Opportunities amidst COVID for the Cosmetic Industry
Covid 2019 has given us the chance to pause and think where we are. This pause has led many professionals to feel that this is the end.But is it actually an end or a beginning? Is it an opportunity or a complete loss? Dr. Renuka Thergoankar explain how the COVID challenge could mean an opportunity for the Indian cosmetic industry
The Pandemic started in November 2019 in China and in Europe it began in January 2020. Europe and other countries apart from China at that time recorded a total 555 confirmed cases of people suffering from the Corona Virus. Hence it was not taken very seriously.
The Global Scenario
Before January 2020 Cosmetic industry was abuzz with market influencers and glamorous models posing with products and consumers were following them ardently. These influencers were selling makeup, skin and hair products to millions of their followers. Until January 2020 Brands were allocating a large portion of marketing ad-spend to the influencer channel. When Covid cases started in January people thought it to be just another disease which was here for some time and companies took the ‘Protect and Prevent’ approach in advertising personal care products.
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As the Time progressed and people saw the rapid growth of the disease by March 2020 with 3, 37,297 patients globally, the approach of the cosmetic industry changed drastically. The world was under lockdown for last one month and a drastic drop in the global sale of cosmetic products was seen. The disease impacted the purchasing power of the customer as the earning potential decreased due to lockdown. No Aspiration based marketing now happened. Consumers just went away from the aspirational models and aspirational buying of cosmetic products. As per Sarah Baumann, Managing Director of London-based marketing agency VaynerMedia, “If content was king yesterday, it’s emperor today” . And suddenly the cosmetic marketing saw people emphasizing on the content and efficacy and well being of the products.
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By April 2619255 Covid cases were present globally. By this time COVID-19 had already impacted company finances. With a major decline in sale and halting of production, companies started facing financial losses. Color cosmetic segment was the worst hit. Cosmetic giant L’Oreal announced that with sales down 4.8 percent in the Q1, its Board of Directors will renounce the planned 10.4 percent remuneration.Several big and small companies started cutting salaries and laying off employees.
By May, with cases increasing globally to 4,63,3916 , the financial impact had already taken a toll on the economic stability of various countries. The countries started pondering on the aspect of removal of lockdown. Many European countries acted by opening the lockdown leading to opening of global market. But with opened market brands realised that the consumer demands had changed. Consumers were interested in buying more Hygiene related and wellbeing products as compared to colour cosmetics. They were looking for natural and sustainable cosmetics. On the manufacturing side, as the production started it was seen that the supply chain had been affected phenomenally with shipments delayed and freight, port and cargo charges increased drastically. This led to doubled costs of the products. Availability of raw materials declined and manufacturing was hence irregular.
Covid 19 and Indian cosmetic industry
In India Covid cases started appearing from late February and by May India had more than 150,000 cases .But India saw an early lockdown from 21st march 2020 which led to slow increase of the infection. But the lockdown led to complete halt to all financial activities in the country. If we look at Indian cosmetic products sales in May, we can see that apart from personal care products like hand wash, soap, body wash, and the sale of other cosmetics had virtually come to a standstill. Productivity has been hampered mainly because of lockdown for 2 months coupled with the migration of labours. The manpower which stayed back had to be provided with accommodation, double salary and food, leading to an increased burden on the pockets of companies. As far as the consumer, there was no brand loyalty at this stage. They were buying personal care and hygiene products of any brand that was either available or affordable.
As per the Global Data’s Survey Covid-19 data It was seen that
- 47% Indians are stocking personal hygiene products.
- With respect to the price range, about 48% Indians preferred beauty products in the middle to premium price range.
- 56% Indians had started spending more time browsing social media
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Harnessing opportunities with respect to business in COVID times: As India is reopening this is the right time to reconsider the challenges and harness opportunities out of it. Looking at the positive side this can be considered as a Great opportunity for Asia-Pacific (APAC) brands to innovate in terms of new marketing strategies and product designs for the beauty and grooming products. More functionality innovation, with brands facing more pressure to convey safety, longevity and product efficacy is desired. Today India is being considered as a new contract manufacturing hub globally and hence it is the right time to make quality and service related changes to make the most of this opportunity. The reduction of import has led to increased opportunity for Indian Raw Material and Packaging industry.
Harnessing opportunities with respect to finance in COVID times: Though today the profits have fallen and many companies are struggling but we can see that the mass market consumers in India prefer Medium to low segment price point products. Hence if the companies reduce their profit margins by 20% and reduce the price of the products they will get ample sale in the mass market. This will help them to grow back in a big way. Similarly with damaged balance sheets of brands, retailers and suppliers new sources of capital is required. Today Government initiatives of Loans to MSME registered companies and start-ups at very low interest and without collateral are available which can be availed easily. The finances can be capitalised by availing Government policies like one window one week policies for product registration and licensing to reduce the time span and quickly turn over and make the most out of it.
Harnessing opportunities with respect to raw material and supply chain in COVID times: India has an opportunity in disguise at the global scenario in the form of companies shifting from China and finding new economically stable locations. Today we should look at More locally sourced ingredients. Since the chances of reoccurrence of the virus has led to a possibility of regular breakdowns in supply chain and availability of raw materials. Hence we should look at our Government policy of “Make in India” and “Aatmanirbhar Bharat”. This will help us to create more reliability and will provide better products. Hence the opportunity is ample even for raw material industries. Raw materials from natural and sustainable sources are being considered by the consumers as better for their health. This demand has led to a need of such raw materials. Similarly packaging import from China has been hampered and this has led us to opportunities for new packaging manufacturing units.
Harnessing opportunities with respect to manufacturing and innovation in COVID times:Many international players are now looking at India for contract manufacturing but quality is being considered first. Hence industries should focus more on safe practices for manufacturing quality products. Put proper plans and actions in place for companies as well as farmers. Bigger role for Contract Manufacturers is now seen as there is a potential for closer collaborationamong brands and retailers, through data sharing and inventory pooling. The pace of innovation has to be accelerated as there is a substantial shift in demand from consumers. Hence more scope for innovative natural and sustainable products.
Harnessing opportunities with respect to product in COVID times : The products in the Preventative categories especially those relating to the WHO recommended hand hygiene such as soap, hand sanitizers, and wet wipes are gaining demand from the consumers. Protective personal care, male and female personal hygiene products, body washes, protective creams etc will be more preferred by the consumers in the next few years. Due to increased use of sanitizers the skin issues have started escalating and hence the demand for Skincare products such as hand creams and moisturizers will be seen. With masks being worn by people for a long time the problems of acnes and rashes will be more seen and hence the demand for Maskene products like Antiacne, soothing and calming products will be more. Beauty from home is the new norm: DIY kits will be sold more. Natural and Organic Products with safer quality higher integrity and transparent innovation is being preferred as a wellbeing initiative by the consumers. Similarly, Touchless format product delivery system are being preferred by the consumers for most of the products.
Harnessing opportunities with respect to marketing in Covid 19 times: Changed Consumer behaviour has led to changed marketing requirements. Today consumers are Favouring brands that depict evidence of adequacy and safety, both from a health and environmental perspective. They are more hygiene-focused .Hence the beauty brands should utilize the time to renovate their online offerings, should Offer e-consultation services and should Invest in right technology and augmented/virtual reality services for the consumers. Transparent Innovation with Farm to Face Concept can be promoted. Use of artificial intelligence for testing, discovery, and customization of products at this time will be very useful in providing the right products to satisfy the consumer needs.
Harnessing Opportunities During Covid Times with respect to Retail Market: Though Online market will increase but retail market is here to stay.The ticket size will decrease but people will prefer to buy products from hygienic shops providing products with utmost importance on Hygiene and packaging.
Way Forward: While the beauty industry may be in a relatively stronger position than other consumer categories, 2020 will be one of the worst years it has ever endured.Lot of opportunities for the Cosmetic and Aroma segment to make it big with proper quality and hygiene practises. Opportunities for Entrepreneurs and Businesses who can manage the field of 6 P’s (Product, Price, Place Promotion, People and Performance) are sky-high. Even before the pandemic, the definition of “beauty” was becoming more global, expansive, and well-being this will not change —and hence, there is reason for hope.
Every crisis comes with an opportunity; Identify, Strategize, Execute the best you can!
Author : Dr Renuka Thergaonkar
Director, R&D Global Consultants Pvt Ltd
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