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The evolving Indian hair care industry

Apr 12, 2007

Indians have evolved from the 'champi' times, wherein hair oil was considered to be the only product meant for hair care. Today, there are a plethora of options available from shampoos and conditioners to hair dyes and post wash products. In this article we focus on the shampoo segment, which is considered to be one of the fastest growing segment in the hair care industry. The India shampoo industry is estimated at Rs 14 bn and is growing at an average rate of 20% per annum. According to AC Nielsen, shampoo is one of the fastest growing categories within FMCG sector and is expected to grow at 25% per annum in the coming years.

Segmentation: The shampoo industry is segmented on benefit platforms: cosmetic (shine, health and strength), anti dandruff (AD) and herbal. 20% of the total shampoo market is accounted by the AD shampoos. The AD segment is the fastest growing segment, growing at 10% to 12 % every year

Usage: The frequency of shampoo usage is very low in India. Most consumers use shampoo only once or twice in a week. In many cases, these products are used on special occasions such as weddings, parties etc. About 50% of consumers use ordinary toilet soaps to wash their hair. About 15% of consumers use toilet soaps as well as shampoo for cleaning their hair. Also 70% of the total shampoo sales are through sachet sales. HLL has higher stakes in the rural market with an 80% share. The bottle sales are popular in the northern region where 50% of the shampoo bottles are sold.

From a penetration level of 13% in 2000, now almost a third of the country's rural population uses shampoo with penetration levels zooming to 32% in 2005. While the north and west zones have tripled in penetration, the south and east zones have doubled during the period between the years 2000 to 2005

After a sober growth in 2004 due to the downturn of the FMCG sector, shampoo sector saw strong growth in the next two years due to the introduction of sachets and a surge in rural demand. The overall shampoo market, which sees annual volume sales of approximately 63,000 tonnes, saw rural offtake grow by 40% last year, while urban demand grew half that at 21%.

Market players: HLL is the undisputed leader from the early 1990s with brands like Sunsilk, Clinic All Clear and Clinic Plus. P & G entered India in Nov 1995, with the world's largest selling brand - Pantene. It also launched Head &Shoulders, which is the leading AD shampoo. Amongst other players are Dabur, CavinKare and Ayur.

Opportunity: Penetration of shampoo is very low in India. The average per-capita consumption of shampoo in India is very low at approximately 13 ml and many people in rural India still use toilet soaps. People still perceive shampoo as high end product in the rural areas. This provides a huge opportunity to the players. The huge size of the untapped market leads to a great potential for the existing players.

Percapita consumption (ml)
Thailand 330
Indonesia 160
India 13

India is and will remain for some time one of the youngest countries in the world. Currently there is a population of 163 m teen in India. Approximately half of the 1 bn plus population is under the age of 20, which is one of the largest consumer of hair care products. This provides huge market for the shampoo players. Also, with the increasing income levels of the middle class population, the usage of shampoos has increased.

Despite its undisputed potential, the rapid expansion of the shampoo market was interrupted in 1999. Overall growth rates in the market slowed to 1.7% in 1999, from 16% the previous year. Lack of innovation was the major reason for slowdown. The perception that shampoos contain harsh chemicals that could damage hair, high price and the view that the shampoo is more of a glamour product rather than a hygiene product led to lower sales. The players came out with the idea of smaller packs, which were a success. Also, products like anti dandruff started getting attention and became the fastest growing category. Players like Dabur and Ayush came up with herbal shampoos.

However in recent times, the value-added shampoo segment is getting quite crowded, with a range of pharmaceutical and cosmetics companies launching specialised products. Godrej Soaps has leveraged its dominance of the hair colour market to launch Godrej Colourgloss shampoo, for users with coloured hair, while pharma companies (including Johnson & Johnson) have launched medicated anti-dandruff shampoos (which will probably carry higher credibility with buyers).

Going forward, by 2015, the under 20 crowd will make up 55% of all Indians providing a huge opportunity to players in this sector. Further, there is potential for converting users of toilet soaps and occasional users. With increasing awareness and advertising campaigns, the overall penetration of shampoos in India is likely to multiply manifold in the next two to three years.

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