Cosmetic industry

Industrial Analysis
COSMETIC INDUSTRY
SUBMITTED BY:
JYOTI YADAV
SHOBHANA SAGAR
MBA( Ist YEAR)

Industrial Analysis (104)
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Table of contents
 Executive summary
 Introduction to Cosmetic Industry
 Indian Cosmetic Industry
 Economic Analysis
 The Role of Government
 Economic Contribution of Cosmetic Industry in India
 Historical background
 Rise of Industrial Cosmetic Market
 Evolution of Cosmetic Industry
 India’s Story
 Cosmetic ProductLine
 Market Demand
 Market Data
 SWOT Analysis
 Porter’s Five Forces Model
 Industry Analysis
 Top 5 Cosmetic Brands in India
 Plan of Action
 References

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EXECUTIVE SUMMARY
Cosmetic industry is the most profitable business for the most of the manufacturers. It has not
only grown in United States but also in various parts of the world such as France, Germany,
Italy, India, Japan, etc. In this industry report, our aim is to collect the data about the cosmetic
industry, and select the data that is suitable for our report. For this process we make use of the
sampling technique. We had chosen Indian cosmetic industry for my study. This is a type of
sampling in which instead of studying the whole data we had chosen a particular country for my
study. Hence we can relate this report for the whole cosmetic market around the world.
The next process is the data analysis method. Through data analysis we can filter the data and
process the data to give some useful information. This will help us to come to some conclusions
and take decisions. Here we will discuss about the Indian cosmetic industry. Then we will
analyze the market trends and the competition rivalry that is going on in this industry. The
approach that is carried out in this industry report may vary according to the user.
With the help of quantitative and qualitative analysis we discuss about the advantages, trends and
problems faced by the cosmetic industry. The methodology used in this industrial report is much
helpful to get the required result. From this result we come to know about the problems and
struggles that a company face to survive in the market.

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Introduction to Cosmetic Industry
The cosmetics business is a billion dollar industry. Every year, women are responsible for
consuming millions of cosmetic products. The cosmetics industry is so large because of several
factors. The media is a huge contributor to the intense pressure to look a certain way. Beauty is
skin deep; however, first impressions are usually what others use to base their personal
judgments. In the business world, people are expected to dress appropriately and carry
themselves appropriately. Studies reveal that better looking people on average earn more than
their peers. Obese applicants are discriminated against because of their larger appearance. Sadly,
how one dresses and appears is often the determinant of the amount of respect one receives.
Cosmetics can pessimistically be seen as a group of products which feeds on either people's
insecurities or egos. Optimistically, cosmetics can be a product which helps us bring our best
face forward. The desire to look beautiful, young, and sexy does not only apply to women, but
men as well. Cosmetic companies are highly competitive with one another. To remain
competitive, companies feel the pressure to come out with innovative products. In the past few
years, cosmetic companies are expanding their product lines to include products for men.
In addition to music, beauty is also the universal language. The popularity of cosmetics in China
is growing with the economy. The government's change towards a more market-based economy
has opened flood gates of opportunities for its people and foreign companies.
INDIAN COSMETIC INDUSTRY
Size of the
Industry
The size of Indian Cosmetics Industry globally is $ 274 billion, while
that of the Indian cosmetic industry is $ 4.6 billion.
Market
Capitalization
According to analysis and figures given by the Confederation of Indian
Industries (CII), the total Indian beauty and cosmetic market size
currently stands at US$950 million and showing growth between 15-
20% per annum.
Output per annum Industry sources estimate a rapid growth rate of 20% per annum

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Percentage in
World market
The overall beauty and wellness market that includes beauty services
stands at about US$2,680 million, according to CII estimates.
History
Bearing a long glowing heritage of cosmetic and beauty, aesthetic makeup products is being
used since olden days and nowadays it appear like a booming economy in India which would be
the largest cosmetic consuming country in a next few decades. While the demand of beautifying
substances are growing day by day, a large number of local as well as international
manufacturers gradually extend their ranges and products in different provinces of India.
Since 1991 with the liberalization along with the crowning of many Indian women at
international beauty pageants, the cosmetic industry has come into the limelight in a bigger way.
Subsequently their has been a change in the cosmetic consumption and this trend is fueling
growth in the cosmetic sector. Indian cosmetic Industry had rapid growth in the last couple of
years, growing at a CAGR of around 7.5% between 2006 and 2008. While this is due to the
improving purchasing power and increasing fashion consciousness, the industry is expected to
maintain the growth momentum during the period 2009-2012. In the Indian Cosmetic Industry
both electronic as well as print media are playing an important role in spreading awareness
about the cosmetic products and developing fashion consciousness among the Indian consumers.
Due to the development of satellite television and a number of television channels as well as the
Internet in the modern day, the Indian consumers are constantly being updated about new
cosmetic products, translating into the desire to purchase them. Additionally, the flourishing
Indian fashion/film industry is fueling growth into the Cosmetic industry in India by making
Indians to realize the importance of having good looks and appearances. Today most of the
cosmetics manufacturers in India cater to the domestic market but they are gradually
establishing their footholds in overseas markets. In recent years, cosmetic manufactures in India
have received orders from overseas markets; for example - Indian herbal cosmetic products have
a tremendous demand in the international market.
Brief introduction
The Indian Cosmetics Industry is defined as skin care, hair care, color cosmetics, fragrances
and oral care segments which stood at an estimated $2.5 billion in 2008 and is expected to
grow at 7%, according to an analysis of the sector.Today herbal cosmetics industry is driving
growth in the beauty business in India and is expected to grow at a rate of 7% as more people
shun chemical products in favour of organic ones.
The emphasis of the herbal cosmetic has been on the spectacular growth of the herbal and
ayurvedic beauty products business as conveyed by beauty expert Shahnaz Husain who was the
first to introduce the concept of ayurvedic cosmetics to the world when she launched her

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products way back in 1970. Today, the Indian cosmetics industry has a plethora of herbal
cosmetic brands like Forest Essentials, Biotique, Himalaya, Blossom Kochhar, VLCC, Dabur
and Lotus and many more. The Indian cosmetics industry has emerged as one of the unique
industries holding huge potential for further growth. In 2009, the cosmetics industry registered
sales of INR 356.6 Billion (US$ 7.1 Billion) despite the global economic recession. Indian
cosmetics Industry has mainly been driven by improved purchasing power and rising fashion
consciousness of the Indian population and industry players spending readily on the
promotional activities to increase consumer awareness and develop their products.
According to a new research report, the Indian Cosmetics Industry is expected to witness
impressive growth rate in the near future owing to rising beauty concern of both men and
women. Today the industry holds promising growth prospects for both existing and new
players.
The baseline is that there has been a rise in variety of products offered by the industry players
in the country. The companies have started going for rural expansion and are offering
specialized products to generate revenues from all the corners of the country. Improvement and
strengthening of the Indian economy in the coming years will also pave the way for the Indian
cosmetics market over the forecast period and develop the Cosmetic Industry.
The Indian Cosmetic market which traditionally a stronghold of a few major Indian players
like Lakme, and Ponds has seen a lot of foreign entrants to the market within the last decade.
India is a very price sensitive market and the cosmetics and personal care product companies,
especially the new entrants have had to work out new innovative strategies to suit Indian
preferences and budgets to establish a hold on the market and establish a niche market for
them.
Market capitalization
According to analysis and figures given by the Confederation of Indian Industries (CII), the
total Indian beauty and cosmetic market size currently stands at US$950 million and showing
growth between 15-20% per annum. The overall beauty and wellness market that includes
beauty services stands at about US$2,680 million, according to CII estimates.
Size of the industry
The size of Indian Cosmetics Industry globally is $ 274 billion, while that of the Indian
cosmetic industry is $ 4.6 billion. The current size of the Indian Cosmetic Industry is approx

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US$ 600 million. Among these fastest growing segment is color cosmetics, accounting for
around US$ 60 million of the market. Industry sources estimate a rapid growth rate of 20% per
annum across different segments of the cosmetics industry reflecting with an increasing
demand for all kinds of beauty and personal care product. Growth in the Indian Cosmetic
Industry has come mainly from the low and medium-priced categories that account for 90 % of
the cosmetics market in terms of volume.
Domestic and Export Share
Costs for importing other products are much higher than producing it in the country. India
usually allows the entry of imported cosmetics without any restrictions but the average import
tariff on cosmetics products is currently very high at 39.2%.
Top leading Companies
 Lakmé is the Indian brand of cosmetics, owned by Unilever. It started as a 100%
subsidiary of Tata Oil Mills (Tomco), part of the Tata Group; it is named after the
French opera Lakmé, which itself is the French form of Lakshmi, the goddess of wealth
who has is also renowned for her beauty.
 Revlon is an American cosmetic for skin care, fragrance, and Personal Care Company
founded in 1932.
 Oriflame Cosmetics S.A. (Luxembourg) is a cosmetics group, founded in 1967 in
Sweden by the brothers Jonas AF Jochnick and Robert AF Jochnick.
 The L'Oréal Group is the world's largest cosmetics and Beauty Company. It
concentrates on hair colour, skin care, sun protection, make-up, perfumes and hair care.
 Chambor cosmetic line is a blend of the finest traditions in terms of radiant color, soft
texture and skin accentuator.
 Maybelline is a makeup brand sold worldwide and owned by L'Oréal.
 Avon Products, Inc. is a US cosmetics, perfume and toy seller with markets in over
140 countries across the world.
 Make-up Art Cosmetics or MAC Cosmetics, is a manufacturer of cosmetics which
was founded in Toronto, Canada by Frank Toskan and Frank Angelo in 1984
 ColorBar cosmetics are one of the leading brands of color cosmetics in India.
 Street Wear is a young, funky and hip brand which globally is positioned at the young
and trendy shopper and the range consists of about 30 SKUs covering categories like
nail enamel, lipsticks, lip gloss, face make-up kits and eye shadows.
Latest developments

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 According to Indian Cosmetic Sector Analysis (2009-2012), the Indian cosmetics
industry is expected to witness fast growth rate in the coming years on the back of an
increase in the consumption of beauty products. Owing to growing disposable income
of the middle class households and changing lifestyle, it is expected that the cosmetics
industry will grow at a CAGR of around 17% during 2010-2013.
 A study even shows that affordability and rising consumer base were the main drivers
behind the high cosmetic sales of around INR 356.6 Billion (US$ 7.1 Billion) in 2009.
Market players are getting lucrative and good opportunities as people have become
more beauty conscious due to changing lifestyle and spreading consumer awareness.
 According to ASSOCHAM the size of India's cosmetics market will rise by almost a
half to 1.4 billion dollars in the next two-three years as people get fashion conscious
and more brands are launched. With increased awakening about cosmetics brands,
which is evident even in rural India, the industry size will grow to around 1.4 billion
dollars from current level of 950 million. It is projected to grow at a CAGR of around
7% during the forecast period.
 Indian Cosmetics Industry is set for a significant growth depending on the capability of
the manufacturers to market their products. Products that claim to renew cells, minimize
pores, and restore hydration have created an $83 billion worldwide market.
 Due to the optimistic assessment the domestic cosmetic and toiletries industry show that
with increased awakening which is growing even in rural India, its size will grow in
next 2-3 years to around US$ 1400 million from current level of US$ 950 million. Till
then India's per capita consumption of cosmetic and toiletries products could be on par
with that of China which currently is US$ 1.5, says ASSOCHAM analysis.
Economic Analysis of cosmetic industry
Product/services
Product segmentation Share
Hair care 22%
Colorcosmetics 18%
Skincare 15%
Bath & shower 13%
Fragrances 9%
Men’sgrooming 7%
Oral hygiene 7%

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Suncare, nail care & baby care 5%
Deodorants 4%
The Role of government
 The FD & C Act prohibits the marketing of adulterated or misbranded cosmetics in
interstate commence.
 The FPLA Act requires an ingredient declaration to enable consumers to make informed
purchasing decisions.
A cosmetic is adulterated if:
- Poisonous or deleterious
- Filthy putrid, or decomposed substance
- Unsanitary conditions
- Poisonous or deleterious substance(container)
- Unsafe color additive
A cosmetic is considered misbranded if:
- False or misleading label
- All required information not included
- Non prominent and conspicuous
- Misleading container
- Color additive – does not conform to applicable regulations
- Packing or labeling in violation of an applicable regulation
The Indian Government has implemented new rules (from April 1st, 2013) to regulate the
import of cosmetics. The rules to amend the existing Drugs and Cosmetics Rules, 1945, were
first published (as draft rules) way back in February 2007. Subsequently after few amendments
these were finalized as ‘Drugs and Cosmetics (4th Amendment) Rules, 2010’ on 19th May,
2010. Amidst concerns raised by many importers on the timely grant of registration certificates,
the Government did defer the implementation. However, these rules were finally brought into
effect on 1st April, 2013.
The Indian Cosmetic Industry:

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According to a research report “Indian Cosmetic Sector Analysis (2009-2012)”, published by
Research and Markets, Indian cosmetics industry has emerged as having immense growth
potential.
The report notes that the cosmetics industry has registered sales worth Rs. 422.3 Billion (approx.
US$ 9.3 Billion) in 2010. It further observes that this rise is attributed to the ever-growing
purchasing power and rising fashion consciousness and beauty concerns of the Indian
population. And of course Indian urban population’s brand/s fetish appears to be never satiated
giving rise to increasing import of cosmetic products.
The ‘new rules’:
All cosmetic products that are imported for sale in India now need to be registered with the
Central Drugs Standard Control Organization (CDSCO) which has been appointed as the
licensing authority for the purpose of these rules.
This new ‘registration’ requirement is primarily to regulate indiscriminate import of beauty and
personal care products by traders with no accountability for contents and no mechanism to fix
responsibility in case a consumer is not satisfied with the quality. In many cases, because of the
lack of regulations on imported cosmetics, these were found to contain hazardous materials.
Thus, new regulation is an attempt to check the sale of sub-standard cosmetic products and also
to harmonize import requirements with those for products manufactured in India.
Which products are covered?
All cosmetic products which are ‘imported’ for ‘sales and distribution in India’ are covered. The
Indian Food and Drugs Cosmetics Act provide a broad definition of cosmetics:
“any article intended to be rubbed, poured, sprinkled or sprayed on, or introduced into, or
otherwise applied to, the human body or any part thereof for cleansing, beautifying,
promoting attractiveness, or altering the appearance, and includes any article intended for
use as a component of cosmetic.”
Some NEW ‘definitions’:
Some of the new definitions introduced under the aforementioned Rules are as follows:-
i. “a Manufacturer is the ‘Brand/trade name owner’’ and not the ‘actual manufacturer;
and
ii. A ‘Brand’ is a category/class of products as opposed to being just the trade name
/brand. For example, the ‘Brand’ will include all brands of lipsticks imported by the
applicant and not just a particular ‘brand name’ of Lipstick. Further, for each product
class, a separate application needs to be filed. For example, shampoo and conditioner
belong to different classes even though these may have a common ‘brand name’. A single
application may be made for registration of more than one brand of cosmetics (including
its different variants and pack sizes) by the same manufacturer.

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RegistrationProcedure:
The trade mark owner, who has no manufacturing unit in India but intends to sell his goods by
way of import through their appointed importers/distributors/marketers in India, is now required
to obtain registration certificate to continue with their marketing activities in India.
For this purpose an application for registration on Form-42, along with all requisite documents
needs to be submitted to Drugs Controller General (I), CDSCO, FDA office in New Delhi.
Information required from the Manufacturer/authorized applicant:
The new rules are an attempt to identify the source of ingredients used in the cosmetic product,
its place of manufacture, claimed benefits and most importantly, its safety standards for human
use. Hence, the rules have mandated a compulsory registration which requires submission of an
application accompanied by documents which provide such information.
Documents required and fees:
An application for the issue of a Registration Certificate for cosmetics intended to be imported
into India need to be made on a specified form, i.e. Form 42 either by:
a. the manufacturer himself or
b. by his authorised agent or
c. importer in India or
d. by the subsidiary in India authorized by the manufacturer
Further, the documents to be provided along with the application include:
a. A request letter by the applicant on the letterhead of the importer or the authorized agent
applying for the registration duly stamped and signed by the authorized person.
b. Form 42 - This requires details such as the location of the actual manufacturing sites of
the products. A single application can cover many brands (read Trademarks/brand
names), many variants; many pack sizes and different manufacturing units corresponding
to the products applied.
c. Proof of payment of requisite fee: Original treasury challan indicating the payment of
registration fee of USD 250 or its equivalent in Indian rupees for each ‘brand’ of
cosmetic product.
d. Power of Attorney (if the application is being submitted by an authorized agent of the
manufacturer. This document needs to be notarized and apostilled or legalized by the
Indian embassy in that country)
e. Schedule D III (details of the cosmetic products to be imported including the chemical
and safety data)
f. Original or a copy of the Label and art works thereof (this will contain the details of the
actual manufacturer and in cases where the manufacturer is not the brand name owner,
the label will at least state, ‘manufactured in XYZ country’)
g. Free Sale Certificate (FSC)/Marketing Authorization

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h. Manufacturing License (and attested English translation if not in English), if any: If there
are multiple manufacturers for a single product, all manufacturers need to provide these
documents
i. Product specifications and testing protocols: details of ingredients used, quality data etc.
j. List of countries where Market Authorization or import permission or registration has
been granted
k. Package inserts, if any (copies of any leaflets, product specification data that goes inside
the packaging has to be provided. No specific requirement has been listed, it is suggested
to provide information about the potential side effects/allergic reactions and other safety
concerns and remedies available)
l. Copies of the information about the brands, products and manufacturer
Time lines for processing of applications:
The time period for issuance of the registration certificate has been indicated to be within six
months from the date of submission of the application form and the required documents
(especially details required with schedule D III). The feedback suggests that the department is
processing and granting the registration certificates within 2-3 months of application being filed.
The ‘registration certificate’ and validity:
The duration of a registration certificate (which is provided with certain conditions imposed and
is given in a specified format- Form 43) is valid for a period of three years from the date of its
issuance.
Economic contribution of cosmetic industry in India
The global cosmetic industry or Multi nationals have been captivated by India in a fascinating
manner–the world’s second most populous country - over 1 billion poeple - even one percent of
captured market at estimated rates is a huge sum for some companies. India has seen an growth
in the cosmetics industry especially in the recent ten years.
Currently, the market size of the cosmetics industry in India is estimated to be worth US$1.5
billion, and is expected to double to US$3 billion by 2014. The industry has been growing at an
annual rate of almost 20%, twice the rate in the United States or Europe. A market surge of 19%
Compound Annual Growth Rate (CAGR) is anticipated till the year 2014.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has published a

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survey which stated that 65% of the teenagers claimed that their expenditure on branded
cosmetics had increased 75% in the past 10 years.
In some of the western countries - where 55 plus age category is the target group, in India the
target range is from 20 plus age group. Indian men are increasingly taking to cosmetics with
men’s personal-care segment estimated at over $200 million.
When one compares the data of male users to their female counterparts, the expense of the male
segment has reported a rise of about 80% over this period. India’s import of cosmetics, beauty
products and intermediate raw materials such as essential oils is approx $400 million per year.
Main reasons for this growth are-increased purchasing power and rising fashion awareness due
to media and other exposures amongst the people. Grooming is also becoming an increasingly
important part of people's mindset because they are now stepping out to work - as retails sector
employees, airlines workers, or other such jobs in the organised sector or at malls or wherever
call centres exist.
Increased advertising creates and captured the imagination and awareness of the people. The
Bollywood factor or the Indian movie industry and its changing fashion also create an impression
and cause purchases to be expedited to match the images people hold close to their ideals - youth
and people of all ages today use deodorants - and think over the importance of grooming and
being fashionable.
Indian cosmetic marketis a fascinating market - the Indian cosmetic market caters to all
sections of society, products ranging from a mere $2 to about $1000. The higher-end market
range is considered to be within $20 to $200, while the middle market consumes products that
are priced below $20.
Increased brand choices caused growth of many brands such as L’Oréal, Maybellene, Lakme,
and others. People today ask for quality of products. This change is across the segments - all
classes of towns and cities and mega cities - people have moved towards quality of products and
self consciousness can be seen as important in rural towns as well.
The MNCs recognise the importance of tapping into the Indian rural market which is 70% of the
Indian population, i.e. nearly 900 million people. To benefit the market and show commitment,
many cosmetic companies, such as L’Oréal, have set up research facilities, Amway and
Oriflame have also set up manufacturing facilities and some of them even export from India to
other markets - investing millions of dollars in India has been a good strategy for India and has
allowed them to to embrace the market and give themselves a cutting edge over other players.

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Historical background
Brief Timeline of Cosmetics
Cosmetic deodorant was invented in 1888, by an unknown inventor from Philadelphia, and was
trademarked under the name Mumm. During the early years of the 20 th century, makeup became
fashionable in the United States of America and Europe owing to the influence of ballet and
theatre stars. But the most influential new development of all was that of the movie industry in
Hollywood. In1900, black entrepreneur Annie Turnbo began selling hair treatments, including
nondamaging hair straighteners, hair growers and hair conditioners door-to-door. In Los
Angeles, Max Factor started selling makeup to movie stars in 1904 that did not cake or crack.
Modern synthetic hair dye was invented in 1907 by Eugene Schueller, founder of L'Orιal. He
also invented sunscreen in 1936. In 1914, T J Williams founded Maybelline, the specialized
mascara manufacturing company. After the First World War, the flapper look came into fashion
for the first time and with it came cosmetics: Dark eyes, red lipstick, red nail polish and the
suntan, invented as a fashion statement by Coco Chanel. Previously, suntans had only been
sported by agricultural workers while fashionable women kept their skins as pale as possible. In
the wake of Chanel's adoption of the suntan, dozens of new fake tan products were produced to
help both men and women achieve the "sun-kissed" look. In Asia, skin whitening continued to
represent the ideal of beauty.
Lipstick was introduced in 1915 in cylindrical metal tubes. In 1922, the bobby pin was invented
to manage short (bobbed) hair. In 1932, Charles and Joseph Revson, nail polish distributors, and
Charles Lackman, a nail polish supplier, founded Revlon, which sells nail polish in a wide
variety of colors. A new method for permanent waving, using chemicals, which did not require
electricity or machines, was introduced in 1933. In 1935, pan- cake makeup, originally
developed to look natural on color film, was created by Max Factor. Aerosols were patented in
1941, paving the way for hair spray. In 1944, a Miami Beach pharmacist, Benjamin Green,
developed sunscreen to protect soldiers in the South Pacific. Lawrence Gelb, in 1950, introduced
Miss Clairol Hair Color Bath, a one-step hair coloring product. Roll-on deodorant was launched
in 1952 and mascara wands debuted in 1958, eliminating the need for applying mascara with a
brush. In 1963, Revlon offered the first powdered blush-on. Aerosol deodorant was introduced in
1965.

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Rise of the Indian Cosmetic Market
It is estimated that the Indian beauty market is worth more than US$ 950 million (approx) and is
rising at 20% a year, twice as fast as the US and Europe markets.
The segment that offers the highest competition is the cosmetic segment, which has multinational
players such as J. L. Morrison, Ponds, Unilever and Colgate-Palmolive. The increasing demand
in the cosmetic industry has led to many international brands, e.g. Maybelline and Revlon, Avon
and L'Oreal have entered the Indian market.
The Indian cosmetics industry is passing through a very active phase in terms of product
development and marketing. Indian consumers are moving away from the merely functional
products to more advanced and specialized cosmetic items. Marketers have taken note of this
change and are developing new marketing strategies to offer the Indian consumer the best. A
cumulative positive impact has been rendered by the upbeat pace of the Indian economy,
postliberalization, which has enhanced disposable income levels and aspirations among rural
consumers, changing lifestyles in the booming middle class, as well as a fast growing base of
youth with a high inclination to self-indulge. Pervasive media and rising westernization
influences have awakened the consciousness of the Indian consumer to proactively seek health
and beauty offerings to look and feel good.
The divergent mindsets and distinct consumer purchasing patterns in the rural and urban areas of
India have prompted manufacturers to pursue focused strategies to cater individually to these
distinct consumer segments. This is especially apparent in bar soaps, shampoos, toothpastes and
lower-end skin care and color cosmetics. Urban areas, on the other hand, saw renewed consumer
excitement through brand extensions, upgrading to family packs, exciting product formulations
such as herbal ingredients, internationally proven scientific formulae and health-positioning
initiatives deployed within mass toiletries. Premium cosmetics, salon hair care, fragrances, skin
care and men's grooming saw emphasis on product differentiation, specialized features and rising
brand awareness and visibility through media and enhanced distribution reach.
Growing media and westernization influence will stimulate awareness of personal hygiene as
well as beauty consciousness, enhancing the adoption and frequency of usage of cosmetics and
toiletries, especially among the rural users. Furthermore, the urban consumer base would
increasingly upgrade to sophisticated mid-priced and premium products. The most dynamically
growing product areas over the forecast period are expected to be color cosmetics, fragrances
and sun care due to their relative immaturity, although everyday use mass toiletries offerings will
continue to rank in the highest sales numbers.
The first challenge that the color cosmetics industry has to face is to undo the negative
connotations attached with "Being fashionable." Further, they also have to dispel the fears that
color cosmetics are harmful for the skin. They need to help people learn to adopt cosmetics as an
essential part of daily grooming.

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In this industry, positioning is carried out mainly by advertisements. Lakme has always
advertised in the various mass media available. It also has a very good distribution network. To
position itself strongly among the 6 million youth section, Lakme came up with Elle18 in early
1996. It was advertised for the "Young girl who breaks the rules and loves to have fun." These
ads showed young, college and high school going girls who projected the image of trying to be
different and "cool."
Evolution of cosmetic industry
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.

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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

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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

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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,

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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.

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Cosmetic Product Lines
Indian cosmetic directory is a vast source guide of cosmetic industry and leading cosmetic
products manufacturing companies of India. Get online information on all small and big
cosmetic products manufacturers, leading suppliers of cosmetic products and all known dealers
of India indulging in cosmetics business, producing a wide range of cosmetic goods. Cosmetic
products directory also provides listing of famous cosmetic websites giving information on most
demanded herbal cosmetic items and major manufacturers and dealers of cosmetic goods in
India. Leading cosmetic products manufacturing companies can be accessed by browsing
websites on cosmetic products directory of India.
Aromatic Oil (98)
Baby Products (77)
Bindis (37)
Contact & Optical Lenses (108)
Cosmetics Toiletries (540)
Essential Oil (335)
Fragrances (220)
(source: http://www.indiamirror.com)

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Fragrances
The market for perfumes and fragrances, as perceived in western parlance, is of a recent
origin. The perfumes and fragrances market had remained confined to small quantities of scents,
eau de colognes, deodorants and after shave lotions. Presently there are some 500 companies in
the fragrance industry, for the small volumes, a little too many. The small scale sector is
dominating the market. The unorganised market could be four times the size of the organised
market.
The growth in demand for perfumes and fragrances over the last 15 years has been phenomenal.
From a very small demand of 950 tonnes in 1990-91, it grew to 12,500 tonnes in 2000-01. The
market for the product is estimated to have expanded by over 50% in three years to 18,300
tonnes in 2003-04. It is further expected to grow to 26,650 tonnes in 2006-07 and to 36,400
tonnes in 2009-10.
The organised sector is dominated mainly by the multinationals. The unorganised sector, with
hundreds of units producing a large number of domestic concoctions, caters to the high upper-
middle tier of the market for low price-end of products. The share of the small and informal
sector is estimated at about one-third of the total market.
Several MNCs have forayed into the Indian market. These include Givaudan SA, Switzerland;
International Fragrances and Flavours (incorporating Bushbooke Allen), USA; Quest
International (subsidiary ICI and earlier a part of Unilever); Firmenc of Switzerland; Haarman &
Reioner of Bayer, Germany; Taleasago, Japan (contract manufacturing).
The perfumes market is becoming highly competitive with the presence of an increasing number
of new players. The consumer is getting used to the imported fragrances. As the process matures,
the market will need to be diversified and more Indian. Companies are importing alcohols and
oils to overcome the need for the right mix and process technology which does not exist in India.
The consumer preferences and product variety are so wide that technology import is unavoidable
at this stage. The market is growing. It is catching up with the nouveau rich life style. A long-
term high growth trend can be seen provided the consumer finds the product within the reach of
his pocket.
Some leading brands include Exclamation, Masumi, Longing, Emeraude, Vanilla Fields, Jill
Sanders, David Off, Adidas, Jovan Musk, Joop (All Cotys Premium brand) Wild Orchid, Ivana,
Shie (Lakme), Fire, Ice, Charlie, Red and White (Revlon) Denim, Yardleys gold, Park Avenue,
Premium, old spice (HLL) etc.

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Baby products
According to the research report conducted by RNCOS, the factors creating a huge demand for
baby and children care products are; increasing awareness about baby health and nourishment
along with increasing spending power of the parents. The report states that the Indian baby and
child care market has substantially grown during the past few years and caught the attention of
many international players. Estimated to be INR 647.6 Billion in 2012, it is forecasted to register
a CAGR of around 17 per cent from 2011-2015.
'The child and baby care market comprises of baby cosmetics, food, diaper, baby and children
apparel, footwear, toys and accessories/merchandise market. The cosmetics market is valued at
INR 7.9 Billion for 2013 that is growing at a CAGR of 12 per cent. The baby food market is
estimated to be around INR 5.4 Billion in 2013 and is anticipated to grow at a CAGR of around
10 per cent during 2011-2015. The baby diapers market is valued at INR 1.9 Billion is expected
to grow at a CAGR of 18 per cent. INR 586.1 Billion children and baby apparel market projected
to grow at a CAGR of 18 per cent during 2011-2015. On the other hand the largely unorganized
children and baby toys market is forecasted to grow at a CAGR of 18 per cent during the same
period. The children and baby accessories market currently valued to be INR 27.0 Billion is
likely to grow at a CAGR of 12 per cent during 2011-2015', mentioned the white paper.
The research report also mentions that the baby and children care products market is growing
fast in-line with the retail industry while it is also expected that large number of companies from
the US and Europe will target India to expand their operations and capture the untapped market.

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Market Demand
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, penetration of satellite TV, increasing appetite for western
goods, and greater product choice and availability are the main drivers of demand for imported
cosmetics 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 want of choices and options. According to industry estimates
the organized modern retail segment in India will grow by over three times during the next five
years to reach $80 billion from the current $21.05 billion. According to a joint study
conducted by KPMG and industry chamber, the Associated Chambers of Commerce
and Industry of India (ASSOCHAM), approximately 315 hypermarkets are expected to come up
in tier-I and tier-II cities across India by end 2011.

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Market Data
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%, 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.
The cosmetics market in India is growing at 15-20% annually, twice as
fast as that of the United States and European market. The growth rate in the cosmetics market
reflects an increasing demand for beauty care products in India. Premium global brands are
gaining sales as Indian consumers gain exposure to the global media and move
from functional items to advanced and specialized cosmetic products. Even with a good growth
rate, however, penetration of cosmetic and toiletries is very low in India. Current per capita
expenditure on cosmetics is approximately $11.00 as compared to $40.00 in other Asian
countries.

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SWOT analysis
Strength
During the three decades, from 1970 to 1990, the cosmetics industry gained momentum
in its extensive development through per capita consumption. Even some segments may vary;
the cosmetic industry is near maturity. The current annual retail sales of the industry totaled up
to $14.5 billion.
The first quarter of this current year has seen a demand beginning to revive and trend is
expected to continue well into the following year.
Weaknesses
Accounting to the past developments, the cosmetics industry has never been always in
such a case. The industry is no longer recession-proof and is now bound for depressions and
declinations. Actually, the sales in the past year are slow moving because of downed consumer
spending. Consumers that time then tend to settle for the less expensive lines.
Another setback of the industry is the demand-price ratio. Within the past five years, the
prices were invariable and steady but promotion budgets were growing and getting greater than
ever.
Opportunities

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In keeping away from a potential head-on competition, a strategy of focusing on special
niches proved to be effective especially in the struggle with the industry leaders. This has been a
great line of attack adopted by smaller companies in their contest with the market leaders. They
survive and exist through specializing in niches, differentiating the product lines, and focusing
on market segment.
A potential huge market has been spotted on men as they account for 50% of adult
population that consume one-fifth of cosmetic sales. The failure of the market leaders in such
opportunity provides hint to smaller companies as to what would be the proper and better
approach to the market.
Furthermore, the senior citizen population is a large growing market segment which
should be given focus as the population’s needs were not being met.
Threats
Notwithstanding the apparent growth of the cosmetic industry during the past four
decades, there are currently more than 700 growing cosmetic companies competing in the
market. Additionally, there are also market leaders that dominate the cosmetic industry.
Consequently, it creates stiff and intensifying competition especially to those smaller companies
as market leaders are putting pressure on these smaller cosmetic companies.

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Porter’s five forces analysis
The Porter Five forces were developed by Porter and they analyze internal and external factors
which affect the competitiveness of a product or industry. They include the threat of substitutes,
threat of new entry, bargaining power of customers and suppliers as well as intensity of rivalry in
the industry. These factors will be identified and applied to the cosmetic industry.
Threat of new entry
This factor analyzes the ease with which firms may enter into an industry. Competitive industries
are likely to attract many firms which will strive to capture a market share. This is likely to
reduce the overall profitability of firms which are present in the industry. In order for firms to
enjoy long term profitability, they should develop customer loyalty within their industry. This
will ensure that although new firms enter an industry, their market share is unaffected since
customers have faith on their products. Development of customer loyalty is achieved through
innovating new products which meet the unique market needs.
The cosmetic industry has a low threat of new entrants. This is due to several factors. The first is
the huge costs of entry. Developing unique cosmetic products requires a lot of resources both in
terms of research and development and the actual manufacturing process. Few middle and small
scale firms have access to the funds and expertise required to perform this effectively. Another
factor which discourages entry into this industry is the huge competition present in the industry.
In addition to the huge competitors such as Avon, Revlon, Clinique, Estee Lauder, LR, Mac and
Unilever, who have a large market share, there are many other small scale competitors who also
have a small market share and who reduce the overall profitability of firms in the industry.
Bargaining power of customers
The bargaining power of customers analyzes the power which consumers have relating to price
changes in the industry. This factor analyzes the power which consumers have in manipulating
price changes due to shifts in demand. When consumers have a high bargaining power, the
manufacturers and sellers may not adequately predict future demand by the market. This may
make them unable to achieve long term profitability due to unpredictable demand patterns.
The cosmetic has a high bargaining power of customers. This is due to the increase competition
and availability of cosmetic products from a variety of manufacturers. Since these products have
high substitutes, then it is possible for consumers to force manufacturers to reduce their product
prices through purchasing those of their competitors. This is a challenge which manufacturers of
cosmetic products face across the world.

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Bargaining power of suppliers
This factor analyzes the power which suppliers have regarding making price changes for their
products. Suppliers who have a high bargaining power are able to influence price changes
through using techniques such as market manipulation through hoarding and restraining supply.
Although some of these strategies are illegal in many countries, suppliers usually apply them
when they want to effect price changes (Diller et. al., 2006: 33-36). The cosmetic industry has a
low bargaining power of suppliers.
This is due to the high number of market players and large supply of diverse products to the
market. There are many cosmetic products which are developed by both large and small scale
manufacturers. Due to the huge supply, consumers have the power to influence the market prices
as opposed to the suppliers.
Threat of substitutes
The threat of substitutes arises when there are similar products developed by competitors which
satisfy the market needs. When consumers have access to substitute products which can satisfy
their market needs, then manufacturers and suppliers lose their bargaining power. Consumers are
able to purchase competitor’s products if they are not satisfied with product price or quality. In
order for suppliers to tackle the challenge of threat of substitutes, they have to innovate products
which meet the needs of their target market segments (Keller, 2003: 595-600).
In the cosmetic industry, there are many competitors as has been discussed. There is therefore a
high threat of substitute products. If manufacturers sell their products at higher prices, or if the
products are of low quality, then consumers are able to purchase substitutes from the many
competitors who are present in the market environment (Gregory, 2003: 77). It is therefore
essential for the market players in the cosmetic to be innovative if they are to tackle the
challenge of the threat of substitute.
Barriers to entry and exit
Barriers to entry and exit refer to the challenges firms face when entering or leaving the industry
respectively. It has been discussed that there are huge costs which are associated with entry to
the cosmetic industry. These costs include costs for developing the products as well as research
costs. These are some of the barriers to entry in the cosmetic industry. In addition, there are
many competitors who reduce the overall profitability of the industry, which makes it a barrier to

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entry. Finally, the many large scale cosmetic firms which enjoy economies of scale make it a
barrier to entry especially for middle and small scale firms.
Barriers to exit include the high development and research costs. Due to the high costs associated
with developing cosmetic products, it is difficult for firms to leave the industry without
achieving the costs for production. There are also many machines and equipment used in
developing cosmetic products and disposing these at a fair market value is difficult hence making
it an exit barrier.
Seller and buyer concentration
The cosmetic industry is appealing fir people of all age groups and social backgrounds. There are
many cosmetic products which are tailored to meeting the needs of different market segments.
The buyer concentration can therefore be deemed as low since there are many buyers who cut
across different market segments both in the developed countries and the developing countries.
However, the seller concentration may be deemed as high in developed countries. Many large
scale cosmetic producers are concentrated in develop countries such as the United States, France
and Germany. For instance, the cosmetic industry is valued at $6 billion in France and $12
billion in Germany. In the US, it is valued at over $20 billion.
However, the seller concentration in developing countries and emerging markets is relatively
low. Few firms have ventured into developing products which meet the specific needs of this
market segment. In order to achieve long term profitability, new market entrants should focus on
this neglected population segment. The high seller concentration in the developed countries leads
to high competition and an overall reduction in profitability for cosmetic firms in this industry.

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PEST ANALYSIS
PEST analysis is a part of external macro environment in which the firm operates cab be
expressed in terms of the following factors:
Political
Economical
Social
Technological
Political Factors:
Some of the political factors to take into consideration are legal issues, rules and regulations of
the government and various others informal as well as formal rules under which a firm must act.
Some of these political factors are:
Tax Policy: the company has to bear a tax rate of 30%, which is the highest amongst all the tax
rates, as the corporate tax rate. This reduces profits of the Industry.
Environmental Regulations: as per the norms of the government the companies under cosmetic
Industry has to convert 30% of lead area into green land to make the environment eco-friendly,
incurring extra cost for the company.
Trade Restrictions & Tariffs : the company has to bear charges for crossing the state borders
for the purchase of raw materials and the delivery of finished product.
Economic Factors :
The purchasing power of a prospective customer as well as the firm’s cost of capital is affected
by various economic factors. Some economic factors include:
Inflation Rate : the inflationary period is adversely affecting the company as the raw materials,
machineries, etc.. have to be purchased at a higher price.
Interest Rates : the rate of interest on corporate loan is 12% and the company has to pay tax per
year.

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Social Factors :
Demographic and cultural aspects form a part of the social factors. These factors affect the
customer needs and size of the potential market. Some social factors include :
Health Consciousness : keeping the safety of the end users and social responsibility in mind the
company has used the chemicals that are not harmful for the skin and are a bit costly than the
other chemicals.
Environment Norms : keeping the environment norms in mind, the company has to convert 30%
of its land into the green area and also use eco-friendly paper for the purpose of packaging.
Emphasis on Safety : the company have to emphasize on employee safety (e.g., insurance policy)
Technological factors :
Technological factors include ecological and environmental aspects. Some technological factors
are as follows:
Research and Development : the company will have to spend a lot on the research and
development of the product.
The company will have to continuing activities to keep a firm hold in the market
Techbology’s effecton firm’s offering : the increase in R&D cost will affect the firm’s offering
as the cost of the product will increase with increase in R&D cost.

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Industry Analysis
The Indian cosmetics market has seen major changes both in terms of user perception and
product availability over the past five years. There have been market shifts during this period and
the past two years have seen the market take further momentum. According to figures given by
the Confederation of Indian Industries (CII), the total Indian beauty and cosmetic market size
currently stands at US$950 million and showing growth between 15–20% per annum. The
overall beauty and wellness market that includes beauty services stands at about US$2,680
million, according to CII estimates.
The steady growth rate in the Indian cosmetic and beauty service market has made the Indian
government see it as a source of potential revenue for the country. In fact CII organized its first
beauty B2B event—Beauwell India 2005—in Chennai in March, which attracted foreign
participation especially from Europe. In presenting the event, TT Ashok, chairman, CII
(Southern Region), said, “As the cosmetic industry is growing so rapidly, we at CII felt the need
for an industry event to showcase the opportunities in the beauty and wellness business, and
present a business platform for suppliers as well as players in the beauty service business.”
The increasing market size is the direct result of the changing socio-economic status of the
Indian consumers, especially women. Higher paying jobs and increasing awareness of the
Western world and beauty trends there have served to change the tastes and customs of the
middle class and higher strata of the society, with the result that a woman from such social strata
now is more conscious of her appearance and is willing to spend extra cash on enhancing it
further. Today increasing numbers of women, especially from the middle-class population, have
more disposable income leading to a change in cosmetic and skin care product consumption.
This actually has fuelled a growth in certain product categories in the market that hardly were
experiencing it earlier. Two such categories are color cosmetics and sun care products that have
shown growth rates of 46% and 13% respectively over the past two years, according to
Euromonitor International.
Customer Segments
According to a CII report, US$0.68 per capita is spent for cosmetics, which might be lower than
some other countries, but this indicates a growing awareness among consumers. “There are two
major factors that are swaying the buying decision among women here. First obviously is the
television and media exposure they have today. The other not so obvious one is the corporate
dressing culture, which slowly is evolving in the Indian market. Due to set dress code in MNCs,
a female employee is conscious about picking the right makeup colors for the office. Today she
has the money and the inclination to spend it on separate sets of products, especially color
cosmetics,” said Abdul Rahim, managing director of the Chennai-based cosmetic distribution
company GR Fragrances Pvt Ltd, which markets the Diana of London range of cosmetics.

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According to a source at L’Oréal India, women in the age group of 30 and above are getting very
selective about the type of products they choose. “As older women have more cash and are more
conscious of their appearance, especially skin, they are willing to spend more on separate sets of
creams and lotions that target problem areas. These women also are more open to buying higher-
priced products,” he says.
In addition, men as well as the beauty professionals and beauty services segment are emerging as
big buyers of cosmetics and skin care here. Pradeep Verma, managing director of Derma Color,
which sells Kryolan in India, said “The market is ready for professional makeup products since
the Indian professional makeup artists are very well-trained and are aware of the products and
prefer to use international brands. Earlier they were sourcing their products from international
markets such as Dubai or Bangkok or Singapore. But now players such as Kryolan and MAC
have direct presence, so the professional makeup artists are picking up from us.”
Brand Positioning
With increasing awareness among customers, it has become very important for the cosmetic and
skin care companies here to develop the right brand positioning and create the right product and
brand awareness.
Pricing of the product and the nature of product usage are the two criteria that define brand
positioning. For instance products falling under the price range of Rs 45 to Rs 200 are in the
mass-market category. The middle market price can range from Rs 200 up to Rs 800. In the
high-end market, pricing can range from Rs 800 to about Rs 5000. Finally there is the premium
range of products where the pricing can touch up to Rs 35,000.
“Today it is important for big brands like us to define different brand positioning to retain the
right market share. For instance, at L’Oréal we push Maybelline and Synergie ranges to the
younger generation and also in the lower income group mass market. While L’Oréal range of
cosmetic and skin care products are for the middle and higher-middle class women and Vichy is
for high-end users,” explains the source at L’Oréal India. Brands such as Lakme and Color Bar
are being pushed as mass market products and focus on younger women and women with lower
buying power. Then there is Revlon, Chambor, Diana of London, Bourjois and Pupa that make
the mid-range while Clarins, Shiseido, MAC, Christian Dior, Nina Ricci, YSL and Lancôme
make the high end. La Prairie touches the premium end of the market.
Besides L’Oréal, Unilever, through its Indian arm Hindustan Lever, Procter & Gamble, and most
premium and high-end brands prefer to come to the country through distributors such as
Baccarose, Euro Traditions, Cosmos Brands, MKP and GR Fragrance.
Product Preference
India presents a big opportunity for global cosmetic vendors selling color cosmetics and
specialized skin care products in the market. Today these product segments are showing
impressive growth rates.

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In skin care, the most popular are anti-wrinkle, anti-blemish and skin-whitening products
followed by sun care and bathing products. However, while presenting a market potential, other
specialized products such as anticellulite lotions or nail creams and nail care products, while
presenting a market potential, need more customer education before they can grow. Meanwhile,
hair color and styling products also have logged in impressive revenue for players such as
L’Oréal and Schwarzkopf in the market. In fact, HLL recently launched hair care products
through its brand Lakme for the mass market in India.
In color cosmetics, lipsticks and nail colors still account for nearly 65% of the market followed
by eye makeup, especially eyeliners and Kohl pencils. In the fragrance market, while most
popular brands are available here, the deodorant versions are showing better acceptance than the
EDPs or the EDTs mainly due to the pricing factor.
Challenges
While the market seems impressive, there are hurdles that impede growth. The Indian duty
structure on imported products can pose a major deterrent to multinational vendors. Despite the
new value added taxation regime, where the duty has been reduced to 12.5%, the overall duty on
the product still comes to about 40%. This in turn reflects in the pricing of the products.
Most vendors add the duty to the product pricing to generate the right revenue. However, there is
no organized cosmetic industry body that can take up the issue with the government. In fact this
leads to the biggest threat —the unorganized or grey channel. There are small retailers in the
market who directly import from markets such as Dubai, where pricing can vary from 30–70%
from Indian product pricing. Thus today the grey channel makes up about 60% of the Indian
cosmetics market.
Growth Opportunity
According to industry watchers, the Indian market is ready and is just waiting for the right spur.
In fact some even expect the market to show 25% growth as they anticipate a boost in the retail
segment.
A shift from generic retail outlets to specialty shops and floor spaces in malls and big department
stores will help the cosmetic and skin care brands showcase their products and increase customer
education and awareness. Features such as makeovers and free beauty consultations will attract
more customers. The trend is visible in certain malls in the major cities across the country
already. Dharmendra Khanna, business manager at Kunchals, a Delhi-based cosmetic specialty
shop, said, “As cosmetic buying is impulse buying, so we need to create the right ambience.”
The consumers today need the right setting to buy their products. Trained staff to create the right
look for the customer to sway their buying is a must.” In fact, the company is expanding its
presence in anticipation of entry of more brands in the country. Similarly, Baccarose is
expanding its Parcos branded cosmetics stores in a big way as are the MKP and Cosmos brands.
However the B and C class towns are yet to see such focused approach from the vendors. In fact
these are markets where more awareness is necessary as they still remain mass-market product

Page 39 of 47
users and have lower spending power. This is a segment that presents a big opportunity to brands
both national and international.
The second big opportunity where India is being perceived to have a good scope is
manufacturing. In fact during the Beauwell event, it came to light that some major European
cosmetic vendors were looking for distributors and third-party manufacturers to set up joint
ventures in the country. In fact after China, India is being seen as a strong manufacturing hub
and a good source for natural ingredients. Shyam Arya, director of Indus Cosmeceuticals, a
cosmetic contract manufacturer, said “In terms of manufacturing, we have a good bio resource as
well as trained professionals that makes it right for multinational vendors to look at India as a
manufacturing hub, especially for natural or herbal-based products.”
Many Indian companies such as Lotus Herbals, Forest Essentials and Shahnaz Husain are
looking to increase their brand presence in the international markets and are scouting for
international partners to sell their products.

Page 40 of 47
TOP 5 COSMETIC BRANDS IN INDIA
Lakme
Lakmé is an Indian brand of cosmetics, owned by Unilever. Lakme started as a 100% subsidiary
of Tata Oil Mills (Tomco), part of the Tata Group; it was named after the French opera Lakmé,
which itself is the French form of Lakshmi, the goddess of wealth, also renowned for her beauty.
Indian cosmet Lakme was started in 1952, famously because the then Prime Minister, Jawaharlal
Nehru, was concerned that Indian women were spending precious foreign exchange on beauty
products, and personally requested JRD Tata to manufacture them in India. Simone Tata joined
the company as director, and went on to become its chairman. In 1996 Tata sold off their stakes
in Lakmé Lever to HLL, for Rs 200 Crore (45 million US$), and went on to create Trent and
Westside. Even today, when most multinational beauty products are available in India, Lakme
still occupies a special place in the hearts of Indian women.

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Lakme also started its new business in the beauty industry by setting up Lakme Beauty Salons all
over India. Now HUL (Hindustan Unilever Limited) has about 110 salons all over India
providing beauty services.
Business
Major beauty cosmetics
Strengths
Brand name
High quality manpower resources
Vast range of products and service
Unilever global technology capability
Weaknesses
High service cost
Use or hard chemicals
Overall market reputation: very good.

Page 42 of 47
Revlon
Revlon has the look of a leader in the US mass-market cosmetics business, alongside L'Or�al's
Maybelline and Procter & Gamble's Cover Girl. Aside from its Almay and Revlon brands of
makeup and beauty tools, the company makes Revlon ColorSilk hair color, Mitchum
antiperspirants and deodorants, Charlie and Jean Nat� fragrances, and Ultima II and Gatineau
skincare products. Its beauty aids are distributed in more than 100 countries, though the US is its
largest market, generating more than half of sales. Revlon products are primarily sold by mass
merchandisers and drugstores such as CVS, Target, Shoppers Drug Mart, A.S. Watson, Boots,
and Wal-Mart. Charles Revson founded Revlon in 1931.
Top 3 Competitors
 Avon Products, Inc.
 The Procter & Gamble Company
 L'Oréal SA

Page 43 of 47
Oriflame
Oriflame Cosmetics S.A. (Luxembourg) is a cosmetics group, founded in 1967 in Sweden by the
brothers Jonas af Jochnick and Robert af Jochnick. The company sells skin care, cosmetic
products and other related products through an independent sales force of over 3 million
people.Oriflame sells their products through a direct selling force. Their direct selling force earn
commission off all sales they personally make, and may also invite others to work with Oriflame,
earning a commission of the sales of teams they develop.

Page 44 of 47
Loreal
L’Oréal is the world’s largest cosmetics company; present in over 130 countries with 66,600
employees world-wide. The company had a turnover of 19.5 billion Euros in 2010.
The company has been present in India for close to 20 years and in 2009 celebrated its global
centenary. Today, L’Oréal India is one of L’Oréal’s fastest growing subsidiaries and employs
over 1000 people across six sites including: four regional offices, a factory in Chakan, Pune and
its headquarters in Mumbai.
L’Oréal’s leadership is achieved through cutting-edge technology with a portfolio of well-known
brands that answer all beauty needs and are distributed in all channels. Each brand benefits from
considerable investments in research made by the L'Oréal Group. The Group's research efforts,
unique in the beauty industry, permit each brand to benefit from formulas specifically adapted to
the needs of men and women worldwide, within each market or distribution circuit that is
present.
In India, L'Oréal brands are present in the following four main categories:
CONSUMER PRODUCTS
L’Oréal Paris
Garnier
Maybelline New York
LUXURY PRODUCTS
Lancôme
Kiehl’s
Ralph Lauren
Giorgio Armani
Diesel
PROFESSIONAL PRODUCTS
L’Oréal Professional
Matrix
Kérastase

Page 45 of 47
Kéraskin Esthetics
ACTIVE COSMETICS
Vichy
La Roche Posay
Chambor
Carried by expert legacy, Chambor is a pioneering beauty house, where the line of color
cosmetics & skin care range of products comes to you from rich ground of technology and
fashion based in Geneva, Switzerland. Chambor’s beauty secrets, created with the finest of
formulations are developed with a precise understanding of the feminine face.
Since 1993, Chambor- Geneva in India has established a foothold in the world of cosmetics as a
renowned classic beauty brand.

Page 46 of 47
Plan of Action
 Natural Factors Analysis
 Market Share & Revenue

Page 47 of 47
References
http://www.indianmirror.com (Last accessed on 15,Oct,2013)
http://en.wikipedia.org/wiki/History_of_cosmetics (Last accessed on 15,Oct,2013)
http:// www.Indianetzone,com (Last accessed on 17,Oct,2013)
http://www.beautypackaging.com/articles/2011/06/alls-fair-in-indias-cosmetics-market (Last
accessed on 20,Oct,2013)
http://www.niir.org/profiles/profiles/cosmetics.html (Last accessed on 21,Oct,2013)
http://www.dnaindia.com/indian-baby-care-industry (Last accessed on 21,Oct,2013)
http://ivythesis.typepad.com (Last accessed on 23,Oct,2013)
http://resurgence2011.blogspot.in/p/lakme-company-profile.html (Last accessed on 23,Oct,2013)
http://www.loreal.co.in/_hi/_in/html/our-company/L-Oreal-India-at-a-glance.aspx (Last accessed
on 23,Oct,2013)
http://www.chambor.com/why-chambor.asp (Last accessed on 23,Oct,2013)

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