Personal Care suffers in Emerging Markets: BoP to the rescue

For a while, until 2013, things seemed to be looking up for personal care companies, domestic and multinational, in emerging economies. Expansion of product categories with higher prices (masstige, a product class for middle income consumers looking to get benefits of high priced premium product at mass market prices), a larger population with disposable income (a million young adults join the workforce each month in India, countries like India, Brazil, Turkey etc. exhibit a collective ascension to the developing middle income with higher purchasing power), all looked favourable for market growth in countries like India, Brazil, etc. This could explain the high optimism displayed by Unilever (the market leader with 51% stake in Indian personal care, a share that is shrinking gradually due to competition from P&G, L’Oreal’s Garnier) when increasing its stake from 52.5% to 67.5% in its Indian subsidiary HUL, in 2013.

However, India with its army of working age adults – many in the low income BoP category, soon found acquiring jobs in an environment rife with lay-offs extremely difficult. The influx of young people into the workforce without adequate positions became a liability instead of an asset, according to Rob Walker of Euromonitor. In response, consumers in India are trading down across personal care product categories, buying fewer shampoo sachets, deodorants and razors than they were in 2013.

This base of the pyramid market for products like face washes and creams was targeted since 2012 by brands like Pond’s, Garnier, Himalaya Herbals, Fair & Lovely, who captured the low income mass market which was in large part rural (two-thirds of the Indian population is rural). This was executed via bit sized packages, priced at INR 5/US$0.08 for sachets to INR 15/US$0.24 to INR 20 for mini-tubes. These labels, market leaders in their own right, sit atop high sales in face washes and creams in urban markets as well, where there is a higher level of beauty consciousness.

Other brands limited to urban India recognized this fiercely competition environment, and have been forced to up their game ("Everyuth is still lagging behind due to competitive intensity", Nov 2014). For the increasingly conscious urban low-to-mid income group looking for herbal ingredients, fairness and cleansing attributes combined with low prices, Everyuth presented lower priced variants from its recently launched herbal line (Everyuth Herbals). These washes aimed to poach the market with lower than popular equivalent prices (INR 35 for 50g, whereas Himalaya’s Neem wash is INR 100 for 100 ml) and easy urban availability. While this puts Everyuth in a position to exploit the trading down trend, the company is yet to catch up.

According to Rob Walker of Euromonitor, emerging markets are seeing ‘turbulence

• in the beauty and personal care sector. Innovation and unique, differentiated strategies will capture the more selective consumers by engaging more actively with their needs, thereby keeping companies relevant, profitable and afloat. Zydus Wellness’s recent launch of Re. 1 (€0.01/$0.02) face wash in its lower priced herbal variant is the ground breaking distribution innovation which is, according to Elkana Ezekiel, MD Zydus Wellness Ltd lead to ‘

exponential growth’, a result of opening up a new market of the aspirational, low-income base of the pyramid in the urban market.

SaiKiran Kadam is an Analyst working with Mordor Intelligence, a market research consulting firm which specializes in Market Research Consulting, Market Research Reports, Market Sizing Reports, Industry Research Reports.