Oriflame to bet big on skincare, wellness in new strategic push
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New Delhi: Sweden-based direct selling firm Oriflame Holding AG is exploring a new product strategy wherein it will focus largely on skincare and wellness categories. In a global change, the company, known for its wide portfolio of beauty and personal care products, is planning to narrow its focus to the recently introduced range of wellness products and its ‘well-established’ category of skincare products.
“In the years to come, these (skincare and wellness) will be our hero categories globally and in India,” said Alexander af Jochnick, chairman of the board at Oriflame, adding that the two categories will be supported by cosmetics and fragrance products.
Oriflame launched its wellness range in India in February 2015, almost six years after it introduced the range globally. It offers nutritional shakes and soups in India under the wellness category. Overall, the company operates in skincare, personal care, cosmetics and fragrance space.
“In the years to come, we will have less of personal care products. We are trying to limit non-skincare and non-wellness products but it’s a very slow process,” Jochnick said. Oriflame hopes to raise the share of skincare and wellness products in its overall revenue from 34% to 50%. Currently, skincare contributes 25% to the total revenue of Oriflame, while wellness holds a share of just 9%. “I want them together to be at least 50%,” he added.
The decision to narrow down the focus to two categories, Jochnick said, is led by global trends. “Skincare has always been a natural focus area for us but wellness is a super interesting trend. People all over the world are concerned about immune system, weight and diabetes,” he said.
According to Rashmi Nair, group business director of media at data research firm Kantar IMRB, the wellness segment is gaining traction across the world.
Wellness segment was growing with “increasing number of people taking to some form of exercise, moving to healthier diets or at least getting conscious about it,” Nair said.
Data from Kantar IMRB’s Target Group Index (TGI) suggests that there is an increase in people engaging in physical activities like walking, running and aerobics. “The people who regularly go for brisk walks has gone up by 14%. We see a lot of precautionary behaviour with more and more people opting for periodic health checkups and checking the nutritional content of what they are buying,” said Nair, adding that the trend is fast growing.
In the direct selling industry in India, the wellness and healthcare products held the majority share of 42% of sales, followed by cosmetics and personal with a 34℅ share, according to the annual survey report by Indian Direct Selling Association (IDSA) and PHD Chambers of Commerce and Industry for the year 2014-15.
At present, Oriflame is operational in 60 countries and registered a turnover of 1.25 billion euros as of March 2016.
The company has also partnered with technology company IBM Corp. in India to create a finance and IT hub. Oriflame will be investing 40 million euros over 7 years to create this global centre just outside Delhi.
“India is an important market for us. We already have two factories in India and are making a new commitment with this IT hub. We are producing in India more than ever before,” said Jochnick.
Other strategic markets for Oriflame include Indonesia, China, Mexico, Turkey and Russia.
Rajat Wahi, partner and head (consumer markets) at consulting firm KPMG said that it makes sense for the company to focus on wellness and skincare. “People are becoming health conscious and there is an opportunity in the sector,” he said.
According to a joint study by industry body Federation of Indian Chambers of Commerce and Industry (Ficci) and KPMG titled ‘Direct selling: Mapping the industry across Indian states’, the direct selling industry in India has the potential to reach Rs.64,500 crore in revenue by 2025.
The industry dominated by companies like Amway, Tupperware and Oriflame was estimated at Rs 7,500 crore in 2013-14. Direct selling in India accounts for just about 0.4% of all retail sales.