COMPANYNOTE

VINICOSMETICS
Leadinginnovativedisruption
IndiaEquityResearch|ConsumerGoods

ViniCosmetics(Vini),anunlistedcompanyoperatinginthepersonalcare
space, is the market leader in the deodorant market riding Foggs
successful no gas, no wastage proposition. Vinis sales grew 10x to
INR5bnoverFY1215andistargetingtodoubleittoINR10bnbyFY18.The
companysstrategyistoidentifyneedgapsandofferavalueproposition
further bolstered by differentiated marketing. Fogg, within a year of
launch,capturedahighshareofthedeodorantmarketwhichwasearlier
ruledbyHULsAxe.FacialpowderWhiteTone,pricklyheattalcJinjolaand
fairness cream Glam up are a few other products in the companys
basket. On the anvil, is likely launch of a range of OTC healthcare
products, packaged foods and neutraceutical products. Though we
concedethatVinientailsdisruptionpotential,withbulkofrevenuesfrom
Fogg(~80%contribution),asofnowitposeslimitedrisktolistedpeers.

EDELWEISSRATINGS
AbsoluteRating

UNLISTED

Foggleadinginnovativedisruptioninacluttereddeodorantmarket
Vinicameasasprayoffreshairridingadifferentiatednogas,nowastageproposition
inacluttereddeomarket,whereplayersweretryingtowooconsumersbyplayingup
theappealfactor.Thecompanysdosagestrategy(promisednumberofsprays)worked
wellwithconsumerslookingforvalueoffering.Ergo,Fogggarneredasignificantpieof
the deodorant market; it is the numero uno player with ~18% market share. And to
maintainitsparamountleadershipithasinitiatedoccasionbaseddeodrantswithmore
specialization and customization. Where the Axe was mainly concentrated on Mens
groomingproductsFoggtappedadditionalmarketslikewomendeodorant.

Consumerfeedbackdrivingforcebehindproductdevelopment
Vini takes feedback seriously. Infact, some of its brands have been developed based
solely on consumer insights. Case in point is Fogg, which was developed based on
consumerfeedbackthatdeodorantbottlesshouldlastlonger.Focusoncreatingbrands
and marketing led the company to outsource manufacturing of all its products,
including Fogg. To reach a wider audience with its small budget, Vini eschews digital
mediacampaignsandfocusesprimarilyontelevisioncommercialstocatcheyeballs.

Willforayinpackagedfoods/OTChealthcarebearepeathit?
SequoiaCapitalinvestedINR1.1bninViniin2013.OntheanvilislaunchofarangeofOTC
healthcare products and packaged foods. It is also evaluating brand extensions of Fogg
into soap, talcum powder and styling gel, categories where the company has been
historicallysuccessfull.ApartfromtheFoggbrand,ViniisplanningtobuildontheDelicca
brand (first sulphatefree face wash in India); investments in television commercials
have been planned. It is also on the prowl for a tie up with a local or international
nutraceuticalsplayer.Vinimayfloataseparatecompanyforthenutraceuticalsrange.The
companyalsoiseyeingentryinBrazil.IfVinimakesadisruptiveforayintoOTC/packaged
foodsspacelikeitdidwithFoggitwillleadtothreattoplayersinthesespacesincluding
Emami,Dabur,HUL,Nestle(dependingonthesubcategory).
EdelweissResearchisalsoavailableonwww.edelresearch.com,
1
BloombergEDEL<GO>,ThomsonFirstCall,ReutersandFactset.

AbneeshRoy
+912266203141
abneesh.roy@edelweissfin.com

PoojaLath
+912266203075
pooja.lath@edelweissfin.com

TanmaySharma
+912240407586
tanmay.sharma@edelweissfin.com

December7,2015
EdelweissSecuritiesLimited

ConsumerGoods
Disruptiveinnovationandmarketing
Earlier in 2011, the deodorant market was cluttered and players were running out of
innovation.HindustanUnilever'sAxewastheundisputedleaderintheexponentiallygrowing
deodorantmarket.However,Vinisnogas,nowastagestrategyofofferingadeodorantin
dosage form worked well with consumers who were looking for a value offering (promised
numberofsprays).ThecompanypromotedFoggasaproducthighonfragranceminusgas
(usedindeodorantspraybottles)signifyingthattheproductwillnotvapouriseeasilyand
linger when sprayed. The valueformoney proposition caught immediate consumer
attentionandFogggarneredasignificantpieofthedeodorantmarket.

DarshanPatel,
Founder&MD

Fig.1:Foggadeowithoutgas,deliveringmoresprayspercan

Iworkforonething:a
differentiatedproduct

Itsbettertodiedifferentiating
thancreatingsomethingthatis
alreadythere.

Funfact:ViniCosmeticswas
namedafterthePatelfamilypet
turtle

Source:Edelweissresearch

Thiswasnotthefirsttimethatthepromoterfamilyhadpulledsuchafeat.Earliertheyhad
launchedMoovanddispacedmarketleaderIodexinthepainreliefsegmentwithitsnostain
proposition. In deodrand space not only was Foggs communication different, the product
itself was different used nonaerosol pumps, unlike other deos. This technique made a
bottlelastfor40daysonanaverage(versus~20daysforotherbrands).Hence,consumers
perceiveditasvalueformoneyoffering(pricedifferentiation).VinithustookonHULsAxe
andJKHeleneCurtis'ParkAvenueandbecamethemarketleaderinthedeodorantmarket,
with~18%marketshare.

EdelweissSecuritiesLimited

ViniCosmetics
Table1:Foggleadsthedeocategorydespitepricepremiumowingtodifferentiatedpositioning
Deodrantbrandscomparison
CompanyName
TargetGroups
Agegroup
Admedia
BrandAmbassadors
PriceRangeperBottle
QtyRange
OtherCategoriesunder
Brandname

Fogg
ViniCosmetics
Men+Women
NoSpecificTarget
MainlyTV
NoMajor
195275
60150ml
OnlyDeo

OtherAlliedBrands

Nufeel,White
Tone,LipDrops

OtherAliedCategories

CoolingTalc,Skin
Care

Axe
HUL
Men
Youth
TV/OOH
RanbirKapoor
180195
150ml
BodyWash,
ShowerGels,
AftershaveLotion
Dove,Lifebuoy,
Lux,Ponds,
Vaseline,Rexona,
Pears,Lakme
SkinCare,Hair
Care,HandWash,
Cosmetics.

Engage
ITC
Men+Women
YouthCouples
TV/OOH/POS
NoMajor
180275
150ml
OnlyDeo

SetWet
Marico
Men
Youth
TV/OOH
AdityaRoyKapur
160
150ml
HairGel

OldSpice
P&G
Men
MatureAudience
TV
MilindSoman
180
150ml
ShaveGel,Soaps,
BodyWash

HE
Emami
Men
NoSpecificTarget
TV/Print/OOH
HrithikRoshan
180
150ml
OnlyDeo

FiamaDiWills,
Vivel,Superia,
EssenzaDiWills.

Livon,Parachute,
Hair&Care,Revive

Soaps,Body
Washes,Face
Washes,
Shampoos,
Moisturiser,Body
Lotion,Creams,
AfterShave,Talc

HairOil,Body
Lotion,Starch

Olay,Gillette,Olay Vasocare,Fair
Handsome,
Navratna,Kesh
King
AfterShave
SkinCare,
AntisepticCream,
HairOil

Source:Edelweissresearch

Consumerfeedback:Bedrockofproductdevelopment
Vinitakesconsumerfeedbackseriously.Infact,itusesconsumerinsightstodevelopsomeof
itsbrands.Foggbeingcaseinpoint.Itwasdevelopedafterthecompanyreceivedconsumer
feedback on 18+ (the first deodrant launched by Vini) that though the fragrance was good
andreasonablypriced,consmerswerelookingforadeodrantbottlethatlastedlonger.Ergo,
thebirthofFoggdeodorantwithoutgas.

Marketshare
Currently, Fogg has ~18% share in the deo segment in India (INR23bn market) with the
numerounoposition.Itsells~2mncanseverymonth.

N.KrishnaMohan,
BusinessHeadHCD,Emami

Thatswhytheyvegotthis
responsefromconsumers.Their
throughputperoutletwouldbe
muchhigherthanthatof
competingbrandsmainly
becauseofthebrand
proposition

Table2:DeodorantMarketSizeinIndia
Year
2007
2008
2009
2010
2011
2012
2014
2015

DeodorantMarketSize(INRmn)
2,830
3,930
5,670
7,930
11,290
15,210
21,000
23,000
Source:Industry,Edelweissresearch

EdelweissSecuritiesLimited

ConsumerGoods
Table3:ProductsinMenDeo
MenDeo

AbhayPandey,
MD,SequoiaCapital

Qty(inml)

MRP

AxeMenPulseDeo

150

Priceper
100ml
195 130

AxeMenAfterShaveLotions
ParkAvenuemendeostorm
ParkAvenuemendeovoyage
EngageBodyliciousDeoSpray
EngageXX2Cologne
SetWetDeodorantSprayPerfume
OldSpiceDeodorantBodySpraySport

100
150
150
150
150
150
150

200
195
240
190
275
160
180

200
130
160
127
183
107
120

Source:Edelweissresearch

"ParaswasaboutRs400500
crorewhenitwasacquiredby
ReckittBenckiser.Viniisalready
ahead,"

Table4:ProductsinWomenDeo
WomenDeo
EvaDeoBodySprayRose
EngageBodyliciousDeoSpraySpell
EngageG1Cologne
DoveWhiteningOriginalDeo

Qty(inml)
125
150
150
169

MRP
130
180
275
185

Priceper
100ml
104
120
183
109

Source:Edelweissresearch

However,HULhasstartedtofightbackindeosegment.HULhasrecognizedtheissueinthe
deodorantcategoryandmovedtoanewmix.AxeSignaturehasdonewellforthecompany.
The company has launched the gold variant in aerosol which is the biggest segment in the
deocategory.Howeverthecompanybelievesthatthebiggestgamechangerwillbetheanti
perspirantcategory.Indiaislargelyaperfumemarket.

HUL has seen good traction post the launch of Axe Signature Collection and has gained
~550bps market share in modern trade within 6 months of launch. The lost traction has
started to return in the deodorant portfolio. This clearly shows that Vini will have to keep
innovatinginthissegment.

Unilever has commissioned a worldclass deodorants manufacturing facility in Khamgaon

whichwillprovidearegularsupplyofhighqualitydeodorantproductstocatertomarkets
across Asia, including India. This will support the indigenization of production for a large
portionofdeodorantsintheaerosolform,whichiscurrentlyimported.

Nondeodorantinitiatives:Highoninnovations
Apart from Fogg deodorants, among many other products Vini also makes facial powder
WhiteTone,Jinjola(pricklyheattalc),18+(deodorant)andGlamup(fairnesscream).The
company has already ventured into women's range under its existing brand. Infact, White
Tone was Vinis first launch; Fogg came much laterafter 18+ deodorant and Glam up
fairnesscream.

VinicreatedacategorywithitsDeliccafacewashwhichcomesasapowderandisclaimed
tobethefirstsulphatefreefacewashinIndia.

EdelweissSecuritiesLimited

ViniCosmetics
Table5:ProductsofViniCosmetics
ViniProducts
Particulars
MenDeo
WomenDeo
NufeelFacialSpray
WhiteTone
GlamUp
Jinjola

Qty(inml)

MRP

FoggblackcollectiondeoOrientalandwoody

120

Priceper
100ml
250 208

FoggMenNapoleaonBodySpray
FoggBlackWomencollectionElegance
FoggFragrantBodySprayforwomen
BothforMenandWomencategories
FacePowder
PowderCream
CoolingTalc

150
120
150
60
70
25
100

195
250
195
140
95
150
55

130
208
130
233
136
600
55

Source:Edelweissresearch

Distributionnetwork
Vinihasbuiltadistributionnetworkspanning0.75mnpointsofsale,5,000wholesalerswitha
500 strong sales force. Fogg, which sells 2mn cans per month, is a major product for the
company(7580%oftotalsales).Deodorantsaresoldthroughmoderntrade,generaltrade,
onlinesitesandchemistchannels.

Advertising
Viniisalsoastrongmarketingcompanywithsharpfocusoncreatingbrandsandmarketing
them effectively. This focus on marketing is the reason why the company outsourced
manufacturingforallitsproducts,includingFogg.

ForitsJinjolatalcumpowder,Vinicameupwithadifferentiatedadwhichstartedwithafair
setupscenesetinavillage,wherepeopleformedacrowdaroundthreemenclaimingtowalk
over hot coal. The first man applied thandum talc over him and began walking, however
midway felt the heat of the coal and lost. The second one applied the Coolum talc and
walked,butfailedmidway.Thelast,thinfraillookingmanappliedJinjolatalcandwasableto
walk over the hot coal with ease and no pain. This ad was followed by a catchy tag line,
Jinjola Talc Lambi Thandak ka Formula. With this ad the brand clearly took on its
compeitorsNavratnacooltalcandDermicool.

Thecompany,inlightofitssmalladbudget,eschewsdigitalmediaandfocusesontelevision
commercials.

Thefamilythemselvesgetinvolvedwithcreationofbrand.Forinstancetheychoosenames
ofthebrandsothatitiseasytoassociatewiththefunctionoftheproductKrackforcracked
heels,Livonforleaveinconditioner(leaveiton)andSetWetforhairthatstylesbecauseits
wet.

Internationalforay
The company is actively exploring international markets, having already established its
presenceinDubai.ViniistryingtoextenditsbrandstotheLatinAmericanmarketofBrazil.
Further,thecompanyisonthelookoutforsuitableplayersinthepersonalcarecategorythat
willbringinnewportfoliosunderViniandexpanditsproductrange.

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ConsumerGoods
Futureplans
Thecompanyhopes to scale Vini into an INR10bn company by FY18. Vini clocked INR5bn
revenueinFY15(up46.2%YoY).

Apart from existing brand Fogg, Vini is planning to build on the Delicca brand slowly; the
companywillstartinvestingintelevisioncommercialsonthebrandinsometime.

Plansarealsoonfortyingupwithlocalorinternationalnutraceuticalsplayertoventureinto
thesegment.Thecompanymayfloataseparatecompanyforthenutraceuticalsrange,butit
willbeundertheViniumbrellabrand.

ViniaimstolauncharangeofOTChealthcareproductsandpackagedfoods.

Somefailures
Vinihasmetwithsomefailuresaswell.Thinkingdifferenthastheinherentriskoffailureas
sometimesanewlydefinedcategorymaybeaheadoftimesortheconsumermaybeunable
to understand / not ready to accept an unheard porposition. For instance, the market was
not ready for Vinis hair perfume brand QCO and it had to be withdrawn from the market
becauseconsumersseemedwaryofusinghairfragrance.

SequoiaCapitalbetsagainonDarshanspastsuccesses
Mr.DarshanPatelstartedViniCosmeticsin2010withasmallinvestmentofINR500750mn
after he had split from erstwhile Paras Pharmaceuticals in 2006. Private equity investor
SequoiaCapitalpickedup9%stakeinViniforaboutINR1bninAugust2013,valuingthefirm
at over INR11bn or nearly 6x sales. Sequoia also held ~14% stake in Paras Pharmaceuticals
beforeitwassoldtoReckittBenckiser.ThemoneywasusedbyVinitoimprovedistribution
reach and expand product portfolio. Bay Capital had also invested INR280mn in Vini in
December2011.

Promoterbackedbystronghistory
Mr. Patel and other family promoters are accredited with creation of strong products /
brandslikeSetWet,Moov,KrackandDermiCool.In1985,the3brothersGirish,Darshanand
Devendra,joinedtheirfather'scompanyParasPharma(hadaturnoverofINR4mn).Overthe
nextdecade,thecompanycarvedagreatsuccessstorywithMoov,KrackandD'Cold,brands
that fetched Paras Pharma a price of 8x sales in 2010 when the company was acquired by
ReckittBenckiser.

Mr.DarshanPatelheld24%stakeinParaswherehespent2decades.Followingdifferences
withhisbrothers,hesoldhisstaketoprivateequityfirmActisCapitalforUSD43mnin2006.
Fouryearslater,ParaswasacquiredforUSD726mn(ActisCapitalearnedahandsomereturn
of~60%)byReckittBenckiser.

EdelweissSecuritiesLimited

ViniCosmetics
Financialperormance

StatementofProfit&Loss
Particulars
GrossSales
TotalIncome
TotalExpenditure
EBITDA
Depreciation
EBIT
Tax
PAT
CashProfit
EPS
NetWorth
TotalDebt
ROCE(%)
EnterpriseValue
BalanceSheet
Particulars
SourcesofFunds
EquityPaidUp
ReservesandSurplus
NetWorth
TotalDebt
CapitalEmployed
ApplicationofFunds
GrossBlock
Investments
CashandBankbalance
NetCurrentAssets(IncludingCurrentInvestment
TotalCurrentLiabilities
TotalAssets
CashFlow
CashFlowfromOperations
CashFlowfromInvestingactivities
CashFlowfromFinanceactivities
FreeCashflow
KeyRatios
Particulars
DebttoEquity(x)
CurrentRatio(x)
ROCE(%)
RONW(%)
PBIDTM(%)
PATM(%)
CPM(%)
AdjustedEPS
CEPS
EnterpriseValue

FY12
507
507
718
(211)
1
(212)
(0)
(212)
(211)
(50)
(79)
201
(144)
190

FY13
1,663
1,663
1,676
(13)
2
(16)
0
(16)
(14)
(4)
(44)
201
(10)
105

(INRmn)
FY14
3,447
3,447
3,089
358
3
355
71
284
286
65
985
0
62
(203)

FY12

FY13

FY14

42
121
(79)
201
147

43
(88)
(44)
201
157

43
942
985
0
990

10
100
53
(39)
309
280

14
133
139
(27)
391
394

22
1,075
251
1,032
477
1,549

141
102
284
293

103
(44)
23
163

276
(931)
746
275

FY13
(4.5)
0.9
(10.2)
0.0
(0.8)
(0.9)
(0.8)
(3.6)
(3.1)
105.0

FY14
0.0
3.2
62.0
60.3
10.4
8.2
8.3
65.3
66.0
202.7

FY12
(2.5)
0.9
144.3
0.0
(41.7)
(41.8)
(41.7)
(50.4)
(50.2)
189.6

Source:AceEquity

EdelweissSecuritiesLimited

ConsumerGoods
AnnexureI

WhathappenedtoParasportfolio
Paras was founded in the early 1980s by Girsh, Devendra and Darshan Patel. The
company developed more than 15 brands including OTC healthcare products such as
Moov (pain relief ointment), Krack (cream for cracked heels), ItchGuard (itch relief
ointment), RingGuard (ring worm ointment), Borosoft (antiseptic cream), Stopache
(headache relief tablet) and DCold (cold and flu remedy tablet). In personal care its
productbasketincludedLivon(hairdisentanglingserum,hairgaintonicandconditioning
cream colour), SetWet (hair gel and deodorant for men), Zatak (deodorant for men),
Eclipse(deodorantandbeautytalcforwomen),DermiCool(pricklyheatpowder),Mrs.
Marino(hairsoftener),Recova(agedefyingfairnesscream)andDr.Lips(lipbalm).

In 2010, Reckitt Benckiser acquired 63% stake in Paras from Actis. Sequoia Capital and
the remaining Paras shareholders, including that of the company's founder, Mr. Girish
Patelandhisfamily,alsosoldtheirstakestoReckittBenckiser.Thecompanythusbought
Indian ointments and personal care firm Paras for INR32.6bn (USD724mn). Paras
portfolio included brands like BoroSoft moisturising skin cream, Zatak deodorant, non
prescription(oroverthecounter)medicationslikeMoov,Krack,D'Cold,Dermicool,Itch
Guard&RingGuardandSetWet.Intheacquisitiongame,ReckittBenckiserpipedGlaxo
SmithKline, Sanofi Aventis, Novartis AG and Johnson & Johnson which too had
submittedconcretebidstoacquiremajoritystakeinParas.

Further,inFebruary2012,MaricoacquiredParasPharma'spersonalcareportfoliofrom
ReckittBenckiserforINR6bn.ThisincludedSetwet,LivonandZatak.Healthcarebrands
Moov,KrackandD'ColdremainedwithReckittBenckiser.

AboutReckittBenckiser:ReckittBenckiserisknownforitsproductsDettolbesidesVeet
hair remover, Strepsils throat lozenges and Mortein pest control aerosol sprays and
mosquito repellents. Developing markets including India, Latin America, Africa, Middle
East and Asia account for about a fifth of Reckitt Benckiser's revenue. The group has
been investing in the fastgrowing non prescription pharma segment over the past 4
years,buyingBoots'OTCbusinessin2006,USbasedAdamscoughmedicinescompany
in2008andtheSSLDurexcondomsgrouplater.

EdelweissSecuritiesLimited

ViniCosmetics
Fig.2:Journeyovertheyears

1983

1985

2001

2006

NaranbhaiPatelfloatsParasPharma

GirishandbrothersDarshan&DevendrajoinParasPharma

GirishPatelstartsSterlingHospitals

DarshanexitsParas.Actispicks23%foraroundRs170cr

2008

DevendraexitsParas.Actisbuyshisstakeforundisclosed
sum.Girishholds30%inParasnow
*NewCEOforParas.ActisbringsinSRaghunandan

2010

ParasregistersanetsalesofoverRs400cr
*ReckittBenckiserbuysParasPharmaceuticalsforRs3,260cr
*DarshanfloatsViniCosmetics

2011

2013

DarshanlaunchesFoggrangeofdeodorants,Maricobuys
personalcareportfoliofromReckittforRs600cr

DevendrastartsAdjavisVenturesandlaunchesLayer'rrange
offragrances
* GirishbuysbackActis'stakeinSterlingHospitals

Source:Edelweissresearch

EdelweissSecuritiesLimited

ConsumerGoods
EdelweissSecuritiesLimited,EdelweissHouse,offC.S.T.Road,Kalina,Mumbai400098.
Board:(9122)40094400,Email:research@edelweissfin.com
NiravSheth
HeadResearch
nirav.sheth@edelweissfin.com

Coveragegroup(s)ofstocksbyprimaryanalyst(s):ConsumerGoods
AsianPaints,BajajCorp,Colgate,Dabur,GodrejConsumer,Emami,HindustanUnilever,ITC,Marico,NestleLtd,PidiliteIndustries,GlaxoSmithKline
ConsumerHealthcare,UnitedSpirits

RecentResearch

Date
Company
Title
Price(INR) Recos

26Nov15 Consumer Biharsliquorban:Benefitthy

Goods
neighbour?;

FlashNote
23Nov15

19Nov15

NestleIndia TurnaroundMDimpresses,
butwillheworkhismagic?;
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Consumer
Goods

6,196

Reduce

Ruralbites,marginexcites;
ResultReview

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RatingInterpretation

EdelweissResearchCoverageUniverse

Buy

Hold

RatingDistribution*
*stocksunderreview

155

45

MarketCap(INR)

>50bn
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Reduce

Total

208

Between10bnand50bn

<10bn

54

10

Rating

Expectedto

Buy

appreciatemorethan15%overa12monthperiod

Hold

appreciateupto15%overa12monthperiod

Reduce

depreciatemorethan5%overa12monthperiod

EdelweissSecuritiesLimited

ViniCosmetics
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