In the early 2000s, a face full of makeup in India was reserved for special occasions – a Diwali party or a close friend’s wedding. Today, beauty regimes are part of the millennial woman’s vocabulary and daily routine. Be it formal in-person or virtual meetings, or casual catchup with friends, she doesn’t shy away from using her setting powder, adding a hint of eyeliner and mascara, and applying her favorite shade of lipstick. In fact, beauty products are used daily by the top quartile of cosmetics users in the country, as is often their shampoo and deodorant use.
This phenomenon is not just limited to metros and Tier 1 cities in India. With smartphone penetration in the country now reaching over 700 million people, women in tier 2 and 3 cities are as exposed to cosmetics as big city girls and similar aspirations to experiment with products. Our research shows that over 15% of topical cosmetics users in India’s secondary and tertiary cities tried face primers, foundations and BB creams for the first time in the last 2-3 years. In response, beauty companies have left no stone unturned to reach out to the far flung towns of states like Himachal, Uttarakhand and Bihar. Therefore, it is no surprise that the country’s beauty market has expanded. From 5800 crores in 2016 9000 crores in 2021.
Interestingly, the demand for beauty products remained the same even when people did not leave the house for business meetings or social gatherings during the lockdown in 2020 and 2021, indicating the flexibility of the sector to expand. This can be attributed to India’s digitally native Millennials and Gen-Z consumers, who want to look good on screen and be ‘always on’ while working from home, often on Instagram, Takataka, or Moj with stories and Upload reel. Such consumer behavior has supported the development of Nykaa. platforms likewhich almost occurred 3700 crore revenue in FY22, a significant jump from 1800 crores in FY20.
Amidst this backdrop, a number of homegrown, online-first brands have emerged over the years. Recognizing that long-term success in the cosmetics sector is based on building emotional connections with consumers, many of these brands have digital-first business models that leverage the power of social media and local celebrities to develop user relatability. pick up. For example, Sugar Cosmetics has attracted more than two million followers on Instagram and achieved best-in-class consumer engagement rates through its use-case-focused content and regional influencer marketing. Similarly, through a spate of content platform acquisitions, The Good Glam Group has effectively leveraged a content-to-commerce strategy to drive massive traffic to its website and products.
However, building a brand in the country’s beauty market has historically been tougher than building one in its personal care segment, where we have seen many more brands mushroom. This is largely because product diversity is more important in the beauty market, where customers want multiple colors and formats of products based on their skin tone and texture. With India’s limited capacity to manufacture cosmetics domestically, brands also need to source from across the world and manage complications with import duties.
That said, based on our work with our extensive portfolio of more than 20 beauty and personal care companies around the world, we’ve seen three things companies can do to thrive over the long term.
Firstly, maintain a good product portfolio with a balance of core SKUs and innovative new products to address the ‘fashion’ nature of the cosmetics category. Second, to create an all-encompassing presence in India for a long period of time. Even in developed markets with a more mature offline and online ecosystem, cosmetics companies need to enable consumers to experience new products offline, but repackage products at their channel of convenience. Third, reinforce a coherent brand story in marketing campaigns to stay emotionally connected to consumers over the years. While a range of brands around the world quickly scale through strong online followings, such as Perfect Diary and Florasys in China, many have not been able to sustain their success because they lack the right consumer engagement and customer loyalty. Is.
These remedies are easier said than done, which is why India’s best-selling beauty brand is still Hindustan Unilever’s Lakme. While investor sentiment has changed regarding the safety of D2C brands in general, we still see an opportunity for high quality home brands to become category leaders based on strong products, delivery, as well as customer loyalty . We remain excited about their prospects as the nation’s consumers continue to grow.
(The author is a partner at L. Catterton, a consumer-focused global private equity firm. Views expressed are her own.)
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