BackKaya to go back to original specialist skincare positioning
The skin services retail chain repositioned itself as a beauty care company in 2010-11 to increase its offerings and attract wider range of consumers
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Mumbai: Kaya Ltd, a unit of Marico Kaya Enterprises Ltd, has gone back to its original proposition of offering skin cure services, moving out of the more competitive salon business that focused on beauty treatments like facials.
The skin services retail chain repositioned itself as a beauty care company in 2010-11 as it looked to increase its offerings and attract a wider range of consumers.
But the beauty care services space has become very competitive, crowded by a large number of unorganized beauty salons and even retail chains like Lakme salons from Hindustan Unilever Ltd, the country’s largest consumer packaged goods company.
“We are not equipped for competing with beauty parlours who pamper the consumers. In regular salon services like facials, our right to win is lower," Harsh Mariwala, chairman and managing director of Marico Ltd, said on the sidelines of a recent function about the reason for shifting back to its original business model.
The company has identified three core differentiators, said Arvind R.P., marketing head for Kaya. Each clinic has an in-house dermatologist, gives personalized skin treatments, and offers products and services researched and developed by dermatologists.
The chain has increased its focus on specialized service categories like laser hair removal, pigmentation, anti-ageing and acne treatments, which has led to the average bill size increasing to ₹ 14,000 currently compared with ₹ 12,000 a year ago. The contribution of these specialized skincare services to overall business has grown to 61% from 50%, said Arvind.
To be sure, the company still offers everyday skin care and skin maintenance services with an average ticket size of ₹ 5,000-6,000 and it also has a range of services starting from ₹ 2,000.
It is also in the process of rolling out the Kaya Skin Bar, a smaller version of the Kaya skin clinics, which it has been prototyping in Bangalore.
The changes are a part of a restructuring exercise which began a year ago with the demerger of Kaya into a wholly- owned subsidiary of Marico Ltd, the maker of Parachute and Saffola oils. Marico Kaya is expected to list on BSE in the first quarter of the next fiscal year. In December, Kaya sold its Singapore-based Derma-Rx International Aesthetics skincare solutions business to private equity firm KV Asia Capital for an undisclosed amount. The company had acquired the Derma-Rx business in 2010 with the intention of adding to the product portfolio of Kaya.
“The sale has been a profitable proposition," said Mariwala, who expects the new subsidiary to have surplus cash following its listing on BSE.
The beauty and wellness services market was estimated at ₹ 11,500 crore in 2013. The industry has been growing at a compounded annual growth rate of 15-20%, said Rashmi Upadhya, associate director of strategy at consultant PricewaterhouseCoopers Pvt. Ltd.
Yet, many businesses in the sector find it difficult to turn profitable because of challenges such as high rentals, utility and staff costs, which keep margins under pressure, she added.
For instance, in 2013, French salon chain Jean-Claude Biguine (JCB) expanded its revenue by 35% as it opened four new outlets. Growth from stores that have been in operation for over a year came in at 20-25%, said Dharmendra Manwani, chief executive officer of JCB Salons Pvt. Ltd.
Profitability at a corporate level is still elusive as a store starts making money in only its second or third year of operations because of high overheads, said Manwani.
All the same, investor interest in the space is high. Companies like VLCC Health Care Ltd, YLG salon chain, Healthkart.com and Guardian Lifecare Pvt. Ltd have raised more than one round of capital, indicating an increasing investor belief in the potential of the so-called wellness sector to generate returns.
“There have more than a dozen venture capital and private equity (PE) deals inked between March 2009 and June 2013," said Upadhya. PE- backed firms have been able to expand into newer regions, widen their portfolio and drive inorganic growth through acquisitions, she added.
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