By Syed Ali,
The personal care industry has taken a beating of the COVID pandemic much like every other industry, however, the resilient revival of the economies has led to a sharp uptick in the personal care industry. We can understand this phenomenon by linking the economic resilience and the consumption of personal care products through the lipstick index or the lipstick paradox; a contentious theory unraveling this phenomenon. The lipstick index coined by Leonard Lauder, Chairman of Estée Lauder, during the 2001 recession as an economic indicator highlighted the increase in Lipstick sales in the early 2000’s recession; as women would purchase lipsticks as an affordable luxury instead of expensive apparel items. Then came the 2020 pandemic, and lipstick sales declined since facial masking was mandated- upending the phenomenon. However as of now, since the global COVID euphoria has calmed for the time being the skincare industry has recorded a strong resurgence especially in India.
India’s beauty and personal care market, estimated at $25.9 billion in 2020, is projected to reach $32.7 billion by 2023, growing at a CAGR of 8.1 percent. There has probably never been a better time to run a direct-to-consumer (D2C) beauty and personal care brand in India. Helped by the availability of cheap smart phones and the proliferation of the Internet, consumers are increasingly discovering a slew of new products and brands online, and are more than willing to experiment, boosting growth prospects of firms operating in the space. Latching on to this proliferation, capital flow in the personal care space has been pouring from all sides for brands and white label manufacturers. The market is also witnessing clarity in terms of podium finishers with digital-only brands becoming household names with their enhanced reach to Tier 2 and 3 cities. The leading brands and aggregators have all received investments including the recent oversubscribed Nykaa IPO. Other notable landmark investments and acquisitions being; Good Glamm Group acquiring ‘The Moms Co.’ for ?500 crores also becoming a skincare unicorn with $1.1Bn valuation on a $150M fundraise. Indian private equity firm ChrysCapital investing $50 million in Wow skincare. Lotus herbals acquired The SoulTree at $ 13 million and invested ? 5.5 crores in the vanity wagon; a clean beauty aggregator. Most notable being, barely a decade old Nykaa, creating a niche for itself in the retail cosmetics, fashion, and beauty space. Nykaa’s valuation soared to nearly $13 billion, making its founder, former banker Falguni Nayar India’s wealthiest self-made woman entrepreneur with a net worth of nearly $7.4 billion. This makes the future of the Indian personal care space stimulating, compounded by the entry of International premium brands paving their way into the Indian market.
A remarkable development has been the capital penetration into the skincare space making inroads all the way to the backend manufacturers. Recently, Delhi-based Vedic Cosmeceuticals currently owned by Mohit Goel and Sandhya Sakhuja, running a premier clean-beauty manufacturing facility for leading skincare brands announced an undisclosed funding by Nikhil Vora’s Sixth sense ventures. Vedic in-houses a state of art R&D facility sourcing clean actives from around the world. The company has consistently grown 15% y-o-y since its inception in 2004 moving 16 million lives across categories and five regions; Asia, Africa, Middle-East, Europe, and America.
Traditionally controlled by legacy brands, the skincare industry is now witnessing a boom due to changing perceptions, growing awareness about natural ingredients/chemical-free products, and most importantly, the rise of direct-to-consumer (D2C) companies making waves in the online retail space. The chaos and bustle in the personal care space with myriad capital flow vents has made this industry the hotbed of opportunities coupled with growing local technical capabilities. Therefore, we can expect India’s prowess in the skincare space globally as a dominant rallying cry. India’s traditional knowledge and enhanced manufacturing capabilities give us an unparalleled impetus to become the global destination for skincare manufacturing. Gaps such as packaging materials and sourcing of clean active from abroad and dependence on Chinese supply chains are an impediment, disconnecting us from achieving absolute self-dependence in skincare manufacturing. However, leading the charge are Indian manufacturers like Vedic and others whose growth story and trajectory are rooted from the bottom and headed upwards. Moreover, during this upward movement and expansion sustainability has to be at the center because an appearance-conscious society is also likely to be a climate-conscious society. Digital-only brands are capitalizing on their clean and natural approach in serving the consumers and this is now being emulated by traditional skincare brands transitioning towards clean and conscious skincare.
(The author is an independent analyst in Strategic Affairs. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).