Changing Lifestyle Lends Thrust To Cosmetics, Toiletries Sector

Traditional ways of life are fast yielding to the new lifestyles among the rising Indian middle class. This segment is now expanding fast is the real backbone of the cosmetics and toiletries industry. The industry is growing at a clip of 15 per cent a year.

The turnover of the sector is estimated around Rs 1,780 crore (Rs 1,547 crore) up 15.1 per cent in 1995-96. The turnover stood at Rs 1,357 crore (Rs 1,180 crore) in 1993-94. The share of cosmetics and toiletries in the total turnover of cosmetics, toiletries and soaps and detergents has been around 23 to 25 per cent during 1992-93 --1995-96.

 

The cosmetics and toiletries market has two major segments :first the hair care products, skin care, talc, men's toiletries, decorative and fragrance and second the natural products including essential oils and aroma.

The natural products segment is worth about Rs 500 to Rs 550-crore. As awareness about the therapeutic values of herbs grows, the natural products segment may see a better growth in the near future.

The market for cosmetics and toiletries shows the influence of different income categories among the middle class. It is almost customary for the upper income individuals to make greater use of lipsticks, nail enamel, cream, shampoo and some other toiletries regularly.The good old shaving sticks have been replaced by fancy shaving creams or shaving gel, even as talcum powder and dusting powder packs push face powders off the racks.

The Indian cosmetics and toiletries industry is dominated by the multinationals yet few of them have made it to the international market in a big way. This is evident from the export performance.

Total exports of cosmetics and toiletries rose a measly 3.6 per cent to Rs 419.2 crore (Rs 404.5 crore) in 1995-96. Exports of essential oils has reached Rs 104.2 crore (Rs 90.6 crore) up by 15.1 per cent in 1995-96. East Europe and North America account for nearly 25 per cent of the total export market (Rs 125.1 crore and Rs 117.6 crore) followed by West Asia with 24 per cent (Rs 117.6 crore) and West Europe with 20 per cent (Rs 97.9 crore).

The fact is this industry has export potential but needs incentives to make its presence felt in the highly competitive international market. The government realising the fact has taken a few initiatives to boost the growth of the industry in domestic as well as in international market.

In the last three to four budgets the central excise duty on cosmetics and toiletries has come down from 120 per cent to 40 per cent. Data compiled by the Indian Soaps & Toiletries Makers Association shows that lower excise duty from 50 per cent to 40 per cent in 1995-96 budget led to a rise in actual revenue collection.

During April-June 1996 the gross excise duty was Rs 30.8 crore (Rs 23.5 crore) and the net excise duty Rs 15.7 crore (Rs 21 crore). The difference being the Modvat credit availed of by the companies.

Lower price improves demand as these products are price elastic. However the alcoholic toiletries do not enjoy the same privilege. Even though the central excise duty is same as on the other products the state excise duty on the alcoholic toiletries is as high as 100 per cent.

Subhash N Kelkar, general manager (Technical), Baccarose Perfumes & Beauty Products, said, "In India, especially because of tropical conditions, certain alcoholic toiletries like deodorant, eau de toilette and eau de cologne are a must but are out of reach of common man because of pricing.

"In fact for the alcoholic products if the state excise is brought down on a par with central excise duty i.e. 40 per cent it will definitely stimulate tremendous growth of the industry and would ultimately lead to higher excise collection."

The financial performance of the 12 select companies shows that the sales income went up by 18.8 per cent to Rs 6,254.9 crore(Rs 5,265.1 crore) in the year to March 1996.

Except for J L Morison all other eleven companies did well in sales .Operating profits of 12 companies rose by 22 per cent to Rs 890 crore(Rs 729.8 crore). Procter & Gamble, Indian Shaving Products, Bausch & Lomb, My Fair Lady and Godrej Soaps managed good performance.

Gross profits of 12 companies rose to Rs 785.2 crore(Rs 646.4 crore). up 21.5 per cent. Procter & Gamble, Hindustan Lever, Indian Shaving Products, Fem Care Pharma and My Fair Lady did well. Net profit of the 12 companies rose to Rs 482 crore(Rs 398.9 crore) up by 20.9 percent. Seven multinational companies improved their net profit.

Profit margins of the select 12 companies improved marginally. Operating profit margin rose to 14.2 per cent from 13.9 per cent, gross profit margin to 12.6 per cent (12.3 per cent) and net profit margin to 7.7 per cent (7.6 per cent).Lakme Ltd could not be included in the study as its figures are not comparable to those of the previous year on account of transfer of sales and marketing business of cosmetic division to Lakme Lever Ltd with effect from January 1, 1996.

Adspend and sales promos play an important role in shaping demand for cosmetics and toiletries. In a way, these products pose a challenge to the advertising and packaging skills as aesthetics and economics need a delicate balance.

Slick packaging and catchy copy to attract the youth call for innovation and proper product pricing for good economics.

However, the industry sources feel that the packaging has not made much progress in terms of quality . The bottle design , cartons & sticker labels do influence the choice of products.

The major bottleneck in the packaging component is that it is dominated by the small scale industry which lacks sophisticated technology and capital base.

If the industry manages to break through such hurdles the prospects for the industry are really bright. The Indian cosmetics and toiletries have a vast untapped potential in herbal cosmetics segment.

Roshan Wadhera, proprietor-managing editor, Wadhera Publications, says, "Now is the time, with ever increasing prices of alcohol products & invention of foreign brands, we have to encourage & develop herbal cosmetics. Price wise it would be competitive and also that they are free from any side effects".

The growing popularity of herbal cosmetics in the Far and Near Eastern countries like Singapore, Hong Kong and Japan is a testimony to this fact. It will certainly be a matter of time before the Indian cosmetics and toiletries make a mark in the global market.