Back to basics, is what seems to be driving the skin-care and beauty industry after the hype around Korean beauty products. Whether it’s a premium brand such as Kama Ayurveda or Forest Essentials and even from that matter more affordable options by the likes of The Ayurveda Company (T.A.C) or Patanajli, the quintessential Indian consumers seem to be spending more than ever. “The ayurvedic beauty product market is as competitive as any other wellness business. Products are specific with a presence of few generic solutions, faith in the company or the product overrides instructions but it takes time to build. Consumers do not take celebrity endorsement at face value like other products. There is a major shift in media focus from traditional to digital,” Sanjeev Kotnala, brand and marketing consultant, Intradia World, told BrandWagon Online.
Revenue in the natural cosmetics market is expected to amount to $0.90 billion by the end of 2023, as per recent data by market research firm Statista. This market is expected to grow annually by 3.52% (CAGR 2023-2028).
Making Money?
Interestingly, these brands have been able to capture a fair share of customers’ wallet. For instance, The Ayurveda Company (T.A.C)’s revenue from operations increased 20x to Rs 12.68 crore in FY22 from Rs 62.2 lakh in FY21. However, the start-up posted a net loss of Rs 2.7 crore, as per regulatory filings accessed by business intelligence platform, Tofler. While premium players such as Kama Ayurveda which started its journey in 2002, reported a 42.7% jump in revenue from sale of products to Rs 134.5 crore in FY22, as posted a net profit of Rs 2.3 crore.
Meanwhile, Forest Essentials’ revenue from sale of products rose 41.96% to Rs 298.05 crore in FY22, while it posted a net profit of Rs 62.35 crore. While it has taken established players such Kama Ayurveda and Forest Essential about more than 10 years to reach profitability, for start-ups such T.A.C, the journey has just begun, hence it will take a few years for it to become profitable. “Companies are riding a trend pushed by a skewed inherent belief in ayurveda. There is also a belief that if it won’t do good, it won’t do any harm, and that has decreased the cost of trial, cost of going wrong – resulting in higher trial and adoption. The products are also performing to expectation in both mass and premium ranges,” Kotnala added.
Expanding horizons
Due to social media platforms such as Instagram, Youtube, among others, there has been a substantial change in the beauty industry, with influencers now testing various products. This has led to an increase in understanding about products among users at the same time intensifying competition. “India has seen a proliferation of brands inspired by or steeped in ayurveda and the sector overall has experienced significant growth due to increased consumer interest. This has led to the entry of numerous brands offering similar products and claims. As a result, the competitive scenario in the market is quite intense at the moment,”Samrath Bedi, executive director, Forest Essentials explained.
In fact, thanks to these platforms and influencer phenomenon, this category has added a new set of consumers from tier-2 and smaller markets. “This change has even benefited people in small towns who, in the past, would have had to travel to the city or a shop to learn about products. Now, they can find information online. This shift in consumer behaviour has ushered in a new era of informed customers,” Vivek Sahni, founder and chairman, Kama Ayurveda added.
To be sure, for further expansion these ayurveda-backed have expanded offline presence besides being on various e-commerce platforms such as Nykaa, Myntra, Amazon, among others. For instance, Kama Ayurveda claims to run 64 company owned retail stores and close to 100 shop-in-shops. “Ayurveda requires a level of understanding and education on the part of consumers. Our offline stores are a key channel to impart this education to new and existing consumers. In India, we have an 80% conversion and 73% loyalty factor, implying that eight out of 10 visit a physical space and purchase a product, and about 70 out of 100 come back as repeat customers,” Bedi said.
Factors which work
With India being a price sensitive market while brands believe that price plays an important role these companies claim that this is not the sole differentiating factor. For instance, a 50 ml rosewater bottle of Kama Ayurveda and Forest Essentials ranges between Rs 450-500, each. However, a 100 ml rose water bottle of T.A.C costs Rs 280. “Innovative formulations, superior ingredients, and the ability to address specific customer needs can be differentiators. Price can also be a significant differentiating factor, especially in a competitive market. Successful brands often find a balance between product offering and price. The aim is to provide high-quality products at competitive prices, appealing to both value-conscious consumers and those seeking premium experiences,” Shreedha Singh, CEO and co- founder, T.A.C, said.
However, a different school of thought of experts believe that price does play a role in influencing consumers’ decisions, product quality, effectiveness, brand reputation, and alignment with personal values, such as sustainability, heavily impact purchasing choices. “Consumers are willing to invest in premium products if they are efficacious and have proven results,” Sahni added.
Taking the brand to consumer
Interestingly, while some of these companies have almost kept its marketing and advertising budget constant over the years, a few have also upped. For example, Forest Essential spent 42.45% more on advertising and marketing at Rs 29.58 crore in FY22 from Rs 20.62 crore in FY21. On the other hand, Kama Ayurveda increased its spend by 14.4% to Rs 27.48 crore in FY22 from Rs 24.02 crore in FY21. “Our marketing budget as a percentage of sales have remained constant however as the company continues to grow and scale, our marketing budgets have increased by almost 35% year-on-year,” Bedi commented.
Furthermore, these brands claim that digital accounts for most of the ad-spends to drive sales, as opposed to traditional medium. For example, Forest Essentials claim that the split between traditional and digital marketing has changed in such a way that the company now spends 75% of the budget on digital advertising. The same goes with the Kama Ayurveda as Sahni explained that its target consumer primarily resides on digital where it consumes content. “Our major marketing activities are concentrated within the digital space. These cover the usual aspects of influencers, performance, programmatic, content, OTT, among others across all parts of the funnel. We also undertake limited traditional activities such as radio, print, OOH throughout the year,” he added.
Meanwhile, for an emerging brand such as T.A.C, the allocation of resources between traditional and digital marketing is subject to comprehensive marketing strategy. However, the company aims to maximise reach and effectiveness across various platforms. “Traditional marketing continues to play a significant role, as it allows us to reach out to a broader audience, including those who may not be as digitally engaged. Simultaneously, digital marketing has emerged as a powerful tool to connect with millennials and Gen-Z, who are prominent users of online platforms. Overall, our marketing approach is a blend of traditional and digital strategies, with careful consideration of sub-mediums that best resonate with our diverse audience,” Singh opined.