Global Cosmetic Industries Essays

Global Cosmetic Industries Essays Global Cosmetic Industries Essay Global Cosmetic Industries Essay Global Cosmetic Industries In the world of globalization with unstable economic situation most of the investors looking for more stable market place to invest for long term. Selecting an appropriate market place with the concern of risk associate with it is a vital task for any investor. Global Cultural Revolution makes all cultural consumers to move into standardized product rather then using local products. Europe and America already achieved a well structure cosmetics and toiletries market where competition is quite high on the other hand emerging market like India and china has a huge base of consumer for international cosmetics and toiletries products. Now a day’s women and man from Asia pacific are more interest in buying global brands for their health and beauty products. Cosmetics and toiletries market is a growth oriented market for which emerging market is the right place to go. In 2003, the world market for cosmetics and toiletries was valued at US$201 billion, up 4. % from 2002. Hair care maintains its global sales amounting to US$42. 4 billion in 2003. (Briney, 2004b). According to Global Cosmetic Industry report (August, 2004) the big three multinationals Procter Gamble, LOreal and Unilever all have played a critical role in developing the  cosmetics  and  toiletries  industry in Asia-Pacific, especially in the emerging markets of China, India and Indonesia. In 2005, Asia-Pacific cosmetic and  toiletries  market saw positive economic indicators and its highest recorded growth in five years. : Manufacturers have been focusing on the opportunities offered by the BRIC countries (Brazil, Russia, India and China). UK: UK has a well structured consumer and market place for cosmetics and toiletries. At the movement cosmetic and toiletries are on the top of product growth cycle and consumers are spending on expensive products. In UK Competition is fierce in both manufacturing and retailing the premium and mass markets. Companies spend to protecting their upmarket brands. The growing involvement of grocery chains in non-food sectors is continuing to exert downward pressure on prices of mass-market cosmetics as they tend to be centred on seasonal sales. As a result a Considerable investment is necessary to bring new cosmetics and toiletries products to the market and to maintain their high profile, and the failure rate of new cosmetic and toiletries products is high in such a competitive market. Householders have been hit by recent crises in interest rates and increased household bills, are likely to be cutting back on spending, particularly on products of luxury market. Recent recession is making consumer to spend less for health and beauty products. For this reason new investment in this sector is a question to consider. Manufacturers are increasingly looking to the emerging markets of Brazil, Russia, India, Mexico and China for expansion plans. China: In contrast to UK, China’s cosmetics market, the second largest in Asia Pacific after Japan, is witnessing increased demand due to improving lifestyles and rising disposable income of the Chinese population. China has a large populace in the age group of 15 to 59 years, which is considered more fashion-conscious who have diversified needs. Consumer of china prefers their won beauty product than foreign brand. In China, for high duty the customs add 60% to the cost of goods, and they Compare western countries and China on cosmetics preference. Fake Goods is another problem for multinationals in china, which damage their brand image and difficult to distinguish between originals and fake one. However, the level of development of the market is still very low. Although several domestic firms are present, foreign companies dominate the market. L’Oreal has the largest market share in China. As a result china already has a fierce competition. India: Indian cosmetics and toiletries manufacturing Industry, 2010 is valuable for anyone who wants to invest and take advantage of lower costs in India, to get market shares as India is boosting its domestic needs; to forecast the future of the world economy as India is leading the way. India has emerged as a highly potential global outsourcing and solutions provider for consumer products  and general merchandise. India has always kept her stand in global competition right from the beginning for finished products such as cosmetics and toiletries. The Indian cosmetics industry is growing the average annual spending of Indian consumers in 2005 is just over US$3 which saw its value share rising from 27% in 1999 to 31% in 2005 and is likely to continue to surge ahead over the forecast period. The total size of the  Indian  retail beauty and cosmetics market is currently estimated at $950 million [Color cosmetics account for 14%, Fragrances 21%, Haircare 19%, Skin care 17%, Beauty services 13%, Herbal products 9%, others 7%]. The overall beauty and wellness market, which includes beauty services, is $2. 68 billion. India is being targeted by global cosmetic giants due to its favourable demographics. The modern, urban Indian women are becoming increasingly conscious about their style and looks. Skin care and color cosmetics have witnessed solid growth for the last few years, In India. Consumers like lower cost and the chance to try new products. Indias cosmetics and toiletries industry is tipped to grow 27 percent over 2006-2011, according to Euro monitor, due to the countrys strong economic performance and youthful demographic structure. New policies and sectors such as Special Economic Zones cut outs completely Tax burdens and overheads in India. With concerning the growing Indian economic and diverse consumer base, acquisition of Dabur India limited would be a promising investment. For acquisition risk assessment and management is vital issue. One of the prominent cosmetic and toiletries Company is Dabur India limited. Dabur India Limited is one of the leading consumer goods companies with interests in healthcare, personal care and toiletries. Dabur is a classic case of a family owned business being handed over to professionals. It is a company making timely strategic interventions to adapt to the business environment and maintaining its brand equity over the years with a turn over of more than Rs. 2. 23 crores, by offers the widest product range and strongest distribution network. Acquisition of Dabur India would be the best option for the investors. Investors need to maintain its local brand image also should have some concern about its main competitors like Hul, Godrej Consumer, Gillette India, Godrej Ind, Colgate, Emami, P and G and so on. Criticism: Though cosmetic and toiletries industry is a growth oriented industry, it facing lots of criticism from environmentalist group. Unilever, Revlon, Avon and Johnson Johnson, yet none of them has denied purchasing talc from the Golcha Group whose biggest mine has been operating illegally for 15 years. Many protected areas and sanctuaries across India suffer from the effects of mining. The Indian Government has a responsibility to ensure that its valuable wildlife reserves are protected. The loss of watersheds causes a lot of unnecessary suffering to local communities. Political system is thoroughly corrupt. India has been sending mixed signals to investors by changing it tax and tariff policies without notice. Sales taxes are levied by individual states which vary from state to state. This complex sales tax structure can sometimes be a deterrent to foreign investors. Conclusion: A strong brand promotional campaign, good distribution network, constant product innovation and quality improvement, and the ability to provide a variety of quality products are some of the major reasons for the success of Dabur India limited. In the future, Dabur india need to increase the amount of natural ingredients used in their products in order to satisfy consumers. At the same time, Dubar need to dedicate huge marketing budgets to promoting the natural aspects of their products. Risk  management is a continuous process that identifies risks; analyzes their impact and prioritizes them; develops and carries out plans for  risk  mitigation, acceptance, or other action. India has less risk factor for foreign investment with more institutionalised political, economic and business situation which is favourable for any foreign investors. Recommendations: Action need to be taken by investors to upgrade Dabur’s brand image nationally and internationally. More camping and advertising would help to improve Dabur’s brand image As India has diverse cultural background Dabur India need to bring more diversity in its products mix and adaptation process. On the other hand standardization is required for global market and huge return to its shareholders and stakeholders. Efficient management is the key to success in this diverse business environment. Dabur’s need to give more emphasizes in research and development of new product. A combination of local and foreign expertises is required for successful business where investors should avid by the low and regulation of health and safety of its employees. Accusation could be a challenging job to do. So from management to advertising all aspect of business needs to monitor closely. Investor should comply with the political, legal, social, economical, environmental, ethical and religious issues as well as its shareholders and stakeholders. Consumer behaviour is The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society. In cosmetics and Toiletries consumer behaviour involves the use and disposal of cosmetics products as well as the study of how they are purchased. Product use is often of great interest to the marketer, because this may influence how a product is best positioned or how we can encourage increased cosmetics and toiletries consumption. As a foreign investor, entering into a new market normally entails a great commitment of resource on consumer trends which is difficult to be recovered or transferred when the measure fails due to adopting a wrong trend in consumer behaviour. Consumer trends in the cosmetics and toiletries industry: The changes in cosmetics and toiletries consumption patterns are largely driven by income growth and demographic factors, particularly lifestyle changes brought about by urbanization, away-from-home employment of women, and increased levels of information while income growth, which affects the purchasing power of consumers, is one of the most important factors contributing to demand changes. Cosmetics and toiletries are not just the domain of women any longer and men too are increasingly taking to the use of more and more body sprays, perfumes and other cosmetics and toiletries. With rising demand from men, the market is getting enlarged and many players are coming out with cosmetic and toiletries products around the world. UK: In UK, National Statistics confirm that expenditure on beauty products and treatments is discretionary and tied in with disposable income; the 10% of households in the lowest gross income group spend a weekly average of just ? 3. 50 compared with those in the highest income group who spent an average of ? 19. 40 in 2005/2006. However, trends in consumer behaviour on cosmetic products and fragrances in UK is high. Younger respondents tend to use products more than older respondents so ostensibly, the UKs ageing population does not bode well for the industry. Which means consumers are moat likely set with there choice and brands. It is a fact, nevertheless, that in UK older people maintains a pride in their appearance and frequently has the disposable income to indulge in premium products. So consumers increasingly expanding their ranges to suit different skin textures and colourings. UK consumers looking for quality choose expensive brands as they feel that price is an indicator of quality. Today more and more consumers are selective on the high quality of the products or services so consumers are sensitive and prefer to buy value for money where low or standard quality cosmetics are dying. UK socialites belong to the upper class. They prefer to shop in specialty stores, go to clubs on weekends, and spend a good amount on luxury goods. Socialites are also very branding conscious and would go only for the best known in the market. So consumer’s expectation is setup highly on quality cosmetics where less intension to try new product also. China: Cosmetics have been around China almost as long as Traditional Chinese Medicine, which dates back some 5000 years. However, during the past several centuries, beauty standards and socio-political norms have changed the small perception of what is beautiful. However still there is a backward trend in consumer behaviour in Chinese cosmetics tradition. In China, the Tang Dynasty, a variety of essential oils were used as perfumes and an abundance of collared lip balms and white facial powders were in fashion. And of course the Qing dynasty promoted feet binding. Not that the latter has any direct correlation with cosmetics, but it does illustrate an odd trend in the long history of beauty and fashion. In June of 2005, one of China’s major newspapers, China Daily, wrote an article titled, â€Å"Chinese Women Go Crazy for Local Cosmetics. † This means strong negative consumer behaviour for international brand. There is a strong interest for bio cosmetics and products in Chinese consumers: natural product made from fruits and vegetables that would use few chemicals that would be safer and give better results on skin. A lot of young Chinese start to pay attention to this concept; they are looking for natural products, without too many chemicals, because they are efficient. Chemicals in cosmetics is likely dishonoured by Chinese people where most of the foreign manufacturers doing it. India: In India, over the years, as a result of the increasing literacy in the country, exposure to the west, satellite television, foreign magazines and newspapers, there is a significant increase of consumer  awareness in cosmetics and toiletries. Apart from psychology and economics, the role of history and tradition in shaping the Indian  consumer  behaviour is quite unique. Perhaps, only in  India, one sees traditional products along side modern products. For example, hair oils and tooth powder existing with shampoos and toothpaste. The success of contestants from India at various well known international beauty pageants in the last few years have also contributed towards making the Indian women more conscious about looks, beauty, grooming and aware of western cosmetic products and brands. More Indian consumers started using cosmetics and a small segment is also seen willing to pay a little more to look good. Indian consumers have a high degree of family orientation. This orientation in fact, extends to the extended family and friends as well. Brands with identities that support family values tend to be popular and accepted easily in the Indian market. Indian consumers are also associated with values of nurturing, care and affection. These values are far more dominant that values of ambition and achievement. Product which communicate feelings and emotions gel with the Indian consumers. The Indian rural market has been growing at 3-4% per annum, adding more than 1 million new consumers every year and now accounts for close to 50% of the volume consumption of fast-moving  consumer  goods in  India. The market size of the fast moving  consumer  goods sector is projected to more than double to US$ 23. 25 billion by 2010 from the present US$ 11. 16 billion. As a result, it is becoming an important market place for fast moving  consumer  goods as well as  consumer  durables with a positive consumer trends. However, in the absence of well known brands in selected product range, consumers are likely to take cues from well established retail outlets hoping that these outlets carry quality products. Consumers believe foreign brands vie increasingly with domestic brands for the growing cosmetics producing real quality. Criticism: The environmental awareness in  India  has started affecting marketing of products based upon their eco-friendliness. In general, Indian consumers are likely to buy environmentally responsible products and packs rather then as a whole. Irritant and allergic reactions may occur. Irritant reactions reflect a damaging effect  of the cosmetic or toiletry on the skin – an example would be the  effect  of too much soap or shampoo on the skin leading to chapping, dryness and soreness. Delicate areas of the body where the skin is naturally thinner such as the skin folds, face, and particularly the eyelids are most vulnerable to irritant reactions. Other sorts of cosmetic which can cause irritation include liquid foundation, mascaras, face masks, toners and anti-ageing creams. Some people suffer from a particularly sensitive skin and experience itching, burning or stinging within minutes of using a product. This is usually a form of irritation rather than allergy and is commoner in people with skin complaints such as rosacea and dermatitis which can react not to buy. Conclusion: Top class, middle class and lower class are income related classifications of the population and each of this class has its own consumption pattern which will have an effect on their ability to source finance for their lifestyle needs. This will mean the emergence of a new consuming class in India. Indian consumers have also developed lifestyles which have emerged from changing attitudes, mind and welcoming western influences and a need for self-gratification. Beauty parlours in cities, eateries, designer wear, watches, hi-tech products are instances which reflect these changes. Indian men and women really need more choice in cosmetics and toiletries that means various consumer trends and behaviour which could be positive sign on product mix and verities by the foreign investors in India. Recommendations: One of the main drivers of growth in natural cosmetics has been the consumer trend towards healthier lifestyles. Rightly or wrongly, good health is often associated in consumers’ minds with all things natural, while chemicals are considered by some to be the root of all evil. Consequently Dabur India comply these perceptions have given rise to demand for natural additives and ingredients used in cosmetics. Dabur India has to bear in mind that consumers in  India  are taking lead in prompting manufacturers to adopt technologies to produce eco-friendly products which changing Trends in Indian  Consumer  Behaviour. The future key for marketing could be to select more ethical and ecological responsible products and packaging, which is also convenient for consumers, thus, balancing environmental concerns with commercial considerations need to be maintained. Adaptation process is more appropriate than standardization in India for foreign investors. Working environment health safety, employee rights, fair trade, food safety, environmental awareness, corporate social responsibilities, charity has to be considered carefully to build up relationship with consumers.