The fast growing Indian beauty market holds strong potential for L’Oreal , which has been looking to grow market share in the region. According to experts, India’s retail beauty and cosmetics industry is likely to reach $ 2.68 billion by 2020, growing at an annual rate of 15-20%, a rate that is twice as fast as that of the U.S. and European Markets. While L’Oreal has been present in India for more than 20 years, the company commands only a 8.5% market share in India’s urban cosmetics market, much lower than its approximately 15% market share in the global make up market. The company is the third leading operator in the region; however it has not been able to capture a significant share in India’s low income consumers. The company is now transitioning to tinier packaging to make its products affordable for the less affluent section of the region and capture a higher market share. L’Oreal is targeting $ 1 billion in revenues from India by 2020 and this strategy might prove to be the key driver to achieve this target.
“Sachet Size” Products Hold Strong Potential In India
According to Nielsen, consumers in India buy more sachet-size shampoos, conditioners and other products than regular-size products. According to Euromonitor, more than half of India’s personal product sales by volume in 2015 came from small packs. While in the past, L’Oreal was not looking create small packages of its products, the company now believes that it cannot survive in India if it does not have tiny packages. With low purchasing power in tier 2 and tier 3 cities of the region, where the “aspirational” population is looking to buy international brands, L’Oreal’s differential packaging strategy should work to the company’s advantage. As standards of living widely differ in the region, the company is adapting to this market by offering a wide range of packaging and prices. Local production and raw material supply ensures that the company can sell its products at low prices in the region. L’Oreal’s production plant in Pune, India accounts for nearly 90% of the sub-continent’s needs and the company also has research and innovation centers in Mumbai and Bangalore. Small size products can be successful in other south Asia countries such as Indonesia as well, where small packs accounted for more than 60% of the country’s personal care sales volume in 2015. After the initial success of tiny packaging in India, L’Oreal is now looking to introduce hair colour pouches in Kenya and South Africa.
As the company looks to grow in emerging economies, adapting to consumer needs in these regions will be critical. L’Oreal’s strategy to drive revenues through smaller size packages should work in its favour and act as a catalyst to meet revenue targets.
View Interactive Institutional Research (Powered by Trefis):
Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.
