Chinese Beauty is Difficult to Enter the Indian Market?

Considering the whole Indian market, there are few Chinese cosmetics brands. Why do Chinese cosmetics companies appear “calm” in the face of the huge potential Indian market?

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Recently, Sanjiv Mehta, CEO of Hindustan Unilever (HUL), an Indian company of Unilever, said that HUL currently accounts for about 10.7% of the sales of Unilever Group and will surpass the United States as the largest market of Unilever. In terms of sales volume, India is already Unilever's largest market.

Population advantages reflect development potential

According to the Euromonitor international research report, the Indian beauty and personal care market is the eighth largest market in the world, with a total value of 15 billion dollars, and it is growing at a rate of about 10% every year.

According to the report of Kesai Consulting, the growth drivers of the Indian beauty market include favorable population structure and increase in disposable income, increase of salaried female labor force, increase of Internet penetration, increase of male beauty, undeveloped rural market, growing bride beauty segment, and rise of strong inclusiveness and beauty care.

Among them, the large population base and the growth of disposable income can best reflect the market potential.

According to a report released by the Retailers Association of India (RAI) in 2018, India has the largest youth population in the world with nearly 600 million people under the age of 25. Moreover, The per capita income (PCI) has jumped over 500 times, increasing to Rs 1,28,829($1565.27) in 2020-21.

More and more women are also joining the workforce. According to the Economic Survey 2019-2020 released by the Government of India in 2020, the proportion of female employees in the salaried employee/fixed wage category increased from 13% to 21% between 2012 and 2018. This is driving the growth of the high-end cosmetics and fragrance industry in India, with the aforementioned industry forecast to grow at a CAGR of 8.4% in revenue between 2020-2023, according to Statista.

The rapid development of e-commerce

As a result of the epidemic, the digitization of Indian society has increased rapidly, and the population has embraced online shopping, online education, online healthcare, and other Internet services, and e-commerce has grown exponentially.

According to a report by India Brand Equity Foundation (IBEF), India's total e-commerce market is expected to grow at a CAGR of 19% from 2017 to 2026.

HUL's sales reflect this as well. According to Unilever's 2021 financial results, HUL reaches over 700,000 retailers through digital channels, direct to consumers. For example, Lakmé, the most followed Indian beauty brand on Instagram, is achieving approximately 30% of its sales through digital channels in 2021.

Notably, Chinese Internet giants took notice of the Indian market as early as 2014.

Chinese investors active in the Indian market in recent years include companies such as Alibaba, Tencent, and Xiaomi, according to the Indian media outlet Business Standard. To date, Tencent has invested more than 14 billion yuan ($1.944 billion) in Indian startups. According to data disclosed by Flipkart in July 2021, Tencent acquired a stake in Flipkart worth about 1.9 billion yuan ($263 million), valuing the company at nearly 270 billion yuan ($37.503 billion) at that time.

International brands prepare for the Indian market early

The huge potential of the Indian beauty market has attracted many international brands and retailers, HUL is one of the largest and highest market capitalization FMCG companies in India, dominating the generic categories of hair care, bath, and oral care. Nine out of every 10 households have used Unilever products.

Other international luxury brands and retailers entering the Indian market include L'Oreal, Estee Lauder, and Sephora.

L'Oreal entered India in 1994. In India's hair dyeing and men's cleaning and care categories, its market share was 28% and 30% respectively, ranking first. Although India's business accounts for only 2% of L'Oreal's global business, India is the fastest growing market.

Lipstick is the most commonly used cosmetics for Indian women. In March 2020, Smashbox under Estee Lauder developed Gula Bae lipstick specifically for the personality and lifestyle of Indian women and appointed Sobhita Dhulipala, one of the most popular actresses in Netflix India, as the brand ambassador.

Estee Lauder is partnering with celebrities as part of a strategic investment in the brand to increase brand awareness and deepen consumer perceptions of the brand. Estée Lauder has 586 stores in India, including 151 stand-alone stores and a partnership with the Indian department store chain Shoppers Stop.

In 2014, Sephora entered the Indian market to gradually expand its presence in the high-end beauty market. Sephora aims to have 50 stores in India by 2022, with further expansion to 75 in the future.

Rarely seen Chinese cosmetic companies in the Indian market

Compared to the Chinese Internet industry and their international counterparts, Chinese cosmetics companies do not seem to be paying much attention to the Indian market. Considering the whole Indian market, there are few Chinese cosmetics brands. Why do Chinese cosmetics companies appear “calm” in the face of the huge potential Indian market?

Sita, vice president of HEBE BEAUTY, the parent company of Y.O.U, told CHAILEEDO that for various reasons, Indian consumers do not have a good feeling about Chinese brands, which is a difficult point for Chinese brands to enter India.

This point is agreed upon by an insider in the Indian beauty market. In his opinion, "Indian national self-esteem is very strong, there is a strong sense of protection for local brands, only the international big brands early prepared, spend a lot of time and capital, can stand firm in India, relatively speaking, Indians pro-European and American brands, for Chinese cosmetics brand recognition, is not high."

But this does not mean that Chinese cosmetics are not suitable for Indian consumers.

Sharon Kwek, consulting director of Mintel's South Asia beauty and personal care division, believes that Chinese cosmetics are a better choice for Indian consumers, considering the price. In recent years, the Chinese beauty and cosmetics industry has been upgrading, "They are good at taking inspiration from the big international brands and popular products and adapting them to produce their products at a third or fifth of the price of the big brands. This is exactly what Indian consumers want."