder, but what is the long term vision for for the brand?

Sam Bedi: Hari, we have one long -term vision. We've had this long -term vision since the incorporation that we want to represent India. We want India to be a global brand. We want to be part of that journey. We started about making India. We started about proudly representing India a long time before it became a campaign here in India. So that's one thing we're very clear. We want to build a global brand that could rival anything outside. I'm just taking examples of a Loccitaine or a body shop or whatever, why can't we have stores in the best malls, in the best high streets, in the best cities in the world with what we've got to offer? And we are working on that. We've opened in London, we've opened in the GCC and we're on our way. So we will build this brand out.

Hari Premkumar: And you are best positioned for that. We've come to the end of it, Sam. So I'll finish with our typical closing question. So for founders listening in who want to build the next forest essentials, what are the personality traits that they can borrow from Sam for them to pull it off?

Sam Bedi: Three words, think one is patience. Please be patient because you cannot get something overnight unless you're some tech mogul or quick wizard. I mean, I think you need to be very patient about what your long -term game is. I think focus because like we, Hari and I have talked about in this podcast, I think it's very important that you know what product, what you're gonna do, what your company's standing for. And I think the third one is good old fashioned hard work. You just can't substitute it. That is something that's going to continue happening. So I think if you can manage these three, I think you're on the road to it.

Hari Premkumar: That's wonderful, Sam. And those are probably, especially the first two, patience and focus are our mantra day in and day out. So we should have a longer conversation on that. But it was an amazing, amazing episode. And just the magic of laying the foundation right and the compounding happening later, we just share patience and focus. I think it's a lesson for everyone. Really appreciate you taking out the time. Thank you so much, Sam.

Sam Bedi: Thank you very much.

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