India’s booming beauty market continues to lure global brands

Increasing demand for premium beauty products, growth of online retail and rising consumption are pushing established global premium beauty brands to expand and new ones like those from South Korea to debut in India

November 25, 2019

South Korean brand AmorePacific is targeting Indian millennials, who are increasingly moving towards Korean beauty brands that promote the concept of ‘Asian beauty’

The Indian cosmetic and personal care market is expected to grow to US$20 billion by 2025 at a CAGR of 25 per cent, with the luxury segment estimated to grow by 15 per cent

In 2018, US$774 million worth of premium beauty and personal care products were sold in India, with the consumer base fast expanding beyond the tier-I markets

Last month, French beauty powerhouse, L’Oreal, invested in Fireside Ventures, an early stage investment fund that identifies and acquires Indian beauty brands and startups

In May this year, AmorePacific Group, one of South Korea’s leading cosmetics firms, launched its specialised make-up brand, Etude House, in India. The playful and quirky Etude House, which has a presence in 10 countries, is the company’s third brand to enter the Indian market. AmorePacific had, however, debuted in India a few years ago, with its trendy and popular beauty brands like Innisfree and Laneige.

AmorePacific is targeting Indian millennials, who are increasingly moving towards Korean beauty brands that have promoted the concept of “Asian beauty.” Significantly, Indian women seem to be very much in sync with global beauty trends since K-Beauty (as South Korean cosmetics are known) programs – from oil cleansers to face masks – have become the rage around the world. This has resulted in South Korean cosmetic exports to quadruple from US$1.6 billion to US$6.3 billion between 2014 and 2018. 

Lee Chang-Koo, head of AmorePacific’s Group Strategy Unit, told the press around the time of the launch that they see “tremendous potential” in India, with the Indian beauty market growing by nearly 10 per cent every year, a fast growth driven by millennial customers with increasing disposable incomes and growing interest in global beauty. After starting their first outlet in 2013 in New Delhi’s Khan Market, they ran 22 online and offline counters as of April 2019. When they launched their skincare brand Laneige in November 2018 bringing its Water Sleeping Mask to the Indian market, the product sold out in just one week, newspapers had reported.

Korean beauty brands are trying to capture a slice of India’s promising US$13.9 billion (Euromonitor International estimate) beauty and personal care market. This market is expected to grow to US$20 billion by 2025 at 25 per cent CAGR, with the premium luxury segment alone estimated to scale up by 15 per cent. Of the entire beauty market, coloured cosmetics is estimated to be worth around US$1.1 billion, while skincare is estimated at US$1.8 billion, reported research firm Euromonitor. Going forward, an annual average growth rate of 17.4 per cent through 2022 is expected for coloured cosmetics while skincare estimated to grow at 10.4 per cent.

Online companies in India that are seeing significant sales in beauty products on their sites are also cashing in on this growing demand. For example, two years ago, Amazon.in had partnered with Korea Trade Investment Promotion Agency to bring brands like The Face Shop, Dermal, The Beauty Co Seoul, It’s Skin, Coony, Mirabelle and Swanicoco to offer Indian consumers access to Korean beauty brands. Targeted at the 16-35 age group, these brands were available at affordable prices ranging from US$5.90 to US$9.78.

There’s high demand growth in markets beyond major metros driven by a rise in the number of HENRYs (High Earners, Not Rich Yet) who do not shy away from spending on premium products

Global brands dominate Indian market

India’s cosmetic industry, however, is not a stranger to global brands. Many international brands like Revlon (the first international cosmetics brand to enter India in the mid-90s), Avon, Burberry, Calvin Klein, Christian Dior, Estee Lauder (whose portfolio in India include M.A.C, Bobbi Brown, Clinique), L’Oreal, Max Factor, Maybelline New York, have been present in India for a long time. The Indian beauty and personal care market, which accounts for less than 5 per cent of the US$532-billion global industry, is not as large as compared to the USA’s US$89.7 billion and China’s US$60.5 billion markets. However, global brands are lured by “growth potential” here. 

In recent years, however, these global brands are facing disruption in the form of homegrown beauty tech start-ups such as Nykaa (Private equity giant TPG’s Growth fund recently invested US$14.4 million in this Indian company valuing it at US$724 million), Sugar Cosmetics, MyGlamm, Bombay Shaving Company, The Man Company and new-age Ayurveda based beauty companies like Forest Essentials and Kama Ayurveda. 

To counter these challenges, global beauty brands are going all out to woo millennials with mini-size products that allow customers to experiment with prestige brands inexpensively and through hi-profile direct consumer connections via social media using Bollywood personalities. To cater to a rapidly digitizing world, these brands operate through multiple channels in India – through Exclusive Business Outlet, Multi Brand Outlets, online retail sites, and their websites. 

These brands are also scouting for more innovative products suited to the Indian skin and market. For example, L’Oréal, present in India, as a wholly-owned subsidiary of the US$30-billion group since 1994, last month invested in Fireside Ventures, an early-stage investment fund focussed on Indian consumer brands, to identify and acquire Indian beauty brands and startups in the beauty tech space. L’Oreal India, which is one of the company’s three most successful subsidiaries, has manufacturing facilities in India in Chakan in Pune and Baddi in Himachal Pradesh, and two R&D centres. Around 90 per cent of its products sold in India are made in India. 

What’s driving India’s Premium market

In the past decade, online retail, premiumisation (refers to the ability and willingness to spend on exclusive goods), growing consumption levels (India’s contribution to global consumption is expected to more than double to 5.8 per cent by 2020), are pushing established premium beauty brands to expand and a host of new ones to debut in India. Take the case of French beauty and cosmetics retailer, Sephora, Los Angeles-brand Smashbox, Dubai based Huda Beauty to name a few.

The concept of premiumisation has especially augmented the demand for beauty and personal care products in India. Euromonitor International study shows that in 2018, US$774 million worth of premium beauty and personal care products were sold in India, with 63 per cent share enjoyed by premium fragrances and hair care products. 

According to L’Oreal’s 2018 annual report, the Indian market is one of the fastest-growing in the world at 10 per cent, and they have zeroed in on aspirational categories in India as makeup, hair colour, and premium skincare as growth areas. The company sells a range of products across categories such as mass-market brands, professional hair products as well as premium beauty products such as Lancôme, Kiehl’s and Vichy, etc.

Betting big on growing premium demand 

Key international beauty brands players, however, have a keen eye on the promising premium beauty care segment in India. Take the case of French beauty products retailer Sephora India, which is a partnership between LVMH Moet Hennessy Louis Vuitton and textile firm Arvind Ltd. Betting big on the premium beauty market, four-year-old Sephora India has reportedly grown at a CAGR of 63 per cent and gained a market share of 28-20 per cent of the US$1.2 billion premium beauty market.

Estee Lauder too is focussed on prioritising to grow the prestige part of the business. Hence, the brands they deployed in India first were their Clinique and M.A.C. brands, which globally are their entry price of prestige and where the conversion from mass into prestige happens. 

It is not surprising that the premium market is a big draw with these international beauty brands. The market for luxury goods in India is growing, according to a Deloitte report, Global Powers of Luxury Goods 2019. The report stated that high growth in the markets beyond major metros has been driven by the rise in the number of HENRYs (High Earners, Not Rich Yet) who do not shy away from spending on premium products. The report underscores that the scope of the luxury market is not necessarily with the rich but it is also with the high-earning, not so rich community, a growing base that is waiting to be tapped. 

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