All’s Fair in India’s Cosmetics Market

India’s cosmetics market is reportedly growing at 15-20% annually. Demand for skin whitening products by men as well as women, is driving the trend, but other beauty products are not far behind.

Written by Lovejeet Alexander, Special Correspondent

The Indian cosmetics industry has witnessed rapid growth over the last couple of decades. With every passing year, the range of cosmetic and beauty products in India has widened tremendously. Beauty product manufacturers in India have mostly been catering to the great demand for cosmetics and toiletries that fall into the low- or medium-priced categories as the greatest demand in India always revolves around economically priced products.

Recent cosmetics business market analysis reveals that many international companies are now outsourcing cosmetics to India and that the cosmetics market in India is growing at 15-20% annually, twice as fast as that of the U. S. and European markets. The growth rate in the cosmetics market reflects increasing demand for beauty care products in India.

However, even with the massive surge in the popularity of cosmetic products, statistics show that the average Indian consumer spends much less on cosmetic products than consumers in any other part of the world.

This also implies that the Indian cosmetic industry has an even greater potential for growth than it is currently experiencing.

Asia Overview

The Japanese cosmetics market is still the largest Asian buyer, but the growth rate is reaching a stable condition. China, the second largest in Asia Pacific, is witnessing increased demand due to improving lifestyles and rising disposable income of the population. The South Korean market is growing at a faster rate than developed regions. There is a clear trend of the market heading toward premium cosmetic products. The younger populace is looking for general skin care and hair care products while the older generation has more specific needs for their cosmetics products.

Global cosmetic giants are attracted to India’s favorable demographics. The modern, urban Indian women are becoming increasingly conscious about their style and looks, with great emphasis on lightening of skin tone. Skin care and color cosmetics have witnessed solid growth for the last few years, with more than half of the skin care market comprising skin lightening creams. Lip products form a majority of the color cosmetics market. In India, small pack sizes are very popular as they offer a lower cost and the chance to try new products.

Hindustan Unilever is India’s largest cosmetics company, followed by L’Oréal.

India’s Story

Driven by growing consumption in rural and semi-urban areas, the fast-moving consumer goods (FMCG) market is set to double from $14.7 billion in 2008-09 to $30 billion in 2012, according to a report by Associated Chambers of Commerce and Industry of India (ASSOCHAM), an industry lobby.

“The FMCG sector will witness more than fifty percent growth in rural and semi-urban India by 2010,” according to a study titled “Prospects in the FMCG sector,” recently made public by ASSOCHAM. The Indian FMCG sector has grown to become the fourth largest sector in the economy with a market size in excess of $14.7 billion.

Skin care and cosmetics account for more than Rs.18.5-billion market size while the hair care market is worth more than Rs.80 billion.

Among the entire range of products that fall within the territory of the Indian cosmetic and toiletries market, the most popular items are color cosmetics, of which nail varnish, lipsticks and lipglosses account for the most sales. In this area, popular local brand names include Lakme and Revlon. Skin care cosmetics experienced a relatively slower growth, and products such as anti-wrinkle creams, cleansers and toners, for instance, are not as popular as facial creams, moisturizers and fairness creams in this genre. Companies like Pond’s and Fair & Lovely rule the roost in this segment.

Male Grooming

Half a decade ago, when celebrated Indian film actor Shah Rukh Khan took a dip in a bathtub to endorse Lux, he did much more than just promote a soap brand. He set a precedent.

Back then, the male grooming market was almost nonexistent and the Indian market had few dedicated products to offer men. Soon after Khan’s commercial, Emami Group entered the men’s fairness cream market. Market talk was that a noticeable proportion of sales of Fair & Lovely, a women’s cream, were from men. Emami decided to push the opportunity. In 2005, Emami created history by launching Fair And Handsome, a fairness cream for men, which still dominates the space with close to 70% market share. The company calls this brand the world’s No. 1 fairness cream. The company achieved sales of $13 million in 2008-09.

In 2007, Hindustan Unilever launched Fair & Lovely Menz Active but it could not gather much share. Over the past year, multinationals such as Beiersdorf (Nivea for Men) and L’Oréal (Garnier PowerLight) launched a series of products for men’s skin care.

The market was soon offering male fairness creams, hair care products beyond dyes, scrubs and face washes. Today, the male grooming segment in personal care is ready for its next round of product expansions and additions.

Now, as the segment evolves, there is a queue of Bollywood actors including Shahid Kapoor and John Abraham who are endorsing male grooming products.

The men’s personal care segment is estimated at over $200 million, with Gillette having the largest market share.

While the overall cosmetics industry is growing at 15% year-on-year, fairness creams constitute a huge market with sales worth nearly Rs.2,000 crore (Nielsen 2010 figures). Of this, men’s fairness creams account for 10%, though growing at 30% year-on-year—a sign that they are catching on. According to a Nielsen survey on male grooming, conducted among 1,000 men in Mumbai, Delhi, Kolkata and Hyderabad, every second man has a monthly date with a salon.

“The importance of male grooming is clear, with the market worth Rs.695 crore and growing at 11 percent. In metros alone, it is growing at 12 percent. The product segments witnessing significant growth include creams, gels, and deodorants. More beauty products targeting men are bound to appear. Increasing disposable incomes, urbanization and greater exposure to the West are the main drivers,” says Anand Ramanathan, analyst, KPMG.

In the personal care category, skin care products are the most popular, offering significant room for growth. In India, fairness creams dominate the space with more than a 45% share, followed by moisturizers at 22%. Now, the market seems to be looking beyond fairness creams.

Emami is poised to expand its Fair And Handsome brand to include products such as shaving cream and foam. In five years, Fair And Handsome has become a Rs.100 crore brand, growing at 45% per annum and contributing 15% to Emami’s revenues.

“The trend is shifting toward the mainstream and there are other brands entering the segment with extensive product launches in the fairness category, along with a number of product extensions,” says Harsh Vardhan Agarwal, director, Emami.

Hindustan Unilever is currently advertising Fair & Lovely MAX Fairness for Men. It has also extended its Vaseline brand to the men’s grooming segment with the introduction of the Vaseline for Men skin care range, including fairness creams, face wash, body lotions and body washes. The popularity of fairness products saw Garnier launch its men’s grooming range, Powerlight, in May 2009. Recently, it launched Garnier Color Naturals for Men and the Garnier Men range of deodorants.

According to a recent study by Hindustan Unilever, men in India’s southern states are most enthusiastic users of skin whitening creams and consume the most of the fairness products, although the love for fair skin is spread evenly all across the country.

“Inspired by the changing grooming behavior of Indian men, in May 2009 we entered the men’s grooming market with Garnier Men. Within three months, Garnier Men became the number two player in the men’s skin care market, which is currently less than five percent of the total skin care market but growing fast. Within that, fairness comprises 85 percent, cleansing 10 percent, and body, sun care and hydration 1 percent each. The potential lies in converting male users of women’s skin care products to products developed specifically for them,” says Dinesh Dayal, chief operating officer, L’Oréal India.

Hair grooming and styling is the latest growth area. Brylcream, which scaled up its appeal though products and advertising featuring Indian skipper MS Dhoni, has company in the form of Marico’s after-shower hair gel, Set Wet from Paras Pharma and the Gatsby brand. Zydus Cadila recently forayed into male skin care with EverYuth Menz, under which the company launched the first scrub for men in India. Besides the scrub, the Ever Yuth skin care range comprises face washes, sunblock and moisturizer for men.

Future Group is also aiming to extend its John Miller brand into the male grooming segment, where it forayed with deodorants. “Growth is coming not just from metros, but small towns, too,” says Devendra Chawla, business head, private brands, Future Group.

Foreign Fairness

The Indian cosmetics market, which was traditionally a stronghold of a few major players like Lakme and Pond’s, has seen a lot of foreign entrants to the market within the last two decades.

India allows entry of imported cosmetics without any restrictions. India’s import of cosmetics and beauty products and intermediate raw materials such as essential oils is currently around $400 million. France, Germany, the UK and the U.S. have been the traditional suppliers with imports gradually increasing from China, Hong Kong, Malaysia, Thailand, and Israel in recent years.

Imported cosmetics have had a major impact on the Indian market. The emergence of a young urban elite population with increasing disposable income in cities, an increase in the number of working women, changing lifestyles, increased affordability of lifestyle-oriented and luxury products, mounting aspirations, influx of satellite TV, increasing appetite for Western goods, and greater product choice and availability are the main drivers of demand for imported cosmetic products. Indian consumers tend to look towards international brands as lifestyle enhancement products.

Foreign products have enhanced growth of the Indian market by attracting aspirational consumers. Indians generally perceive foreign brands as being of superior quality.

The strong growth of organized retail in India is also creating a demand for more imported cosmetics products, even in second tier cities, where disposable incomes are larger and the demand has been subdued due to desire for choices and options.

According to industry sources, the total size of the Indian retail beauty and cosmetics market is currently estimated at $1.5 billion, with fragrance comprising the largest component. Color cosmetics account for 14%; fragrances, 21%; hair care, 19%; skin care, 17%; beauty services, 13%; herbal products, 9%; and others, 7%. If the overall beauty and wellness market is considered, which includes beauty services, the market is estimated to be around $2.68 billion.

Packaging Strategy

More and more shelves in shops and boutiques in India are stocked with cosmetics from around the world. Since the opening up of the Indian economy in the early ’90s, many international brands like Avon, Burberry, Calvin Klein, Cartier, Christian Dior, Estée Lauder, Elizabeth Arden, Lancôme, Chambor, Coty, L’Oréal, Oriflame, Revlon, Yardley, Wella, Schwarzkopf, Escada, Nina Ricci, Rochas, Yves St. Laurent, Tommy Hilfiger, Max Factor, Max Mara, and Shiseido have entered the Indian market.

Pricing and packaging strategies are very important here, as India is a very price-sensitive market. Indian consumers want the best but many are not always willing to pay that liberally. Understanding the attitudes, preferences and aspirations of the different segments of India’s consuming class is very crucial to achieving success in the Indian market.

Given the price-sensitivity of the Indian consumers, many cosmetic and toiletries companies had to re-launch their products in smaller pack sizes to make them more affordable. Hindustan Lever of the Unilever group and Revlon were the first to introduce small pack sizes.

Revlon went to the extent of introducing a small-range of 8ml nail polishes and lipsticks, and was soon followed in its strategy by many Indian companies as well. Small pack sizes have proved to be very popular in the Indian market as they offer consumers a lower purchase cost that they can afford and, at the same time, the opportunity to try new products.

The market is booming like never before. With the Indian middle class expected to increase tenfold to 583 million people by 2025, it looks as if things will only get brighter for the fair cream and other beauty and personal care manufacturers.

About the Author
Lovejeet Alexander is a New Delhi—based journalist and photographer.