Cosmetic Industry

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MARKETING MINI PROJECT

THE COSMETIC INDUSTRY – AN ASSESSMENT

OF THEIR MARKETING STRATEGY

By

Iswarya Ramesh 3511210448

Vijay Shankar 3511210449

Sonia Jacob 3511210455

Savadh P 3511210477

Janaki Raman 3511210492

Apoorva Singh 3511210494

Shyam Srinivasan 3511210503

Cosmetic Industry

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What are cosmetics?

Cosmetics are any substances which are used to cleanse, change or enhance the

appearance of the skin, hair, nails or teeth. Cosmetics are of two kinds namely:

a) Beauty preparations like make-up, perfume, skin cream, nail polish and

b) Grooming aids like soaps, shampoos, shaving creams and deodorants.

Certain products which have cosmetic value are considered under a different

category because of certain effects or constituents that they possess.

Products that claim to have a therapeutic effect or that contain certain active

ingredients not allowed in cosmetics are considered to be drugs, for example,

topical antibiotic creams while those containing natural active ingredients are

considered to be natural health products.

Insect repellent lotions and sprays are pesticides and not cosmetics.

Cosmetic market

Cosmetic Industry is a part of the FMCG (Fast Moving Consumer Goods) industry

and forms a part of personal care which constitutes about 20% of the total FMCG

market.

Personal care20%

Other FMCG Categories

80%

FMCG market

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Cosmetic Market in India – A Glance

Global cosmetic giants are attracted to India’s favorable demographics. The urban

Indian women are becoming increasingly conscious about their style and looks,

with great emphasis on lightening of skin tone. Skin care and color cosmetics have

witnessed solid growth for the last few years. Lip products form a majority of the

color cosmetics market.

Hindustan Unilever is India’s largest cosmetics company, followed by L’Oreal

Skin care and cosmetics account for more than Rs.18.5-billion market size while

the hair care market is worth more than Rs.80 billion.

Among the entire range of products that fall within the territory of the Indian

cosmetic and toiletries market, the most popular items are color cosmetics(for

women) of which nail varnish, lipsticks and lip glosses account for the maximum

sales. Skin care cosmetics (for both men and women) such as anti-wrinkle creams,

cleansers and toners are not as popular as facial creams, moisturizers and fairness

creams in this genre.

The emergence of a young urban elite population with increasing disposable

income in cities, an increase in the number of working women, changing lifestyles,

increased affordability of lifestyle-oriented and luxury products, mounting

aspirations, influx of satellite TV, increasing appetite for Western goods, and

greater product choice and availability are the main drivers of demand for imported

cosmetic products.

Target market

The target market in India has been mainly women in the past few decades. But

during the last decade there has been a substantial increase in the use of cosmetic

products by men. In 2005, Emami created history by launching Fair and

Handsome, a fairness cream for men, which dominates the market with close to

70% market share. Followed by Hindustan Unilever, L’Oreal (Garnier) and

Beiersdorf (Nivea) have introduced products specifically for the male grooming

sector.

Hair grooming and styling is the latest growth in the country. Brylcream, Paras

Pharma (Set Wet) and Gatsby are some of the emerging brands that are market

players in this segment.

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Players in the global market

The most dominant players in the market are

RANK

(2012) NAME LOGO

BRAND VALUE

(USD $ MILLIONS)

1 Olay 1175611,756

2 Avon 79017,901

3 L’oreal 77447,744

4 Neutrogena 62486,248

5 Nivea 55745,574

The Indian Market

The Indian cosmetics market, which had a few few major players like Lakme and

Pond’s, has a lot of foreign entrants within the last few years like Avon, Burberry,

Calvin Klein, Cartier, Christian Dior, Estée Lauder, Elizabeth Arden, Lancôme,

Chambor, Coty, L’Oréal, Oriflame, Revlon, Yardley, Wella, Schwarzkopf, Escada,

Nina Ricci, Rochas, Yves St. Laurent, Tommy Hilfiger, Max Factor, Max Mara,

and Shiseido have entered the Indian market and prove to be a tough competition

for the local brands.

India allows entry of imported cosmetics without any restrictions. India’s import of

cosmetics and beauty products and intermediate raw materials such as essential oils

is currently around $400 million and mainly from France, Germany, the UK and

the U.S.

Foreign products have seen extensive growth in the Indian market because Indians

consider foreign products to be of superior quality. According to industry sources,

the total size of the Indian retail beauty and cosmetics market is currently estimated

at $5.8 billion, with fragrance comprising the largest component.

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.

Market capitalization

The total Indian beauty and cosmetic market size currently stands at US$950

million and showing growth between 15-20% per annum and the overall beauty

and wellness market that includes beauty services stands at about US$2,680

million ( Confederation of Indian Industries (CII)).

Market Segmentation

14%

21%

19%

17%

13%

9%

7%

Personal care

Cosmetics Fragerance Hair Care Skin Care Beauty Services Herbal Products Others

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Market Size for Decorative Cosmetics Sector

The decorative cosmetics can be further dived into sub sectors namely: Facial

make-up, Eye make-up, Lip products and Nail products. . According to industry

sources, the total size of the Indian retail beauty and cosmetics market is currently

estimated at $5.8 billion.

Facial Make-Up

Face make-up holds the largest value of share among the decorative cosmetics

ranges; it has increases from 40% in 2008 to 42 % in 2009 over all. The growth

rate was at constant increase. The growth in facial cosmetics continues to be driven

by innovations in formulations and constant customer support, particularly those

promising anti-ageing properties and facial moisturizers has brought revolutionary

changes in the cosmetics sectors.

Eye Make-Up

Eye make-up includes mascaras, eye shadows, pencils, kohls, and eye shades. The

sales of eye make –up products have increased compared to the previous year.

Mascara is the largest subsector in the eye- make-up cosmetics, the sale in which

accounts more than half of the value of retail sales of eye make-up.

Lip Products

Lip Products includes lipsticks, glosses and lip shades, etc. The retail sales value of

lip products had increased since 2010, however, the growth of lip products was at a

slower rate than other categories of decorative cosmetics such as face and eye

make-ups. However, they do contribute only to a smaller percentage to the total.

Nail Products

Nail products in India is one of the important subsector in decorative cosmetics.

This product subsector regularly suffers adverse publicity due to health hazards

from ingredients commonly found in nail polish and polish remover, which may

affect volume sales and individual’s health. However the consumers are not

influenced by these reports in spite of complaints.

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Marketing mix

The acute distinction between the premium and mass-market facial care is often

determined by its nature of the product. The majority of the value of retail sales

comes from products perceived as premium or sub-standard by their price, brand

image, promotion and method of distribution. The 4Ps of the cosmetic industry

which constitute to the marketing mix are as follows

Product

Cosmetic products are well known among all the classes of women and men.

Cosmetic companies have been offering specialized products and opting for online

retailing to attract new customers. Cosmeceuticals and Nutricosmetics are one of

the few emerging trends in the Indian cosmetics market.

Product Categories

Consumer products: Products given to the consumers at competitive prices

through mass market retailing channels ranging from hair care, skin and nail care,

make up and perfume products that meet the demands of these consumers.

Professional products: Products designed, especially for salon and parlor

professionals with products ranging from hair colorants, hair treatment and styling

products, facial kits, skin and nail care formulas.

Luxury Products: Providing specialized products by providing personalized

advice at the time of sale and available at selective retail outlets.

Active cosmetics: Dermo cosmetics are available at certain retail outlets and

pharmacies which offer consumers proven safety and used under the advice of a

pharmacist or dermatologist.

Image: The product categories for

Loreal brand

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Price

Indian consumers always want high quality of goods but may not be willing to pay

high prices. Understanding the attitudes, preferences and aspirations of the

different segments of India’s consuming class is very crucial to achieving success

in the Indian market.

Given the price-sensitivity of the Indian consumers, many cosmetic and toiletries

companies have re-launched their products in smaller pack sizes to make them

more affordable. Revlon went to the extent of introducing a small-range of 8ml

nail polishes and lipsticks, and was soon followed in its strategy by many Indian

companies as well. Small pack sizes have proved to be very popular in the Indian

market as they offer consumers a lower purchase cost that they can afford and, at

the same time, the opportunity to try new products.

Place

The cosmetic industry follows both direct and indirect distribution.

Direct sellers expand their reach by deepening their networks of distributors across

second-tier and third-tier cities. Direct selling companies such as Avon, Oriflame

and Modicare continue to build greater awareness by introducing brand new offers

each month. Due to their continued efforts to connect with consumers and launch

products at every price point, these companies strongly increased their value sales.

The cosmetics are also sold through retailers and also available in supermarkets,

malls and departmental stores. Cosmetics are also sold through specialized stalls

within large markets with personalized consultation while selling.

Cosmetics that are popular having high level of brand awareness, sell their

products through specialist websites, for e.g. Mac.com. Subsequently, these

websites are often interfaced which other networking sites such as Face book and

Twitters. Not only do these sites offer products for sale, but some also offer

consultations with experts, advice and gossip at a discount rate. This combines a

shopping trip to a beauty shop with reading an online `magazine’

Promotion

Promotion represents all of the ways a company communicates with a customer. It

includes advertising, selling, public relations, trade shows, direct mail, and other

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communication techniques. Successful promotions are intended to change beliefs

or increase awareness, knowledge, and purchase intent among potential buyers.

Some advertising techniques used are Aspirational Advertising, Celebrity

endorsement, socially responsible advertising, unique selling points, scientific

evidence, fear, advert composition and advertising to minority markets.

Marketing strategy

The marketing strategy that is very specific for the cosmetic industry is internal

marketing which is important for the salesperson to represent a brand. The

enthusiasm, product knowledge and attitude toward the products will be conveyed

to potential customers during interaction with such sales personnel. Having

employees who use and love the brand that they are marketing and have a good

attitude toward the company are as important as external marketing. They will help

spread the word about the products not only at work, but off the job to friends and

family as well.

Factors affecting consumer decisions

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There are many factors affecting the consumer’s decision while buying a product.

Culture

One major factor significantly influencing the consumer behavior of an individual

is culture. European markets being the home market for L’Oreal there is a vast

difference between Indian market in terms of history, cultures and level of

development. Cosmetics meet the esteem needs of people as cosmetic assist them

in improving their image to gain acceptance, or to gain social status or social

recognition. Esteems needs being high up in the hierarchy of needs, the Indian

culture has a huge impact on psychology and consumer purchase decision making

process at all levels.

Personal Factors

Changing Demographics

India has a young and rapidly growing population with most of the population

below 35 years of age unlike many countries where the aging population exceeds

the young population creating high dependency ratio. It is expected that this new

generation will result in an overall increase of 70% of Indian GDP. Since

increasing number of women in the age group 22 to 45are becoming independent

and joining the work force instead being house wives there is more demand for

cosmetic products. These women have the disposable income and the decision

making power to buy what they want. This has resulted in high demand for

cosmetics in India. With the increasing literacy rate, Indian consumers are

becoming more conscious about personal grooming and the demand for high-

quality cosmetic products has increased rapidly. Hence, there is a huge demand for

world-renowned brands of cosmetic products in India

Demand for Luxury Cosmetic Brands

With the rapidly increasing number of millionaires in India, the market for luxury

brands is growing annually at a compound average growth rate (CAGR) 35%

especially since the emerging young urban populations of India, combined with

high disposable income are increasingly looking for lifestyle-oriented and luxury

products with an internationally recognized brand. India has the 3 rd highest brand

conscious population in the world. L’Oreal being an internationally recognized

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cosmetic brand has introduced luxury product lines such as Lancôme, Bodyshop

and active cosmetics such as Vichy to India.

Perceptions

Color Selection

The culture has an impact on people’s perception of shapes, colors and space.

People interpret different colors based on their job, age, gender, status or even

religious beliefs. For an example red is considered to be a color of celebration

for Indians where black is considered to be color of mourning. When producing

color cosmetics these perceptions are taken in to account as it drives the consumer

demand. L’Oreal has large range of color pallets to suite specific Indian

consumer preferences. For an example introduction of gold, jade, Indian

pink, turquoise, orange and browns for Indian cosmetic markets.

Fair Skin Syndrome

Almost all cultures around the world have a preference towards fair skin tone. The

desire for pale skin amongst Indians is emerging from the history because of the

cast system. In addition to this history colonization by lighter-skinned invaders

from the west for 200 years, the concept of fairness being superior is embedded

deep within the Indian psyche. Skin lightening creams are by far the most

popular categories in India skin-care market and valued at $318M.L'Oréal has

identified this huge market potential and has entered this specific market 1st

with“Garnier” and next with their super high end line “Vichy”. However, L’Oréal

products so far have a small market share. The major players in this segment are

Lakme, Ponds, Fair & Lovely followed by players such as Nivea, Godrej and

Revlon.

Beliefs and Attitudes

Harmful chemicals in cosmetics

Customer possesses specific belief and attitude towards various products mostly

driven by cultural norms. These beliefs and attitudes makeup brand image and

affect consumer buying behavior. Even though cosmetic products are regulated and

tested prior to be made available in the markets consumers are still afraid of

chemical substances present in them. Since consumer protection regulations with

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regards to cosmetic product are not present in India, Indian consumers are

much more reluctant to accept safety of cosmetic products.

.

Social Factors

Boom in Salon Care

The out-look towards personal grooming and beauty is changing in the Indian

society. Beauty is no longer for the rich and famous. With the boom in the salon

and spa industry there is large demand for salon and spa care products in India.

L’Oreal salon care products lead in this industry because they were the trend

setters where they opened up the L’Oreal Hair & Beauty Academy to train salon

professionals. Today, L'Oreal markets its range of specialized hair care products

exclusively through salons and beauty parlors.

Bollywood Influence on Cosmetic Industry

Indian film industry “Bollywood” has a tremendous influence on the growth of

the cosmetic industry in India. Actors and actresses are considered as style icons of

youth of India. Brand Ambassadors of these cosmetic industries like Sonam

Kapoor or Aishwarya Rai who promote Loreal are also idols and hence increase

sales for the particular brand.

Trends

Trends are long lasting because they emerge from collective needs of consumers

that are part of their culture. With the popularity of satellite Television and a wide

variety of television channels as well as Internet, more and more Indian consumers

are constantly exposed to wide variety of global cosmetic brands creating more

brand awareness which often translates to sales. They are linked to consumers’

behavior and psychological patterns that reflect their unique culture.

Hair Care and styling

Dark Eyes, long black hair are two things that are considered as attraction in the

Indian culture. At present 85% of Indian women have long hair. Most young girls

are encouraged to wear their hair from young age. When maintaining long to

medium long hair, hair fall and breakage are main issues faced by Indian women.

In the past hair care meant oil massage and shampoo, now more and more users

have started adding conditioners to their hair care list. They do like to use

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hair serums as a way to tame frizz and improve shine. L’Oreal has introduced

“Total Repair 5”shampoo and conditioner to meet these specific consumer

demands. Due to increase in awareness, with more available global fashion trends,

Indian consumers are more open to styling their hair by, perming, colouring,

straightening ,re-bonding or even using hair spray, gels and hair crèmes.

Brand Loyalty

Hard Core Loyal - who buy the brand all the time.

Soft Core Loyal - loyal to two or three brands.

Shifting Loyal - moving from one brand to another.

Switchers - with no loyalty (possibly `deal-prone', constantly looking for bargains

or `vanity prone', looking for something different)

The factors affecting brand loyalty are Brand name, Product Quality, Price,

Design, Store Environment, Promotion and service quality.

SWOT Analysis of the industry

STRENGTHS:

Operative communication: Diverse use of cosmetic has increased the

communication globally and mitigates the local market risks. For e.g. Avon

is a global player in cosmetic industry.

Innovation: The new inventories in cosmetics has increased its demand, like

recently lakme launched a new kajal which is eye conic and non smudging

for 10hours, is a new way to attract the customer and off course a new

innovation.

High R&D: R&D helps to better test the products before launching it into

the market. It also protects the company from law suits and it also helps

them to make and create better products for the consumer by being tested for

various factors.

Strong Brand Equity: Strong brand equity help to dominate the market and

help to gain customer trust for the brand , it also protect the company from

any major drops in stock exchanges and help to trade around the globe.

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The cosmetic industry has gained momentum over the years hence there is a

high demand for products.

WEAKNESS

Marketing: They market their product at first as a superior product for

women with extraordinary qualities but when tried, it proves otherwise, so

they gain negative trust and low customer appreciation.

Finance: Finance for R&D is needed in large amounts and hence is difficult

to obtain.

Animal Testing: Many products are tested on animals and this is not

supported by animal lovers and hence these brands may lose customers.

The industry is no longer recession-proof and is now bound for depressions

and declinations.

Another setback of the industry is the demand-price ratio. Within the past

five years, the prices were invariable and steady but promotion budgets were

growing and getting greater than ever.

OPPORTUNITY

Emerging market is a great way to increase the production of different

products and launching them in market.

Inventing of some new product which is different from the product which is

already there in market.

To expand their product in the global market so that their sales of product

increase and more people can know their product and tried to use them.

The expansion of product and services is also a great opportunity for

cosmetic industry. By expanding their services they increase their

availability.

The senior citizen population is increasing day by day so it is also the

segment to increase the growth of market as for e.g. the launching of anti

ageing cream in market is one of them.

As far as India is concerned the future generations is still at an average of 35

years and hence have lots of disposable income.

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Women at the age of 22 to 40 are more and hence more demand for

cosmetics.

Smaller companies survive by producing products of specific niche thus

avoiding major players and concentrate on market segmentation.

THREATS

A threat is also the growing competition within the field of cosmetic brands.

Most products are within the reach of the citizens of developed countries

only and not reaching out even to the average people from the under

developed countries.

While a company may be producing the best of its line, people may find

that their products are not of their basic needs and would skip buying

products.

Scary stories regularly appear in the media about side effects of cosmetic

ingredients.

Discounting premium cosmetics can damage the very exclusivity and image

that the consumer is buying into.

Young consumers are generally the biggest users of cosmetics; thus an

ageing population may prove disadvantageous

Price wars.

Large number of market players

Possible market segments

1. Geographic

Area: Metropolitan cities and towns

2. Behavioral:

Occasions: those who go to school, college& office.

User Status: Regular usage for better results

Attitude towards the product: conscious about personal care.

3. Demographics:

Age: 15+, the target customers are teenagers and working men and women

who are conscious about their looks and self presentation.

Education: Students or Graduates

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Sex: Unisex

Occupation: Students and office goers are mainly targeted by this

industry.

Lifecycle: single and married male and female

Social Class: Most of the cosmetic brands target Middle and Upper class

people.

Target market strategies

There are several different target-market strategies that are being followed in the

industry. Targeting strategies usually can be categorized as one of the following:

Single-segment

Selective specialization

Product specialization

Market specialization

Full market coverage

Product life cycle

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Components of a business

Conclusion

The cosmetic industry is a blooming industry as far as India is concerned. This

industry has a large scope in the near future as the number of people with

disposable income are rising in number and thus increasing the purchasing

capacity. This industry has a wide space for innovations and developments and his

is expected to thrive well in the coming years.