HUL, Godrej, other consumer goods firms to look at JVs with beauty segment
Consumer packaged goods makers like HUL and Godrej Consumer and beauty product companies like L’Oreal India to look at joint ventures (JVs), say experts
Latest News »
- Tejas Networks to make stock market debut on 27 June after IPO
- Amtek Auto’s managing director resigns as board discusses debt issues
- Presidential election: Nitish Kumar faces fresh calls to reconsider decision on Ram Nath Kovind
- Licence not required for serving liquor at private functions: Kerala High Court
- Infosys must take cue from Uber, disclose reports of all internal investigations
Large consumer packaged goods makers like Hindustan Unilever Ltd (HUL) and Godrej Consumer Products Ltd (GCPL) and beauty product companies like L’Oreal India Pvt. Ltd will increasingly look at joint ventures, collaborations and investing in niche entrepreneurial ventures in the beauty and personal care sector as they seek growth, experts said at the India Beauty and Hygiene Association (IBHA) conclave in Mumbai.
In the last five years new companies have gained 10% market share from established companies in the US. Moreover, the success rate for new products is just 5% whereas failure rate is 95%, Himanshu Bajaj, partner, consumer industries and retail, AT Kearney, told Mint on the sidelines of the conference.
According to Bajaj, entry barriers to the consumer space have reduced because of digital technology, prompting the entry of many more entrepreneurial companies into the sector.
“As large companies look for growth they are now looking at these start-ups,” he said Bajaj.
Smaller set-ups are nimble and able to address small niches profitably which has caused large companies to rethink their business models.
“Companies have changed their business models to look at small niches and addressing them in a profitable way,” said Anil Chug, chief executive officer, Wipro Consumer care and Lighting innovation.
For instance, in March, Marico Ltd, the maker of Parachute and Saffola oils, acquired a 45% stake in Beardo, a men’s grooming brand that sells beard oils, beard waxes, soaps and other grooming products for men’s facial hair.
Earlier this week, on Thursday, Unilever Plc’s venture arm Unilever Ventures Ltd announced a tie-up with venture capital firm IDG Ventures India Advisors Pvt. Ltd and Amazon Web Services Inc. (AWS) to launch an initiative to invest between $500,000 and $5 million in early-stage tech start-ups of India.
In May 2016, L’Oreal announced a a strategic investment in Founders Factory, a London-based global digital accelerator and incubator, to support the growth of five high potential early stage start-ups and co-create two new businesses as part of a yearly incubator programme.
Science- and tech-driven categories which include products like sun care and dermaceuticals—a combination of cosmetics and pharmaceuticals—are a niche category. However it is the fastest growing category at 16%in the beauty and hygiene business, according to a report launched by IBHA and ATKearney on Friday. Overall, the Indian beauty and personal care sector is expected to grow 5-6% from $8 billion in 2016 to $10 billion in 2021, said the report.
“The market in India is still very small. Even if we compare it to Indonesia and reach its penetration levels many of the segments will double or more than that. There is no reason why it should be half of that,” said Sandeep Kohli, executive director, personal care, HUL. According to Kohli there is a big space of innovation and competition will further expand the market. Also, innovation is not only about products. It’s also about how to take the product to the consumer, said Kohli.
The packaged consumer goods market has historically been about mass and scale. This still remains the core of the market, explains Sunil Kataria, business head – India and South Asia, GCPL.
What’s changed though is that with digital, a lot of small opportunities have come up which may or may not become big. Companies have to take a call on these, he said.