Hindustan Lever's acquisition of Lakme-Lever is going to create a monolith in the Rs 1,500 crore cosmetics market in India. While Lakme was already the pace-setter, the takeover has created a giant among dwarfs in the industry. Going by the aggressiveness of a company like Hind Lever, the cosmetics industry which is currently growing at 25 per cent per annum is expected to see a boom not only in terms of growth but also in sheer size. Hindustan Lever's aggressive strategies will increase market penetration, market growth and size, and the seeds of the gameplan were sown when the Lakme-Lever joint venture was formed.The Lever strategy is predictable, going by previous examples. They would intend to block every possible route in the market with their brands (and brand extensions, as and where the logic applies), to create a strong base in the face of ensuing competition.
While existing domestic players would not pose a threat to the might of Levers, competing with international majors (some of which arealready here sharpening their tools) is where the threat lies.
HLL would never sacrifice volumes and are targeting high topline growth, mainly by keeping a hold on the price line. Experts believe that this would also give it the advantage of dictating prices at the retail end.
Lakme brands already enjoy a leadership position, leveraging on its brand equity, of over 50 per cent market share in colour cosmetics. Colour cosmetics is a roughly Rs 200-crore business in India, growing at a pace of 25 per cent per annum. Over the last few years, global names like Oriflame, Avon, Revlon, Amway and Benckiser have been making their presence felt in the domestic personal care market.
In the Indian market, the competition is primarily between Lakme and Tips & Toes, both of which have to also fight a large unorganised market. In nail enamels, Tips & Toes has around 12 per cent market share as against Lakme's share of over 50 per cent. In lipstick, Lakme is towering over Tips & Toes with a share in excess of 60 percent, according to industry estimates. In the domestic market too, cosmetics for the masses has extended beyond elementary levels, such as colour options to a more mature need to cater to a market which demands more attractive product forms.
There are some differing opinions about the Levers gameplan in this field. Some industry experts feel that Levers would hesitate in bringing in its premium range of cosmetics (Elizabeth Arden, Calvin Klein) in the near future, considering that currently volumes are large in the mid-size and lower end of the market.
With regards to volumes, HLL will not sacrifice its topline growth, and has always targeted the large volume-generating segment of the market.Others feel that the Unilever range of Elizabeth Arden and Calvin Klein would come down in a year's time, and HLL would manage to generate volumes even in this very premium segment of the market.
Take for instance, HLL's Denim brand. Internationally, Denim is a premium product. In India too, the brand has managedto get a mass appeal.
However, once the market matures, with more consumers graduating to a premium segment of perfumes and colour cosmetics, which is happening at a considerably fast pace given the growing awareness and increasing disposable incomes, Levers would gain by having already built its presence, brick by brick.
Having blocked this raw, largely untapped part of the market, with the entry of other international names, HLL would be in an entrenched position to face the onslaught with renewed expenditure in advertising and marketing, which has always been its strong point.
At this point in time, domestic players do not pose a major competition to Levers, considering the size, strength and ability to expend large monies into promoting their brands. But a larger wave of competition emerging from foreign shores is in the offing. This is the moment for which HLL is quietly preparing for.
Till this happens, and till such a time that Levers unfolds its weapons to fight the emerging competition, themonolith, it is believed, would be flexing its muscles and growing. Today may be big for HLL, and tomorrow could be bigger, depending on how it measures its steps.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
