Cosmetic Industr y

MARKETING MINI PROJECT THE COSMETIC INDUSTRY AN ASSESSMENT OF THEIR MARKETING STRATEGY

By Iswarya Ramesh 3511210448 Vijay Shankar Sonia Jacob Savadh P Janaki Raman Apoorva Singh 3511210449 3511210455 3511210477 3511210492 3511210494

Shyam Srinivasan 3511210503

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What are cosmetics? Cosmetics are any substances which are used to cleanse, change or enhance the appearance of the skin, hair, nails or teeth. Cosmetics are of two kinds namely: a) Beauty preparations like make-up, perfume, skin cream, nail polish and b) Grooming aids like soaps, shampoos, shaving creams and deodorants. Certain products which have cosmetic value are considered under a different category because of certain effects or constituents that they possess. Products that claim to have a therapeutic effect or that contain certain active ingredients not allowed in cosmetics are considered to be drugs, for example, topical antibiotic creams while those containing natural active ingredients are considered to be natural health products. Insect repellent lotions and sprays are pesticides and not cosmetics. Cosmetic market Cosmetic Industry is a part of the FMCG (Fast Moving Consumer Goods) industry and forms a part of personal care which constitutes about 20% of the total FMCG market.

FMCG market

Personal care 20%

Other FMCG Categories 80%

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Cosmetic Market in India A Glance Global cosmetic giants are attracted to Indias favorable demographics. The urban Indian women are becoming increasingly conscious about their style and looks, with great emphasis on lightening of skin tone. Skin care and color cosmetics have witnessed solid growth for the last few years. Lip products form a majority of the color cosmetics market. Hindustan Unilever is Indias largest cosmetics company, followed by LOreal Skin care and cosmetics account for more than Rs.18.5-billion market size while the hair care market is worth more than Rs.80 billion. Among the entire range of products that fall within the territory of the Indian cosmetic and toiletries market, the most popular items are color cosmetics(for women) of which nail varnish, lipsticks and lip glosses account for the maximum sales. Skin care cosmetics (for both men and women) such as anti-wrinkle creams, cleansers and toners are not as popular as facial creams, moisturizers and fairness creams in this genre. The emergence of a young urban elite population with increasing disposable income in cities, an increase in the number of working women, changing lifestyles, increased affordability of lifestyle-oriented and luxury products, mounting aspirations, influx of satellite TV, increasing appetite for Western goods, and greater product choice and availability are the main drivers of demand for imported cosmetic products. Target market The target market in India has been mainly women in the past few decades. But during the last decade there has been a substantial increase in the use of cosmetic products by men. In 2005, Emami created history by launching Fair and Handsome, a fairness cream for men, which dominates the market with close to 70% market share. Followed by Hindustan Unilever, LOreal (Garnier) and Beiersdorf (Nivea) have introduced products specifically for the male grooming sector. Hair grooming and styling is the latest growth in the country. Brylcream, Paras Pharma (Set Wet) and Gatsby are some of the emerging brands that are market players in this segment.

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Players in the global market The most dominant players in the market are RANK NAME LOGO (2012) 1 Olay 2 Avon 3 Loreal 4 Neutrogena 5 Nivea The Indian Market The Indian cosmetics market, which had a few few major players like Lakme and Ponds, has a lot of foreign entrants within the last few years like Avon, Burberry, Calvin Klein, Cartier, Christian Dior, Este Lauder, Elizabeth Arden, Lancme, Chambor, Coty, LOral, Oriflame, Revlon, Yardley, Wel la, Schwarzkopf, Escada, Nina Ricci, Rochas, Yves St. Laurent, Tommy Hilfiger, Max Factor, Max Mara, and Shiseido have entered the Indian market and prove to be a tough competition for the local brands. India allows entry of imported cosmetics without any restrictions. Indias import of cosmetics and beauty products and intermediate raw materials such as essential oils is currently around $400 million and mainly from France, Germany, the UK and the U.S. Foreign products have seen extensive growth in the Indian market because Indians consider foreign products to be of superior quality. According to industry sources, the total size of the Indian retail beauty and cosmetics market is currently estimated at $5.8 billion, with fragrance comprising the largest component.

BRAND VALUE (USD $ MILLIONS) 1175611,756 79017,901 77447,744 62486,248 55745,574

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Personal care
Cosmetics Fragerance Hair Care Skin Care Beauty Services Herbal Products Others

7%
9% 13%

14%

21%

17% 19%

. Market capitalization The total Indian beauty and cosmetic market size currently stands at US$950 million and showing growth between 15-20% per annum and the overall beauty and wellness market that includes beauty services stands at about US$2,680 million ( Confederation of Indian Industries (CII)). Market Segmentation

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Market Size for Decorative Cosmetics Sector The decorative cosmetics can be further dived into sub sectors namely: Facial make-up, Eye make-up, Lip products and Nail products. . According to industry sources, the total size of the Indian retail beauty and cosmetics market is currently estimated at $5.8 billion. Facial Make-Up Face make-up holds the largest value of share among the decorative cosmetics ranges; it has increases from 40% in 2008 to 42 % in 2009 over all. The growth rate was at constant increase. The growth in facial cosmetics continues to be driven by innovations in formulations and constant customer support, particularly those promising anti-ageing properties and facial moisturizers has brought revolutionary changes in the cosmetics sectors. Eye Make-Up Eye make-up includes mascaras, eye shadows, pencils, kohls, and eye shades. The sales of eye make up products have increased compared to the previous year. Mascara is the largest subsector in the eye- make-up cosmetics, the sale in which accounts more than half of the value of retail sales of eye make-up. Lip Products Lip Products includes lipsticks, glosses and lip shades, etc. The retail sales value of lip products had increased since 2010, however, the growth of lip products was at a slower rate than other categories of decorative cosmetics such as face and eye make-ups. However, they do contribute only to a smaller percentage to the total. Nail Products Nail products in India is one of the important subsector in decorative cosmetics. This product subsector regularly suffers adverse publicity due to health hazards from ingredients commonly found in nail polish and polish remover, which may affect volume sales and individuals health. However the consumers are not influenced by these reports in spite of complaints.

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Marketing mix The acute distinction between the premium and mass-market facial care is often determined by its nature of the product. The majority of the value of retail sales comes from products perceived as premium or sub-standard by their price, brand image, promotion and method of distribution. The 4Ps of the cosmetic industry which constitute to the marketing mix are as follows Product Cosmetic products are well known among all the classes of women and men. Cosmetic companies have been offering specialized products and opting for online retailing to attract new customers. Cosmeceuticals and Nutricosmetics are one of the few emerging trends in the Indian cosmetics market.

Product Categories Consumer products: Products given to the consumers at competitive prices through mass market retailing channels ranging from hair care, skin and nail care, make up and perfume products that meet the demands of these consumers. Professional products: Products designed, especially for salon and parlor professionals with products ranging from hair colorants, hair treatment and styling products, facial kits, skin and nail care formulas. Luxury Products: Providing specialized products by providing personalized advice at the time of sale and available at selective retail outlets. Active cosmetics: Dermo cosmetics are available at certain retail outlets and pharmacies which offer consumers proven safety and used under the advice of a pharmacist or dermatologist.

Image: The product categories for Loreal brand

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Price Indian consumers always want high quality of goods but may not be willing to pay high prices. Understanding the attitudes, preferences and aspirations of the different segments of Indias consuming class is very crucial to achieving success in the Indian market. Given the price-sensitivity of the Indian consumers, many cosmetic and toiletries companies have re-launched their products in smaller pack sizes to make them more affordable. Revlon went to the extent of introducing a small-range of 8ml nail polishes and lipsticks, and was soon followed in its strategy by many Indian companies as well. Small pack sizes have proved to be very popular in the Indian market as they offer consumers a lower purchase cost that they can afford and, at the same time, the opportunity to try new products. Place The cosmetic industry follows both direct and indirect distribution. Direct sellers expand their reach by deepening their networks of distributors across second-tier and third-tier cities. Direct selling companies such as Avon, Oriflame and Modicare continue to build greater awareness by introducing brand new offers each month. Due to their continued efforts to connect with consumers and launch products at every price point, these companies strongly increased their value sales. The cosmetics are also sold through retailers and also available in supermarkets, malls and departmental stores. Cosmetics are also sold through specialized stalls within large markets with personalized consultation while selling. Cosmetics that are popular having high level of brand awareness, sell their products through specialist websites, for e.g. Mac.com. Subsequently, these websites are often interfaced which other networking sites such as Face book and Twitters. Not only do these sites offer products for sale, but some also offer consultations with experts, advice and gossip at a discount rate. This combines a shopping trip to a beauty shop with reading an online `magazine Promotion Promotion represents all of the ways a company communicates with a customer. It includes advertising, selling, public relations, trade shows, direct mail, and other
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communication techniques. Successful promotions are intended to change beliefs or increase awareness, knowledge, and purchase intent among potential buyers. Some advertising techniques used are Aspirational Advertising, Celebrity endorsement, socially responsible advertising, unique selling points, scientific evidence, fear, advert composition and advertising to minority markets. Marketing strategy The marketing strategy that is very specific for the cosmetic industry is internal marketing which is important for the salesperson to represent a brand. The enthusiasm, product knowledge and attitude toward the products will be conveyed to potential customers during interaction with such sales personnel. Having employees who use and love the brand that they are marketing and have a good attitude toward the company are as important as external marketing. They will help spread the word about the products not only at work, but off the job to friends and family as well. Factors affecting consumer decisions

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There are many factors affecting the consumers decision while buying a product. Culture One major factor significantly influencing the consumer behavior of an individual is culture. European markets being the home market for LOreal there is a vast difference between Indian market in terms of history, cultures and level of development. Cosmetics meet the esteem needs of people as cosmetic assist them in improving their image to gain acceptance, or to gain social status or social recognition. Esteems needs being high up in the hierarchy of needs, the Indian culture has a huge impact on psychology and consumer purchase decision making process at all levels. Personal Factors Changing Demographics India has a young and rapidly growing population with most of the population below 35 years of age unlike many countries where the aging population exceeds the young population creating high dependency ratio. It is expected that this new generation will result in an overall increase of 70% of Indian GDP. Since increasing number of women in the age group 22 to 45are becoming independent and joining the work force instead being house wives there is more demand for cosmetic products. These women have the disposable income and the decision making power to buy what they want. This has resulted in high demand for cosmetics in India. With the increasing literacy rate, Indian consumers are becoming more conscious about personal grooming and the demand for highquality cosmetic products has increased rapidly. Hence, there is a huge demand for world-renowned brands of cosmetic products in India

Demand for Luxury Cosmetic Brands With the rapidly increasing number of millionaires in India, the market for luxury brands is growing annually at a compound average growth rate (CAGR) 35% especially since the emerging young urban populations of India, combined with high disposable income are increasingly looking for lifestyle-oriented and luxury products with an internationally recognized brand. India has the 3 rd highest brand conscious population in the world. LOreal being an internationally recognized
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cosmetic brand has introduced luxury product lines such as Lancme, Bodyshop and active cosmetics such as Vichy to India. Perceptions Color Selection The culture has an impact on peoples perception of shapes, colors and space. People interpret different colors based on their job, age, gender, status or even religious beliefs. For an example red is considered to be a color of celebration for Indians where black is considered to be color of mourning. When producing color cosmetics these perceptions are taken in to account as it drives the consumer demand. LOreal has large range of color pallets to suite specific Indian consumer preferences. For an example introduction of gold, jade, Indian pink, turquoise, orange and browns for Indian cosmetic markets. Fair Skin Syndrome Almost all cultures around the world have a preference towards fair skin tone. The desire for pale skin amongst Indians is emerging from the history because of the cast system. In addition to this history colonization by lighter-skinned invaders from the west for 200 years, the concept of fairness being superior is embedded deep within the Indian psyche. Skin lightening creams are by far the most popular categories in India skin-care market and valued at $318M.L'Oral has identified this huge market potential and has entered this specific market 1st withGarnier and next with their super high end line Vichy. However, LOral products so far have a small market share. The major players in this segment are Lakme, Ponds, Fair & Lovely followed by players such as Nivea, Godrej and Revlon. Beliefs and Attitudes Harmful chemicals in cosmetics Customer possesses specific belief and attitude towards various products mostly driven by cultural norms. These beliefs and attitudes makeup brand image and affect consumer buying behavior. Even though cosmetic products are regulated and tested prior to be made available in the markets consumers are still afraid of chemical substances present in them. Since consumer protection regulations with
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regards to cosmetic product are not present in India, Indian consumers are much more reluctant to accept safety of cosmetic products. . Social Factors Boom in Salon Care The out-look towards personal grooming and beauty is changing in the Indian society. Beauty is no longer for the rich and famous. With the boom in the salon and spa industry there is large demand for salon and spa care products in India. LOreal salon care products lead in this industry because they were the trend setters where they opened up the LOreal Hair & Beauty Academy to train salon professionals. Today, L'Oreal markets its range of specialized hair care products exclusively through salons and beauty parlors. Bollywood Influence on Cosmetic Industry Indian film industry Bollywood has a tremendous influence on the growth of the cosmetic industry in India. Actors and actresses are considered as style icons of youth of India. Brand Ambassadors of these cosmetic industries like Sonam Kapoor or Aishwarya Rai who promote Loreal are also idols and hence increase sales for the particular brand. Trends Trends are long lasting because they emerge from collective needs of consumers that are part of their culture. With the popularity of satellite Television and a wide variety of television channels as well as Internet, more and more Indian consumers are constantly exposed to wide variety of global cosmetic brands creating more brand awareness which often translates to sales. They are linked to consumers behavior and psychological patterns that reflect their unique culture. Hair Care and styling Dark Eyes, long black hair are two things that are considered as attraction in the Indian culture. At present 85% of Indian women have long hair. Most young girls are encouraged to wear their hair from young age. When maintaining long to medium long hair, hair fall and breakage are main issues faced by Indian women. In the past hair care meant oil massage and shampoo, now more and more users have started adding conditioners to their hair care list. They do like to use
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hair serums as a way to tame frizz and improve shine. LOreal has introduced Total Repair 5shampoo and conditioner to meet these specific consumer demands. Due to increase in awareness, with more available global fashion trends, Indian consumers are more open to styling their hair by, perming, colouring, straightening ,re-bonding or even using hair spray, gels and hair crmes. Brand Loyalty Hard Core Loyal - who buy the brand all the time. Soft Core Loyal - loyal to two or three brands. Shifting Loyal - moving from one brand to another. Switchers - with no loyalty (possibly `deal-prone', constantly looking for bargains or `vanity prone', looking for something different) The factors affecting brand loyalty are Brand name, Product Quality, Price, Design, Store Environment, Promotion and service quality.

SWOT Analysis of the industry STRENGTHS: Operative communication: Diverse use of cosmetic has increased the communication globally and mitigates the local market risks. For e.g. Avon is a global player in cosmetic industry. Innovation: The new inventories in cosmetics has increased its demand, like recently lakme launched a new kajal which is eye conic and non smudging for 10hours, is a new way to attract the customer and off course a new innovation. High R&D: R&D helps to better test the products before launching it into the market. It also protects the company from law suits and it also helps them to make and create better products for the consumer by being tested for various factors. Strong Brand Equity: Strong brand equity help to dominate the market and help to gain customer trust for the brand , it also protect the company from any major drops in stock exchanges and help to trade around the globe.

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The cosmetic industry has gained momentum over the years hence there is a high demand for products. WEAKNESS Marketing: They market their product at first as a superior product for women with extraordinary qualities but when tried, it proves otherwise, so they gain negative trust and low customer appreciation. Finance: Finance for R&D is needed in large amounts and hence is difficult to obtain. Animal Testing: Many products are tested on animals and this is not supported by animal lovers and hence these brands may lose customers. The industry is no longer recession-proof and is now bound for depressions and declinations. Another setback of the industry is the demand-price ratio. Within the past five years, the prices were invariable and steady but promotion budgets were growing and getting greater than ever. OPPORTUNITY Emerging market is a great way to increase the production of different products and launching them in market. Inventing of some new product which is different from the product which is already there in market. To expand their product in the global market so that their sales of product increase and more people can know their product and tried to use them. The expansion of product and services is also a great opportunity for cosmetic industry. By expanding their services they increase their availability. The senior citizen population is increasing day by day so it is also the segment to increase the growth of market as for e.g. the launching of anti ageing cream in market is one of them. As far as India is concerned the future generations is still at an average of 35 years and hence have lots of disposable income.

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Women at the age of 22 to 40 are more and hence more demand for cosmetics. Smaller companies survive by producing products of specific niche thus avoiding major players and concentrate on market segmentation. THREATS A threat is also the growing competition within the field of cosmetic brands. Most products are within the reach of the citizens of developed countries only and not reaching out even to the average people from the under developed countries. While a company may be producing the best of its line, people may find that their products are not of their basic needs and would skip buying products. Scary stories regularly appear in the media about side effects of cosmetic ingredients. Discounting premium cosmetics can damage the very exclusivity and image that the consumer is buying into. Young consumers are generally the biggest users of cosmetics; thus an ageing population may prove disadvantageous Price wars. Large number of market players Possible market segments 1. Geographic Area: Metropolitan cities and towns 2. Behavioral: Occasions: those who go to school, college& office. User Status: Regular usage for better results Attitude towards the product: conscious about personal care. 3. Demographics: Age: 15+, the target customers are teenagers and working men and women who are conscious about their looks and self presentation. Education: Students or Graduates
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Sex: Unisex Occupation: Students and office goers are mainly targeted by this industry. Lifecycle: single and married male and female Social Class: Most of the cosmetic brands target Middle and Upper class people. Target market strategies There are several different target-market strategies that are being followed in the industry. Targeting strategies usually can be categorized as one of the following: Single-segment Selective specialization Product specialization Market specialization Full market coverage

Product life cycle

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Components of a business

Conclusion The cosmetic industry is a blooming industry as far as India is concerned. This industry has a large scope in the near future as the number of people with disposable income are rising in number and thus increasing the purchasing capacity. This industry has a wide space for innovations and developments and his is expected to thrive well in the coming years.

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