January 21, 2019
The increasing demand of personal care products containing Ayurvedic formulations by the young and old alike has boosted the market for this segment. As a result, the size of this space is set to double to US$8 billion by 2022. Overall, the Ayurveda industry is projected to grow at a CAGR of 16 per cent till 2025, according to a study by the Confederation of Indian Industry (CII). In fact, the percentage of natural or organic ingredients and formulations in the Indian personal care industry has increased by around one percentage point every year. If the trend continues, then the segment’s contribution by 2025 would go up almost by half, according to market researcher Nielson.
Hence, it is not surprising to find Indian homegrown players as well as large multinationals in the Fast Moving Consumer Goods (FMCG) segment rebooting their plans to explore opportunities, driven largely by increasing awareness, growing disposable incomes, changes in consumption patterns and lifestyles. The market potential has inspired mixing of natural ingredients into products such as shampoos, soaps, skincare creams, oils, fragrances, toothpaste, shaving products, among others. A leading case in point is US-based Colgate-Palmolive which has introduced its India-focused ayurvedic brand, Cibaca Vedshakti. It plans to expand its offerings following brands such as Sensitive Clove.
Similarly, Hindustan Unilever has relaunched its brand of Ayurvedic personal care products under the umbrella brand of Ayush, comprising toothpaste, soap, hand wash, shampoo and face wash in the five south Indian states. Coupled with this came the acquisition of Indulekha hair oil, an Indian personal care brand from Kerala with a strong presence in the markets of south India. In addition, Hindustan Unilever has launched Citra, a natural skin care product.
Not to be left behind, homegrown companies such as Dabur, Emami, Godrej, Hamdard Laboratories and the Himalaya Drug have boosted their strategy with Ayurveda at the core. Companies like Hamdard and Dabur are even innovating and customizing herbal products for young consumers. Recently, Dabur launched a slew of products including, what it claims to be, India’s first ayurvedic gel toothpaste, under the Dabur Red franchise. In addition, the 135-year-old company has doubled the land under cultivation for medicinal herbs, besides tying up with ecommerce giant Amazon to make its products available on its online marketplace. This has considerably expanded market outreach.
Similarly, Emami recently acquired the Kesh King brand of medicinal hair oil from SBS Biotech for more than US$232 million. Other legacy companies, too, believe that the new found popularity of age-old personal care and healthcare solutions is giving fresh impetus to their businesses. Cholayil, producer of the Medimix brand, has grown from soaps to other categories including face wash and moisturiser. The Chennai-based firm is now looking to lean on its Ayurveda legacy as it targets younger audience that is increasingly warming up to these products. Others have also begun employing sales staff to deepen inroads into the majorly untapped rural markets that feature string demand.
Industry estimates suggest that the natural products have been appealing greatly to millennials in urban as well as rural markets in addition to older consumers who are not new to such traditional formulations. Increasing awareness about the harmful impact of chemicals and synthetic ingredients has also driven demand. In 2017 alone, the natural segment accounted for 41 per cent of the US$2.5 billion personal care products market with tier-2 and tier-3 cities showing the fastest growth.
Significantly, the Ministry of AYUSH (Ayurveda, Yoga, Naturopathy, Unani, Siddha and Homeopathy), set up in 2014, has provided the impetus for greater usages of natural ingredients in personal care products segment, in particular. Coupled with this, amendments to Drugs and Cosmetics Rule of 1945, allowing inclusion of natural products, including Ayurvedic, to contain preservatives and flavouring agents, has driven activity in the space. Meanwhile, funding allocation for the ministry in the fiscal 2018-19 Union Budget was raised by over 13 per cent to about US$2 billion, giving an extra boost. The Government has also taken up standardization of AYUSH to help with its mainstreaming.
The AYUSH sector is expected to generate over 26 million direct and indirect jobs by 2020. Especially since, according to Commerce and Industry Minister, Suresh Prabhu, the Government has allowed 100 per cent foreign direct investment in the space. The minister, while addressing a wellness conference in Kerala recently, underlined the importance of stakeholders to harness their resources, adding that with a wealth of over 6,600 medicinal plants, India has become the second largest exporter of AYUSH and herbal products. As per Basic Chemicals, Cosmetics & Dyes Export Promotion Council (CHEMEXCIL), India is acknowledged to be the second largest exporter of herbal cosmetics after China.
Multinational corporations and large Indian companies apart, the growing opportunity in the natural products space has been lapped up by niche ventures set up by newer entrepreneurs. Brands such as Kama Ayurveda, Forest Essentials, Kanai, The Lotus Tales, Vilvah, Satliva and Just Herbs, to name but a few, have gained wide acceptance at home and overseas with each clocking impressive income growth. They are riding on the growing demand from savvy young buyers for organic solutions for their fast-paced and pollution-ridden lifestyles. These ventures, many backed by foreign funding, have gone back to the roots to employ traditional solutions for modern healthcare and personal care challenges.
The demand is also evident from the fact that even international brands such as L’Oreal ,Wella and L’Occitane have expanded their presence in the Indian formulation segment, as they cater to the unique needs of Indian consumers. L’Oreal even had to launch a new range of hair care products using natural ingredients under its Garnier Ultra Blend brand. Multinational companies have also tied up with niche Indian personal care brands. New York based Estée Lauder, for example, picked up a stake in Forest Essentials, a brand which has made a name for itself at home and abroad. Similarly, Kama Ayurveda has turned into a global brand with others such as Organic Harvest and Soultree claiming their own spots, riding on the ustrangth se of natural ingredients.