Local cosmetics brands have room for further growth

In the early 2000s, face painting in India was reserved for special occasions – a Diwali celebration or a close friend’s wedding. Today, beauty regimes are part of the millennial woman’s vocabulary and daily routine. Whether it’s for formal in-person or virtual meetings, or casual get-togethers with friends, she’s not shy about using her setting powder, adding a dab of eyeliner and mascara, and applying her shade of rouge. favorite lipstick. In fact, beauty products are used daily by the top quartile of cosmetic users in the country, as frequently as their use of shampoo and deodorant.

This phenomenon is not limited to Indian metros and Tier 1 cities. With smartphone penetration in the country now reaching over 700 million people, women in Tier 2 and 3 cities are as exposed to cosmetics as girls in big cities and have similar aspirations to experiment with products. Our research suggests that more than 15% of casual cosmetic users in secondary and tertiary cities of India have tried primers, foundations and BB creams for the first time in the last 2-3 years . In response, beauty companies have spared no effort to reach remote cities in states such as Himachal, Uttarakhand and Bihar. It’s no surprise, then, that the country’s beauty market has grown from 5800 crores in 2016 for 9000 crores in 2021.

Interestingly, demand for beauty products persisted even when people weren’t leaving their homes for business meetings or social gatherings during the 2020 and 2021 shutdowns, attesting to the resilience of the sector’s expansion. This can be attributed to India’s digital native Millennials and Gen Z consumers, who want to look good on screen while working from home and are “always on”, frequently uploading stories and reels to Instagram. , Takatak or Moj. This consumer behavior has supported the growth of platforms such as Nykaa, which has generated approximately 3,700 crore revenue in FY22, a significant jump from 1800 crore in FY20.

In this context, several local online brands have emerged over the past two years. Recognizing that long-term success in the cosmetics industry tends to be based in part on building emotional connections with consumers, many of these brands have digital-driven business models that leverage social media and the power of local celebrities to develop user reliability. Sugar Cosmetics, for example, has garnered over two million Instagram followers and achieved top consumer engagement rates with its use case-driven content and regional influencer marketing. Likewise, through a series of content platform acquisitions, The Good Glam Group has effectively leveraged a content-to-commerce strategy to drive mass traffic to its website and products.

However, building a brand in the country’s beauty market has always been more difficult than building one in its personal care space, where we’ve seen the proliferation of many other brands. This is largely because product variety is more critical in the beauty market, where customers want multiple product shades and formats, depending on their skin tones and textures. With India’s limited ability to manufacture cosmetics domestically, brands must also source globally and manage the complexity of import duties.

That said, based on our work with our extensive portfolio of over 20 beauty and personal care businesses around the world, we have observed that there are three things businesses can do to thrive in the long term.

First, maintain a good product portfolio with a balance between core SKUs and innovative new products to meet the fashionable nature of the cosmetics category. Second, establish a long-term omnichannel presence in India. Even in developed markets with more mature offline and online ecosystems, cosmetics companies need to allow consumers to experience new products offline, but restock products at their convenience. Third, reinforce a consistent brand story across marketing campaigns to continually stay emotionally connected to consumers year after year. While a range of brands around the world have grown rapidly thanks to strong online followings, such as Perfect Diary and Florasis in China, many have not been able to sustain their success as they lack a genuine consumer engagement and customer loyalty.

These steps are easier said than done, which is why India’s top-selling beauty brand online is still Hindustan Unilever’s Lakmé. While there has been a shift in investor sentiment regarding D2C brand advocacy in general, we nonetheless see an opportunity for high-quality local brands to become category leaders through product, distribution and strong customer loyalty moats, and we remain excited about their prospects as consumers nationwide continue to evolve.

(The author is a partner at L Catterton, a global consumer-focused private equity firm. Opinions expressed are his own.)

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