Indian Cosmetics and Toiletries Industry Profile* oS ECT ees Handbook of Cosmetic Science and Technology mentions three reasons why human beings use cosmetics: fa) to enhance personal appeal through adornment of body: (b) to camouflage flaws in integument such as pimples on face; and (c) to alter or improve upon natural beauty. Use of cosmetics and toiletries is not just for vanity; it is to enhance beauty or to camouflage ugliness. Being beautiful is considered to be advanta- geous tn Many Ways: attractive people eam more, are more likely preferred life partners, and more acceptable in society. No wonder, Americans spends more on beauty than on education. The cosmetics and toiletries industry caters to the needs and wants as well as the whims and fancies of their customers. HISTORY AND EVOLUTION OF COSMETICS AND TOILETRIES INDUSTRY “A woman without paint is like food without salt” said the Roman philosopher, Plautus. The origin of cosmetics lies in antiquity since times immemorial when human beings began to use adornments for body. Egyptians were well-versed with the use of body oils, face and body paints and ointments, Babylonians in the use of depilatories and eye adornment, Greeks in perfumes, Romans in creams, Chinese in nail paints, and Persians and Arabs in incense and perfumes. Middle age England provides evidence of commoners ap- ing the royals in use of cosmetics. Records of people using cosmetics and, also, beauty treatments can even be found in the Old Testament. India has had a long history of using henna, perfumes, kohl, and flower fragrances. Indians have tradition- ally been used to using natural ingredients to make cosmetics and toiletries. Historical evidence shows that the ideas of self-beautification and use of cosmetics both by women and men in ancient India were prevalent. The deep understanding of the use of cosmetics in Indian history is evidenced in the cosmetic practices interwoven with seasons, daily rituals, longevity, health and happiness. At different times in history, the use of cosmetics and toiletries has been limited to royalty and aristocracy due to its exclusiveness. Strangely, at other times, such use has also been ascribed to women of dubious morality who needed to adorn themselves to enhance their appeal or hide their ugliness and age. In some societies, the use of cosmetics has been considered taboo due to societal or religious reasons while there arc other societies where its use has been celebrated in arts, literature, sculpture and painting. The modem cosmetics and toiletries industry emerged in the 19° century and along with colonisation and imperialism spread the western beauty ideals around the world. This facilitated the association of white- Fs industry profile has been prepared by Dr, Azhar Kazi, formerly Professor of Business Administration at the Aligarh Mustim Universiy, Indie and De Adela Kazni, Lecturer in Management at Sophia College, Ajmer, India. I is intended to he used as a Basis for class discussion rathe then to illustrate either effective or ineffective handling of a managerial situation, Reprinted by permission of authors,538_ Strotegic Management skinned, westernised people with the prevailing beauty conception of people. European and American firms became the pioneers of cosmetics and toiletries products and rapidly spread through multinational firms making and selling consumer products. Paris and New York became the beauty capitals of the world. The Cosmetics and toiletries industry took advantage of these underlying trends by creating brands. Subsequently, by creating aspirations around those brands made them exclusive and pushed them into global markets lead Ing to creeping homogenisation of beauty ideals. The advent of 20" century, especially since the 1920s, saw the beginning of the fashion revolution. ft was caused by the advances in chemical industry, industrialisation, and increasing international trading. Perform. ing arts such as theatre, ballet and films provided a boost to use of cosmetics and led to its popularity among masses, Intemational beauty pageants, fashion shows, and the film industries have added to the popularity and mystique of using cosmetics and toiletries around the world, MARKET SIZE AND POTENTIAL Cosmetics and toiletries products are a part of the larger beauty and personal care industry. Usually, when cosmetics are referred to, what is meant is colour cosmetics and make-up segment of the personal care indus- try. The US is the biggest consumer of cosmetics and toiletries products and France is the largest exporter. The markets have been shifting in recent years from the Wester countries to South America, Eastern Europe and Asia, particularly China. The potential of beauty and personal care products in India can be gauged from the comparison of sta- tistics with global and comparable economies around the world. The market size and forecast till 2018, as shown in Exhibit 1, shows that India had about USS10.36 billion market size in 2014, which is expected to grow to USS13.48 billion by 2018. Seen in comparison to the size of market in the US at US$79.5 bil- lion in 2018, it seems to be quite low. Even comparing it to China—that is likely to have a market size of USS65 billion or Brazil at US$S9 billion—the Indian markct is small and is nearly equal to that in Russia where the market is declining. The small market size at present indicates that the scope for future prospects is encouraging. Exhibit 1 Market Size (Historic and Forecast) for Beauty and Personal Care Products in US$ Million 2013 2014 2015 2016 2017 2018 USA 73,2561 74,2970 753313 6548.0 779009 T4959 | China 2198 47,2404 0,793.1 $4.938.6 59,0508 65,007.5 Brazil 429828 46.288.7 49.1979 12.3983 S5.621.7 59.0188 | India 9,293.1 10,3595 10,992.6 1,733.0 12,568,7 13.4816 Russia 14,1766 13,668.3 13,473.6 13.3894 13,3784 13,4104 | South Africa | 3,682.0 3828.0 3,967.8 4,096.8 421 43128 | Global 444n64.7 | asse721 | 467,743.70 | 4812241 | 95s > | sions ‘Source: Euromonitor fram trade sources / national statistics The per capita consumption for beauty and personal products in India is estimated to be quite low at USS8.2 in 2014, which is likely to grow to US$10.1 by 2018, as shown in Exhibit 2, The highest consump- tion is in Brazil which, by 2018, is likely at be at US$283.4 per person followed by that in USA at USS242.2.Coie 1: Indian Cosmetics and Toiletries Industry Profile 539 ing with Population has ne, a ‘arly 4, ‘. 3 + jaa. Low consumption of beauty ang c 7 times more consumption per person as compared to that in 7 Personal products in India at present supports the view that there are food prospects for growth, South Africa China 327 India 79 Global 75.1 Source: Exromonitor from trade sources / national statistics | The growth index, with base at 2013, is expected to be 128.8 by 2018 in India, as shown in Exhibit 3, could be considered as moderately high growth. The fastest growth by 2018 is anticipated in China at 143.9 followed by Brazil at 132.2. Brazil already has a high per capita consumption. In the US the growth index shows very low growth as compared to the base of 100 in 2013, the growth index is only 109.7 by 2018. Exhibit 3 Growth Index of Beauty and Personal Care Products China Brazil India South Africa Usa Russia Globat Source, Euromonitor from trade sources / national statistics Indi it imported cosmetics and they have had a major impact on the Indian market. It : also nother daca tor titer the growth of cosmetics and toiletries in a imports a Sosmete and toiletries products have been grawing in recent years ata healthy pace. Exhil ise ws ci "po a dung the five-year period 2009-2014, Some ofthe major cosmetic items impored by Indiaare Fragrance on-transfer long-stay lipsticks, liquid lip colour, eye make-up, specialized s incare products, particular 2ntiageing/anti wrinkle, anti-blemish and skin-whitening (fairness) ereams, professional ha Cy540_ Strategic Management ing products, and preparations for shaving creams and skin care products for men, Sun care products Such, as sun blocks and sun protection products are also popular. Eshibit4 Imports of Essential Oils and Resinoids, Perfumery, Cosmetic of Toilet Preparations Year Imports in Rs. Lakh nen 0 Exports in Rs, Lakh . Yearanea 2014 (Apr-Nov) 261 602,566.61 | 2013-2014 M9R28.01 12.23%, $82,846.73 6.00% | 2012-2013 311,716.36 24.98% $32,880.62 35.34% 2011-2012 249,412.50 33.59% 615,406.95 39.27% | 2010-2011 186,697.07 30.81% AALS THAG 12.84% | 2009-2010 142,723.50 391,580.75 sank at hp://urv.comnirer nic.in/eidh/Teomentayp, Lay | ——— and personal products in India as good Sourer: Department of Commerce, Export-Import Data rettieved February 11, 2015. Overall, the market indicators point out the prospects of beauty ; J with adequate potential for growth in market size and rise in per capita consumption, The likely areas for growth include colour cosmetics, fragrances, specialised skin care and hair care products, professional salon items, and makeup cosmetic products. In the skin care segment, Indian consumers face specific skin problems and thus look for expertise in solving them. They also aspire to use international Premium skin care brands. The shampoo segment has scen a major shift; consumers moving beyond basic hair washing to specific hair needs such as hair loss and baldness. The hair oil segment traditionally has had nearly half of consumption coming from purchase of loose hair oil which is perceived as having association with nutrition There is growing awareness of better quality in packaged hair oil. INDUSTRY STRUCTURE AND DRIVERS In India, the cosmetics and toiletries industry could be broadly divided into the organised and unorganised sectors. The organised sector has three kinds of firms: 1. Muttinational firms such as Hindustan Unilever, P&G, Colgate-Palmolive, L'Oreal, Revlon, Estee Lauder, Maybelline, Amway and Avon. 2. Large Indian firms such as Dabur, Godrej, Marico, Emami, Himalaya Herbals, Bajaj Corp, and Jyothi Labs. 3. Small and medium-sized Indian companies which are several in number. There is a huge unorganised sector comprising small-scale, micro and cottage units spread over the coun try making products based on imitation or traditional formulae with local chemicals and materials. Micro, small and medium (MSME) sector has registered as well as unregistered units that manufacture soaps and detergents, cleaning and polishing preparations, and perfumes and toiletries preparations all coming under the National Industrial classification code 2424. According to the 2011 edition of the survey report of the Ministry of micro, small and medium enterprises, there were 11,571 registered units employing 78.854 persons, having gross value of output at Rs. 7720.19 crore including export value of Rs. 314.69 crore in 2006-2007. There were 55,000 unregistered units employing 1.74 lakh persons, having gross value outpt! of Rs. 921,70 crore in 2006-2007. An innovative move was initiated in 2007 by the small and medium-scalCase 1: Indion Cosmetics and Toiletries industry Profile 541 pharmaceutical and cosmetics manufacturers in Maharashtra to team up to form clusters as part of their strat- egy to survive and tap opportunities in the export markets.As a beginning, about 90 fs joined together to float the first in Indi nning, about 90 cosmetics manufacturers 1 ea ett ts cosmetics cluster in India—the Herbal and Cosmetis Cluster at Wasti a es lantern hee “i ‘on the outskirts of Mumbai. The Wasai cluster will also become the seventh Cosmetics and toiletries industry around the world is highly fragmented with many small and mostly family-owned firms; many of which are highly secretive about their activities. This makes ita difficult indus- try toanalyse and understand. Itis not a capital- or technology-intensive industry, so it is easy to launch an entrepreneurial venture making beauty Products or to set up a service outlet to provide beauty services. This industry experiences sudden shifts in fashions and fads that could challenge the market position of existing firms and open up opportunitics for newer ones. Brand loyalty is fickle as customers watch new products being introduced at a dizzying pace. Cosmetics are not necessities so require a high level of imagination and crcativity to be marketed. It is hard to assure success of cosmetics products as the markets are highly competitive and there are a large number of competing products vying far the customers’ attention. Effective marketing communication and getting through the products through myriad distribution channels require high level of creative talent and astute marketing skills. The ability to understand consumer behaviour and preferences is the key to success in the cosmetics and toiletries business. There are a number of factors that are seen as driving the demand for cosmetics and toiletries in India. ‘Among these are: the emergence of a young urban elite population with increasing disposable income in cit- ies, the rise of the aspirational class in rural and semi-urban areas that want to partake the fruits of economic development; an increase in the number of working women, changing lifestyles of Indians, increased afford~ ability of lifestyle-oriented and luxury products, desire to experiment with brands and products, penetration of satellite television, freer imports and increasing appetite for western goods, greater product choice and availability, greater awareness of products and brands and the emergence of e-commerce. The growth of Indian film industry and fashion industry and crowning of many Indian women at international beauty pag- cants has also proved to be beneficial to the prospects of cosmetics and toiletries industry in India. Indian consumers tend to look towards Indian as well as international brands as lifestyle enhancement products. Foreign products have enhanced growth of the Indian market by attracting aspirational consumers and most Indians generally perceive foreign brands as being of superior quality. PRODUCTS, TECHNOLOGY AND MANUFACTURING are placed under the group of ‘manufacture of other chemical products’ of products comes under the manufacture sub-class Cosmetics and toiletries in India ced ur according to the National Industrial Classification, 2008. The class s te i of soap and detergents, cleaning and polishing preparations, perfumes and toilet preparations. The ofcosmeties and toiletries includes manufacture of pre-shave, shaving or after shave preparations: personal deodorants and anti-perspirants; perfumed bath salts and other ‘bath preparations; beauty or make-up Preps a tions and preparations for the care of the skin, other than medicaments: manicure and pedicure preparations, €tc.In practice, however, these classifications do not seem to be sacrosanct—though still legal in Indis—pos- sibly owing to the dynamic nature of the industry. The cosmetics and toiletries products include a 1. Skin care 2. Hair care 3. Fragrance 4. Personal hy S.. Make-up products ide range of products that are listed as follows:$42 _ Strategic Management a. Face makeup b. Eye makeup ©. Lipstick 4. Nail products An illustrative list of the bewildering variety of products and services of cosmetics and toiletries industry in India is presented in Exhibit 5.° Exhibit An Illustrative Chart of the Variety of Cosmetics and Toiletries Products in India Aloe Vera Hair Conditioner | Eye Cream Moisturising Cream Amla Hair Oil Eyeliner Moisturising Gel Ama Shikakai Shampoo Cleanser Moisturizer Anti Acne Cream Face Creams ‘Moisturizing Lotion Anti Aging Cream Face Scrub ‘Moisturizing Skin Lotion Anti Dandruff Lotion Face Wash Muscle Pain Oit Anti Dandruff Oit Facial Cream Nail Patish Anti Dandrufl Powder Facial Gel Nail Polish Remover Anti Marks Cream Facial Scrubs ‘Natural Body Creams Anti Pigmentation Cream Hair Care Cosmetics Natural Hoir Wigs Anti Pimple Cream Hair Care Products Nourishing Creams Anti Wrinkle Cream Hair Cleanser Peiroleum Jelly Anti-dandruff Shampoos Hair Colours Plastic Combs Antiseptic Cream Hair Conditioner Powder Brush Apricot Serub Hair Creams Raw Materials for Cosmetics Anificial Human Hair Hair Dye Remy Hair Extension Astringent Lotion Hair Gets Shaving Cream Ayurveda Cosmetics Hair Growth Gel Shaving Kit Baby Oil Haie Nourishing Conditioner | Skin Care Cosmetics Baby Powder Hair Oil Skin Care Creams Beauty Creams Hair Shampoos Skin Cream Beauty Saton Equipment Hair Styling Gel Skin Moisturizer Body Brush Mair Tonic Skin Ointments Body Care Products Hair Washing Lotion Skin TonicCote 3: Indian Cosmetics ond Toiletries industry Profile 543 5 Contd. pantit Body Deodorants Mand Washing Gets Sou Body Massage O11 ‘ Mand Weft Hair Soap and Detergents Body Moisturizers Henna ‘Sun Protection Cream Dody Oils Ne tenpa Hair Dye ‘Sun Protection Lotion Body Scrubber Henna Paste Sunscreen Lotion Bristle Hair Brush, Menna Tube Talcum Powders Cold Cream Human Hair Extension Toilet Roll ‘Compact Powder Human Hair Wigs Toitetries Cosmetic Brushes Lemon Shampoo Tooth Brush Cosmetic Ingredients Lip Bata Tooth Paste Cosmetics Intermediates Lipstick Waring Strips Curly Hait Wigs Microcapsule Wigs for Men Dry Skin Ointment Microspheres Wigs for Women Source: Based on information avaiable at haip://ununa.indianindustry.com/covmetics/. Last retrieved Februr ary 13,2015. Areview of the global cosmetic industry points out four important trends on technology and innovations. These are: utilisation of information systems to enhance marketshare; growing proportion of transitive cos- meceuticals in the cosmetic market; and special cosmetic products for aging population and customisation forethnicgroups. The information systems are mainly manifested in the increasing use of online advertising campaigns that can be planned and launched in shorter times than for those in print media. Online shopping isalso a rising marketing access channel for customers and manufacturers. An apt example of the use of ichnology and innovation in cosmetics industry is of two L’Oreal brands that launched partnerships with kchnology companies to allow customers to use the latest technology to Jet the customers try out cosmetics tefore they buy. Yves Saint Laurent(YSL) group has partnered with Google to enable make-up artists to stow customers how to apply their make-up via digital technology, while L’Oreal has launched a ‘make-up seaius’ app to allow customers to see how make-up will look on their face before buying it. Technological Advancements in area such as stem cell, superoxide dismutase and fullerenes are some of the innovative ingredients to produce skin care, hair care and colour cosmetics with new or improved functionality. Cosmeceuticals, a combination of cosmetics and pharmaceuticals, refer to cosmetic products that have Medicinal or drug-like benefits. According to market studies around the world, there is an increasing segment *fcustomers who look for not just beauty enhancing qualitie: s in cosmetics but also their ability for curing, Ritigati i ving diseases. Anti-aging cosmetics have a rising demand from people who Fi esc tee cea erat ot sin Wee This is done by the cosmetics and toiletries industry Y Widening the ambit of ingredients they use such as plant acids and enzymes . Produce sun screens lovions Andcreams, Customisation for ethics groups is a major wend in inevaliee toadapt Scape and toiletries to ferent ethnic groups around the world on account ofvmiying sin ane foment in w ; ne Cosmetics ¥e popular product category in countries suchas India and slobal and domestic companies atemptto cater Customers interested in whitening skin and preventing (he harsh ate -544 _Strotegle Monagement Manufacturing of cosmetics and toiletrics is a combination of the old and See ee Tea Age-olg methods still in use in factories that rely on traditional ways of making aede end chemist eran there are modern production units that rely on sophisticated equipment and method s ani chen istry 9 "produing cosmetics, A large part of cosmetic chemistry is to do with making blends of mil L Es tire ic canbe used to clean the skin. These mixtures have to be effective, mild and safe, and make up alarge proportion of the total volume of cosmetics. When traced back to source the basic raw materials for arora surfactants are cither plant oils or petroleum. A typical shampoo is usually diluted anionic surfactant that is harsh on human skin and hair when used alone and so is blended with other surfactants to reduce the ill-effects ang tg improve the cosmetic properties such as ereaminess and stability of the product. The final product emerpes after the basic shampoo is subjected to cosmetic enhancement through addition of ingredients that impan, colour, perfume and other effects as pearl effect. . — In recent years, it has been the manufacturing practice of larger players to seek manufacturing efficiencies by moving offshore completely, or by concentrating on fewer products and making these as efficiently ag possible. The global companies where the first approach was adopted include Reckitt & Colman, Elizabeth Arden, L'Oreal, Avon, Wella and Helene Curtis, In contrast to this the strategy of concentrating on fewer Products and making these on an internationally competitive basis has allowed Gillette to become the re- gional supplier of shaving foams, hair sprays and antiperspirants to the Gillette group. SALES AND MARKETING OF COSMETICS AND TOILETRIES Cosmetics and toiletries is one of the fastest growing retail segments in India. The Indian cosmetics and toiletries industry has been a traditional strong hold of a few major players like Lakme and Ponds, After liberalisation in 1991, there have been a number of foreign entrants to the Indian markets. 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 want of choices and options. The segmentation of markets for cosmetics and toiletries is based on several different types of bases. A popular way is to segment in terms of product categories as Euromonitor, the marketing intelligence firm does. This segmentation is as below: Exhibit 6 Segmentation of Cosmetics and Toiletries M: larket According ta Product Categories Bath and shower Fragrances Premium cosmetics Beauty and personal care | Haircare Sets / kits Cotour cosmetics Skin care Mass cosmetics Deodorants Men’s grooming Sun care Source: Based on segmentation suggested by Euromonitor asis of pricing and the type of customers. This leads niche market with high quality, better packaged and the mass segment which is a high volume and low price seS- among lower and middle classes who aspire to use cosmetics Another popular way in India is to segment on the b: to the creation of a premium segment that is a smaller, higher priced products. The other segmen ment that is aimed to attract first-time users but cannot afford the highly priced ones,Case 1: indion Cosmetics and Tolletrles industry Profile _ $45 positioning and branding is important in cosmetics anes ae of companies may make the customers gored oF zmay’ i ct many types of customers w! ‘rats. In addition, the plethora of cosmetics products i jote clear and Tocused. Positioning for premium segment of cosmetics is aired at product differentiation. pe sucess caine Unilever’s Fair & Lovely cream serves to show the importance of positioning as igis marketed as “change of destiny* product that makes the women transform in many ways and not just sain deep. Lifebuoy continues to remain the world’s largest selling soap on the basis of its health protection esitioning. Dettol, packaged in a green wrapper, is positioned as a germicidal soap while Lux continucs its ypng-standing brand positioning as beauty and glamour. Pears soap remains the glycerine-based, non-animal fat transparent soap in the Premium category, Consumer behaviour in cosmetics and toiletries market in India offers challenging contrast to what is seen inother countries particularly in Europe and US, Indians have traditionally been perceived to be savers than nders. Yet, there is a sublle change in behaviour affecting the spending pattem of consumers indicating iat there is greater willingness to loosen the purse strings and start living for today than saving for future. Consumers, especially among working women in metros like to pamper themsclves and spend more on | peauty and personal care products. Increasingly, it is not just women who arc interested in buying cosmet- igs but there is a growing market for male grooming products. Indian men have a very different attitude to using cosmetics than their forcign counterparts. For instance, they are not ashamed of using their sisters’ or ives" face cream or trying out their hair colouring. Demand is rising not just in the metropolitan cities but in smaller cities and towns including the tier 11 and III cities. The consumption patterns are also undergoing change as earlier girls in schools and colleges did not wear make-up, but now they start carly. This segment isgrowing but most companies seem to be focusing on the core segment of working women in metros aged tetween 21 and 28, Women in smaller towns use more of colour cosmetics after they get married otherwise itis occasion-based usage in India. Customers in these markets are price-sensitive, aware of the ill-effects ofchemical-based cosmetics and thus prefer natural and ayurveda products. Pricing is a sensitive issue in cosmetic and toiletries industry owing to several unique factors. There is an impression that the Indian customers want the best but not always willing to pay for the best. This may not really be true for the modern customer yet the Indian markets are indeed price-sens . The large number of foreign companies has had to grapple with the issue of appropriate pricing for their products. Generally, itey had to bring down the prices to cater to the preferences and budgets of the Indian consumer. Cosmetic and skincare packaged products manufacturers are targeting the masses with value brands cheaper by 20- 30% from their existing line-up of brands. Maybelline and L'Oreal known for their premium products have tad to widen their product portfolios to include value products. Several companies have adopted the mode ofoffering smaller pack sizes to make them more affordable and this tactics has enabled those companies to ‘apture market share. Hindustan Lever and Revlon were the first to introduce small pack sizes. Developing innovative pricing strategies is also very important, as India is a very price sensitive market. Distribution plays a key role in cosmetics and toiletries as they are included within the broad area of fast Moving consumer goods having repeat purchases. There are several distribution formats that have developed ser the years, Broadly, the distributors fall into two groups of store-based retailing and non-store retailing. Among the store-based retailers are the grocery retailers and non-grocery retailers. Grocery retailers are of a luge variety among them discounters, small grocery retailers, supermarkets and hypermarkets, Non-grocery Railers are pharmacies, beauty specialists, department stores, variety stores and mass merchandisers. Non- ore retailing is done through direct selling, e-commerce or ¢-tailing and home-shopping. Marketing communications play an extremely important role in cosmetics and toiletries industry. Fac- ‘ors such as rapid growth of the industry in recent years, increasing range of cosmetics products, entry of and toiletries marketing. Association with foreign perceive them as better quality. Herbal content or tho are interested in cosmetics that have not side- in the market makes it imperative for the positioning546 _Strotegic Management foreign companies, tougher competition and emergence of satelite television and Internet a midi market. ing communication critical, Indian consumer is constantly exposed to adverisent i kt ballon of new cosmetics and personal care products. There are instances where misleading a ens m a that make exaggerated claims about the capability and performance of the product have Been GotNel A eblisements for fairness creams, which make up a large chunk of skin cream segment in India, have a icularly been accused of depicting people with dark skin people as being inferior to those who are fair. According tthe consumer complaints council, misleading or false advertising is most rampant th the FEN GUE bare sector, accounting for more than half the total number of advertisements to have been banned by the Advertsing Standard Council of India. Since 1985, the Council has been laying down the guidelines for creating a se, regulatory mechanism for ensuring ethical advertising practices. | Packaging of cosmetics has to take technical, cost and aesthetic factors into account, g I factors are considerations for chemical and physical computability, retention of volatiles, providing leak. proof caps and tamper-proof seals, Aesthetic factors include the appearance and presentability. Cosmetics require special attention as sometimes packaging may be a major cost factor. All these considerations have to keep in view the legal requirements for instance related to labelling. Among technical LEADING COSMETICS AND TOILETRIES COMPANIES IN INDIA ‘The cosmetics and toiletries industry in India has different types of companies. As pointed out above, in the section on industry structure, there are multinational companies, large Indian companies and small and medium enterprises. Among the multinational companies there are several top global companies such as Hin- dustan Unilever, P&G, Colgate-Palmolive, L'Oreal, Revlon, Estee Lauder, Maybelline, Amway and Avon, Among the multinational companies operating in the cosmetics and toiletries industry in India, Hindustan Unilever holds the top position in terms of sales revenuc. It is the Indian subsidiary of Unilever whose origin goes back to the 19" century starting with producing soaps and margarine. The origins of Hindustan Unilever (HUL) in India go back to 1888 when Unilever exported Sunlight soap to India. Personal care is among its four business areas in India. Acquisition of Ponds in 1986 and Lakme in 1998 strengthened its position as 2 personal care business in India. Lakme India, a part of the Hindustan Unilever and founded in 1952 is a major Indian cosmetic company. It is also rated high as a trusted brand in the country. The major personal care brands of Hindustan Unilever are Lifebuoy, Lux, Close-up, Fair & Lovely, Dove Clinic Plus and Clear. Proctor & Gamble (P&G) is among the largest multinational companies globally and among those that operate in India. P&G Global was established in 1837 and its India operations started in 1964. P&G also owns Gillette India. The company operates in three businesses of beauty and grooming, household care, and well-being. The major personal care brands of P&G are Gillette, Head & Shoulders, Olay, Oral-B, Pantene, and Wella. Colgate - Palmolive is a global consumer products conglomerate and started in the 19" century as a small soap and candle manufacturer. It started operating in India as Colgate-Palmolive Private Limited in 1937 and started with offering dental creams and introduced tooth powders and toothbrushes in 1949, Its sells both the Colgate and Palmolive brand products. Among its major oral eare brands in India are Colgate toothpastes, toothbrushes, toothpowders and mouthwashes. Personal care brands are Palmolive body wash, liquid hand wash, shave preps, skin care and hair care. L'Oreal Paris is an international company set up in 1909. It has operating in India as L'Oreal India since 1994 and is among its fastest growing subsidiaries around the world, The businesses L'Oreal India op¢t ates in are hair care, colouring, skin care, make-up and perfume. lts major brands in consumer products a L’Oreal Paris, Garnier and Maybelline New York. In luxury products it has Kichl’s, Lancéme, Ralph Lauret, Giorgio Armani and Diesel. It also offers professional products such as Matrix and Cheryl's cosmeceutials and active cosmetics like Vichy.Case 1: indian Cosmetics and Toiletries industry Profile S47 Re ten me a in 1932, is a global colour cosmetics, hair colour, beauty tools, fragrances, sk- ee mrure with the Meats 2nd Beauty care products company, It started operations in India in 1994 Bet pestbn Super ae Eroup when it launched India's first colour cosmetics. [ts major brands in ee i rire’: eee Cana Revlon Nail Enamel, ColorStay, Strect Wear, Revlon Absolute C, Flex, Estee Lauder started in 1946 in USA sev up in 2005. It runs stores in alliane and operates in India through its 100% subsidiary ELCA Cosmetics a ance with Shoppers’ Stop and has a stake in Forests Essentials a green edocs aah uae maior brands in India are MAC, Tommy Hilfiger, Donna Karan, Aramis and Clinique. nic et 11S, Masbeltin 8 global cosmetics company operating worldwide in many countries and was te alee Seomaicckany Hest Global women’s make-up brand, It started operations in India by Isuncl 2 in . Its major by in i i = 1d the Maybelline brand. ajor brands are in various categories of make-up products under Amway Corpor fon ts among the world’s largest direct selling companies set up in 1959. It has been operating in India since 1995 and is now India’s leading direct FMCG selling company. It has five businesses of nutrition and wellness, beauty, p nl s i ersonal care, home care and great value products. The major brands are Awitude, Dynamite, Satinique and Persona, Avon is one of the world’s largest beauty product sellers and among top global brands set up in 1886. It has been operating in India since 1996. The product line of Avon includes Avon Color, ANEW, Solutions, | Avon Naturals, Little Black Dress among others, Besides the foreign companies included in the brief description above there are several others foreign companies of note such as Oriflame, Officiana Farmaceutica Italiana, Innisfree Corp, Faces Cosmetics, Shisaido, and Schwarzkopf. There are a number of large Indian companies in the cosmetics and toiletries industry the major ones Dabur, Godrej, Marico, Emami, Himalaya Herbals, Bajaj Corp, and Jyothi Labs are briefly described in the paragraphs that follow. Dabur India is among the largest Indian companies in the cosmetics and toiletries industry in India. It was set up in 1884 and has personal care in its business portfolio in consumer business. It operates in some countries outside India and derives one-third of its revenue from its international business. Its unique selling proposition is herbal and ayurveda products. Its major brands are Vatika, Dabur Red toothpaste, Dabur Lal Dant Manjan, Babool and Fem. Godrej business group conglomerate set up in 1897 and has two companies related to cosmetics and toi- letries industry, Godrej Consumer and Godrej Industries. Both of these companies are not exclusively into personal care and emerged in 2001 out of Godrej Soaps. Godrej Consumer is a home and personal care and FMCG company. It is a one of the leading Indian companies in soaps and hait colours. Its major brands in India are Cinthol, Godrej No. 1, Godrej Protekt, Godrej Expert, Renew and Godrej Nupur Henna, Maricois a major Indian company in beauty and wellness businesses with food, hair care, male grooming and skin care products and sells in many countries. It emerged out of the family oil business in 1990. Its major brands in India are Parachute, Nihar Naturals, Parachute Advanced Body Lotion, Hair Care, Livon, Nihar Naturals Uttam, Set Wet and Mediker. Emami Limited is a major Indian FMCG company in cosmetics, healthcare and baby care products. It Was set up in 1974 and sells its produets in many countries. Its major brands are Boroplus, Himani Navratna, Fair and Handsome, Emami Vasocare, Emami 7 Oils in One, and He Deodorant. Himalaya Herbals started as Himalaya Drug Company in 1930 and specialises in health and cosmetics Products based on ayurveda organic herbs and oils. It makes a range of products in face care, body care, body and foot care, hair care, baby care and oral care under its Himalaya Herbals brand name. Bajaj Corp is a major Indian company in the consumer products. business. Tt was operating as a part of the Bajaj family business group since 1953 but came in existence as Bajaj Corp in 2006. It operates mainly548_ Strategic Management its major brands in India are Bajaj Kailash Parbay in har ils nd has some peut in skin eae, Aen i ae a OL a Thanda Tel, Bajaj Almond Drop Hair Oil, Bajaj Brahm Jasmine Hair Oil and Baja Nomarks Range of skin care brands. Jyothi Laboratories is a major consumer-products company care is one of its four businesses the others being fabrie care, home ¢ onal care are Margo, Fa, and Neem Active Toothpaste. ; re There are several other companies of note some of which are in herbal and ayury ae prot: some of the companies are Ayur, Shahnaz Hussain, VLCC, My Fair Lady, J.L. Morrison, Paramount Cosmetics, ang Lotus Herbals. in India sct up in Kerala in 1983. Personay care and dish wash. Its major brands in COMPETITIVE SCENARIO IN COSMETICS AND TOILETRIES INDUSTRY The potential size and the growth of sales of cosmetics and toiletries in Indian markets has encouraged more domestic companies to invest in growth and has attracted a large number of forcign companics into India. These companies, mostly from developed economies, face stagnation in their own markets and look to markets in developing and emerging economies such as China and India to fuel their continued growth, The Indian market, for instance, is experiencing double the growth that is seen in US and Europe. . As described in the previous section, there is a large number of Indian and foreign companies vying for a share in the growing market. Competition is intense in view of the fact that the cosmetic and toiletries market is an open market and imports are allowed freely into India. Indigenous products have been doing ‘well in the market against stiff competition from foreign products despite the latter being perceived as hay- ing better quality. Global brands face tough competition from long-entrenched domestic companies who have intimate knowledge of the local markets and decades of customer loyalty. But foreign companies are learning fast and responding with competitive moves of offering smaller-packs, adopting natural, herbal and ayurveda formulations, sctting up research and development centres and generally trying to understanding the discerning Indian customer and her preferences and capacity and willingness to pay. It is evident that, with intense focus on urban markets, the competitive arena is already crowded. Moving into the suburban and rural areas requires companies to hone their sales and distribution skills, speak to their customers in a language and idiom they understand and make them identify brands and logos. Exhibit 7 presents data pertaining to the top 20 stand alone personal care companies in India. As the fig- ures reveal, Hindustan Unilever is far beyond the reach of competition with Lakme and Ponds in its Portfolio. Ithas the bencfit of pedigree with the company brand being familiar in India since a long time and having an extensive distribution network reaching into the nook and cranny of the vast county that India is. Dabur, Godrej and Marico make up the vanguard of domestic companies fighting out for revenue and market share, As scen from the list of companies there are a large number of foreign companies that are listed as public companies and have a presence either in certain product categories (Colgate in oral care) or products (B3j3j Corp in hair oil). Competitive strategies range from the mass produced and mass marketed cheaper version by the domestic companies and the large number of small- and medium-scale enterprises to the differentiation strategies of premium manufacturers and marketers mostly from foreign countries. Thus, the choice is wide. Cosraet- ics and toiletries companies need to make a choic ‘On the one hand is the attraction of mass market with Yolumes leading to sales based on lower prices, medium quality and far reach into the vast market while on the other side is the lure of being a competitor to the best global brands and offering premium products to discerning clientele. Overall, the competitive landscape with domestic and foreign companies, in cosmetics and toiletries industry in India is complex and dynamic Product category focused and all inclusive product portfolio compa— fase 2 inction Cosmetics and Tottetries industry Profite 549 companies using different raw ms es 8 AW Mates i 5 i aural and herbal inputs. Growth als and ingredients ranging from organic and inorganic chemicals tential offers . reach into the Indien NBetentsh offers motivation for both domestic and foreign companies 10 shibit 7 Top 20 Personal -” Exhibit p nal Care Companies in India (Standalone) in Terms of Annual Sales Personal care company | Year Ended Sales Net Profit Total assets be (Rs crore) (Rs crore) (Rs crore) BSaaiiel aa Mar'14 28,019.13 3,867.49 3277.05 | aber nia Mar'l4 4,870.08 672.1 1946.63 [ Gocre) Consumer Mar‘14 4,079.84 564.84 3025.24 Maries Mar'14 3,682.49 577.2 2381.47 Colgate Mar’l4 3,578.81 539.87 599.86 P&G Jun’ 14 2.050.94 302.02 100290 ‘| Gillette India Jun" 14 1,749.79 51.42 643.46 Emami Mar" 14 1,705.08 398.23 oaso2 | Godrej Industries Mar'l4 1,453.55 119.69 2774.13 | Jyothy Labs Mar'14 1,260.18 106.11 1396.35 Bajaj Corp Mar'14 671.73 150.44 522.07 My Fair Lady Mar’ 14 110.56 0.68 na. JL Morison Mar‘14 89.16 2.34 na, Paramount Cosmetics Mar’ 14 47.39 15 39.92 JUS Svendgaard Mar" 14 35.28 28.79 91.06 GKB Ophthalmics Mar'14 31.38 0.83 29.33 Techtran Polylenses Mar’l4 28.15 1.75 na. Magna Industries Mar’14 22.6 0.62 na Ador Multiproducts Mar’ 14 9.93 =1.06 na || Satat Herbs Mar’14 116 0.01 na. nary 14, 2015. | Source http://w moneyconteul.com/storks/ilata bank /standatone/personatcare hind Last retrieved (na, = not available)550 Strategic Management SUPPLIERS TO COSMETICS AND TOILETRIES INDUSTRY sents and formals Cosmetics and toiletries manufacture requires a large varlety of raw materials, A ee tie a ntl that inelude herbs, herbal extracts, oifs, synthetic chemicals and phytochernca e yere es ceialeon significant input for cosmetics. In each of these categories of raw inate stes f Sree that are ueed by the industry, For instance, chemicals may incluce 00 lr Oe ara alcohols, acids, polyethylene glycols, surfactants and a nic compounds, dialky * . J emulsifying waxes. ‘There are also equipment manufacturers who manufacture in the factories producing cosmetics and toiletries. These equipment ‘emulsifiers, and sieving, grading, and labelling equipment. Most of thes Maharashtra and Delhi regions. and supply the specialised machinery used t include heaters, kettles, pulverisers, ¢ suppliers are located in Gujarat, ENVIRONMENTAL AND HEALTH ISSUES Cosmetics and toiletries industry worldwide as well as in India has certain environmental and health issues that are of concern. These relate to clean air and water, waste management and animal rights. One of the most controversial environmental issues is of the use of volatile organic chemicals (voc) such as ethyl alcohol chich is used as a solvent, Propellants and several other ingredients used to make cosmetics and toiletries are also VOCs. Emissions from VOC in colognes, perfumes, toilet water, aftershaves and body splashes cause air and water pollution. | ‘Animal testing is widely prevalent in the manufacturing units of cosmetic and toiletries companies around the world. Several large multinational companies have been using ‘animal testing for years. Countries around the world have been taking legal action to prevent cruelty to animals in the process of manufacturing of ‘cosmetics and toiletries, European Union implemented the Cosmetics Directive law in 2009 to ban animal testing. India too responded in 2014 to advocacy by groups such as Humane Society International, People for Animals, and People for Ethical Treatment of Animals by banning use of animal testing and import of products that are based on animal testing. This amended Drugs and Cosmetics Rules. imposing dual ban (test and import), has now put India in the league of European Union and Israel that had imposed such ban long ago, Many countries including Australia, Brazil, New Zealand, Taiwan and the United States have already introduced bills proposing national cosmetic animal test bans. Waste management concerns have given risc to the use of recyclable packaging materials. Companies have invested in eliminating, reducing or redesigning environmentally harmful packaging materials. Health concerns such as the case of carcinogenic effects of using skin creams have been there since a long time. Cosmetics and toiletries manufacturers are responding with greater use of natural and organic materials containing ingredients like proteins and vitamins as well as botanical extracts from plants such as aloe and cucumber. Increasingly, customers value not just the smell and feel of cosmetics but also their ability to nourish and protect body and skin. Rising environmental concems have caused cosmetics and toiletries manufacturers to research natural and organic raw materials to use in their production processes. However, erties of the cosmeties and toiletries industry charge that the environmental actions advertised are often exaggerated, false or misteading. REGULATION IN COSMETICS AND TOILETRIES INDUSTRY Cosmetics and toiletries industry is subjected to regulation by the government in India. The manufacture and sale of drugs is a licensed activity under the Drugs and Cosmetics Act,1940 and the Drugs and Cosmetics Rules, 1945, administered by the ministry of health and family welfare. The licensees are required to com- ply with the provisions of the Act, Rules and the condition of the licence granted to them by the licensingnorties for manufacture and sale of d : 413; National Pharmaccuticals Pri ing Polio regulations also incorporate Drugs (Prices Control) Order, "The Drugs and Cosmetics Sieh: gan 7 airugs in the eat 1340 have elaborate provisions to check the production ofspurious and sche ded deuge fir Wise Act provides elaborate definitions of theterms spurious, adulterated ai impor, sale and istrbunee a ‘aking penal actions against the offenders. The Act covers manu- os a aga n of cosmetics and drugs which also apply to homeopathic, ayurveda, ene Sealer ca India (DGCI) is the central licensing authority that has the power to in ee De incel licences for import, export or manufacture of drugs, cosmetics or medical devices oF permission for conducting clinical trials. The DCGI also has the sole power to issue licenses for the manufacture, sale, and export of 17 categories of drugs, Clinical trials are defined in relation to drugs, cosmetics and medical, and involve their systematic study with the objective of determining their safety, efficacy, performance or tolerance. Organisations interested in clinical trials have to register with the Central Drug Authority and get approval from an Ethics Committee registered swith it. Labelling declarations are regulated by the Bureau of Indian Standards that sets the standards for cosmet- icsproducts. There are different specifications for different types of products such as skin creams and lipstick and the ingredients used to make them in the Indian Standards (1S) 6608:2004 and 9875:1990 respectively. There are regulations in details covering the permitted synthetic organic colours and natural organic colours aad their amounts used in cosmetics to prevent excessive use of harmful materials such as arsenic, lead, heayy metals and mercury. The union health ministry has released the draft Drugs and Cosmetics (Amendment) Bill, 2015 to amend the Drugs and Cosmetics Act, 1940 for upgradation and introduction of provisions for clinical trials and regulation of medical devices CHALLENGES AND PROSPECTS FOR FUTURE A growing industry such as the cosmetics and toiletries industry in India offers exciting prospects but poses daunting challenges too. There are various challenges both to the domestic as well as foreign companies operating in India. These range from rising intensity of competition to regulation and safety requirements to be met. Competition intensity has been on the rise making cosmetics companies respond in various ways. Do- mestic companies compete to protect their turf while foreign companies compete to first gain a beach head and then to make forays into the market and then hold on to their market share in the face of onslaughts from both domestic and foreign players. At present, the foreign companies such as Hindustan Unilever and Colgate-Palmolive are in the lead. They continue to leverage on their brand name, reach into the markets, and wide product portfolio. There are frequent launches of their international brands into the Indian market catering to customers willing to adopt or switch to pricey products duc to theie rising aspirations and dis- posable income, However, high import duties and packaging cost are still keeping many foreign companies away from the Indian markets. In addition, the price-conscious consumer remains an enigma as well as an imitant to the foreign companies. Domestic companies like Dabur whose product differentiation is based on natural and herbal products continue to hold their sway over the market, To the foreign companies, understanding of Indian consumer behaviour has been a lesson in unlearning many of the conventions and practices they are used to in their home markets. For instance, skin whitening isa unique feature of the skin care segment in Indian markets, To this companies have been adding other features such as skin brightening and spot reduction to enhance the acceptability of their products.552_ Strotegic Management The widening of market segmentation (o include men’s grooming products is a welcome development for most foreign and Indian companies, It has helped them to widen their product portfolios and add to their sales revenue. Indian men are increasingly taking to the use of more and more body sprays, perfumes and other cosmetics and toiletries. Marketing communication including advertising also nudges the men to gq forward and enjoy the benefits of making themselves more handsome and appealing. With rising demand from men, the Indian market is getting enlarged and many companics are coming out with cosmetic products, especially skin care products, for men. The challenge in this gender-based segment lies in catering to the specific demands of men and boys in the suburban and rural areas. | The role of modern retailing formats to sales of cosmetics and toiletries is significant. Increasing expan. sion of retail chains, rising footfall, more shelf space to personal care products, Internet retailing all add up to better prospects for the cosmetics and toiletries industry. The challenge lies in adapting company's distribution channels and other marketing variables to the emerging scenario, ; Technology of cosmetics preparation and adding safety features is of special concem to cosmetics and toiletries industry. So is the case with regulation that serves to protect the customer from low-quality and unsafe products. These two factors of technology and regulation are of special concern for small and medium enterprises as they have limited means to adopt sophisticated technology and face problems due to regula- tory requirements. Cosmetic scientists and dermatologists are working on latest innovations and technology for the formulation, design, testing, use, and production of cosmetic products for skin, hair, and nails. New areas of research and development in dermatocosmetic vehicles, surface film, causes and measurement of skin aging, make-up produets, skin healing, cosmetics in sports, cosmetotextiles, nutricosmetics, natural ingredients, cosmeccuticals are emerging as contributors to better understanding and application of science to cosmetics and toiletries. The challenge of fake and imitation products continues to bedevil the cosmetics and toiletries industry as the lure of brand name remains but the high price of these brands prevents custom- ers from realising their aspirations. India not only has a burgeoning market for cosmetics and toiletries but is also a major hub for exports of personal care products to many countries in West Asia and South East Asia, The major countries to which India exports are Bangladesh, China, France, Germany, Malaysia, Nepal, Pakistan, Saudi Arabia, Singapore, South Africa, Turkey, UAE, and USA. Export of herbal and ayurveda products also has demand in Europe and US. Non-resident Indians constitute a big market for Indian cosmetics and toiletries firms in some re- gions of the world. There are prospects for emergence of new specialised segments such as halal (halal means lawful in Ara- bic) products. Products that have vegetarian ingredients and have no meat and alcohol ingredients are consid- ered as halal cosmetics and toiletry products. These products appeal to Muslims and other communities who are strict vegetarians like the Jains. Many products from companies such as Dabur and Himalaya Herbals already are halal products as they are vegetarian. This indicates potential for halal-certified cosmetics and toiletries market segment in India, Prohibition on animal testing and ban on animal fat based products tend also support the demand for halal products. Iba Halal Care, India’s first halal cosmetics brand, was launched in 2014 in Ahmedabad by Ecotrail Personal Care, a company headed by two Jain women. This could be a trend-setter in the emergence of a new market segment looking to be catered by the major players. Overall, cosmetics and toiletries industry in India,which has witnessed a strong growth in the last few years, has emerged as one of the markets holding immense growth potential, New product launches catering to consumers" growing requirements will fuel growth in the industry, for which the future outlook seems exceptionally bright. Indian cosmetics and toiletries industry holds promising growth prospects for both existing and new players. Consumers are increasingly shifting towards ‘natural’ and ‘herbal’ cosmetic prod- ucts as they are associated with bio-active ingredients and safe for human skin, Women are spending more on cosmetics as they are actively earning and spending money on grooming themselves. Men are joiningCase 4: Indian Cosmetics and Toiletries Industry Profile 553 sistically in making them: ihractive. 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