PORTERs five forces

The threat of established rivals The internal rivalry in cosmetic industry is very high. There is a presence of domestic players and International players in the market. The Indian cosmetic industry is marked by presence of few companies with global presence, which has the larger share of cosmetic market. The threat of new entrants A new entry into this industry is not an easy trade. New entrants have to compete with large giant cosmetic companies. Most of the multinational companies invest good amount of capital for research and development and marketing expenditures. For new entrant a capital required for business is huge. The funds are required for investment in R&D, production, distribution and marketing which covers advertising cost which is crucial in this competitive industry. A major challenge for new entrants are advertising and positioning of product in 95 the minds of consumers, as market is flooded with many national and international brands. Another issue is price sensitive market. The new entrants have had to work out innovative strategies to satisfy Indian preferences and budgets to establish a hold in the market. Many cosmetic companies launch their products in smaller pack sizes to make them more affordable. An opportunity for new entrant is to build a product under a synergy and collaboration with giants cosmetic companies. The threat of substitute products

In Porters theory threat of substitutes exists when a products demand is affected by the price change of substitute product. The consumers have a lot of brand choice as cosmetic market is flooded with many brands. Due to this demand, product becomes more elastic. So the treat of substitute is low. Buyer power Consumer buying power is very high. To retain consumers is very challenging task. In cosmetic industry consumers do not always stick to one brand of skincare or hair care because the switching costs are very low. This means that buyer power is high and demand for favorable prices. Brand awareness is more in urban India, but brand loyalty is less towards the products, whereas brand awareness is less in rural India and brand loyalty is more. Bargaining supplier power Buyer supplier power is moderate. Suppliers in cosmetic industries are fragmented. Suppliers in cosmetic industry are interlinked together. Suppliers are often are insignificant in scale compared to major cosmetic manufacturers. Chemical producers have wide variety of sources to earn revenues; they are not completely dependent on cosmetic manufacturers. Overall the role supplier in cosmetic industry is adequate.

SWOT Analysis

Strength During three to four decades, from 1970 to 2010, the industry has gained a momentum

 Its extensive development trend is expected to continue well into the following years to come Industry is more mature Positive revenue growth projections Innovated industry Contributing to the economic growth of country Major cosmetic companies have global presence Increased per capita consumption Robust sales and distribution network Weakness The sales in the past year are slow moving because of downed consumer spending Industry is bound to depression and declination Product prices are invariable Promotion budget are getting bigger Industry dominated by market leaders

Opportunities Aging baby-boomers, who have high spending power, tend to spend more on beauty products Emerging markets, which have high economic growths i.e. Europe, Latin America, and Asia are replacing the matured and developed western markets Strategy to grow through M&A increases global presentation Specializing in niches, differentiating the product lines, and focusing on mass market segment Threat China can be both opportunity and threat because it has high capability to develop products and compete in global markets Consumer concerns on health, environment Alternative to animal tests may raise manufacturing costs More intense regulations New launched products are vulnerable to uncertainty of regulatory review Growth in counterfeit goods Stiff competition and price war.

Cosmetic Brands Product Analysis

Financial Data of Various Personal Care companies Personal Care-MNC Full Year Equity Company Name Rs.Cr. INDUSTRY - Per Care-MNC Colgate-Palm. 13.6 Gillette India 32.59 Hind. Unilever 216.26 Johnson & Johns. 14.4 Jyothy Consumer 116.46 L'Oreal India P & G Home Prod. 11.29 P & G Hygiene 32.46 Rayban Sun Optic 24.48 Reckitt Benck. 26.28 Ind.Composite 487.82

Sales Rs. Cr.

NP Rs. Cr.

EPS Rs.

Mkt. Cap. Rs. Cr. 16990.48 6294.6 125495.7

P/C Ratio 35.4 56.8 45.3

P/E Ratio 38.9 79.2 49.6 -

3,163.81 498.03 32.1 1,437.72 87.75 24.4 25,810.21 3,189.04 11.7 2,738.98 176.76 1,227.50 450.76 3.53 0.2 1,127.50 43.89 3,930.39 -344.14 1,684.86 203.22 62.6 61 33.89 13.8 3,493.50 538.03 161.8 43898.73 4430 -

490.3 9120.45 158391.53

38.9 44.1

44.9

33.18

Key Financial Ratios

Indian Cosmetic Industry

The size of Indian Cosmetics Industry globally is $ 274 billion, while that of the Indian cosmetic industry is $ 4.6 billion.

Size of the Industry

According to analysis and figures given by the Confederation of Indian Industries (CII), the total Market Capitalization Indian beauty and cosmetic market size currently stands at US$950 million and showing growth between 15-20% per annum. Output per annum Percentage in World market Industry sources estimate a rapid growth rate of 20% per annum The overall beauty and wellness market that includes beauty services stands at about US$2,680 million, according to CII estimates.

Top leading Companies

Lakme is the Indian brand of cosmetics, owned by Unilever. It started as a 100% subsidiary of Tata Oil Mills (Tomco), part of the Tata Group; it is named after the French opera Lakm, which itself is the French form of Lakshmi, the goddess of wealth who has is also renowned for her beauty. Revlon is an American cosmetic for skin care, fragrance, and Personal Care Company founded in 1932. Oriflame Cosmetics S.A. (Luxembourg) is a cosmetics group, founded in 1967 in Sweden by the brothers Jonas AF Jochnick and Robert AF Jochnick. The L'Oreal Group is the world's largest cosmetics and Beauty Company. It concentrates on hair colour, skin care, sun protection, make-up, perfumes and hair care. Chambor cosmetic line is a blend of the finest traditions in terms of radiant color, soft texture and skin accentuator. Maybelline is a makeup brand sold worldwide and owned by L'Oreal. Avon Products, Inc. is a US cosmetics, perfume and toy seller with markets in over 140 countries across the world. Make-up Art Cosmetics or MAC Cosmetics, is a manufacturer of cosmetics which was founded in Toronto, Canada by Frank Toskan and Frank Angelo in 1984 ColorBar cosmetics are one of the leading brands of color cosmetics in India. Street Wear is a young, funky and hip brand which globally is positioned at the young and trendy shopper and the range consists of about 30 SKUs covering categories like nail enamel, lipsticks, lip gloss, face make-up kits and eye shadows.

Latest developments

According to Indian Cosmetic Sector Analysis (2009-2012), the Indian cosmetics industry is expected to witness fast growth rate in the coming years on the back of an increase in the consumption of beauty products. Owing to growing disposable income of the middle class households and changing lifestyle, it is expected that the cosmetics industry will grow at a CAGR of around 17% during 2010-2013. A study even shows that affordability and rising consumer base were the main drivers behind the high cosmetic sales of around INR 356.6 Billion (US$ 7.1 Billion) in 2009. Market players are getting lucrative and good opportunities as people have become more beauty conscious due to changing lifestyle and spreading consumer awareness. According to ASSOCHAM the size of India's cosmetics market will rise by almost a half to 1.4 billion dollars in the next two-three years as people get fashion conscious and more brands are launched. With increased awakening about cosmetics brands, which is evident even in rural India, the industry size will grow to around 1.4 billion dollars from current level of 950 million. It is projected to grow at a CAGR of around 7% during the forecast period. Indian Cosmetics Industry is set for a significant growth depending on the capability of the manufacturers to market their products. Products that claim to renew cells, minimize pores, and restore hydration have created an $83 billion worldwide market. Due to the optimistic assessment the domestic cosmetic and toiletries industry show that with increased awakening which is growing even in rural India, its size will grow in next 2-3 years to around US$ 1400 million from current level of US$ 950 million. Till then India's per

capita consumption of cosmetic and toiletries products could be on par with that of China which currently is US$ 1.5, says ASSOCHAM analysis. Market Data According to industry sources, the total size of the Indian retail beauty and cosmetics market is currently estimated at $1.5 billion, with fragrance comprising the largest component. Color cosmetics account for 14%, fragrances - 21%, hair care - 19%, skin care - 17%, beauty services 13%, herbal products - 9%, others - 7%. If the overall beauty and wellness market is considered, which includes beauty services, the market is estimated to be around $2.68 billion. The cosmetics market in India is growing at 15-20% annually, twice as fast as that of the United States and European market. The growth rate in the cosmetics market reflects an increasing demand for beauty care products in India. Premium global brands are gaining sales as Indian consumers gain exposure to the global media and move from functional items to advance and specialized cosmetic products. Even with a good growth rate, however, penetration of cosmetic and toiletries is very low in India. Current per capita expenditure on cosmetics is approximately $11.00 as compared to $40.00 in other Asian countries. More and more shelves in shops and boutiques in India are stocked with cosmetics from around the world. Since the opening up of the Indian economy in the early nineties, many international brands like Avon, Burberrys, Calvin Klein, Cartier, Christian Dior, Estee Lauder, Elizabeth Arden, Lancome, Chambor, Coty, LOreal, Oriflame, Revlon, LOreal, Yardley, Wella, Schwarzkopf, Escada, Nina Ricci, Rochas, Yves St. Laurent, Tommy Hilfiger, Max factor, Max Mara, and Shiseido have entered the Indian market. Import tariffs Indian import tariffs on cosmetics have been significantly reduced over the last several years. The total customs duty for cosmetics and beauty products classified under HS Code 3303 to 3307 is currently 26.84 percent, down from 31.7 percent last year and over 56 percent in 2005-06. The components of this total duty includes a basic custom duty of 10 per cent [applied on the cost insurance freight (CIF) value of goods]; an additional duty of customs popularly called countervailing duty or CVD of 10.30 per cent; and a special CVD of four percent. The special CVD of 4 percent is intended to represent the incidence of sales tax, value added tax and similar levies applicable on domestic goods. The countervailing duty is equivalent to the local excise tax on similar articles manufactured within the country.