India – Valérie Kaminov

VALÉRIE KAMINOV – BIOGRAPHY Valérie Kaminov is Founder and Managing Director of the highly successful International Luxury Brand Consultancy. For over 25 years Valérie has been at the forefront of the global cosmetics industry and has worked with a vast array of luxury, premium and niche beauty brands and fragrances. With her extensive expertise, commercial acumen and practical experience IL Brand Consultancy has become one of the most sought after management and distribution agencies specialising in global beauty. Recognised for the breadth of business sectors and extensive distribution channels it works with, ILBC’s international client portfolio spans both well-established names and newly-emerging brands in hair care, make-up, skincare, fragrance, devices and top-to-toe brands. Valérie’s wealth of knowledge in international growth strategies and business development is combined with an inspirational and forward-thinking approach. Through her exceptional insight and understanding of the industry Valérie has helped brands amplify their market reach, elevate their brand presence, improve their business performance and achieve commercial success globally. A further aspect of her business is her skill in brand evaluation, acquisition due diligence, risk assessment and commercial growth which has led Valérie to regularly advise Private Equity Funds, multi-national organizations and financial investors. This capability in combination with her advanced qualifications and proficiency in corporate governance have made her a much-desired Board Advisor and Non-Executive Director. From her CEW mentoring, organisation of the International Manufacturers & Distributors Forum (IMF) and guest lecture programmes, Valérie is a passionate and dynamic advocate of the global beauty industry. Valérie splits her time between her London HQ 98 and her central Paris office as well as managing a satellite network in Russia & China.

INDIAN CELEBRITIES & OMNICHANNELS TAkE ThE STAGE IN BEAuTy

There are many compelling reasons to invest in India. India’s benchmark Nifty 50 (the weighted average of 50 of the largest listed Indian companies), posted a return of almost 44% in 2021 (to October 5, 2021). On top of that, analysts are forecasting a further earnings growth of 35 % for the big companies in the Nifty 50 Index. In addition to company earnings, India’s economic indicators, such as Gross Domestic Product (GDP) are also bouncing back from historic lows after the coronavirus pandemic. Interest rates are at their lowest levels in two decades. And, estimates for GDP growth are 8-10% for 2022– the highest of any emerging markets country. India’s $850 billion retail market is the fourth largest market in the world.

Finally, the COVID-19 lockdown transformed consumer purchasing patterns in India, with the majority of consumers shifting to online platforms, even for their essentials and daily needs. Indeed, in India, the e-commerce industry is expected to grow to US$ 200 billion by 2026 (it was US$ 38.5 billion in 2017) and is slated to become the second-largest in the world by 2034. Furthermore, the e-retail industry in India is primed to reach nearly 300 to 350 million shoppers in the next five years – propelling online Gross Merchandise Value (GMV) from $100 to 120 billion by 2026. This incredible growth is fueled by the increasing base of first-time internet and smartphone users –an outcome of ‘Digital India’ campaign.

As of August 2020, India had 760 million internet connections. According to Euromonitor’s International’s Economies and Consumers data, in 2021, the percentage of the Indian population using the internet in India increased to 48%, in comparison with just 29% in 2016. In fact, India’s online retail sales are forecast to jump from last year’s $42.8 billion to $51.52 billion, and is projected to reach almost $120 billion by 2024. Last year, the Indian online sector was the secondfastest-growing market, despite the global pandemic. In addition to low interest rates, high liquidity and fiscal incentives have helped India claim a “hot emerging market” position. But within that “hot emerging market,” the largest potential for growth stands to come from e-commerce. In regards to beauty e-commerce/ e-tailer players, the ecosystem has seen a paradigm shift, with e-commerce as the distribution channel providing big gains. E-commerce gains have even spurred new brick-and-morter shops, as physical entities of online only brands & businesses. A closer look at this landscape is now, more-than-ever, important if a company is to capitalize on the opportunity India currently offers.

TRENDS: OMNICHANNEL RETAIL PROVIDES ACCESS TO GLOBAL BRANDS

A healthy share of purchases in premium beauty and personal care categories such as fragrances, skin care and colour cosmetics have traditionally been made via duty-free shops at airports. However, the pandemic necessitated bans on travel, to and from India. Businesses adapted by using teleconference technology. Both the opportunity and need for international travel dropped off, almost entirely. This resulted in the demand for premium products being re-directed to Indian retailers such as: Nykaa, Purplle, Parcos, Sephora, etc.

ShARE OF ONLINE BEAuTy AND PERSONAL CARE MAkET IN INDIA 2021

40%

35% 38%

30%

25%

20%

15%

10%

5%

0% 20%

16%

10% 9%

7%

Nykaa Amazon and Flipkart Others Purple Good GlammMyntra

Nykaa launched The Global Store (TGS) in July 2021, which imports and offers international beauty brands to consumers in India under one roof. The platform, accessed by consumers exclusively through the Nykaa mobile application, provides prices inclusive of customs, duties and taxes. TGS offers brands from countries such as the US, South Korea and Finland, which were not previously available in India. To compete with Nykaa, Reliance and Tata also announced their plans to launch online platforms that cater to beauty and skin care demands. Reliance will be fully integrated with Reliance’s AJIO platform, which currently sells products such as apparel and personal accessories. In the long term, the retailer has announced soon opening Sephora-style retail stores to cater to the needs of offline shoppers. Tata plans to launch several private label lines through its platform, which will also be distributed through its Westside stores nationwide, offering an omnichannel experience to consumers.

Myntra is another major online retailer that has announced its expansion plans in the industry. Its competitive advantage (in selling fashion products such as apparel online) puts it in a strong position to expand and succeed in the beauty and personal care space. Another premium beauty and personal care retailer, Parcos, announced the launch of its online platform in 2021, but also opened stores in tier-2 and tier-3 cities, such as Lucknow. Expansion, like that of Parcos (of online presence in smaller cities), is making premium offerings more accessible to consumers outside of major metroploes.

Not only are offline retailers entering the online channel, but online retailers are also expanding in the offline space. Online retailer Nykaa, which led the online channel in December 2021, announced that it would open 300 stores nationwide and would expand its offline presence. Similarly, even D2C brand Mamaearth announced that it would focus on its offline presence by expanding to 100 cities from its current 70 cities. Analysts project that omnichannel retailing will remain the key priority for all major brands in beauty and personal care, but the question of online vs offline sales (which poses a greater demand) remains to be seen in the future. What’s certain is, with so many large retailers announcing their entry online, and online shops going taking foot offline, the competition is expected to intensify, making an already competitive industry even more heated.

CASE STUDIES

Baccarose has been a leader in the distribution of international luxury beauty brands for 40 years with a 60% market share. From establishing the very first fragrance counter in a department store in India in 1984, it is now present in 5,000+ points of sale in the country. The retail brand Parcos has recently launched Parcos.com, its online shopping destination for luxury fragrances and beauty products. With 55 stores and slated to grow to 100 by the end of 2023, the Parcos omnichannel ecosystem is the largest fragrance player in the retail front as well in India. Biju Anthony, CEO of Baccarose Perfumes and Beauty Products Pvt ltd. Says that, “My greatest learning over these decades has been

Biju Antony - CEO & ED, Baccarose Perfumes and Beauty Products Pvt Ltd. that India is an execution market and not a strategy market and having the right partner in India is critical for any luxury brand to succeed. The biggest have failed or have limited presence because of going on their own, or not having the right partner in India. Hence investing in right teams, processes and bringing international experiences.” Baccarose has created a robust digital ecosystem to propagate and deliver seamless and efficient service via Parcos.com, and aggressively building its own brand Chambor to spearhead the massive segment in the colour segment and re-establish dominance are on the cards. Licensee brands are also planned as well as launching more owned brands. From 22 brands, Baccarose now has approximately 70 brands and hence expansion is of key importance. Baccarose used the time during the recent pandemic to rethink its business strategy, to transform itself into a more lean and efficient organization. Parcos.com was launched in this period. Consumers have moved away from department stores to purchase beauty products either from speciality formats or from ecommerce. There is a considerable shift in the distribution formats for the Luxury Beauty industry. From Beauty Assistants driving advocacy now, it’s the beauty influencers who are fuelling demand and driving purchase decisions and trials via social media. Baccarose aims to deliver an omnichannel consumer experience. Community engagement through curated content IPs with influencers, educational content, social media, and more, is in the roadmap ahead. Beauté Luxe, a leader in the distribution of perfumes and cosmetics in travel-retail and domestic markets in Africa, has announced a partnership with Beauty Concepts, a giant in the distribution of perfumes and cosmetics in India. These companies will work to open travel-retail outlets which will bear the name Beauté Luxe.

David Dayan, CEO of

Beauté Luxe India

Beauty Concepts is the largest distributor in India with nearly 140 brands in its portfolio and many outlets across India. They now cover the entire spectrum of distribution, from mass market to niche, and have even opened their own stores to be able to ensure that luxury brand standards are met at all times. Rajiv Bahety, current President of Beauty Concepts, describes the company: “When we talk about Beauty Concepts, we tell the story of pioneers who envisioned the idea of offering Indian consumers the ability to easily find and purchase beauty products from all over the world, all over India.” Bahety’s words describe well the ethos behind much of what’s happening in the e-retail/e-commerce industry in India today—the key objective being, to bring the world’s products to the Indian consumer in small and big cities, alike. Looking ahead, Beauty Concepts plans to expand and increase the number of Beauté Luxe duty-paid stores in domestic airports, increasing their existing presence in some domestic airports in India. After opening the first Beauté Luxe store in Kolkata, three more stores will open between 2022 and 2023 in Cochin, Amritsar, and Indore. These stores will offer a travel-retail type of service with a unique concept: retail with experiential engagements & upscale services tailored to travelers with time-constraints,” explains David Danyan, the founder of Beaute Luxe.

TO CONSIDER: RURAL AREAS UNDER-PENETRATED

65% of the total Indian population still resided in rural areas in 2021, as per Economies and Consumers data. Although D2C brands increased, allowing nationwide access to products for both urban and rural consumers alike, there still needs to be a lot of work done on the part of companies wanting to reach customers in rural areas. Internet penetration and the adoption of online shopping is still not as high in India as in some other markets. Though it is expected to change, for now, companies are still limited to markets in less rural areas.

TOP TREND: CELEBRITIES LAUNCH THEIR OWN BRANDS

India has a large youth population that looks up to film stars and wants to purchase products that are celebrated or created by them. Celebrities launching their own product lines, especially in the fashion industry, has, therefore, always been commonplace in India. However, these celebrities are now also focusing on beauty and personal care. Katrina Kaif was amongst the first, launching the brand Kay Beauty in 2019 by collaborating with Nykaa. However, several others have since entered the industry, such as Masaba Gupta. This trend continued in 2021, with Indian Bollywood actress Deepika Padukone announcing that she would be launching her own lifestyle brand in 2022, with beauty products, including skin care. Along similar lines, in October 2021, South Indian film actress Keerthy Suresh announced the launch of the organic skin care brand Bhoomitra. The brand targets consumers who are seeking natural skin care products.

One of the highest-paid actresses in

India, Katrina Kaif attends the Nykaa Beauty awards 2020 in Mumbai, India

TOP TRENDS: SKIN CARE, MEN’S CAR, PERSONALISATION, CHILD-SPECIFIC PRODUCTS & NUTRACEUTICALS

The pandemic had a positive impact on sales of skin care products, globally. Home isolation shifted consumer priorities. As a result, more time and money is now spent on skin care routines and less on make-up. Around 50% of India’s female population falls in the age group of 30-year-olds and above, (according to Euromonitor International’s Economies and Consumers data). The opportunity for skin care companies to tap into this market is ripe. The per capita disposable income levels for females in India has increased by a 5% CAGR between 2016 and 2021, making the opportunity even more interesting for companies.

PuRChASE PREFERENCES FOR ONLINE BEAuTy AND PERSONAL CARE PRODuCTS IN INDIA

Effects on the skin

Fragrance

Effects on hair 4.1 5.5 7.4

Usage 3.1

Price 2.6

Hence, during the coming years, it is projected that anti-agers will experience solid growth due to the rise in demand and the expansion of the category, as more young women use these products. The Gen Z and Gen Alpha populations (groups of people that are born between 1995-2009 and 2010-2024, respectively) also represent a growth opportunity for brands. According to Euromonitor International’s Economies and Consumers Data, these age groups accounted for 47% of the total population in India as of 2021. This population base is known to be active on social media platforms, outgoing, and ready to spend on beauty. There are several brands that are emerging that are focused on these age groups. For example, in early 2022, a new skin care brand, Fabbeu, was launched that has a strong focus on the Gen Z population.

AYURVEDIC SKIN CARE

Globally, skincare brands that combine wellness, clean ingredients, and ethics of sustainability are in demand. In India, Ayurveda which brings together these elements are rising in demand and are projected to continue to be sought out. Consumers feel safe using products with Ayurvedic ingredients or processes, as they are natural, and hence have (what is perceived to be) no side-effects. Taking note of this, in 2022, Honasa Consumer Private Limited (HCPL) (which operates Mamaearth) and The Derma Co. together have launched Ayuga, a skin care brand based on Ayurvedic recipes. Collaborating with Bollywood actress, and yoga and wellness ambassador, Shilpa Shetty Kundra, the brand aims to tap into demand from millennials, who complain of hectic lifestyles. Shahnaz Husain Group expanded its portfolio of herbal and Ayurvedic skin care products and launched new products using Ayurvedic oils, as well as extracts of sandalwood, jasmine, rose, vetiver, aloe vera, wheatgerm, and almond. Lastly, in October 2021, Vedix, which focuses on Ayurveda-based beauty products, expanded its portfolio by launching skin care products for men, which include moisturizers and face serums.

MEN’S CARE

According to Euromonitor International’s Economies and Consumers data, as of 2021, 52% of the entire Indian population is male, offering companies a consumer base rooted in largest population segment in the country. This has resulted in several direct-to-consumer (D2C) brands entering the market in the last few years, such as The Bombay Shaving Company, Ustraa and Beardo. In addition, to offering traditional shaving products, these companies also offer products such as beard oils, body wash/shower gel, hair growth products, hair oil, fragrances and face serums, empowering men with skin care ranges suited to their varying needs. During the coming years, new beauty and personal care companies are projected to enter the category, especially those offering premium men’s grooming products for the modern man.

PERSONALIZATION

Personalisation has become evident in categories such as fragrances and colour cosmetics. For example, Givaudan Fragrances, Scentmatic, Firmenich and Ninu Perfume are a few of the companies that are leveraging AI technology in some capacity to enhance the consumer experience. Analysts project that more companies will work on offering recommendations and products driven by artificial intelligence, as this category becomes increasingly popular and in-demand globally, as well as more trusted by younger generations.

CHILD SPECIFIC PRODUCTS

Parents have become concerned about exposing their newborns and their sensitive skin to harmful chemicals. Hence, there has been a rise in companies offering safe baby-related products. For example, D2C company The Ayurveda Company recently launched a baby care range by the name of T.A.C Junior, that offers 100% Ayurvedic products. Along similar lines, Godrej Consumer Products also launched its own brand goodnessme in October 2021, offering baby care products that are manufactured using organic ingredients. Also, it must be noted that when it comes to baby-related products, parents are open to making slightly more premium purchases than what their pockets may actually allow. India was the country with the second largest population globally in 2021, after China. The country has a high baby population. As of 2021, 7% of the Indian population was in the age group 0-3 years (according to Euromonitor International’s Economies and Consumers data). Here again, India offers up another consumer base with a strong potential (to tap into), for those companies willing to meet the demand for natural baby products. Additionally, it must be noted that online & D2C brands gained momentum in regards to sales of baby products due to the pandemic. Traditionally, baby and child-specific products experienced solid sales through the offline channel, as young mothers preferred to look at products before making a purchase for their little ones. However, during the pandemic, parents made online purchases as they didn’t want to risk going out, and consequently, have themselves and their new-born contract the COVID-19 virus. With internet penetration increasing and mothers becoming more comfortable making online purchases, these brands are projected to see an additional push during the years to come.

NUTRACEUTICALS

The Indian nutraceuticals industry is now dominated by functional foods, followed by dietary supplements. The market for fortified foods and probiotics will be driven by this trend. Supplements of vitamins and minerals will see high demand in the forthcoming years. Herbal supplements and protein/amino acid supplements are expected to have similar market revenues in the future and collectively hold half of the market revenue. As per Future Market Insights analysis, the market for nutraceutical gummies, a preferred product format, is predicted to grow at a 15% CAGR between 2021 and 2031. Demand for nutraceutical excipients is predicted to increase at a CAGR of 7.10% between 2021 and 2031. In the future, the industry will benefit from rising sales of nutritional supplements and multi-functional excipients. Dry nutraceutical excipients account for more than 3/5 of all nutraceutical excipients consumed.

As an emerging market, India offers a wealth of opportunities for beauty brands ready to invest in an e-commerce omnichannel approach and a celebrity brand ambassador. Brands that incorporate top trends and meet consumer demands are most likely to succeed. The time to get in is now, as competition will only grow in the near future, and growth is still limited to urban or semi-urban areas.