Last fortnight, Kylie Cosmetics launched in India, hot on the heels of the Minimalist achieving an astonishing 100 Cr scaleup in just 1 year. 

World’s Beauty Spot

The pursuit of beauty has always been a deeply ingrained human desire. 

Beauty has appeared essential to our well-being and comparable to our quests for ethics and goodness. 

The origins of cosmetology trace back to ancient civilisations, notably in Egypt and India. Evidence from the Indus Valley civilisation around 2500 to 1550 BCE reveals advanced beauty practices used by both men and women.

One of the earliest documented beauticians is found in the Hindu epic, the Mahabharata, where Draupadi, serving the queen of Virata, adopts the role of 'sairandhri'—an attendant in the palace's women's quarters. She carries a 'prasadhana petika', a vanity case filled with items for beautification, highlighting the ceremonial importance of cosmetics at the time. 

Shola Shringar or sixteen adornments, circa 1800 CE, Kangra School of Art, National Museum, New Delhi

The early civilisation in India saw the integration of beauty routines into daily and seasonal rituals, enhancing one’s persona while aiming for spiritual and physical wellness.

Parallel to these ancient practices, the Western cosmetics industry flourished much later, around the late 1800s. 

This growth was spurred by technological advancements such as improved lighting, mirrors, and the advent of commercial photography, which heightened people's awareness of their visual appearance. In the West, Iconic brands like Rimmel, Guerlain, and Hudnut emerged, revolutionizing the market with safer, more reliable products such as face powders and lipsticks—previously homemade and often toxic.

In India, the concept of makeup was still evolving, and it wasn’t until 1918 that the first domestically produced product, Mysore Sandal Soap, was introduced. 

During World War I, the export of sandalwood from India faced severe disruptions. Recognising the abundance of this resource locally, Maharaja Krishna Wadiyar of Mysore capitalised on the situation. 

He led to the setup of the Government Sandalwood Oil Factory, which was tasked with extracting oil from sandalwood, a process central to producing various goods, including cosmetics. Inspired by the availability of this resource and its potential applications, the Maharaja envisioned creating a product that was both luxurious and uniquely Indian. 

Thus, the idea of manufacturing soap using sandalwood oil was born.

Mysore Sandal Soap quickly symbolised Indian ingenuity, combining traditional practices with modern manufacturing techniques. The soap was made using pure sandalwood oil, known for its distinctive fragrance and skin-beneficial properties, including antiseptic and moisturizing properties.

The soap’s success was followed in 1919 by another landmark product, Afghan Snow cream. 

This product was named during a visit by Afghanistan’s King Zaheer Shah to India, where he likened a homemade cream presented to him that reminded him of the snow of Afghanistan. It became the first beauty cream produced in the region, enjoying endorsements from royalty and high society.

As these products gained popularity, they laid the groundwork for an awareness and appreciation of quality, locally-produced cosmetics. 

Early innovation and discoveries from India set the stage for it becoming a major player in the global beauty industry.

Looking Self-Reliant

The beauty and skincare market transformed as India journeyed through the early 20th century. 

In the late 1920s, influenced by the Swadeshi Movement’s call for national self-sufficiency, products like Boroline Cream, launched in 1929, became symbols of Indian ingenuity. This antiseptic cream addressed common skin issues such as dryness and minor wounds, providing a versatile and effective solution when reliance on imported goods was discouraged. 

The 1940s saw further evolution in consumer preferences, partly influenced by Western culture, as the Indian public became more aware of global beauty trends. 

Introduced in 1941, Lux soap catered to the growing desire for glamour and luxury, tapping into the cinematic appeal of the era. It promised a touch of elegance that resonated with the aspirations of an emerging middle class that admired the allure and sophistication seen in Hollywood films.

The launch of Pond’s Cold Cream in 1947 coincided with India's independence and addressed the practical need for skin protection against harsh winters, a common issue across much of North India. 

The product's timely introduction appealed to the newly independent populace eager to embrace products designed for their specific needs. Post-independence, the scenario changed significantly. 

The absence of domestic brands was impacting India’s foreign exchange reserves. The solution was to produce more and more products domestically. 

As a result, in 1952, Lakmé was born.

The idea for Lakmé seeded from a conversation between India’s first Prime Minister, Jawaharlal Nehru, and J.R.D. Tata of the Tata Group. Concerned about the high demand for imported cosmetics and its drain on foreign exchange, Nehru suggested that Tata create a brand that could cater to the Indian market.

It quickly became a household name, filling a market void and fostering a sense of national pride in Indian-made goods.

​​Lakmé’s success in India can largely be attributed to its keen understanding of the local market needs. The brand specifically formulated products to withstand the Indian climate and cater to Indian skin tones and types, largely unaddressed by foreign brands. 

Lakmé’s early adoption of a broad product range, from lipsticks to skincare creams, ensured it met diverse consumer needs under one roof, enhancing its appeal across various demographic segment

The success of Lakmé spurred other Indian entrepreneurs to explore the beauty and skincare industry, leading to the establishment of several other iconic brands. 

Dabur, established in 1884, embraced Ayurvedic principles for its products like Dabur Amla Hair Oil in the 1950s. These products leveraged traditional Indian practices of oiling hair to strengthen hair and promote health. Similarly, Godrej introduced Cinthol soap in 1952, which was well-received for its focus on health and hygiene..

In 1975, the launch of Fair & Lovely (now Glow & Lovely) marked another significant moment in the Indian beauty industry. Promising a fairer complexion, the product tapped into the longstanding cultural preference for lighter skin, which, despite being controversial, resonated with a large segment of the market. 

This product highlighted the profound impact of Western beauty standards, showing how global influences were reshaping local beauty ideals and preferences.

By the late 1990s, the Indian beauty and skincare market was estimated to be worth around US $600M, with an annual growth rate of ~20%. 

The high growth with a sizeable consumer base meant that Global brands were ready to knock on Indian doors as it opened up its economies

Pageant Setting Foundation

The 1990s would usher in a significant shift in the Indian beauty and skincare market. 

The transformation was spurred by cultural and economic upheavals, globalisation, economic liberalisation, and progressive gender norms.

The crowning of Sushmita Sen and Aishwarya Rai as the first Indian Miss Universe and Miss World winners marked the rise of the Indian beauty queens on the global stage; Indians would go on to win another Miss Universe and three more Miss World crowns during the 1990s. 

Beauty became even more aspirational, and existing cultural reservations against women using beauty and skincare products were challenged. Rising disposable incomes in women's hands, spurred by strong female labor force participation rates of ~45%, amplified this trend.

Demand for beauty and skincare products rose exponentially.

Several international beauty brands entered the newly opened and liberalized Indian market. 1995 saw the first global brand, Revlon, establish its presence in India, by partnering with the Modi group and customizing its products for Indian conditions and preferences.

The likes of L’Oreal, M.A.C., Maybelline and Clinique followed. Advertisements ran galore.

Spoilt for choice, the Indian consumer gravitated towards foreign products, perceiving them as trendy and modern. Put on a sudden backfoot, the likes of Lakme tried to innovate by revamping their packaging and introducing newer products like highlights; but to limited success. Eventually, Tata sold Lakme to Hindustan Unilever Limited in 1998 for INR 200 Cr. 

Despite the influx of various skincare and beauty products, for the Indian populace, skincare and beauty were still synonymous with fairness. Sales of skin whitening creams had jumped to ~INR 900 Cr in 2001, having almost tripled in just three years, on back of an ~4x increase in available brands.

Riding on this realisation, the fairness market in the 2000s saw competition-induced product innovation and the surprising emergence of a new customer category.

To combat the dominance of Hindustan Unilever’s Fair and Lovely Cream (launched 1975) , which had had an undisputed 90% market share in the late 1990s, competitors had to innovate. 

In 2005, Emami changed the nature of the game by launching the first skin whitening cream for men - ‘Fair and Handsome’ and onboarded Sharukh Khan to market it. Fair and Handsome would go on to become a INR 100 Cr brand in just five years. 

Emami was the first brand to bank on the hidden demand for men's skincare products. Estimates suggested that 30% of women’s fairness creams users were men!

The same year, Shah Rukh Khan would also dip in a bathtub for an advertisement for Lux. 

The non-existent market for male grooming products had been tapped and was ready to explode.

By 2010, the fairness market had sales worth ~INR 2,000 Cr, growing at 15%, with men’s creams accounting for around 10%, but growing at double the fairness market rate. 

Focus on men’s skincare was representative of the many changes the global beauty and personal care industry saw in the 2010s.

Bold & Premium

The 2010s marked a considerable shift in consumer behaviour. 

Earlier, consumers took a largely ingredient-agnostic approach, which resulted in buying general-use products influenced by advertisements and celebrity endorsements.

Now, consumers started seeking specific products catered to their skin and body type, ethnicity, value systems, and even religion. Transparency regarding ingredients and manufacturing processes became important, and tags like sustainable, toxin-free, organic, and cruelty-free started selling.  

Premiumization became a major growth driver. Consumers were willing to pay a higher premium for products deemed effective in solving their specific pain points. The beginning of the decade saw sales of premium products outpacing mass products in most of Western Europe and North America. 

By the end of the decade, premium and masstige products would account for over half the Chinese and U.S markets.

With the advent of broadband, consumers started relying on the internet to not only extensively research products to fulfil their requirements but also make convenient online purchases.

These trends would propel the BPC to a ~$540 Bn global market by 2015, split across the following segments. 

The Indian market was not impervious to these trends.

Recognizing a white space in the market, brands like WOW Skin Science, Patanjali and Sugar Cosmetics entered the market with Indianized offerings.

While WOW skin science banked on offering natural herbal products without synthetic additives like silicones, mineral oil, parabens etc., Sugar cosmetics tried to solve for India specific pain points like products that would be resistant to heat and humidity, lipstick shades more suited to Indian skin tones.

Patanjali doubled down on the demand for organic herbal products, adding the winning element of using traditional, ayurvedic formulations, locally sourced ingredients, and powerful marketing strategies to highlight the cultural essence of their products.  

Parallely, premiumization had become a key growth driver – representative of the remarkable growth in the BPC industry, given that just a decade ago, sachets accounted for ~50% of Fair and Lovely’s sales! Premium global brands like Sephora entered the country and saw double digit growth.

By 2018, Indians bought USD 774m worth of BPC products, almost ~10 percent of the overall ~USD 8 billion BPC market. 

A spate of e-commerce platforms, such as Amazon and Flipkart, and BPC-focused category creators, such as Nykaa, facilitated this rise. 

India’s rising share in the BPC market meant that both global brands and new home-grown disruptors were looking to mesmerise the Indian audience  

Highlighting Ingredients

Patanjali’s overnight success in the entrenched beauty landscape marked a pivotal shift in the Indian consumer’s mindset.

It gave rise to a class of discerning users who would no longer take a mono carton on its face value. They read labels by habit, had a working knowledge of formulations and could cut through the marketing to understand the science behind beauty products.

The incumbents were weighed down by their legacies, slow product launches and bureaucracy of their R&D cycles to serve the rising niche. A bunch of first-generation entrepreneurs spotted this gap to build purpose-driven, quick-to-market, online-first direct-to-consumer (D2C) brands in beauty and personal care (BPC).

The newcomers were ready to experiment and innovate, buoyed by a receptive user base. They prioritised personalised offerings, targeted use cases, clean ingredients, authentic packaging, and inclusive marketing.

Ace investment banker and ex-Kotak MD, Falguni Nayar began her second act with Nykaa, driven by the vision to build the Sephora experience for Indians, online.

Nykaa created an entire market from scratch with an inventory-led model, a seamless user interface, private labels (2015), ‘beauty bars’ to educate wide-eyed users and offline stores (Nykaa Lux and Nykaa On-Trend) to offer the touch-and-feel experience of beauty shopping.

Not too far from Nayar’s base in Prabhadevi, Manish Taleja and Rahul Dash launched Purplle out of Ghatkopar, an online multi-brand retailer and salon-booking platform. A year in, they evolved into a pure-play BPC retailer and later pivoted into a fulfilment marketplace, controlling logistics for 3rd party brands. Much like Nykaa, Purplle introduced private labels and took the omnichannel route in 2017 to solidify its presence.

The phase also marked a pushback against unrealistic beauty standards and a confident move towards skin positivity. ‘Why feed your skin what you would not eat’ was the order of the day.

Taking a cue from the prevailing sentiment, The Ayurvedic Experience and WOW Skin Science among others started a range of Ayurveda-inspired, chemical-free products. Going a step further, Plum, pulp and Juicy Chemistry introduced a 100% vegan, cruelty-free portfolio, focusing on alignment of values with their consumers.

In 2016, mCaffeine launched a coffee-infused line, building a unique positioning of a brand built on a single ingredient.

First-time parents Varun and Ghazal Alagh set out to solve the problem for their new-born son by developing a toxin-free brand with onion seed oil as its hero ingredient. Mamaearth and The Moms Co unlocked the infant-oriented, safety-first personal care space.

The fervent activity did not go unnoticed, and venture investors soon stepped in to meet the capital needs of the upstarts as they faced off against the heavyweights.

All That Glitters is VC Gold

As 2017 started, new-age BPC startups received $550M+ in venture funding

The Jio revolution enabled online players to partner with social media influencers and acquire customers faster.

The war chest allowed the insurgents to experiment with virtual try-ons, skin analysers, shade finders, digital mirror screens and other tools to shorten the average R&D cycle to ~7 months as against the traditional 12+ month timeline.

Newer players, with fresher propositions, further expanded the BPC landscape. Bare Anatomy offered hyper-customer solutions, NatHabit launched an artisanal range, and Conscious Chemist doubled down on science-first, informed skincare.

Third-time beauty entrepreneurs Ashutosh Valani and Priyank Shah started a cruelty-free brand named Renee Cosmetics after successfully building and selling Beardo - to Marico - and Villain - to Mensa Brands.

A common refrain was that it was never easier to launch a personal care brand, and never more difficult to scale it.

COVID-19 increased lives, prioritised health and wellness, and made self-care a habit. As people were confined indoors, their screen times skyrocketed, with internet trends and fads serving as coping mechanisms.

However, Korean beauty would not be a fad unlike countless social media #challenges or Dalgona coffee.

The K-beauty wave was built on elaborate 10-step routines, innate suitability to the Indian skin texture and natural ingredients such as centella asiatica, ginseng and snail mucin, all aimed at achieving the coveted ‘glass skin’ look.

Innisfree was the first Korean brand that was introduced in India, with 100% FDI. The likes of Faceshop, Tonymoly, Etude House, Oh K!, Klairs, 3CE, Missha, and Secret Key soon followed before Indian brands launched dedicated sub-brands to ride the wave.

The period also saw synergistic partnerships between Bollywood actors and beauty brands, going beyond just paid endorsements.

Shilpa Shetty’s minority investment in Mamaearth and the stellar returns encouraged others to take the bold leap. Alia Bhatt soon picked up a stake in Nykaa.

Katrina Kaif’s Kay Beauty, Deepika Padukone’s 82E and Hyphen by Kriti Sanon marked the arrival of celebrity-owned brands. It enabled the actresses to put their money where their faces were while leveraging their star power to elevate brand visibility and attract a following.

BPC had been a big benefactor of the pandemic. The playing field now appeared crowded, with 80+ D2C players.

As competition became cut-throat, small brands looked like they weren’t going to survive the onslaught from mighty incumbents and heavily-funded insurgents

Competitive Shades of Red

The frenzy witnessed its share of dead ends and ambitions gone haywire.

Cosmetics brand Belora had to shut down for lack of capital. On the other hand, Mumbai-based salon service provider-turned-personal care brand MyGlamm bit off more than what it could chew.

In 2021, it acquired content players POPxo, Plixxo, Scoopwhoop and MissMalini Entertainment along with beauty and wellness logos such as The Moms Co, St. Botanica and Sirona, resulting in an unwieldy mesh.

Hits and misses notwithstanding, the Indian BPC market was estimated at $19B in 2022 and was slated to touch $30B by 2027, making up 5% of the global industry. 

Cosmetics, fragrances and skincare were poised to be the fastest-growing categories for an upwardly mobile, conscious, informed consumer class.

Rising internet penetration was expected to unlock aspirational, underserved users in Tier 2 India and beyond. India’s per capita BPC spend stood at $14 vs. $38 in China and $313 in USA, denoting the enormous growth potential.

Pure-play BPC players were expected to grow ~2x faster than FMCG houses owing to higher trend-responsiveness and speed of execution despite the latter’s supply chain moat. Younger brands were able to harness the power of storytelling by tapping on a content-to-commerce play.

Mamearth mastered the template as it made a high-profile debut on the stock markets, marking a watershed moment for D2C brands in beauty and beyond.

Despite the gold rush in the previous decade, pockets of value remained for players big and small.

Bombay Shaving Company (BSC), The Man Company, Man Matters, Beardo, Ustraa and LetsShave built a niche in the male grooming space, valued at ~$2B. Kama Ayurveda, Ranavat, Forest Essentials and Fable & Mane took Ayurveda to the world by merging the traditional philosophy with modern lifestyle for western markets.

In November 2022, the Tata Group announced plans to open 20 tech-enabled beauty stores, to complement its online app called Tata CLiQ Palette, signaling the salt-to-software conglomerate’s interest in building the full O2O beauty experience.

Seven months later, Reliance Retail made its foray into the BPC market with its omnichannel platform named Tira.

Tira was expected to operate the group’s playbook to enter into exclusive partnerships, use the expertise from building Ajio and scale up to 400 stores in quick time, while piggybacking on the parent’s cash reserves.

Reliance’s entry marked a severe threat to marketplaces such as Nykaa and Purplle and scaled D2C brands such as SUGAR Cosmetics and Mamaearth, all of whom were growing their offline presence as the logical next step to their online-first origins.

The small guys were going to give the big guns a good fight. 

Getting Under Your Skin

Despite intense competition, the launch of new brands continued post-COVID. 

It accelerated.

As customers became more aware of products' effects, their preferences evolved. This created a void in the market, and incumbents, especially FMCG brands, were slow to respond.

Skincare became the biggest entry point. 

All the popular skincare brands that are actives-based, such as Minimalist, Foxtale, Deconstruct, Pilgrim, and The Derma Co were launched in the last five years.

Within a short period, these brands have achieved reasonable scale. 

The Minimalist crossed annual revenue of INR 100 crores within 8 months. Similarly, ‘The Derma Co.’ (one of the Mamaearth’s brands) recently crossed an annual revenue run-rate of INR 500 crore.

Founders attributed this early-stage success to the availability of a more evolved customer base looking for personalised solutions. These brands also got incentivised for being transparent, a trick which they picked from the playbook of global peers like The Ordinary.

Their SEO ranking improved organically with an increase in search for active ingredients. For example, The Minimalist had named the product itself as Niacinamide 10% face serum, as compared to general use face serums.

New-age BPC players adopted leaner R&D and product development cycles, effectively shortening the time it takes to bring products to market by around 50%

This has enabled newer brands to charge a premium, earn better margins, and grab market shares from general-use case brands. 

The BPC sector contributes a third of all e-commerce orders, accounting a fifth of the GMV.

The sector is on a robust growth trajectory, with projections estimating it to reach a market size of $33 billion by 2027.

The masstige sector has been vibrant, with low-barrier to entry and cash-rich incumbents pumping money

Winning the Crown

The epic contest between new age and legacy continues as it has done for a century. 

The giants have remained proactive, launching their digital native brands (DNBs), strategically investing in promising companies, and acquiring multiple brands to cater to the shift in consumer demand towards innovative new brands - using natural ingredients, sustainable and more personalised.

This ‘umbrella of brands’ strategy has proven far more effective than the troubled roll-up model.

Roll-ups, which were all the rage in 2021 have failed to deliver on its promise globally and in India. Thrasio, which pioneered the model, declared bankruptcy in the US. In India, Mensa Brands, Good Glamm Group and GOAT are finding it tough to raise capital, with some even getting sued by former investors of the brands they acquired. 

Honasa has successfully replicated the house of brands strategy, with Derma Co. joining Mamaearth in the INR 500 crore club. Homegrown Aqualogica and acquired Dr. Sheth’s growing faster than Mamaearth itself.

Omnichannel strategies, encompassing Quick-commerce, offline, and international growth, are the next big opportunities.

For Zepto, the beauty category has grown three-fold in the last quarter. 

Multiple brands, such as Sanfe and BSC, have claimed to reach higher revenue numbers from Blinkit than Amazon in recent months, a total shift from the norm.

For Mamaearth and SUGAR, the incremental revenue above the INR 100 Cr mark mostly comes from offline expansion. The duo has opened multiple exclusive beauty outlets (EBOs) and expanded to over 1L general trade stores. Though still far from ITC's network of over 10L stores, the growth has been terrific. 

Digitally native brands are going global now.

Mamaearth has a significant presence in the Middle East, WOW and Skin Essentials have expanded into retail in the US via Walmart and CVS, with Skin Essential doing 35% of its revenue from the US. Minimalist sells its products on Sephora in multiple countries including the UK and Australia.

The Ayurveda Experience sells its products in 20+ countries, with 95% of revenue coming from outside India. It recently raised another $26M to fuel this growth. Even 5000 year-old Ayurveda is adapting to digital commerce.

The beauty market already has two public unicorns, MamaEarth and Nykaa. Challengers like SUGAR, BSC, and Minimalist are emerging. None of these existed 10 years ago. 

As India explodes, the epic contest between large and small will continue. But as recent history suggest, the Davids are beating the Goliaths to eat out of the 100,000 Cr market.

Writing: Keshav, Ajeet, Nikhil, Parth, Shreyas, Tanish and Aviral Design: Omkar, Abhinav and Chandra