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India’s Cosmetic Market Ready for Big Leap

By: Priyanka Bhattacharya
Posted: October 10, 2008, from the January 2006 issue of GCI Magazine.

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India presents a big opportunity for global cosmetic vendors selling color cosmetics and specialized skin care products in the market. Today these product segments are showing impressive growth rates.

In skin care, the most popular are anti-wrinkle, anti-blemish and skin-whitening products followed by sun care and bathing products. However, while presenting a market potential, other specialized products such as anticellulite lotions or nail creams and nail care products, while presenting a market potential, need more customer education before they can grow. Meanwhile, hair color and styling products also have logged in impressive revenue for players such as L’Oréal and Schwarzkopf in the market. In fact, HLL recently launched hair care products through its brand Lakme for the mass market in India.

In color cosmetics, lipsticks and nail colors still account for nearly 65% of the market followed by eye makeup, especially eyeliners and Kohl pencils. In the fragrance market, while most popular brands are available here, the deodorant versions are showing better acceptance than the EDPs or the EDTs mainly due to the pricing factor.

Challenges

While the market seems impressive, there are hurdles that impede growth. The Indian duty structure on imported products can pose a major deterrent to multinational vendors. Despite the new value added taxation regime, where the duty has been reduced to 12.5%, the overall duty on the product still comes to about 40%. This in turn reflects in the pricing of the products.

Most vendors add the duty to the product pricing to generate the right revenue. However, there is no organized cosmetic industry body that can take up the issue with the government. In fact this leads to the biggest threat —the unorganized or grey channel. There are small retailers in the market who directly import from markets such as Dubai, where pricing can vary from 30–70% from Indian product pricing. Thus today the grey channel makes up about 60% of the Indian cosmetics market.