According to a joint report by Redseer Strategy Consultants and Peak XV, pure-play brands to drive India’s US$ 30 billion beauty and personal care market opportunity

Among comparable nations, India's beauty and personal care market will develop the fastest, with a compound growth rate anticipated to be 10% between 2022-27 and reach US$ 30 billion in size, according to a joint report by Redseer Strategy Consultants and Peak XV.

China's Beauty and Personal Care (BPC) market will increase by 7%, while Indonesia's market will grow by 8%. India, which will make up close to 5% of the potential for global growth, spends US$ 14 in the BPC category per person, compared to US$ 313 in the US and US$ 38 in China, which are the two countries with the largest per-capita expenditures.

According to Mr. Rohan Agarwal, Partner, Redseer Strategy Consultants, there’s a growing need globally among consumers for products that are tailored to individual skin or body types. Customers are increasingly willing to pay premiums for effective and safe solutions, which leads to rapid growth in the mass market and premium categories. Though customers research a lot about products online, they are willing to shop through multiple channels.

Online is a significant channel for BPC in India, as it is projected to become a US$ 10 billion market by 2027, accounting for roughly a third of the overall market.

Brands that only promoted pure play by focusing on particular use cases have disrupted the industry and achieved faster growth rates, gross margins, and profitability than BPC players that are primarily focused on fast-moving consumer products. For instance, in the last five years, the average revenue increase of the greatest pure-play BPC businesses was five times that of the largest Fast Moving Consumer Goods (FMCG)-led BPC players.

The importance of specialized, BPC-focused firms is indicated by the fact that the Indian BPC market is expanding twice as quickly as FMCG-led brands. The study predicts the creation of numerous hundred-million-dollar pure-play BPC brands as the Indian BPC market matures.

The beauty landscape's transformation has also birthed a slew of innovative brands, including L'Oréal, Nykaa, Honasa Consumer Limited, and Pure Play Skin Sciences, with niche offerings. These companies are more agile in responding to evolving consumer needs, positioning themselves as leaders in this dynamic market.

There is a lot of activity in specialised use cases, from acne management to anti-ageing remedies. In order to deliver more effective products to a specific audience, brands are devoting a sizeable percentage of their organizational resources and capacity to new product creation, research and development, and customer insights, says, Ms. Sakshi Chopra, Managing Director, Peak XV.

Major pure-play BPC companies had an average gross margin of 72% in 2022, which was much higher than the 44% average for FMCG-led BPC companies. These pure-play enterprises sustain competitive bottom lines with FMCG-led companies despite their significant investments in R&D and customer education. Large pure-play BPC companies have an average Earnings Before Taxes (EBT) of 12% globally, compared to 14% for FMCG-led businesses.

As a result, pure-play BPC businesses are valued highly. Large pure-play BPC companies have a price-to-earnings (P/E) ratio of 51, which is around 1.8 times higher than the P/E ratio of 28 for FMCG-led BPC companies.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.