Marico's Kaya turns to smaller outlets to drive growth, cut cost

Kaya, the skin solutions arm of Mumbai-headquartered Marico Ltd, is to launch smaller outlets in the fourth quarter of the financial year, in a bid to drive penetration and cut costs.

The move comes at a time when Kaya has been looking to break even, 10 years after it was launched. While the business contributes about seven per cent to Marico's top line, it continues to be a drain on the company's bottom line, incurring a loss of Rs 29.1 crore at the PBIT (profit before interest and tax) level in the last financial year.

The plan, according to Kaya’s Chief Executive Officer Ajay Pahwa, is to have a scalable model at half the cost incurred to set-up the regular outlets, which are called Kaya Skin Clinics.

The latter, according to company executives, requires an investment of approximately Rs 80 lakh an outlet.

The area of these outlets typically starts from 1,000 square feet onwards.

SHRINKING TO EXPAND

• Kaya, the skin solutions arm of Marico Ltd, is to launch smaller outlets in the fourth quarter of the financial year
• Kaya contributes about 7% to Marico's top line, but continues to be a drain on the company's bottom line
• Marico’s game plan is to have a scalable model at half the cost incurred to set up the regular outlets

The new, smaller-format stores, Kaya Skin Bars, would cost Rs 35-40 lakh each to set up, with the focus on offering more products than services, and the head-count capped at three per outlet as against eight to 10 people that man the regular clinics.

The area of these new stores would be under 500 square feet, Pahwa says, and would kick off in cities such as Bangalore and Delhi, before moving to places such as Mumbai, Pune and Kolkata.

In five years, says Pahwa, the endeavour is to have 150-200 of these smaller-format stores — more than double the number that Kaya has seen in the last 10 years.

Currently, Kaya has a total of 107 clinics in India, West Asia and the Far East, including countries such as Singapore and Malaysia. Besides cutting losses, the newer smaller-format stores are expected to give a further boost to Kaya's topline, growing at over 30 per cent per annum.

The division closed the 2011-12 financial year with revenues of around Rs 300 crore.

The market for premium skin care is pegged at Rs 600-700 crore in India, growing at 20-25 per cent per annum. LÓreal, which promotes brands such as Kiehl's, Vichy and Body Shop; Clinique, owned by Estee Lauder; and Dermalogica, promoted by the International Dermal Institute, are some of the operators in the space.

One of the home-grown players, besides Kaya, is VLCC, which in the last few years has stepped into premium skin care largely by offering its own range of products.

Pahwa says that a combination of offering products as well as services sets Kaya apart from the other players, which are exclusively focused on offering products.

"While the doctor-led services will not be available at the smaller outlets, a few key services will be there besides a wider range of products starting from Rs 300 going up to Rs 3,000," Pahwa said.

Approximately 54 different products addressing skin-related issues will be available at the smaller outlets.

This is an addition of 18 products to Kaya's existing range available at its regular skin clinics.