Hair Care Sector Analysis

A Report on Hair Care Industry in India

STUDENTS: INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE

September 4, 2010
Authored by: Jatin Bhagat, K Sudharshna and Vardhan Singh
 Hair Care Sector Analysis
A Report on Hair Care Industry in India

Hair Care Product Sector in India

Evolution of the Hair care market in the country
“The Rs.85,000 crore FMCG market in India is growing at a fast pace despite of
the economic downtrend. The increasing disposable income and improved standard
of living in most tier II and tire III cities are spearheading the FMCG growth across
the nation. The changing profile and mind set of the consumers has shifted the
thought to 'Value for Money' from 'Money for Value'.”
The Indian hair care market is part of the burgeoning personal care sector under
FMCG in the country. A growing population with higher disposable incomes and
greater consciousness about appearance has made a strong case for the Indian
personal care sector.
Till 1991 personal care products in the country were treated as luxury goods and
had a huge excise duty of 120% attached to them (except oral care).Since then,
however gradual taxation relaxations has brought down the excise duty level as
low as 30%.This fact coupled with the paradigm shift of changing lifestyles of the
Indian middle class and growing income levels have made these products more
affordable.

Personal Care products include the following sectors

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• Hair care
• Oral care
• Skin care
• Cosmetics
• Female hygiene

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The annual personal care segment in the country is expected to be $54.6 billion as
of 2010 end. It is one of the highly marketed sectors in the FMCG category and
accounts for an astounding 20% share of the total television advertising in 2009

Out of which the split up of sub divisions was as follows

Hair care
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Market Analysis

It’s one of the fastest growing segments within the personal care sector along with
baby care and feminine hygiene. the growth in hair care industry is specifically
robust in the hair colorants category.
As of 2009 the sector as a whole generated total revenues of $1.4 billion
,representing a compound annual growth rate (CAGR) of 15.4% for the period
spanning 2005-2009. In comparison, the Japanese and Chinese markets grew with

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 CAGRs of 1.2% and 6.2%, respectively, over the same period, to reach respective
values of $4.9 billion and $2.4 billion in 2009.

Sales of conditioners proved the most lucrative in the previous year with a total
sales of $703 million and around 48.6% of the total market share.

This trend is expected to continue till the projected period of 2014 albeit a slower
growth rate in the latter years.

$ INR € %
Year million million million Growth

2005 817 39911 587.6

2006 938.4 445842.6 674.9 14.90%

2007 1077.4 52632.7 774.8 14.80%

2008 1248 60965.4 897.5 15.80%

T ABLE I INDIA HAIR CARE MARKET VALUE 2005-08
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F IGURE 1I NDIAN HAIR CARE P ERCENTAGE G ROWTH

Market volume
The hair care sector can be subdivided into hair care products and hair care
services. The latter is a growing trend with clinics such as Dr.Batra’s, Kaya’s skin
clinic etc across the nation. We shall however examine the former in this report.

Hair care products consists of the following major sub sectors

• Hair oils
• Hair shampoos
• Hair colorants & conditioners
• Hair gels
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 Source: data monitor
Major players
Hair colorants -Godrej, Garnier, L'Oreal, and Lakme.
Hair oils - HLL, Marico, and Dabur India
Hair oils -HLL, and Procter & Gamble.
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Consumer demarcation in Indian Hair Care Industry
Traditional Problems associated with the hair care sector
When the FMCG companies embarked upon hair care products they faced a
seemingly uphill task in changing the life style of the people .Indians were
traditionally used to oiling their hair with coconut oil and using either bath soap or
conventional powders such as shikkakai for washing their hair.
Hence hair care products were viewed as a luxury and often with mistrust an
attitude shown both by the consumers and reciprocated by the government. Over
the years a combination of increased awareness, growing income and aggressive
marketing has ensured a steady change in the consumer psyche and has resulted in
greater penetration of hair care products.
Preferences of hair care products is still dominated by personal lifestyle biases as
seen by the urban vs rural divide
Urban Indian: most do not prefer oiling their hair and hence hair colorants,
shampoos and conditioners are more favorable to them
Rural Indians: they still predominantly oil their hair and are increasingly switching
from local players to established ones due to fear of adulteration and aggressive
selling by the FMCGs. Usage of hair oil is a typical Indian traditional habit now
being increasingly restricted to the rural side. It is perceived to offer benefits of
nourishment, hair strengthening, faster and better growth, and reduce the problem
of falling hair.
This divide is also reflected in the major hair care players with HUL increasingly
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concentrating on after wash and colorant segment and Marico leveraging its hair
oil leader position with the take over of HUL’s Nihar by Marico.

Industry Analysis by Porter’s five forces

Buyer power
“The major retailers in the Indian hair care market are supermarkets/hypermarkets,
pharmacies and drugstores.” These have considerable negotiating power over the
FMCG majors because hair care constitutes only a small segment of the retail
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 stores’ product range. Backward integration is more of a common sight with the
use of private labels rather than forward integration.
The major hair care players have increasingly started niche targeting of customers
aiming at a greater loyalty and hence forcing the decrease in buyer power.
Supplier power

“Suppliers in the hair care market include manufacturers of chemical ingredients,

such as foam boosters, thickeners, conditioning agents, preservatives, modifiers,
and special additives, and packaging materials.

The main active ingredients of hair care products are surfactants, which are
typically derived from petrochemicals.”

The increased regulations by the government requires that the ingredients be

environment friendly which drives up the R&D cost and hence reduces the
suppliers’ power.

New entrants

Presence of existing multi national brands with high degree of economies of scale
acts as a huge deterant. However new entrants have increasingly adopted a strategy
of micro segmentation concentrating on a few niche markets.

Substitutes

Includes soap and its old nemesis of traditional Indian hair care products. However
with changing attitudes as previously elaborated threat of substitutes is
increasingly looking dumb.
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Rivalry

This is dominated by few big players who often, offer a wide range of products.
Robust market growth, customer loyalty and product diversification has helped to
ease the rivalry.

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GLOBAL HAIR CARE MARKET
The hair care product market is expanding like never before! According to a report
issued by Global Industry Analysts, Hair care is witnessing tremendous growth
primarily due to the increasing consumer emphasis on healthy hair, the catchword
being ‘Personal care begins with hair’. Hair care is one of the most competitive
segments in the toiletry industry. World market for hair care products is projected
to reach $42.5 billion by the year 2010, a growth of 19.6% over five years.

Men becoming more conscious of their appearance and devoting a larger portion of
their resources towards adorning their locks and looks, imparted a new dimension
to the hair care industry. Within the hair care products market, demand for
hairdresser-related products is greatly influenced by growth in disposable income
and changes in consumer spending and habits. Upscale professional products are
increasingly finding takers for home use. Demand is also on the rise for natural and
salon-based products. Ingredients gaining popularity include aromatherapy oils,
natural plant extracts, proteins, exotic botanicals, shine enhancers and products
fortified with vitamins and UV protection. Shampoo Market worldwide is
forecasted to grow at a CAGR of 3.35% over the years 2011 through 2015, as
stated in a recent report published by Global Industry Analysts, Inc. Conditioner
Market in Asia-Pacific is projected to reach $405.64 million by the year 2012.

Major players in the marketplace include Alberto-Culver, Aveda Corporation,

Beiersdorf AG, Henkel KGaA, John Paul Mitchell Systems, Neutrogena Corp, Kao
Corporation, Lion Corporation, L'Oreal, Procter & Gamble, Revlon Inc., Shiseido
Co. Ltd, and Unilever Plc, among others.

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 F IGURE 2 G LOBAL M ARKET TREND OF HAIR CARE I NDUSTRY

HAIR OILS

The hair oil industry in India is different as in the case against shampoos or any
other hair care product. The use of hair oils have been ingrained into the habits of
Indian people so the need of building a market for it is not required. However that
does not imply that the competition is any easier in 1800 crore Indian Hair Oil
Industry. Major competitors like Hindustan Unilever, Marico Industries, Dabur
India and Cavin Care have been out with a slew of products to vociferate their
presence in the industry. The industry is out against not only against each other but
also against natural oils like mustard oil and coconut oil which people have been
using traditionally over the years. The fact is manifested when we say that branded
players collectively account for only one-third of the total hair oil market up
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against loose oils.

The branded oil players or the Value added oil players are severely dependent on
the availability and price of their inputs. For example, the price of copra, the key
input in coconut based hair oils, has been a key factor determining the fortunes of
the major players in this segment. The coconut oil market accounts for 72 per cent
share in the hair oil market. In the branded coconut hair oil market, Marico (with
Parachute) and Dabur are the leading players.

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Conversion from unbranded to branded products and growth in the light hair oil
category is what is driving the Rs 5,770-crore hair oil market. Perfumed oil (Rs
2,930 crore) and coconut oil (Rs 2,110 crore) comprise the two main segments of
the hair oil market.

Volume growth for the hair oil category is currently pegged at 12.8 per cent and
value growth at 17.7 per cent.

However, it is the light hair oil segment within perfumed oil that is the fastest
growing segment recording a value growth of 23.8 per cent and a volume growth
of 14.1 per cent in 2009, according to The Nielsen Company.

Hair oils have primarily been the forte of Indian companies such as Dabur, Emami
and Bajaj Corp (previously Bajaj Sevashram). The various types of Hair oils in the
market are:

Coconut oil
Marico started branding in the coconut oil category with its Parachute brand in the
early 1990s. This led to the growth in the overall category that had been stagnating
earlier.

Parachute currently dominates the branded coconut oil segment which continues to
grow at 10 per cent.

The hair oil segment with perfumed oil (includes heavy amla oils, cooling oils and
light hair oils) and coconut oil accounts for more than 55 per cent of the larger hair
care industry (Rs 9, 150 crore) which includes shampoos (Rs 2,840 crore),
conditioners (Rs 80 crore) and dyes (Rs 1,190 crore).

Today, players such as Bajaj Corp are making a steady effort to move coconut hair
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oil users to light oils.

Light hair oils

The light hair oil category is dominated by Bajaj Almond Drops with a share of
46.8 per cent volume share followed by Dey Chemical's Keo Karpin at 21.5 per
cent and Marico's Hair & Care at 15.2 per cent.

In other categories such as heavy amla oil, where growth has been flat, it is Dabur
Amla which dominates the segment with a volume share of 69.5 per cent followed

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 by Marico's Shanti Amla Badam at 8.3 per cent and Dabur Sarson Amla at 5.8 per
cent and Bajaj Brahmi Amla with a 3.4 per cent share.

Cooling oils
The cooling oils segment also recorded robust growth at 21 per cent last year due
to Emami's Navratna hair oil brand spending heavily on advertising the brand.

Today Emami's Navratna leads in the cooling hair oil category with a 44 per cent
volume share followed by brands such as Him Gange (from GK Burman Labs)
with a 29 per cent share.

HAIR GELS
Hair gel market segment is at a primary stage and not many local brands are
available in India. Hair gels/creams are mainly used for hair grooming by men and
is used as a fashion accessory. The market penetration of hair gels/creams is very
low, and is limited to a small section of the urban market.

The major brands in Hair Gels for men are Brylcreem by Sara Lee and Parachute
After Shower Anti-Dandruff hair cream and Styling Gel by Marico.

Brylcreem was a well-known brand in India, the brand lost ground as it did not
come up with new offerings. After Sara Lee acquired the brand from Smithkline
Beecham in 1993, the brand was repositioned as a young, cool and upwardly
mobile one which helped in garnering more share.

In the hair cream market, Brylcreem had a market share of 42 per cent in 1996 that
has grown to 72 per cent in 2002. In the hair gel market, the brand in 1998 had a
market share of five per cent while now the share is 70 per cent.The increase in
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market shares also coincides with the growth of the men's toiletries market in
India, which is estimated to be in the region of Rs 250 crore.

Parachute Hair Styling Gel was launched in November ’06 meant for a younger
audience looking for a product that would help them look the part every day. The
gel’s natural ingredients not only helped in styling but also made them softer by
providing nourishment unlike any other gel. Parachute After shower anti-dandruff
hair cream was launched in March-06. The product was positioned as an all
natural product not only for styling but also boasted of 4 in 1 benefit i.e. Non-
sticky, Anti Dandruff, Works all day and prevents breakage.
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The market for Hair Gel for men is growing at a rate of 12 per cent to 15 per cent.

MAJOR PLAYERS
MARICO LIMITED
Marico Limited (formerly Marico Industries) is engaged in the manufacture, sales
and distribution of consumer products and services such as hair care, skin care and
health foods. The company's products and services are marketed in more than 20
countries in the Middle East, the Asian sub-continent, Australia and the US. The
company has 11 manufacturing facilities including six in India and five outside
India.
The company sells various hair care products under brand names such as
Parachute, Mediker, Shanti Badam Amla, Nihar, Starz, Oil of Malabar. In addition,
it markets two hair care brands under Hair & Care, a perfumed non-sticky hair oil
and Silk N Shine, a hair conditioner.
In 2009, the company launched Almond Gold non sticky hair oil with almond
proteins) under the brand Hair & Care, Parachute Advanced revitalizing hot oil and
Parachute Advansed cooling oil in the hair care product category.
Further, the company offers perfumed oils to consumers in Bangladesh and hair
creams and hair oils
(with lower coconut oil content) in the Gulf countries. Its products include
Camelia, Aromatic, Fiancee, Hair Code, Caivil, Black Chic, Hercules and Sundari.

Marico Limited generated revenues of $491.4 million in the financial year (FY)
ended March 2009, an increase of 25.4% over 2008. The company's net income
totalled $38.6 million in FY2009, an increase of 11.6% over 2008. During the
FY2009, the consumer products division recorded revenues of $454.5 million, an
increase of 23.7% over 2008 India, Marico’s largest geographical market,
accounted for 79% of the total revenues in FY2009. Revenues from India reached
$388.4 million in 2009, an increase of 19.4% over 2008.
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UNILEVER
Hindustan Unilever Limited (HUL) is India’s largest Fast Moving Consumer
Goods Company having product ranges across 20 distinct categories in Home and
Personal Care products.

Unilever is a global manufacturer and marketer of consumer goods in the food,

personal and homecare segments. Unilever operates under a dual structure. The
group has two parent companies: Unilever NV and Unilever plc. Unilever NV is a

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 public limited company registered in the Netherlands, while Unilever plc is a
public limited company registered in the UK and Wales. The two parent
companies, Unilever NV and Unilever plc, along with the group companies,
operate as a single economic entity: Unilever. It operates through subsidiaries in
Germany, Switzerland, France, the UK, the US, and China and has operations in
over 170 countries. The group's primary operating segment comprises three
geographic regions: Western Europe, The Americas and Asia-Africa Central and
Eastern Europe (CEE). The Americas region includes operations in North America
and Latin America. The Asia-Africa CEE region includes operations in the Middle
East, Africa, South Asia, South-East Asia, North-East Asia, Australasia and
Central and Eastern Europe. The Western Europe region includes operations in
France, Germany, The UK, Belgium, Italy, Netherlands, Spain, Denmark, Norway
and Sweden.

In April 2009, Unilever acquired TIGI’s professional hair product business and its
associated advanced education academies for a cash consideration of $411.5
million. TIGI's major brands include Bed Head, Catwalk and S-Factor.

Unilever generated revenues of $55.4 billion in the financial year (FY) ended
December 2009, a decrease of 1.7% over 2008. The company's net income totalled
$4.7 billion in FY2009, a decrease of 33.0% over 2008. During the FY2009, the
personal care division recorded revenues of $16.5 billion, an increase of 4.1% over
2008. The increase in revenues was attributable to underlying volume growth of
2.3%, driven by stronger innovation, advertising and promotional activities.
Asia-Africa CEE accounted for 37.4% of the total revenues in FY2009. Revenues
from Asia-Africa CEE, reached $20.7 billion in FY2009, an increase of 2.9% over
2008.

A total of 70 Million consumer packs from Marico reach approximately 130

Million consumers in about 23 Million households, through a widespread
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distribution network of more than 33 lakh retail outlets in India and overseas.
Marico's focus on sustainable profitable growth is manifest through its consistent
financial performance -a CAGR of 21% in Turnover and 27% in Profits over the
past 5 years- while setting a record of several consecutive quarters of year on year
growth- 43 for Profits and 39 for Sales.
The Marico scrip is listed on the Bombay Stock Exchange (BSE) (Code 531642) &
on the National Stock Exchange (NSE) (Code "MARICO")

DABUR
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Dabur India Limited (DIL) is a fast moving consumer goods (FMCG) company
that manufactures and distributes products in health care, personal care and food
products sectors. The company’s distribution network includes 50 carrying and
forwarding (C&F) agents, about 5,000 distributors and over 2.8 million retail
outlets all over India. It operates in India, Nigeria, Egypt, Nepal, Bangladesh, the
UAE and the UK. The company operates through three business units: consumer
care business, consumer health business, and international business.
The consumer care division (CCD) caters to seven distinct segments: hair care, oral
care, health supplements, digestives & candies, home care, baby oils & skin care
and foods. The hair care segment products include hair oils, mustard oil and
shampoos. These products are marketed under brands Dabur Amla, Vatika and
Anmol.

Dabur India Limited generated revenues of $583.9 million in the financial year
(FY) ended March 2009, an increase of 19.1% over 2008. The company's net
income totalled $80.1 million in FY2009, an increase of 17.1% over 2008.

Hair colorants & Conditioners

According to A C Nielsen (the world's leading marketing information company),
hair colorants, feminine hygiene, and baby care have accelerated growth in
personal care market.
Hair colorants are substitutes for hair dye to counter graying hair. Hair colorants
indicate strong growth trends with a YoY (year over year) growth of 8 per cent.
Gone are the days when hair conditioners and hair colorants were used
occasionally to look beautiful. Today, they have become the way of life. However,
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hair conditioners in India still face a difficult market due to long established habit
of using hair oil and ayurvedic treatments, as they are cheaper for consumers and
lack the chemicals of conditioners.
Hair colorants
Hair color market has seen a boom in recent years. L’Oreal, Godrej and Revlon
and Henkel-Schwarzkopf are some of the major brands in this country
Today, the total hair color industry in India is around Rs 650 crore. This is further
divided into the retail and the salon segment. The former is growing at over 20%
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 annually. According to market research Godrej’s market share at 40 per cent,
followed by L’Oreal at 15 per cent and Revlon at 8 per cent. Rest of the brands
make up the remaining 37 per cent.
Today, if there are more brands in the Indian market, it’s largely due to demand.
When hair colors first came to India, more than a decade ago, it was largely to
cover grey hair. But with the increasing number of youth in the country, it has
become a fashion statement, especially with the young and trendy.
Hair colors were traditionally aimed at the 15-45 age female segments. But market
research shows that there was a growing population of 15-45 males which
patronized the category in a big way.
Conditioners

The hair conditioner market is estimated at around Rs 200 crore and is growing at
about 40 to 50 per cent a year.

In India, the share of hair conditioners is merely one-fifteenth of the shampoo

market. In most mature markets, the share of hair conditioners is about one-third.

Hair shampoos
Hair shampoo market in India is pegged at Rs 2,200-crore but it has fragmented
where the smaller players in the market such as Dabur India and CavinKare have
registered sizzling growth rates recently.

According to industry data, while value growth achieved by the industry in the first
nine months of the financial year 2009-10 slowed down to 9.3 per cent compared
with the 15.2 per cent growth recorded in the comparable period of the last year,
Dabur, with a growth of 19.4 per cent in the nine months of 2009-10 outpaced
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market growth, while CavinKare, with brands such as Chik and Meera, too
registered a 11 per cent growth. Market leader Hindustan Unilever's growth in
shampoos this fiscal was, however, slower than the market at 7.8 per cent.

In fact, Johnny-come-lately brands from ITC such as Fiama di Wills, Vivel and
Superia, with a growth rate of 10.5 per cent have outpaced category growth in the
first nine months of this fiscal. ITC's brands also carved out a two per cent share of
the market.

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Dabur's brands have seen 20-30 per cent growth rates for the fourth year in a row.
It has stuck to its strategy of offering shampoos which are natural products.
Besides that it has added more variants to its Vatika range — earlier it had only
two variants but added root strengthening and hair fall control shampoos.

Vatika also had a packaging makeover and extended the brand to hair oil as well,
which makes it a complete hair care brand.

The Rs 2,200-crore market for shampoos also includes Rs 600 crore of anti-
dandruff shampoos.

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Hit by food inflation

In the case of CalvinKare, the slower growth in the shampoo market this fiscal was
due to the spiralling food inflation, which impinged on disposable incomes, as well
as the delayed monsoons last year. The company's brands still grew better than the
last year – growth at 11 per cent the first three quarters of this fiscal bettered the
8.1 per value growth in the comparable period last year (see table).

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 Given the lion's share of the market HUL has, even though its growth was slower
than the others, its value share of the market only dropped marginally from 46 per
cent to 45.4 per cent. Dabur increased share from 5.6 per cent to 6.2 per cent, while
CavinKare too saw a marginal increase in share from 11.1 per cent to 11.2 per
cent.

Still HUL leads the overall shampoo market with a 45.4% share. Clinic, its biggest
brand, has approximately 34% share, followed by Sunsilk at 10.9%. Other hair-
care brands from HUL’s basket include Lakme Hair Next at the mass-premium
level, Lux with a limited presence in the category and ayurvedic brand Ayush
which is sold through the company’s direct selling arm.

The domestic shampoo market is majorly split into three distinct tiers by price. The
top-end constitutes new entrant Dove, L’Oreal, P&G’s Pantene and Head &
Shoulders, HLL’s Sunsilk, L’Oreal’s Garnier Ultra Doux and Dabur’s Vatika.
Average price points in this segment range from Rs 115-240 for 250-ml bottles.
While L’Oreal and now Dove are at the top of the heap, Pantene and Head &
Shoulders occupy the next rung of pricing, followed closely by Sunsilk, Vatika and
Garnier Ultra Doux constituting the bulk of the market. HLL’s Clinic Plus and
P&G’s Rejoice are at the mid level (price points: Rs 55-60 for 200 ml), while low-
tier brands include Ayur and Chik. Sachets at price points of Rs 1, 2 and 3,
meanwhile, continue their stronghold specially in semi-urban and rural markets.

The Dove hair-care range, positioned as `premium niche’ similar to its soap
variant, comprises shampoos, conditioners and leave-ons.

Future Research
This report aimed at broadly reviewing the hair care industry in India and its
growth pattern in the last few years. We have analyzed the hair care industry as a
Hair Care Sector Analysis | 9/4/2010

whole under the framework of porter’s 5 forces analysis. We also have covered
different categories of products under hair care, their growth patterns and the key
industry players in each category. In the subsequent report, we will come up with
the consumer surveys, market innovations and the segmentation, targeting and
positioning framework for a new entrant to invest and thrive in this particular
industry.

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References
F32ADB7B-0B84-44EF-9034-709BA74E7650-1-data monitor report on the hair
care sector in india
http://www.superbrands-news.com/2005/05/27/hair-colour-market-booms-
india.htm
http://www.reportbuyer.com/consumer_goods_retail/cosmetics_grooming/indian_f
mcg_industry_outlook_2013.html
http://www.equitymaster.com/research-it/sector-info/consprds/consprds-
products.html
http://www.cosmeticsdesign.com/Products-Markets/World-hair-care-market-
victim-of-its-own-success
http://www.naukrihub.com/india/fmcg/overview/hair-care/
Global Industry Analysts, Inc., (GIA) Hair Care Report
http://www.thehindubusinessline.com/2010/04/22/stories/2010042251110500.htm
http://www.hinduonnet.com/businessline/iw/2001/01/21/stories/0521e051.htm
http://www.marico.com
http://www.hul.co.in

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