Tata Group’s re-entry in beauty segment will push competition & innovation, say industry experts

The $22.34 billion worth of beauty and personal care market will get a boost with rise in competition and growing innovation with the entry of Tata Group in the segment, even as the consumer base continues to grow.

beauty segment, competition, consumption pattern, retail channels, Tata Group, online brands, e-commerce
Tata Group's announcement to enter beauty space will spruce up competition in the segment. Image: Bloomberg

Tata Group’s reentry into the beauty segment will give this market a further push, leading the already existing beauty and personal care brands to innovate more in order to stay relevant and scale up the industry. Earlier last week, Tata Group had announced its plans to re-enter into the beauty business after a break of 23 years, with the launch of its own beauty products line. Consumers now are also looking at newer and better options for their skincare and beauty product needs, and the category is far from stagnation and will continue to grow and see further innovations. Tata Group’s entry, for one, too will add more thrust to the segment. 

Beauty space to heat up with giant Tata entry

“Considering that the Tata Group has stayed away from this segment for the past 23 years, it would be interesting to see their return. For existing players, this will heat up the space immensely. It is fair to assume that all digital brands who are already spending more than what they had done in the previous years will need to spend more to access the same type of consumers but the flipside to this is that the consumers get more options,” said Harini Sivakumar, Founder & CEO, Earth Rhythm – a beauty products brand.

More competition, jolt to startups

While it is still not known if Tata Group will launch eco-friendly products, or if it will foray into the premium or luxury segment, or if it will be an online or an offline brand – the entry will definitely add to the competition and will have existing brands and start-ups re strategize their next move in the market. “Tata Group has an edge already with their online as well as offline retail channels. With Westside store presence across the country and online shopping platform Tata CliQ, the firm has a set customer base already at its disposal. This is a big differentiator for Tata Group and their entry into the beauty segment will get a boost through these channels and market presence,” said Pankaj Renjhen, COO & Jt Managing Director, ANAROCK Retail.

What’s in it for Tata Group

The beauty and personal care market amounts to $22.34 billion in 2021 and the market is expected to grow annually by 6.95% (CAGR 2021-2026), according to Statista. The pull for Tatas into the beauty segment is all too understandable. Pankaj Renjhen, said, “Consumers today are spending much more on their lifestyle and, particularly, on beauty. I think there is great opportunity in the segment right now with more and more people getting added to the consumer base with every passing day. Also, players like Nykaa have already shown everybody the way to taking over this segment.”

The beauty and personal care segment has witnessed a boom of sorts during the pandemic year while also going through a revolution in more than one way. The year 2020 and forward brought a surge in the demand for natural and organic skincare and beauty products with consumers becoming ever more aware and conscious about the products they are using, the ingredients that are used in their making, their side-effects, etc. This has led to many established brands in the segment now moving towards sustainability with their product range, packaging or even at operations level. 

Revenue in the natural cosmetics segment amounts to $834.5 million in 2021, and the market is expected to grow annually by 7.83% (CAGR 2021-2025). The factors leading to this rise in the number of such brands is the availability of products by home grown start-ups and brands that suit Indian skin types and hair – a need that largely remained unfulfilled by international brands. Besides, the ‘Make in India’ push has further escalated the rise in the number of homegrown brands in the segment.

Tata Group announced its plans to re-enter into the beauty business after more than two decades of exit from post the sale of its Lakme brand to Unilever. Noel Tata, non-executive chairman of Trent Ltd, a Tata Group unit operating a chain of retail stores, said during an interview that beauty products will be a key focus for the firm from now on along with footwear and underwear. “Extended product line and experimentation with formats for these products are in the offing as we see these as growth areas in retail,” he said. The Tata Group will re-enter the beauty business, while the revenue from beauty, footwear and underwear category is pegged around $100 million, the market for which is of about $30 billion now, the company said.

“I feel that we have barely scratched the surface in these categories and a significant part of these markets are still unorganized and a shift to organized retail is bound to happen. We are also seeing a shift in consumer behavior preferring more fashionable products in these categories,” Noel Tata added.

Azaz Motiwala, Founder & CMD, IKON Marketing Consultants, said, “The Indian beauty industry is growing at a double digit CAGR. Recent successes of domestic beauty e-commerce players like Naykaa and Purplle in the segment have grabbed the attention of major players. The Indian consumer is highly obsessed with digital and social media platforms, right from seeing the DIY make-up videos to buying beauty products online. Tata’s entry into the beauty segment at this juncture of the industry is the correct move though a bit late.”

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