The big booming business of beauty

Manish Taneja, co-founder and CEO of Purplle.com, the heavily-funded Nykaa rival within the on-line beauty ecommerce house, describes how in Seoul in case you go to Myeong-dong market, you’ll find in its criss-crossing alleys over a thousand retailers promoting tens of millions of completely different Korean cosmetics and skincare merchandise. Beauty is a mega business in South Korea.
India, for all its massive measurement, is nowhere close to tiny Korea within the beauty market stakes however given the frenzied tempo at which the cosmetics and private care business is exploding right here – fuelled by a whole bunch of new D2C manufacturers – it is probably not too lengthy earlier than we attain the dimensions of the business within the Land of the Morning Calm. In 2021, India’s beauty and private care house obtained a fund infusion of over $350 million – and these are very conservative estimates – in comparison with round $100 million in 2020. One misplaced depend of the quantity of new start-ups coming into the house – however one yardstick as Purplle’s Taneja factors is that they’ve over 50,000 uniquely completely different merchandise (SKUs) on the platform and are promoting 25,000 distinctive objects each month.
The booming BPC (beauty and private care) market in India was estimated at $24 billion in 2021 and is anticipated to cross $40 billion within the subsequent 5 years.
 And that forecast will simply be met in case you see how a lot funding begin ups within the sector are attracting. Take the Good Glamm Group which raised $100 million in Series C spherical, in three tranches final 12 months, with buyers like Amazon and Wipro, or take Purplle which first acquired a $45 million infusion in a spherical led by Sequoia Capital, and some months later raised $75 million from buyers together with Kedaraa Capital, capping it with one other $38 million in a Series D funding. Then there’s the poster child of this house, Honasa Consumer, the mum or dad of child and skincare merchandise firm Mamaearth, which early this 12 months added one other $52 million to its funds kitty taking its valuation to $1.2 billion.

Buying spree

 Armed with these wealthy battle chests the aggressive beauty brigade is on a shopping for spree. Just final month Mamaearth acquired Mumbai-based BBlunt from Godrej Consumer Products Limited. Earlier it had picked up fast-growing content material firm Momspresso. Content-to-commerce conglomerate, the Good Glamm Group has been much more acquisitive – shopping for out The Moms Co and St. Botanica in addition to buying a majority stake in Organic Harvest and making a strategic funding in Sirona Hygiene, all inside a couple of months of one another. Its portfolio now cuts throughout BPC classes from beauty, haircare, skincare, mother and child, grooming, naturals, hygiene and natural amongst others. “We will proceed to accumulate or make strategic investments in the direction of finishing this portfolio and scaling the manufacturers underneath the Good Glamm Group umbrella. We count on to finish extra acquisitions within the first quarter of 2022,” declares a really bullish Darpan Sanghvi, Group Founder and CEO, Good Glamm Group.
 Purplle with an overflowing kitty of over $160 million in funding– most of which, says Taneja, continues to be within the financial institution – has taken stakes in Juicy Chemistry,Good Vibes, female hygiene agency Carmesi, NYbae and most not too long ago Faces Canada in a bid to diversify its portfolio.
 Just earlier than its blockbuster IPO – which has solely elevated the optimistic investor sentiments about this house – beauty and style e-commerce platform Nykaa acquired homegrown skincare model Dot & Key.

Year of consolidation

 It’s exhausting to maintain monitor of these buyouts as there’s one being sealed actually each different day. Which raises the query – is 2022 going to be a big banner 12 months for M&As within the business of beauty in India?
 All indicators are there of a market poised to see an exponential rise in acquisitions. As Nitin Passi, Joint Managing Director, Lotus Herbals, factors out, consolidation is imminent as within the final two years, digital, cheap, and extra intuitive advertising and marketing initiatives have led to the emergence of “ revolutionary micro-brands” that penetrate extra emotionally with the customers.
Entry is commoditised now, agrees Shankar Prasad, founder and CEO of Plum, a D2C beauty model began in 2014. He says entry to merchandise, entry to advertising and marketing instruments, entry to media are at an all-time low and anybody with a passing curiosity within the class can get in. However, he says whereas obstacles to entry have been breached, obstacles to scale haven’t – therefore we’re seeing a lot offers motion.
The offers are mutually helpful to each the acquirer and purchased. Take the case of Lotus Herbals which has acquired luxurious Ayurveda model SoulTree, picked up 32 % stake within the dermaceutical firm Fixderma India and 25 per cent stake in DTC model Conscious Chemist.
 “From 2019 onwards, our technique acquired recalibrated in the direction of acquisitions and investments other than nurturing our present business with an omni-channel future-ready method. We have drawn a method of both proudly owning such companies or partnering with passionate founders who want mentoring and entry other than the capital to grasp their ambitions,” explains Passi.
 For corporations like Lotus, and conventional private care giants like HUL, Marico (which acquired Beardo), Emami (with important stake within the Man Company) and Dabur, which made its intentions to accumulate clear, there are wealthy pickings accessible.
 As Mohit Malhotra, CEO of Dabur India, stated in the course of the firm’s current investor name, “We are working very aggressively and we aren’t simply open to natural entry but in addition open to inorganic performs right here and that’s why we have now a battle chest of round ₹5,500 crore saved within the stability sheet as a result of it’s a faster ramp up by way of inorganic and there are loads of start-ups which can be found.”
The dozens of entrepreneurs we spoke to for this story all say they have gives galore. Take Amritha Gaddam, Founder & CEO of The Tribe Concepts. “Yes we have now been approached by big corporations not simply within the home but in addition from the worldwide market. We nevertheless, are taking our time and evaluating all of the gives and operating them by way of a fantastic comb,” she says.
 Gaddam says, there are ample advantages and limitations across the consolidation we’re seeing. “When a big model is available in to consolidate loads of emphasis is paid on high quality checks, certifications, battle of pursuits and founder chemistry. I see this consolidation development rising within the close to future as a result of we as a rustic are seeing a surge in start-ups and this chain of thought is being inspired very positively which is nice as a result of I feel this disruption out there was a lot wanted,” she provides.

Growth and consolidation

But discuss to buyers and entrepreneurs and virtually all say that whereas consolidation is going down, the expansion section continues to be very robust and there’s big headroom for brand spanking new manufacturers to nonetheless are available. Kannan Sitaram, enterprise Partner at Fireside Ventures is emphatic that there’s house for extra investments into start-ups with differentiated choices – describing how they’ve simply funded in a single such model known as Pilgrim, which is bringing world beauty practices into India, launching handpicked merchandise from completely different geographies (vinotherapie from France, and ideas from Jeju in Korea.).
 As Sanghvi of Good Glamm Group explains, “It’s an area (BPA) the place many manufacturers can exist and succeed, nevertheless this can be very necessary to determine a USP or differentiator to make customers perceive why they need to select you. This just isn’t a winner-takes-all market.” By Diwali 2023, the corporate goals to get to the billion greenback income scale and be considerably worthwhile. “At that time, I feel we shall be IPO prepared,” Sanghvi provides.
Taneja of Purplle.com concurs. He factors to how the gross margins in beauty are so excessive and the white areas are so many who a whole bunch of manufacturers can co-exist and he goes again to his favorite Korean instance to explain why extra gamers can co-exist. “Beauty may be very private, exploratory, and has numerous wants. There are completely different pores and skin sorts, pores and skin tones, climate situations and textures. You will see extra manufacturers catering to every of these areas,” he says.
 From vegan, natural, fruit primarily based, Ayurveda-based, downside fixing formulation for various wants (zits, dryness, hairfall, and many others and many others), attention-grabbing new make up concentps, new niches are rising. Categories that didn’t exist a pair of years in the past are flourishing now.
Also Plum’s Prasad says that the market has advanced to such an extent it’s straightforward for brand spanking new manufacturers to do a crore a month in gross sales now. The gross margins are so good on this business that many really feel even a stagnating model will survive simply, so does not likely must promote out. 
On the identical web page is Vineeta Singh, Co-founder & CEO, SUGAR Cosmetic who says. “While it might sound that consolidation has picked up important momentum this 12 months with loads of established companies buying budding manufacturers, I imagine there’s a large worth that’s but to be unlocked amongst these rising gamers and there’s benefit for these manufacturers to scale individually.”
With SUGAR Cosmetics, she says, “our key technique will stay to develop organically and we’ll opportunistically take a look at acquisition alternatives sooner or later. The model has a present ₹500 crore ARR and we’re scaling at equal stage throughout models so we aren’t capital-infusion in the mean time.”
 The optimism displayed by the gamers appears justified once you take a look at the buyer panorama. Just final week India’s largest trendy retail retailer chain Shoppers’ Stop opened a standalone luxurious beauty retailer known as SS Beauty in Mumbai. Nykaa has been increasing its offline presence with two units of segmented shops – one aimed toward premium prospects and one other at a extra mass client base. Similarly, Internet and on-line retailer Myntra – extra identified for its attire collections – not too long ago stated that beauty and private care shall be key focus areas in 2022. Clearly, the beauty pie is getting larger and larger.

Published on

February 27, 2022

https://www.thehindubusinessline.com/specials/corporate-file/the-big-booming-business-of-beauty/article65087069.ece

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