Multinationals' new oil regime

The growth in premium, value-added oils has stoked their interest as other categories saturate

Once abandoned by international consumer product companies, hair oil appears to be back on their radar. LÓreal launched its Six Oil Nourish recently with Katrina Kaif as the brand ambassador, the first campaign by the actress since switching over to the French major from Pantene, the shampoo brand of American giant Procter & Gamble that she had endorsed for the last few years.

This will be the third hair oil from LÓreal. It had launched one last year under Garnier's Goodbye Damage range. The first hair oil was launched more than a decade ago under its Ultra Doux range,but was discontinued.

"But the step-up in focus as far as hair oils goes has happened only now," admits Satyaki Ghosh, director, consumer products division, Löreal. "The value-added segment is growing prompting the action," he says.

In professional products, LÓreal has been steadily adding hair oils under brands such as Keratase, Matrix and LÓreal Professional. These products are typically sold at salons, where LÓrealhas a strong reach.

But the French major is not the only firm to be tapping the hair oil market. The country's largest FMCG, Hindustan Unilever, launched the Dove Elixir hair oil last year, years after off-loading Nihar, a coconut oil brand, to Marico. At that time, HUL had said that Nihar was non-core to its portfolio, hence its sale.

Why the new oiling regime?
Growth. The value-added hair oil market, which commands a premium over plain oils, is evolving. According to market experts, this segment today is bigger than the core coconut oil market within overall hair oils. In value terms, it stands at Rs 4,701 crore or 58 per cent of the Rs 8,105 crore hair oil market. Coconut oil, on the other hand, stands at Rs 3,404 crore. The value-added market is also growing faster than coconut oils, prompting multinationals to step into the space.

Ghosh says, "Growth is in double-digits, which excites us."

There are other factors, too, prompting this spurt in interest from MNCs. "The value-added oil segment is not as commoditised as cocout oil is. Some companies may not have the expertise to manage the fluctuations in agri-commodity prices, making it easier for them to consider the value-added segment instead," says Abneesh Roy, associate director, research, institutional equities, Edelweiss.

Factors such as propensity of consumers to spend in urban areas is fueling this trend, says Kaustubh Pawaskar, analyst, FMCG at Mumbai-based brokerage Sharekhan.

Local companies stay put
But Indian companies are not sitting idle. Marico's MD-designate Saugata Gupta says that his company has an ayurvedic hair oil aimed at reducing hair fall in the south and west of India. Products such as these, experts say, could be scaled up as Marico eyes growth from value-added products. Similarly, companies such as Bajaj Corp and Dabur have a portfolio of products in the value-added space and are pushing these aggressively. Ghosh says, "This space is evolving fast and I expect more players, both international and local, to step in."

Apart from standing for better scalp nourishment, managebility and shine, companies are excited by the value-added segment because of its price premium. A 100-ml bottle of coconut oil is available for Rs 27-30. In contrast, a 100-ml Löreal Six Oil Nourish or Dove Elixir hair oil is nothing else than Rs 199 per bottle. Hair oils under professional brands such as Keratase are even more expensive given that they are targeted at a select group of people who frequent high-end salons.

New value additions
Most companies are also beginning to invest heavily in research and development to provide the best oil nourishment to consumers. "Consumers are becoming discerning, which means you can't take them for a ride when it comes to ingredient selection. Many consumers, especially are aware of what each product brings to the table. So companies have to be careful," Roy of Edelweiss says.

Companies such as LÓreal and HUL are pulling out all stops when designing these products. HUL, for instance, has three variants under its Elixir range including a rose and almond oil, a lavender and olive oil and a hibiscus and argan oil. The most commonly-used and popular ingredients for most players, however, include almond and olive oil. Among ayurvedic ingredients, it is amla, shikakhai and reetha.