India - The sleeping beauty awakes

Greater interest in personal grooming, more disposable income and increased exposure to international beauty, fashion and lifestyle trends all combine to form a thriving personal care and cosmetics market in India. Annemarie Kruse looks at a challenging and complex marketplace.

According to ACNielsen, the personal care and cosmetics market in India was worth Rs 167,636m in 2005, which marks an increase of 6%. The general personal care category, including soaps and shower products, oral care, APDs and fragrances, grew 4% to Rs 89,308m. Women’s personal care (hair remover, sanitary products, skin care and colour cosmetics) grew 6% to Rs 25,861m and hair care, the biggest individual sector, increased 13% to Rs 42,987m. The men’s market (shaving preps and razors), unfortunately, did not fare so well, falling 6% to Rs 9,480m.

Sujit Das Munshi, executive director, ACNielsen South Asia, explains: "The personal care and cosmetics market accounts for 30% of the Indian FMCG market, with the cosmetics segment occupying only 5% of this figure."

ACNielsen defines the personal care and cosmetics segment in India as consisting of 24 sub-categories. "A total of 19 categories belong to the personal care market, which grew 5.4% in 2005. The cosmetics segment includes skin creams, lipstick, nail enamels and hair dyes and increased 8.2% in the last year."

Among these categories, bath and shower, hair care, oral care and skin creams (including skin lightening creams – called fairness creams in India) rank the highest in terms of consumer spend. Men's care, fragrance, women's care and hair dyes are next in line, while lipsticks and nail enamels are lowest in terms of consumer spend.

As far as the prestige sector is concerned, India has a luxury goods market worth an estimated $445m, and has been tagged as one of the fast growing luxury goods markets across all categories, according to a recent survey by the Federation of Indian Chambers of Commerce. Mintel takes a similarly optimistic view, forecasting high growth rates – and the prospects for fashion and beauty retailers are promising.

The Indian government recently approved the liberalisation of foreign direct investment rules, which will allow foreign luxury brands and retailers to own and operate their own stores in the country for the first time. Hitherto, international retailers have only been able to operate in India through franchise agreements.

Up close and personal

The personal care market is dominated by multinationals, led by Hindustan Lever Limited (HLL), Unilever's Indian arm, which claims a 30% market share. Unilever has been operating in India since 1931 when the company set up its first subsidiary and today its personal care portfolio includes brands such as Lux, Lifebuoy, Pears and Rexona in the bar soap segment, Fair & Lovely and Ponds in skin care, Sunsilk Naturals and Clinic in hair care, the oral care brands Pepsodent and Closeup and deodorant brands Axe and Rexona. HLL also owns Lakmé, a Indian cosmetics company founded in 1947. Lakmé's brands include a wide range of colour cosmetics and skin, hair, sun and body care. The company also operates a large beauty salon network throughout the country.

Procter & Gamble has chosen to concentrate on hair care, represented by Pantene, Rejoice and Head & Shoulders. Colgate Palmolive, meanwhile, has focused on the oral hygiene market with its Colgate brand. However, the company is moving into other, more lucrative segments and has recently brought the Palmolive brand of bathroom products to India. Its portfolio also includes shaving preps for men and Charmis, a cold cream introduced in 2000.

L'Oréal also takes a significant share of the Indian market, but its products tend to be distributed in urban rather than rural areas in India. The group started operations in the country through a subsidiary in 1990 and is present today in the skin care, hair care and make-up categories. In 1994 the group established a full subsidiary and since then L'Oréal India has achieved steady double-digit growth, posting a 46% increase in turnover on 30 September 2005.

Garnier is L’Oreal’s most widely distributed brand, while L’Oréal Paris has a slightly higher price point. The group says: "L'Oréal Paris has managed to establish itself as an accessible luxury brand through high quality sales outlets. Both colour cosmetics and skin care are distributed in premium counters in selective stores across India and the products come with personalised services and trained beauty advisers." Maybelline was launched in 1998 and is distributed in selective retail outlets only.

Henkel India is represented in the skin and body care market with its international Fa range and local brands like Margo and Neem, but it is also active in the hair care and salon market. And fellow German company Beiersdorf is currently building up a full subsidiary after the licensing agreement with its Indian partner expired.

Direct sellers Amway, Avon and Oriflame also play an important role in the Indian cosmetics market since their direct selling systems manage to reach even remote towns and villages.

Although the multinationals have a firm grip on the marketplace, there are some major national players. Chief among them is the Godrej group, which manufactures consumer goods, food, chemicals and machine tools, and also operates technology and real estate divisions. However, the company also has a personal care portfolio which includes a range of colourants, the Cinthol, Fair Glow and Godrej No.1 soap brands and shaving preps.

Its main competitor is Dabur. Founded in 1884, Dabur manufactures health and personal care products with a focus on herbal ingredients. Its best known brands include the Vatika and Anmol range of shampoos and hair oils, with Dabur Amla hair oil as the flagship product. Dabur is also active in the oral hygiene category.

The mane attraction

The hair care market is dominated by shampoo products which P&G says are worth Rs 1,100 Crore.

HLL is the market leader with its Sunsilk and Clinic brands, followed by P&G’s Head & Shoulders brand, its Asian shampoo brand Rejoice which was launched in India a few years ago, and the ubiquitous Pantene. Shampoos are available in different pack sizes including sachets, which are an important entry price point.

"The shampoo segment is a sachet-led market. The combination of affordability, ease of trial, convenience, ease of distribution and packaging innovation is leading to the small pack phenomenon. Although this is a regular purchase category, the major price points are Rs 1, Rs 2 and 50 Paise. This is driven by the per litre price of shampoo which is much lower in sachets than it is in bottles,” confirms Munshi.

Hair oil, believed to make Indian hair fuller, stronger, blacker and glossier, is another important category. Munshi says: “India has had a long tradition of oiling hair. Small packs (150ml or less) are driving the category growth. Added value in the form of ingredients such as amla, almond or cooling oils have also helped to attract consumers.”

Companies are also trying to drive market growth in the cluttered hair care category by introducing further segmentation in treatment and styling products. Lakmé, for example, recently introduced new product categories with its Hair Next range, adding hairsprays and mousses, segments as yet untapped by other hair care brands.

Growth in the colourant market, meanwhile, stands at 25.6%, according to Munshi. Godrej has seen similar results and says that the colourant market grew 24% in the second quarter of fiscal 2005-06, with its own colourant business increasing by 32%. The company's brands include a wide range of cream, powder and oil-based colourants as well as henna products.

This has encouraged the multinationals to step in. In May 2005 H&S introduced the two new colourant ranges: Silkience, positioned as an up-market brand, and Palette for home use. L'Oréal introduced its Nutrisse range to India in 2000, followed by Color Naturals, a line specifically developed for Indian hair.

The professional hairdressing industry in India is a fairly recent success story. L'Oréal's Professional products division was one of the first of its kind to enter the Indian salon market. Today the professional hair care industry is said to be worth Rs 200 Crore, with double-digit growth rates. L'Oréal's Kérastase and Professional brands are the market leaders and are distributed in 4,000 salons nationwide. Second in line is H&S’s Schwarzkopf, followed by P&G's Wella.

A light touch

The skin care market is also seeing increasing segmentation. Many multinationals have begun introducing product ranges from their international portfolios to the Indian market.

In December HLL announced that it would introduce a range of premium skin care products taken from its international Pond’s portfolio in selective channels across key markets in India. And Pond’s recently introduced oil-control and talcum products in an attempt to reposition itself from a winter care brand to an all-purpose skin care line. HLL also introduced an oil-control variant to Pears, another traditional winter brand.

HLL is also planning to take its Fair & Lovely brand into other categories, including the men’s market. The company has also introduced new lower-priced skus across its skin care brands to further penetrate the rural markets.

Meanwhile, Indian personal care manufacturer Emami, which owns brands such as Naturally Fair, Navratna and Golden Beauty Talc, recently announced that it would expand its BoroPlus range into a full skin care brand by 2007.

In the oral hygiene sector Colgate Palmolive is the market leader. The company markets a wide range of toothpastes, toothpowders and toothbrushes in addition to products for dentists. Other leading manufacturers include Dabur, which is particularly strong in the tooth powder segment, a traditional Indian format. In fact, Dabur says its Dabur Red Tooth Powder is the biggest brand in this sector.

According to Colgate, almost half of the population does not have access to modern dental care and per capita consumption is one of the lowest in the world. A recent consumer study found that as much as 60% of the population have never visited a dentist and only 2% visit a dentist regularl, while almost 30% of Indians do not use any modern oral care products at all.

In urban areas 7% do not use modern oral care, a number that rises to 37% in rural areas where people still use traditional products such as neem twigs, charcoal and ash. Consequently, tooth decay is prevalent among over 63% of 15 year olds and as many as 80% of 35-44 year olds. Levels of gum disease were found to be even higher.

In order to reach a wider range of consumers and to increase its penetration in the rural markets, Colgate says that it is important to offer a product range with very accessible price points. The company says that it faces competition from cheaper brands but that its Cibaca brand is still the leader of the low price segment.

Bubbling over

Bar soaps are another favourite format across India and bath and body products ranging from face cleansers, deodorants, body wash and shampoo are available in this format.

Munshi says: "While there has been a slow-down in the toilet bar soap segment, the liquid body wash format is gaining acceptance. These products grew 21.9%, while toilet soap bars increased 3.7%. The growth trigger for the bar segment is innovation in the form of new variants. An example is the introduction of a chocolate variant to the Lux brand, which is one of the latest entries in the bar soap segment."

Godrej says that it is the second largest toilet soap manufacturer in value terms and that its first half 2005 soap sales rose 20%. The company’s three power brands Cinthol, Godrej Fairglow and Godrej put in a strong performance, boosting Godrej's soap market share to 8.8%.

Dabur entered the soap market in September 2005 with a honey and saffron face soap under in its Vatika umbrella. D Garg, vp marketing Dabur, says: "The soap segment is among the biggest FMCG categories in India, with 98% of urban and 88% of rural Indians using soap for bathing. Among these, the beauty and skin care sub-category is the largest and comprises almost 50% of the total soap market."

In the body wash sector, shower gels are also starting to make their presence felt, albeit only in urban areas. Colgate was an early entrant in 2003 when it launched Aroma Sensual shower gel, followed shortly after by Aroma Crème. The company says: “The shower gel category is an emerging category wherein consumers are seeking a new sensorial bathing experience that bar soaps are unable to provide.” The shower gels are distributed in metropolitan areas rather than rural regions.

Colgate also introduced the liquid format to the handwash category when it launched Naturals Liquid Handwash in 2002.

With the liberalisation of the Indian economy the domestic image of what constitutes beauty has also changed, and this is reflected in the media. Bollywood, the Hindi film industry, plays a huge role in everyday life in India. Actors and actresses tend to be role models for the average female consumer. Most companies have therefore roped them in as brand ambassadors – and none more so than beauty brands trying to generate major pulling power.

Recently, Bollywood heart-throb Shahrukh Khan was signed as brand ambassador for HLL's Lux in an attempt to rebrand the classic female beauty soap, sparking off heated debates in the Indian media about whether male grooming is effeminate. The TV advertisement, designed to commemorate the brand's 75th anniversary, features Khan, the first Indian man to represent Lux, in a spa setup, surrounded by four Bollywood actresses and former Lux ambassadors. And although market analysts are uncertain if Khan's sex appeal will actually translate into increased product sales, the public discussion has certainly put the spotlight on Lux.

However, while the image of a man immersed in a bath tub filled with rose petals might challenge established stereotypes about male grooming, there are other personal care categories which male consumers have been quicker to embrace.

Beauty pageants carry a great deal of status in India which is perhaps not surprising given that the Indian society is accustomed to a standardised evaluation of beauty. This is particularly evident in matrimonial advertising which frequently specifies the exact physical requirements for a prospective bride or partner (tall, fair, slim etc). As with many South Asian and South East Asian countries, a light complexion tends to be one of a woman's most prized assets but the fairness trend is also affecting men – a fact that beauty manufacturers are well aware of.

HLL launched its first skin lightening cream in 1978 with Fair & Lovely. Hitherto, Indian consumers tended to use home-made lightening treatments containing natural ingredients. The dominance of F&L continued until 1998 when Cavin Care introduced Fairever cream, which grabbed a 6% market share in its first six months. In 2000 Godrej launched Fair Glow soap in the then new category of fairness soaps. The soap was an immediate success prompting Godrej to launch a Fair Glow cream variant and HLL in turn followed suit with a fairness soap in 2001.

Today the fairness cream market is worth Rs 930 Crore, Geetika Sasan Bhandari claims in India Today. Rs 270 Crore of this figure caters for men, Bhandari says, and the male fairness segment is a growing market. In June 2005 Emami launched the first ever skin lightening cream for men. Fair & Handsome is aimed at the urban male aged 15-35, the company says, and Emami is aiming for sales of Rs 13 Crore by the end of its first financial year. So far the product appears to have been very successful. Mohan Goenka, director of Emami, says: "We were very surprised to see that the desperation to look fair starts so early. In the South [where skin tones tend to be darker] we found boys in Classes II and III buying this product because they wanted to look like [film stars] John Abraham and Hrithik Roshan."

Bhandari says that the men's grooming category, including shaving products, hair care, styling and fragrances, is worth Rs 800-1,000 Crore. Skin care is also an important growth area for the men’s sector. L'Oréal recently introduced its Men Expert range to the Indian market. "The latent need was probably there but it has only just come to the fore and we have entered an area where the inclination for looking good is a reflection of the new modern, corporate India," says Ashwin Rajgopal from L'Oréal. Marketers are attributing the increasing demand to an increase in foreign travel, exposure to international trends and male style icons like Abraham or fellow actor Saif Ali Khan as well as increased interaction with international clients.

And outlets such as Shopper's Stop, part of Kah Raheja Corporation, are also dedicating more shelf space to men's products. Bhandari says that outlets in metropolitan areas have more shelf space for new product ranges such as skin care, while shops in smaller cities tend to stock staples like aftershaves, deodorants and body lotion. Salil Nair, head of buying and merchandising at Shopper's Stop, says that enquiries for men's products in 2005 were up 40% over the previous year and sales rose 10-15%.

Urban power

In India beauty companies must sell across a very complex range of demographics, targeting different classes and levels of education as well as urban, semi-urban and rural consumers across the 28 Indian states. In fact, Emami's flagship brand Navratna Oil, has four brand ambassadors to reach different segments of society.

As a rule urban consumers have greater spending power than consumers from a more rural background. Munshi confirms this: "Urban India's contribution to the personal care market has remained constant at 67%, while in the cosmetics segment urban consumers account for as much as 82%. The cosmetic category is still a metropolitan phenomenon but with the boom in the Indian fashion world, greater access to television, greater product choice and availability we can expect the cosmetics market to expand further."

The retail structure in India is as diverse as its population. In metropolitan areas modern retail outlets such as self-service stores and supermarkets are a fast emerging category, serving a more sophisticated modern consumer. In these modern store environments there are in-store sampling and POS activities. In more rural areas neighbourhood stockists are prevalent. HLL says that its distribution system in the rural markets covers over 50,000 villages via 6,000 sub-stockists. But the company says it is also exploring new sales channels, such as direct selling. HLL’s direct selling arm is Hindustan Lever Network, which has independent consultants who cover 1500 towns and cities between them, accounting for over 80% of the urban population.

Another sales channel is the company’s Project Shakti, a programme creating micro-enterprise opportunities for rural women with the aim of improving the livelihood and standard of living in rural communities. The company says that Shakti has become an extended arm of its operations in the rural hinterland. The project now covers over 50,000 villages in 12 states in partnership with regional state governments and NGOs. HLL has also launched an online grocery supermarket service, Sangam Online, which is said to have about 55,000 customers.

The sheer size of the Indian populations makes it virtually irresistible to the C&T industry. After a slow start, the Indian personal care market is now wide awake and ready to embrace new products - so long as they are well priced and intelligently positioned and marketed.