Analysis of the cosmetic industry in India

INTRODUCTION

Just a simple idea can lead to the development of a great business proposal. However feasible and practically implementable ideas are rare and have to be nurtured and then implemented at the exact correct time for it to be successful. In my business proposal I would like to present the prospect of establishing Tulip’s as a brand that deals in various skin care products in the ever expanding cosmetic industry in India.

In this proposal we would like to have a look at how we plan to launch the product in the market, what kind of market share are we looking at capturing, what is the segment of the market we are targeting, the various marketing strategies, profitability, break even analysis etc.

Ideally we would like Tulip’s to break even by its 3rd year of operation and start generating shareholder return on equity by its 5th year of operation.

Company’s Mission

The primary mission is to establish Tulip’s as an important brand that represents quality in skin care and represents the changing face of the cosmetic industry.

To accomplish the above mentioned mission we would have to design, a creative marketing program, high quality manufacturing and research and a comprehensive distribution network using widespread retail outlets, extensive promotion via media and internet, and skin-care consumer-stalls throughout malls in large metropolitan cities.

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By using a widely spread distribution channel we would be able to target a niche segment of customers who are more than willing to provide the quoted price if they are satisfied with the quality of goods and services that are provided.

We would look to establish Tulip’s as the brand for quality skin care products within our target market and promote it as the next cosmetic must-have.

Hence establishing Tulip’s as an important brand that represents quality in skin care can be achieved in the following ways:

High quality manufacturing and research.

A creative marketing program.

Creating a multi-channel distribution strategy.

Development of a wholesale distribution network by the third quarter of 2011.

The successful launch of a customer catalogues and stalls in malls by the third quarter of 2012.

Objectives

Launch Tulip’s retail by the third quarter of 2011.

Launch Tulip’s wholesale by the last quarter of 2011.

Generation of a profitable return by year end 2012.

To establish Tulip’s as a successful brand by 2013.

Factors crucial for success

Product Quality.

Pioneer Advantage.

Market Research.

Quality control.

Key Product placement.

What we would also look forward to attaining is the creation of a “buzz” about this “hot…new” brand in the market through a combination of PR and appropriate product placement.

An analysis of the skin care industry

The skin care industry in India is valued at $180 million.

However in India, the market for skin care products is at a very nascent stage.

The business for skin care solutions in India is expanding at a rate never witnessed before and it includes increased awareness amongst consumers, progress in technology and other such concepts.

The skin care products available in the market can be segregated into:

Facial creams cleansers, sunscreens, anti-wrinkle creams, dark circle removing creams, moisturizers, toners, fairness creams, etc.

Approximately 60% of the skin care market consists of facial creams, moisturizers, fairness creams, etc.

In both the markets urban and rural the penetration level is relatively low.

The Main Reason being that People home-made and traditional products are still preferred by the people to cure skin ailments.

However, within a period of the last five-six years, it has been observed that there is a huge demand which is growing exponentially for skin care products in India.

With the adoption of new lifestyles, availability of greater number of choices in products to choose from and an increase in disposable incomes the general population are now follow their favorite celebrities and role models more closely and are taking a greater interest in personal grooming.

Hence, the facial skin care market is booming.

The competition amongst products from rival companies to occupy maximum shelf space in retail stores is at an all-time high.

The cosmetics market now includes facial skin care products as one of their primary components.

To remove pimple’s, worry lines, acne and to combat stress in an effort to look young, creams and potions are being used in India increasingly just as is the case in the western countries.

Since the market penetration level is comparatively low, hence growth is expected to be around 20% over the next five years.

Major Rivals in the Skin care industry

The leader with around 53% of the market share is Hindustan Lever which owns Fair and Lovely, Ponds, Lakme which have a big grasp in the market share of skin care products in India.

CavinKare – Fairever occupies a market share of around 12 %.

Godrej- Fair Glow has a market share of about 4%.

Emami – (Gold Turmeric and Naturally Fair) has a market share as well.

Revlon (Fair and Glow) is also becoming increasingly popular.

SWOT ANALYSIS

Strengths:

Providing a quality skin-care cosmetic cream which closes face pores and gives a non-greasy face on which make-up can last longer.

In the age of glamour, bringing an extension to beauty and a cosmetic necessity.

Providing high quality products.

Having widespread availability and promotion.

Providing Safe skin product.

Pioneer Advantage

Weaknesses:

Highly competitive market.

Threat of the competitors about copying the product.

Difficulty in creating a high-adoption rate.

High advertising cost.

High legal and corporate expenses.

Opportunities:

Entering into the Cosmetic and Skin-care Industry at the same time.

Creating new variations of anti-sweat cream at a fast pace to meet different skin requirements and customer’s sensual needs.

Manufacture anti-sweat body creams.

Giving samples of cream for comparison with other foundations, concealers, face-creams for the summer.

Advancing the cream to a product that protects the skin from UV rays.

Threats:

Highly competitive market.

Global Recession.

Differences in taste and preferences.

Government rules and laws.

High promotional and development costs.

PEST ANALYSIS

PEST analysis is a part of external macro-environment in which the firm operates can be expressed in terms of the following factors:

Political

Economical

Social

Technological

To analyze various macro environmental factors we use PEST analysis. PEST analysis fits into an overall environmental scan.

POLITICAL FACTORS

Some of the political factors to take into consideration are legal issues, rules and regulations of the government and various others informal as well as formal rules under which a firm must act. Some of these political factors are:

TAX POLICY: the company has to bear a tax rate of 30%, which is the highest amongst all the tax rates, as the corporate tax rate. This reduces the profits of the company.

ENVIRONMENTRAL REGULATIONS: as per the norms of the government the company has to convert 30%of the land area into green land to make the environment eco-friendly, incurring extra cost for the company.

TRADE RESTRICTIONS& TARIFFS: the company has to bear charges for crossing the state borders for the purchase of raw materials and the delivery of finished product.

ECONOMIC FACTORS

The purchasing power of a prospective customer as well as the firm’s cost of capital is affected by various economic factors. Some economic factors include:

INFLATION RATE: the inflationary period is adversely affecting the company as the raw materials, machineries, etc. have to be purchased at a higher price.

INTEREST RATES: the rate of interest on corporate loan is 12% and the company has to pay a tax of 60 lakhs per year as tax.

SOCIAL FACTORS

Demographic and cultural aspects form a part of the social factors. These factors affect the customer needs and size of the potential market. Some social factors include:

HEALTH CONCIOUSNESS: keeping the safety of the end users and social responsibility in mind the company has used the chemicals that are not harmful for the skin and are a bit costly than the other chemicals.

ENVIRONMENT NORMS: keeping the environment norms in mind, the company has converted 30% of its land into the green area and also used eco- friendly paper for the purpose of packaging.

EMPHASIS ON SAFETY: the company has emphasized on employee safety and has taken a employees’ insurance policy of Rs.1 crore with an annual premium of Rs. 50000/-

TECHNOLOGICAL FACTORS

Technological factors include ecological and environmental aspects. Some technological factors are as follows:

RESEARCH AND DEVELOPMENT: the company will have to spend a lot on the research and development of the product in the upcoming years as the company has the advantage of being a pioneer in launching such a product in the Indian market and the product will be easily copied by the competitors. Thus, the company will have to continue investing in the research and development activities to keep a firm hold in the market.

TECHNOLOGY’S EFFECT ON FIRM’S OFFERING: The increase in the R&D cost will affect the firm’s offering as the cost of the product will increase with increase in R&D cost.

Segmentation, Targeting and Brand Positioning

SEGMENTATION

ON THE BASIS OF DENSITY

URBAN SUB-URBAN RURAL

ON THE BASIS OF GENDER

MALE FEMALE

ON THE BASIS OF DEMOGRAPHIC AGE

18-25 25-35 35-45 45-55 55-65

ON THE BASIS OF OCCUPATION

WORKING WOMEN HOUSE WIFE STUDENTS

ON THE BASIS OF SOCIAL CLASS

WORKING CLASS UPPER CLASS MIDDLE CLASS LOWER CLASS

ON THE BASIS OF PSYCHOGRAPHIC LIFESTYLE

CULTURE ORIENTED SPORTS ORIENTED OUTDOOR ORIENTED

Geographic region

India

Focusing on Delhi, Mumbai, Kolkata, Bangalore and Jaipur.

Density

Urban, suburban, rural

Gender

Female

Demographic Age

18+

Occupation

Students, Professionals, Homemakers.

Social Class

Working class, Upper class, Middle class, Lower class

Psychographic Lifestyle

Outdoor oriented, Culture oriented, sports oriented

TARGETING

The target market of the product is as follows:

ON THE BASIS OF DENSITY

URBAN SUB-URBAN RURAL

ON THE BASIS OF GENDER

MALE FEMALE

ON THE BASIS OF DEMOGRAPHIC AGE

18-25 25-35 35-45 45-55 55-65

ON THE BASIS OF OCCUPATION

WORKING WOMEN HOUSE WIFE STUDENTS

ON THE BASIS OF SOCIAL CLASS

WORKING CLASS UPPER CLASS MIDDLE CLASS LOWER CLASS

ON THE BASIS OF PSYCHOGRAPHIC LIFESTYLE

CULTURE ORIENTED SPORTS ORIENTED OUTDOOR ORIENTED

POSITIONING

Positioning can be defined as the process or steps by which we ensure that the company’s product have a unique identity and image in the consumers mind.

The main purpose behind it is to fix the brand in the consumers psyche so as to maximize its prospective benefit to the company goal is to locate the brand in the minds of consumers to maximize the potential benefit to the firm.

As a result of positioning, a successful creation of value proposition is created in the consumers mind.

The company is positioning its product as the first anti-sweat lotion.

The company will promote its product using various advertisement tools such as television ads, print ads and broachers.

BRIEF PRODUCT INFORMATION

Our product is a new advancement in the cosmetic industry.

It is a lotion that needs to be applied on daily basis or before any form of makeup. It blocks the formation of sweat on the skin and thus prevents the makeup or other cosmetic products from getting spoilt.

The cream regulates secretion of sweat through facial pores and eliminates accumulation of sweat, oil and dust, thus, cools and refreshes.

It is a milk based product that helps you be beautiful without doing harm to your skin.

Brand Name –

Tulip’s Anti- Sweat Blend

PRODUCT INGREDIENTS

milk

MILK

112634-main_Full

PURIFIED SPRING WATER

page0_blog_entry90_3

ROSE WATER

glycerine

glycerine formula

4. GLYCERINE

cucumber-slices1

5. CUCUMBER EXTRACTS

cetrimide_powder

cetrimide

6. CETRIMIDE

7. SESAME OILsesame oil

Triclosan__DP300_

Triclosan

8. TRICLOSAN

frescolatefrescolate

9. FRESCOLATE

Packaging –

The product is available in glass bottle with a user-friendly cap to provide an easy and satisfactory flow of the lotion. The glass bottles are used so that the lotion can stay in the usable state for a longer period of time.

Packing Size –

The lotion is available in a single packaging of 75ml, 250ml to provide uniformity to the market.

FINANCIAL ESTIMATES

Note: Currency mentioned below is in Indian Rupees. Also 1 lac= 1, 00, 000 Rs. And 1 crore= 1, 00, 00, 000 Rs.

Procurement of Funds:

Mr.Niranjan Kallamundkur : Rs. 62500000/-

Mrs. Sunita Kallamundkur : Rs. 62500000/-

Ms. Munni Joshi : Rs. 62500000/-

Ms. Sheela Chainani : Rs. 62500000/-

Corporate Loan @ 12% p.a. : Rs. 50000000/-

Allocation of Funds:

3 acre Land @ 4 crores per acre 120000000

Machineries:

Mixers (10 @ 5 lakhs each) 5000000

Dispensers (5 @ 2.5 lakhs each) 1250000

Package Divider (10 @ 2 lakhs each) 2000000

Packager (10 @ 4 lakhs each) 4000000

Working Capital Required 147750000

Total Investment 280000000

COSTS

Raw Material (Rs. 41.67 per 100ml) 56263000

Development of Shed 50000

ISO Certification Charges 2000000

Employee Insurance Policy worth 1 crore Premium 50000

Converting 30% land into Green Area 30000

Expenses

Per Month

Per Annum

Director’s Salary @ 80000 each per month

560000

6720000

Maintenance Of Machinery

50000

600000

Electricity

60000

720000

Telephone Charges

18000

216000

Advertisements:

TV Ads

Print Ads

Others

30000000

4000000

1000000

Distribution/Transportation Charges

1500000

18000000

Stationary

3000

36000

Printing Ink

40000

180000

Paper For Packaging

1250000

15000000

Glass Bottles:

75 ml @ 0.50 each

250ml @ 0.75 each

25500

23250

306000

279000

Depreciation @ 10% on all the machineries

1225000

Interest on Loan

6000000

BUDGETED SALES FOR THE YEAR 2009 – 10

75 ml Bottle – 50000 units per month

600000 units per year

250 ml Bottle – 30000 units per month

360000 units per year

CALCULATION OF PRICE PER UNIT

PARTICULARS

75 ML

250ML

Raw Material

31.25

104.18

Glass Bottle

0.50

0.75

Other Costs Per Unit

87.32

87.32

Total Cost Per Unit

119.37

192.25

Profit 10% of Cost

11.94

19.23

Sale Price to Wholesaler

131.31

211.48

Cost Price to Retailer (104% of SP to wholesaler)

136.56

219.94

MRP of the Product (106% of the CP to retailer)

145

235

PROFIT ANALYSIS:

Profit for the Year = 600000 X 11.94 + 360000 X 19.23

= 7164000 + 6922800

= 14086800 Rs (Indian)

PROMOTION

The product will be launched simultaneously in the major cities of India i.e. Delhi NCR, Kolkata, Mumbai, Jaipur and Bangalore.

It shall be available at all beauty centers and specialized markets.

The aim will be to provide the customer as much ease as possible through the wide network of retailers and distribution points.

A nationwide campaign to promote the skin care product would be undertaken via television ads, print media