INDIA’S PERFUME MARKET EXPANDS AND DIVERSIFIES AS SEGMENT MATURES

BY RAGHAVENDRA VERMA, in New Delhi

INDIA’S perfumery market is expanding with fast growing demand, easier availability of top brands and greater choice of products across the price range. According to market researcher Euromonitor International, the country’s overall fragrance market registered annual sales of USD298 million in 2016 and is projected to grow at an annual rate of 13.7% in next five year as the country’s USD2 trillion economy continues to grow at more 7% annually. Research from the Indian Institute of Management Ahmedabad suggests the country’s perfume market is worth USD328 million (in 2015).

Rising awareness about personal care products, increasing disposable income, growing demand in the country’s expanding middle class and the increasing availability of affordable mass market perfumes are pushing this demand, said Research & Markets’ ‘India Fragrance Market Overview’ report published in June 2016. Furthermore, as an increasing number of Indian consumers are shopping online, the market share of perfume e-sales is expected to increase from 7% of the total perfume market in 2015 to 11% in the next five years, said ‘A Snapshot of The Fragrance Industry of India’ report by the Indian Institute of Management Ahmedabad. In 2015 online perfume market was USD23 million and is projected to be USD54 million by 2020, it said.

“Perfume sales are driven by growing young population, higher discretionary spending and increasing importance to male growing,” Pragya Singh, vice president of the Gurgaon, near New Delhi-based retail and consumer products consultancy firm Technopak Advisors Pvt Ltd told Cosmetics Business Markets. Perfumes can also command a higher price with better packaging going forward, she said.

Indian consumers are also becoming more educated in using perfumes and graduating from deodorants, which have been their key source of scent thus far, Damanjit Kohli, executive director of Eurolux Fragrances, a Gurgaon-based perfume manufacturer told Cosmetics Business Markets. “Though deodorants are still popular, the demand for body mist, non-gas based body sprays and perfumes is growing significantly,” he said.

And wealthier consumers are moving towards purchases of exclusive high-fashion or premium cosmetic brands, whose budgets include high profile promotions and advertisements, said Shahnaz Husain, owner of the cosmetics brand Shahnaz Husain Herbals Inc that also markets a fragrance, branded with her personal ‘Shahnaz Husain’ signature costing Indian rupees INR5,000 (USD78) in a 50ml pack size. “People are much more brand conscious today and this is more so among users of premium products,” she told Cosmetics Business Markets.

However, the Indian premium perfume market remains very fragmented. “No brand would have a more than five percent share and there are lot of grey market products imported from other countries,” with importers sometimes evading customs duties,” said Ms Singh.

Other consumers are happy to pay the cost of compliance, however, with some importers able to tap the popularity of foreign brands through new ventures that source perfumes on demand with full custom clearance, even for one piece at a time. “We work on pre-booking basis and customers have to wait for one month,” said Mohit Khatri, founder of Projekt Perfumery India, an online retail site launched in November 2015.

Foreign perfumes have been present in Indian market for a long time but they were average brands and were highly priced, Mr Khatri told Cosmetics Business Markets. “We are overbooked and our user [website visitor] traffic, currently at 20,000, is doubling every month,” he said.

According to Mr Khatri, his customers are now spending USD60 every month on personal grooming, four times the amount they used to spend a year earlier. “Next year it may go up to USD120 as they have more products to choose from,” he said.

Still, imported premium perfumes are limited to a very small consumer base or are used for occasional wear, mainly due to their high cost, said Ms Singh. The premium perfume segment in India starts from USD40 an item and about 60% of sales are to women, she said.

There is also growth at the other end of the market. The long absence of lower priced branded perfumes is now being exploited by Indian deodorant sellers, who in the past year have launched perfumes under their deodorant brand. Axe from Hindustan Unilever, Fogg from Vini Cosmetics and Engage from ITC, with perfume prices varying between IND200 (USD3) and INR500 (USD7) for 100ml packs.

Another segment that is increasingly important are scents with natural ingredients, which can help Indian companies create a distinct identity for their brands without excessive marketing investment, Shakti Vinay Shukla, principal director of Fragrance & Flavour Development Centre told Cosmetics Business Markets. “The new companies do not have the marketing budget to compete with any of the big international brands,” he said, “but with the natural tag, they get established right away.”

However, even for the USD30 (60ml) price range, creating perfumes with natural ingredients is a big challenge given the high cost of raw materials. The costliest synthetic material is INR100,000 (USD1,500) per kg, while in naturals, jasmine and ‘tuberose absolute’ costs INR250,000 (USD4,000) per kg and rose oil goes up to INR1.2 million (USD18,000) per kg, said Mr Shukla.

Companies must also factor in high retailer margins when pricing which for the cheaper brands are mostly above 50% of the selling price, said Mr Kohli. As for fragrance ingredients – he said those used in Indian mass market products are usually strong while the high-end products use distinct notes and fragrances of floral and musk, he said.

According to Mr Khatri, although 90% percent of female perfumes sold in India are floral, mostly jasmine or rose, several companies have started to experiment with new and unusual fragrances such as leather, wood, jungle, or even after-rain soil. One such perfume is ‘Chai Musk’ by Bombay Perfumery that is inspired by spicy tea. According to Ms Singh, currently the perfume brands are not deriving much value from the market but in the long run India presents a good potential: “There will be a continuous growth and over the next five years – perfumes will have a very strong market,” added Mr Kohli.

Q&A BOX OUT – DAMANJIT KOHLI, DIRECTOR OF EUROLUX FRAGRANCES, A GURGAON-BASED CONTRACT PERFUME MANUFACTURER.

*Which is the fastest growing perfume segment in India?

DK: Those falling in the price range of INR200 [USD3] and INR500 [USD7.80]. The demand for some of the perfumes that we make in this range has gone up 10 times in last five years.

*Is INR200 not too low a price for selling perfumes?

DK: Students from a small town and cities would find a perfume of more than INR500 towards the high side, though in metropolitan cities this would be an average price. Priced at INR1,000 to INR1,500 [USD1.50 to USD 2.30], a product would have little market in smaller towns.

*How are you managing operations in such a low price environment?

DK: We keep our price point low as volumes are significantly higher. We bring in lot of processes in-house and build our infrastructure in a way to give competitive price to our customers.

*What are the major factors attracting customers to particular perfumes brands?

DK: People try perfumes that they see repeatedly in television ads. For non-branded ones, the packaging and appearance is what attracts the customers towards the product followed by its fragrance.

NEW PERFUME

Chai Musk is a product of experimentation with unusual scents by a new Indian company, Bombay Perfumery. Inspired by a cup of strong tea infused with lemongrass, the perfume has an addictive woody fragrance with a note of spicy tea. Costing INR4,100 (USD 64) for a 100ml pack, the perfume contains lemongrass, ginger root, Chinese osmanthus, Brazilian mate, Spanish cade oil and sandalwood. It was launched as a natural product in November 2016 with a range of eight perfumes.