January 2013

Reevolv Advisory Services

Private Limited
Indian Salon Hair and Skin Products Industry Report
This document has been prepared by Shilpa Bhattar and Kaustubh
Kulkarni. For any queries or detailed information contact us on
+91 22 - 60022001 or email at research@reevolv.in
Indian Salon Hair and Skin Products Industry Report

2


Table of Contents
Particulars
Page Nos.
1. Executive Summary 4
2. Salon Products Industry Overview
2.1. Market Opportunity 5
2.2. City Wise Market Analysis 8
2.3. Growth Drivers 10
3. Business Dynamics
3.1. Evolution of the Industry 13
3.2. Salon Products Category Differentiation 16
3.3. End Consumer Psyche 17
3.4. Business Model 18
3.5. Buying Criteria of Salons 24
3.6. Porters Five Forces Model 26
3.7. Key Success Factors 29
3.8. Key Challenges of the Industry 31
4. Brands Spread
4.1. Organized Salons (Salon Chain wise) 32
4.2. Unorganized Salons (City wise) 33
5. Primary Surveys / Interviews
5.1. Salon Professionals 42
5.2. Distributors 46
5.3. End customers 48
6. Professional Products Pricing
6.1. Hair Products 54
6.2. Skin Products 54
Indian Salon Hair and Skin Products Industry Report

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7. Private Equity Deals with Valuation
7.1. Forest Essentials 56
7.2. Richfeel 57
8. Player Profile
8.1. LOral 59
8.2. Richfeel 64
8.3. Schwarzkopf 67
8.4. Streax 69
8.5. Wella 75
8.6. Astaberry 79
8.7. Blossom Kochhar Aroma Magic 83
8.8. Biotique 87
8.9. Cheryls 89
8.10. Christine Valmy 93
8.11. Dermalogica 95
8.12. Ekta Cosmetics Limited 99
8.13. Ess Kay Beauty Resources 103
8.14. Forest Essentials 106
8.15. Headstart International 110
8.16. JCKRC 114
8.17. Jovees 116
8.18. Lotus Herbals 120
8.19. O3+ 124
8.20. Shahnaz Husain 128
8.21. VLCC 130
9. Annexure: Ratios 134

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1. Executive Summary
The growth of salon products industry is a direct fall out of the surge witnessed in demand for salon industry
in India. The salon products industry has seen a similar trend as observed in the salon industry due to the
direct correlation of the services offered by salons and the products which form the part of these services. The
industry has seen a sea change from limited product offerings to a wider product portfolio especially targeted
towards professional salon segment.
Hair care and skin care are the main constituents of this industry. The two categories show a distinct trend
with hair care being dominated by a few international brands like XXX, whereas the skin care category is
highly fragmented with multiple options of domestic and international brands.
The size of the salon products (hair and skin) market in India was Rs. XXX billion in 2010, of which hair
constituted XXX% i.e. Rs. XXX billion and skin constituted Rs. XXX billion The share of the urban market was
around XXX% i.e. Rs. XXX billion.
The key success factors of this industry are




The findings of the survey conducted across cities and customer groups are as under:




As per our estimates, the urban salon products market will more than double and reach Rs. XXX billion i.e. a
CAGR of XXX% (2010-2015E). The total salon hair products market in India is expected to reach Rs. XXX
billion and salon skin products is expected to reach Rs. XXX billion growing at a CAGR of XX% (2010-
2015E). However the industry has to overcome challenges like................................................. etc. which are
acting as an impediment to growth.



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2. Salon Products Industry Overview
2.1. Market Opportunity
The growth in salon industry is one of the major growth drivers for growth in salon products market mainly hair
and skin products. Consumers generally go to salons for hair services. In a typical salon, around XX% of the
revenues are from hair services (hair cut, colour, styling etc.) and balance XX% from skin services (facial,
cleanups, manicure/ pedicure etc.)
Total Market
The size of the salon products (hair and skin) market in India was Rs. XXX billion in 2010, of which hair
constituted XXX% i.e. Rs. XXX billion and skin constituted Rs. XXX billion The share of the urban market was
around XXX % i.e. Rs. XXX billion.
As per our estimates, the urban salon products market will more than double and reach Rs.
XXXbillion i.e. a CAGR of XXX% (2010-2015E). The total salon hair products market in India is
expected to reach Rs. XXX billion and salon skin products is expected to reach Rs. XXX billion
growing at a CAGR of XXX% (2010-2015E).
Salon Hair and Skin Products Industry Size (20052015E)

Rs. In billion 2005 2010 2015E
CAGR%
(200510)
CAGR%
(201015)
Total


Hair

Skin

Urban


Hair

Skin

Rural


Hair

Skin








Indian Salon Hair and Skin Products Industry Report

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Salon Hair and Skin Products - Urban Market Tier 1, 2 and 3 cities
The salon hair and skin products market in urban cities (tier 1, 2 and 3 cities) was around Rs.
XXbillion in 2011 with tier 1 cities constituting more than XX% of the total market in Tier 1, 2 and 3
cities.
Salon and Salon Hair and Skin Products Industry Size Tier 1, 2 and 3 cities












Tier 1 Delhi-NCR, Mumbai, Kolkata, Bangalore, Chennai, Hyderabad, Pune, Ahmadabad (cities with population of more than 5
million).
Tier 2 Agra, Allahabad, Amritsar, Asansol, Aurangabad, Bhopal, Coimbatore, Chandigarh, Dhanbad, Durg-Bhilainagar,
Vishakhapatnam, Gwalior, Indore, Jabalpur, Jaipur, Jamshedpur, Jodhpur, Kannur, Kochi, Kanpur, Kollam, Kota, Kozhikode,
Ludhiana, Madurai, Malappuram, Lucknow, Meerut, Nashik, Patna, Nagpur, Raipur, Rajkot, Ranchi, Srinagar, Surat,
Thiruvananthapuram, Thrissur, Tiruchirappali, Vadodara, Varanasi and Vijaywada. (cities with population of 1 to 5 million).
Tier 3 Ajmer, Aligarh, Amravati, Bareilly, Belgaum, Bhavnagar, Bhiwandi, Bhubaneswar, Bikaner, Bokaro, Cuttack, Dehradun,
Durgapur, Erode, Firozabad, Gorakhpur, Gulbarga, Guntur, Guwahati, Hubli-Dharwad, Jalandhar, Jammu, Jamnagar, Jhansi,
Kolhapur, Malegaon, Mangalore, Moradabad, Mysore, Nanded, Waghala, Nellore, Puducherry, Rourkela, Saharanpur, Salem,
Sangli, Siliguri, Solapur, Tiruppur, Ujjain, Warangal (cities with population of 0.5 to 1 million).
Cities
No. of
Cities
Salon market
Rs. million
Salon hair
products market
Rs. million
Salon skin
products market
Rs. million
Total Salon (Hair
and Skin
products) market
Rs. million
Tier 1 cities


Tier 2 cities


Tier 3 cities


Total


Tier 1 Salon Hair and Skin Products Industry
Size (2011)

Pie Chart
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Salon Hair and Skin Products - Urban Market State wise








Salon Urban Market Key states and per capita expenditure (2010)
Key States
Urban Population [in
millions]
Urban Salon Hair
Products Market
Size [Rs. million]
Urban Salon Skin
Products Market
Size [Rs. million]
Total Urban Salon (Hair
+ Skin) Products
Market Size [Rs.
million]
Maharashtra


Tamil Nadu


Uttar Pradesh


Andhra Pradesh


West Bengal


Karnataka


Gujarat


Madhya Pradesh


Haryana


Rajasthan


Kerala


Bihar


Others


Total






State-wise Salon Skin Products (Urban) Market
(2010) Market Size Rs. XXX Billion
Pie Chart
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2.2. City Wise Market Analysis
Cities
Population
(2011)
(mn)
(1)

Population
(2020)
(mn)
(2)

Population
Growth Rate
% (2011-
2020)
GDP (2005)
USD Bn
(3)

GDP (2020)
USD Bn
(3)

GDP
Growth
Rate %
Average
HH Income -
2007-08
(INR)
(4)

Est. Size of
the Salon
Hair
Products
Market (Rs.
Mn)*
Est. Size of
the Salon
Skin
Products
Market (Rs.
Mn)*
Key salon
organised
players
No. of Cent-
res
Tier 1


Delhi



Mumbai



Kolkata



Bangalore



Chennai



Hyderabad



Pune



Ahmadabad




Cities
Population
(2011)
(mn)
(1)

Population
(2020)
(mn)
(2)

Population
Growth Rate
% (2011-
2020)
GDP (2005)
USD Bn
(3)

GDP (2020)
USD Bn
(3)

GDP
Growth
Rate %
Average
HH Income -
2007-08
(INR)
(4)

Est. Size of
the Salon
Hair
Products
Market (Rs.
Mn)
Est. Size of
the Salon
Skin
Products
Market (Rs.
Mn)
Key salon
organised
players
No. of Cent-
res
Tier 2
Surat



Nagpur



Chandigarh



Nasik



Kanpur



Lucknow



Coimbatore



Vishakap-
atnam


Indore



Aurangabad



Jaipur



Baroda



2.3. Growth Drives
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3. Business Dynamics
3.1. Evolution of the Industry
3.2. Salon Products Category Differentiation

Hair Products Skin Products




3.3. End Consumer Psyche

3.4. Business Model
Salon Product Industry Business Model




Part I: The Product Company
Part II: Key Function of Product Company
Part III:
Salon Segments
Salon Segment Buying Criteria
Pricing Power
w.r.t. end
customer
Differentiation


3.5. Buying Criteria of Salons

Graphical Representation
Indian Salon Hair and Skin Products Industry Report

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3.6. Porters Five Forces Model




No Five Forces Remarks Counter Strategies
1. Power of Supplier
a. Abundance of raw material
Availability in Indian and international market
Highly cost competitive

2. Availability of Substitutes
Consumer products
Significant savings in terms of time and money

3a. Entry Barriers

Strong Product Portfolio
Market reach
Training Infrastructure

3b. Entry Barriers

Plethora of brands
Fragmented market
No market leader

4. Power of Customers
Focus on product quality
Availability of options
Brands with Salon specific products (Professional Segment)

5a. Competitive Rivalry

Few established players
Strong brand awareness in professional hair segment

5b. Competitive Rivalry
Lack of established brands
No barrier to switch across brands for salons
Influx of international brands

Diagram
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3.7. Key Success Factors

3.8. Key Challenges of the Industry
.


















Indian Salon Hair and Skin Products Industry Report

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4. Brands Spread
4.1. Organized Salons (Salon Chain wise)

Salons Skin Brands Hair Brands



4.2. Unorganized Salons (City wise)
Preamble

All India Professional Skin & Hair Products








Part 1: Brand Presence in Tier 1 Cities - Professional Skin & Hair Brands

Ahmadabad
Chennai

Hyderabad

Mumbai

Bangalore

Delhi

Kolkata

Pune


Part 2: Tier Wise Brand Presence - Professional Skin & Hair Brands

1) Tier 1
2) Tier 2
3) Tier 3

Part 3: North East South West - Brand Presence - Professional Skin & Hair Brands



Bar Chart
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5. Primary Surveys / Interviews
5.1. Salon Professionals
Interviewer 1: Director Leading Salon chain
Questions Answers
What are the benefits of having single brand for hair
segment

How do companies market hair brands
What are the decision parameters for hair and skin
services

LOral is the leader across India. Who according to
you command second position across India

What are the buying criteria for salon products
Why do customers buy professional products
What is your perception about salon skin care market

Interviewer 2: Head Leading International Salon Skin Care Brand
Questions Answers
What is the difference between Indian and global
market

How many SKUs do you have in India
What is your product differentiation
What are the key challenges in the industry
What are the key selection criteria for salon
What is percentage share between men and women
for salon skin services

What is your take on male grooming market
What are your views on threats from fake products

Interviewer 3: Salon Manager
Questions Answers
Which products do you use in you salon for hair and
skin services?

What is the segment wise price differential for across
LOral brands

What is the share of hair services and skin services?
What is the broad price differential between LOral &
Krastase?

What is the gender ratio at your salon?
What kind of skin services opted by customers
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Which segment (Hair / Skin) depicts higher retail
sales? And why?

How is the training support from the product
companies?


Interviewer 4: Technical Head - Skin
Questions Answers
What are the parameters for selecting a skin brand by
salons?

Do the salons necessarily use single brand for skin
services?

From where the salons face competition for hair
services?

What is the percentage of services between basic
services and treatments?

How do you categorize your facials

Interviewer 5: Technical Head - Hair
Questions Answers
What is you perception about hair products across
leading brands?

Who is the market leader in hair products and why?
What is the degree of brand loyalty with the
customers?

What is the margin offered to salons by the product
companies

Do the salons necessarily use single brand for all
their hair services?

What are the categories for salon hair products? And
broad percentage share?

Do the customers walk in for greying cover up or
fashion for hair coloring services?


Interviewer 6: Executive Leading Domestic Skin Care Brand
Questions Answers
What is the difference between consumer and
professional products

What are the challenges in professional segment
What is your take on metro market
What is the product cost for salons as a percentage
of service pricing

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5.2. Distributors
Preamble:
Questions Responses
What are the type of product segments you offer to
the salons?

Who are your customers?
What kind of Skin / Hair brands you distribute?
What is the product profitability in hair and skin
segment?

What are the margins offered to distributors?
What are the margins offered to salons?
What is the average inventory carried by the
distributors?

What is the % share of hair products and skin
products in total revenue?

What are your observations on professional hair
and skin products market of the distributors?

What are the criteria for you to choose a company
for becoming a distributor?

What is the ROI offered by the product companies?
Do you have your own sales force?
Is there any approval required from the existing
companies to take up new products for distribution?

What is the general geographic spread?
Are you open to try out new products?
What are the buying criteria of Salons?
Is it easy to make the salons switch or try out new
products?

What is the credit period offered by product
companies?

What is the credit period offered to salons?
Is exclusivity necessary for distributors?
What is the role of distributor?
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5.3. End customers
Preamble:
Part 1: General Take aways
a) Monthly Expenses (Rs/Month) on Salon Services
b) Advanced Hair Services Preferences
c) Advanced Skin Services Preferences
Part 2: Hair Services
a) Type of preferred salons
b) Hair Colour
c) Brands for Hair Services
Part 3: Skin Services
a) Salon Preferences for Skin Services
b) Brand preferences for skin products
c) Willingness to experiment with skin care brands


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6. Professional Products Pricing
6.1. Hair Products
The pricing is based on consumer / professional products available in the market across brands.
No Brand Shampoo Conditioner
Qty Price range Qty Price range




6.2. Skin Products

No Brand Cleansers Toners Moisturiser Mask/ Face pack Serum

Qty Price Range
(Rs)
Qty Price Range
(Rs)
Qty Price Range
(Rs)
Qty Price Range
(Rs)
Qty Price Range
(Rs)










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7. Private Equity Deals
7.1. Forest Essentials (Mountain Valley Springs India Private Limited)
Year Investor Amount
invested
Instrume
nt
Equivalent stake Current Stake
(%)


Deal Multiples
Assuming that FY2008 numbers would have been achieved without any fund infusion

Estee Lauder International Inc.
FY2007
(Trailing*)
FY2008
(1 yr forward*)
FY2009
(2 yr forward#)
Pre-money equity
valuation (Rs. millions)

Post-money equity
valuation (Rs. millions)

EV (Rs. millions)
Sales (Rs. millions)

EBITDA (Rs. millions)

PAT (Rs. millions)

P/Sales

EV/Sales
EV/EBITDA

PE



Indian Salon Hair and Skin Products Industry Report

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7.2. Rich Feel Health and Beauty Private Limited
Year Investor Amount
invested
Instrument Equivalent stake Current
Stake (%)



Deal Multiples

Bennett Coleman & Co. Limited
FY2009#
Pre-money equity valuation (Rs. millions)

Post-money equity valuation (Rs. millions)
EV (Rs. millions)

Sales (Rs. millions)
EBITDA (Rs. millions)
PAT (Rs. millions)
P/Sales
EV/Sales
EV/EBITDA

PE


Indian Salon Hair and Skin Products Industry Report

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Brand Equity Treaties Limited
FY2011
(Trailing*)
FY2012
(1 yr forward#)
Pre-money equity
valuation (Rs. millions)

Post-money equity
valuation (Rs. millions)

EV (Rs. millions)

Sales (Rs. millions)
EBITDA (Rs. millions)
PAT (Rs. millions)
P/Sales
EV/Sales
EV/EBITDA

PE


Indian Salon Hair and Skin Products Industry Report

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8. Player Profiles
8.1.

8.1.1. Overview
Company Name

Company Profile

Promoters Name

Brands

Year of Inception

Product Segments

Mens Range

Production Facilities
Training
Distribution / Geography

Key Clientele

Future Plans

Indian Salon Hair and Skin Products Industry Report

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8.1.2. Financials
Profit & Loss Account for the year ended 31st December (Rs. Mn)

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Sales
Total Revenues

Direct Costs
Personnel Expenses


Administrative Expenses


Selling & Distribution


Advertisement and sales promotion


Total Expenditure
EBITDA
Depreciation
EBIT
Financial expenses
Profit before Tax
Profit after Tax


Balance Sheet as at 31st December (Rs. Mn) FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Share Capital incl. share application money
Reserve & Surplus
Shareholders funds
Secured Loans
Unsecured Loan
Loan Funds
Deferred Tax Liability
Total Liabilities

Gross Block
Net Block
Capital Work in Progress
Investments
Net Working Capital (excl. cash & bank)
Cash & Bank
Net Working Capital (incl. cash & bank)
Total Assets


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Key Ratios FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Profitability Ratios

PBT %

PAT %



Return Ratios

ROCE %

ROE %



Financial Ratios

Capital Employed

Total Debt/ Net Worth

Secured Debt/ Net Worth

Total Debt to EBITDA



Turnover Ratios

Working Capital Turnover Ratio

Net Fixed Assets turnover ratio

Inventory Days

Debtors Days



DuPont Analysis

EBIT/ Total Income

PAT/EBIT

PAT/ Total Income

Total Assets/ Net Worth

Total Income/ Total Assets





Indian Salon Hair and Skin Products Industry Report

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+91 22 - 60022001 or email at research@reevolv.in
Address: No. B/002,Vision Court Staney Fernandes Wadi CHS Ltd., Plot no. 746, MTNL Exchange Lane,
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You can also email the research analyst at
Shilpa Bhattar
shilpa@reevolv.in
Kaustubh Kulkarni
kaustubh@reevolv.in