Manish Taneja, co-founder and CEO of Purplle.com, Nykaa’s heavily funded rival in the online beauty e-commerce space, describes how in Seoul, if you visit the Myeong-dong market, you’ll find in its alleyways that criss-cross over a thousand outlets selling millions of different Korean cosmetics and skincare products. Beauty is a mega-business in South Korea.
India, despite its large size, is nowhere near tiny Korea in the beauty market stakes, but given the breakneck pace at which the cosmetics and personal care sector is exploding here – fueled by hundreds new D2C brands – it may not be long before we reach the business ladder in the Land of the Morning Calm. In 2021, India’s beauty and personal care space received an infusion of over $350 million – and these are very conservative estimates – compared to around $100 million in 2020. We’ve lost count of the number of new start-ups entering the space – but one According to Taneja, Purplle has over 50,000 different unique products (SKUs) on the platform and sells 25,000 unique items each month.
Booming BPC (beauty and personal care) market in India was estimated to be worth $24 billion in 2021 and is expected to surpass $40 billion over the next five years.
And this forecast will be easily satisfied if you see how much funding start-ups in the sector attract. Take the Good Glamm group which raised $100m in Series C, in three tranches last year, with investors like Amazon and Wipro, or take Purplle which first secured a $45m injection in a round led by Sequoia Capital, and a few months later raised $75 million from investors including Kedaraa Capital, capping it at an additional $38 million in Series D funding. Then it The poster child for this space is Honasa Consumer, the parent company of baby products and skincare company Mamaearth, which earlier this year added another $52 million to its fundraising pool, bringing its valuation at $1.2 billion.
Armed with these rich war chests, the aggressive beauty brigade is in full swing. Last month, Mamaearth acquired Mumbai-based BBlunt from Godrej Consumer Products Limited. Previously, he took over the fast-growing content company Momspresso. Content-to-trade conglomerate Good Glamm Group has been even more of a buyer – buying up The Moms Co and St. Botanica in addition to acquiring a majority stake in Organic Harvest and making a strategic investment in Sirona Hygiene, all within months. of each other. Its portfolio now covers all BPC categories of cosmetics, hair care, skin care, mom and baby, grooming, natural products, hygiene and organic, among others. “We will continue to acquire or make strategic investments to complement this portfolio and grow the brands under the Good Glamm Group umbrella. We expect to make more acquisitions in the first quarter of 2022,” says optimistic Darpan Sanghvi, Founder of the group and CEO of Good Glamm Group.
Purplle with a bubbling pot of more than $160 million in funding — most of which, Taneja says, is still in the bank — has taken stakes in Juicy Chemistry, Good Vibes, feminine hygiene company Carmesi, NYbae and more recently Faces Canada in an effort to diversify its portfolio.
Just ahead of its blockbuster IPO – which has only heightened positive investor sentiment towards the space – beauty and fashion e-commerce platform Nykaa acquired the skincare brand local Dot & Key.
It’s hard to keep track of these buyouts because there’s one that’s literally sealed every other day. Which begs the question – is 2022 going to be a big banner year for beauty M&As in India?
All the signs are there of a market ready to experience an exponential increase in acquisitions. As Nitin Passi, co-CEO of Lotus Herbals points out, consolidation is imminent because over the past two years digital, inexpensive and more intuitive marketing initiatives have led to the emergence of “innovative micro-brands”. that penetrate more emotionally with consumers.
Entrance is now commoditized, agrees Shankar Prasad, founder and CEO of Plum, a D2C beauty brand launched in 2014. He says access to products, access to marketing tools, access to media are at the below and anyone with a passing interest in the category can enter. However, he says, while the barriers to entry have been breached, the barriers to scale have not – which is why we see so much action.
The agreements are mutually beneficial for both the acquirer and the acquiree. Take the case of Lotus Herbals, which acquired the luxury Ayurvedic brand SoulTree, took a 32% stake in the dermaceutical company Fixderma India and a 25% stake in the DTC Conscious Chemist brand.
“Starting in 2019, our strategy was recalibrated towards acquisitions and investments, in addition to nurturing our current business with a future-ready omnichannel approach. We have developed a strategy of either owning such businesses or partner with passionate founders who need mentorship and access outside of capital to achieve their ambitions,” says Passi.
For companies like Lotus and traditional personal care giants like HUL, Marico (which acquired Beardo), Emami (with a major stake in Man Company) and Dabur, which has made its acquisition intentions clear, rich choices are available.
As Mohit Malhotra, CEO of Dabur India, said during the company’s recent investor call, “We are working very aggressively and we are not only open to organic entry, but also open to inorganic play here. and that’s why we have a war chest of around ₹5,500 crore kept in the balance sheet because it’s a faster ramp-up through inorganic and there’s a lot of start-ups available .
The dozens of entrepreneurs we spoke to for this story all say they have deals galore. Take Amritha Gaddam, founder and CEO of The Tribe Concepts. “Yes, we have been approached by big companies not only in the domestic market but also in the international market. However, we take our time and evaluate all offers and comb through them,” she says.
Gaddam says there are many benefits and limitations around consolidation that we see. “When a big brand comes to consolidate, the focus is on quality checks, certifications, conflicts of interest and the chemistry of the founders. I see this consolidation trend increasing in the near future as we, as a country we are seeing an increase in the number of start-ups and that chain of thought is being encouraged in a very positive way, which is great because I think this market disruption was much needed,” she said. adds.
Growth and consolidation
But talk to investors and entrepreneurs and almost all of them say that even though the consolidation is underway, the growth phase is still very strong and there is still huge scope for new brands to arrive. Kannan Sitaram, venture capital partner at Fireside Ventures, insists there is space for more investment in start-ups with differentiated offerings – describing how they just funded such a brand called Pilgrim, which brings global beauty practices to India, launches hand-picked products in different geographies (vinotherapy from France and concepts from Jeju in Korea.).
As Good Glamm Group’s Sanghvi explains, “This is a (BPA) space where many brands can exist and be successful, but establishing a USP or differentiator is extremely important to make consumers understand why they should It’s not a winner-takes-all market.” By Diwali 2023, the company aims to reach $1 billion in revenue and be significantly profitable. “At this point, I think we will be ready for the IPO,” adds Sanghvi.
Purple.com’s Taneja agrees. He points out how gross margins in beauty are so high and there are so many white spaces that hundreds of brands can coexist and he goes back to his favorite Korean example to describe why more players can coexist. “Beauty is very personal, exploratory and has varied needs. There are different skin types, skin tones, weather conditions and textures. You’ll see more brands catering to each of these areas,” he says.
Vegan, organic, fruit-based, Ayurveda-based, problem-solving formulas for different needs (acne, dryness, hair loss, etc.), exciting new makeup concentrates, new niches emerging. Categories that did not exist a few years ago are now flourishing.
Additionally, Plum’s Prasad says the market has evolved so much that it is now easy for new brands to make a crore in sales per month. Gross margins are so good in this industry that many believe that even a stagnant brand will easily survive, and therefore don’t really need to sell.
On the same page is Vineeta Singh, Co-Founder and CEO, SUGAR Cosmetic who says. “While it may appear that consolidation has gained significant momentum this year with many established companies acquiring budding brands, I believe there is tremendous value still to be unlocked among these emerging players and there is merit for these brands to evolve individually.”
With SUGAR Cosmetics, she says, “Our key strategy will remain organic growth and we will opportunistically look at acquisition opportunities in the future. The brand has a current ARR of ₹500 crore and we are moving at an even units, so we are not considering a capital injection at this time.
The optimism displayed by the players seems justified with regard to the consumer landscape. Just last week, India’s largest modern retail chain Shoppers’ Stop opened a standalone luxury beauty store called SS Beauty in Mumbai. Nykaa has expanded its offline presence with two sets of segmented stores – one aimed at high-end customers and the other at mass customers. Likewise, internet and online retailer Myntra – best known for its clothing collections – recently declared beauty and personal care to be key areas in 2022. Clearly, the beauty pie is getting bigger and bigger. fat.
February 27, 2022