Hair Oil Note - On A Slippery Slope PDF

On a Slippery Slope
Thematic Note
Sector Outlook
Cautious
Thematic Note on Indian Hair Oil Category

On a slippery slope
March 2014
Find Spark research on Bloomberg (SPAK <go>), Thomson First Call, Reuters Knowledge and Factset
On a Slippery Slope
Sector Outlook
On a slippery slope
As Indian consumer begins to emulate west, we have witnessed several traditional categories in the Indian
beauty and personal care (BPC) space struggling for survival. Notably a few categories have not only survived
this western consumerism onslaught but also managed to find global acceptance. Though sporadic in usage,
several categories such as hair oils have begun to emerge on a global platform as MNCs have begun to show
renewed interest in these offerings.
Indian hair care space continues to be dominated by hair oils despite emergence of several other substitute
offerings in terms of gels, serums and conditioners. Coconut Hair Oil (CHO) continues to be the largest selling
hair oil, with growth in this category being driven by conversion from unorganized market. However the share
of coconut hair oil has been stealthily on the downward trend as Value Added Hair Oils (VAHO) have made
inroads into the coconut oil market. We see that VAHO has a definitive advantage considering they are less
exposed to raw material vagaries and command better pricing power than CHO. Given the established
conversion pattern from CHO to VAHO, it was least surprising that the competitive intensity in the VAHO
category has increased manifold. Not only did several regional players venture into the category, but MNCs
(HUL,LOreal, etc) also began to show renewed interest and launched several brands to have a pie of the VAHO
category. The early entrants though enjoy unabated market leadership in their respective VAHO categories
(Dabur in Amla hair oil, Bajaj Corp in Light Hair Oil (LHO) and Emami in Cooling hair oil) driven by their
superior brand strength, value for money offering and wide established reach.
Marico: Marico with a strong presence in the CHO category has begun to feel the pinch as conversion to VAHO gains
momentum. Limited pricing power due to wide unorganized market and heavy copra cost vagaries is weighing down
CHO market. Though present in VAHO markets, market leadership edge as in CHO could be lost in conversion theme.
Dabur: Dabur is the market leader in the Amla hair oil platform, with presence in CHO and LHO too. Dabur Amla
gaining prominence as usage and reach of Amla based hair oils increase. Being present vertically across other hair
care categories, to end up as key beneficiary if there is a shift away from hair oils to other categories.
Bajaj Corp: Would be one of the key beneficiary of this conversion to VAHO. Market leader in LHO under its Bajaj
Almond drops (ADHO) brand, it has miniscule presence in Amla and Cooling hair oil space. Heavy reliance on single
brand ADHO (97% to revenues) could be fatal with competition intensifying in the LHO space.
Emami: Market leader in the Cooling hair oil through its brand Navratna, which contributes to ~25% of its revenues.
Though medicinal in nature, wider availability (Salons) and affordability (Sachets) have made them widely popular.
Coverage Universe View: On a relative basis we prefer ITC to HUL among the large caps and prefer Bajaj Corp
(BJCOR), Emami (HMN) and Jyothy Labs (JYL) among the small & mid-cap. Stock Calls: ITCBuy (TP:Rs.389), HULReduce (TP:Rs.526), BJCOR-Buy (TP:Rs.253), Emami Buy (TP:Rs.502), DaburReduce (TP:Rs.165), ZYWL
Reduce (TP:Rs.502), JYL-Buy (TP:Rs.246), GCPL-Reduce(TP:Rs.717), GSKCHAdd(TP:Rs.4632), Marico
Reduce(Rs. 214) CLGT- Sell (TP:Rs.991)
Cautious
Date
Mar 27, 2014
Market data
BSE SENSEX
22095
Nifty
6601
BSE FMCG
6954
FMCG Index vs. Sensex

500
400
300
200
100
0
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Executive Summary
Thematic Note
BSE SENSEX
BSE FMCG
Performance (%)
1m
3m
12m
Sensex
5%
4%
18%
Nifty
6%
5%
17%
BSE FMCG
6%
1%
19%
Tejash Shah
tejash@sparkcapital.in
+91 22 4228 8155
Gnanasundaram S
gnanasundar@sparkcapital.in
+91 44 4344 0062
On a Slippery Slope
Thematic Note
Hair quotient in global context
Sector Outlook
Hair Care as % of global Beauty & Personal Care CY13
Cautious
In the global hair care space, conditioner & oils recording strongest growth
Baby Products
Others
19%
Hair care remains a

prominent part of the
global BPC market,
In a dove hair care
study 75% of the
participants agreed
hair care products
are used to feel
more attractive
(Click for additional
data)
Skin Care
23%
Bath and Shower

9%
Hair Care
17%
Oral Care
9%
Cosmetics
13%
Fragrances
10%
7.1%
Men's Grooming
6.8%
Deodorants
6.7%
Sun Care
6.7%
Cosmetics
6.1%
Skin Care
5.9%
Oral Care
5.7%
Fragrances
5.7%
Hair Care
5.6%
Depilatories
5.2%
Bath and Shower
5.2%
Source: Industry , Spark Capital Research
Global Per capita consumption in terms of $ remains in favor of hair care
Global top 10 hair care brands and their market share CY13
Brand
Company
L'Oral Paris
L'Oral
7.6
Pantene
Procter & Gamble
7.0
Garnier
L'Oral
5.1
5.8
Schwarzkopf
Henkel
4.4
5.8
Sunsilk
Unilever
4.2
Head & Shoulders
Procter & Gamble
4.0
Clairol
Procter & Gamble
2.7
Dove
Wella Professional
Unilever
Procter & Gamble
TRESemm
Unilever
2.3
1.8
1.5
Skin Care
14.1
Hair Care
10.6
Cosmetics
7.7
Fragrances
6.1
Men's Grooming
Oral Care
Bath and Shower
5.4
Deodorants
2.9
Baby Products
Sun Care
Depilatories
2
1.3
0.7
Market share (%)
On a Slippery Slope
Thematic Note
Rise of the oils - Globally
Sector Outlook
Cautious
What led to rise of hair oils on a global platform

2010 -13 hair care categories CAGR
Conditioners & oil
8.6%
Shampoos
6.2%
Colourants
6.1%
Hair Loss
6.0%
Salon
2-in-1
Others
2.5%
2.3%
0.3%
Since CY2010 hair care markets in Western

Europe and North American witnessed massive
slowdown pressure (Click for additional data)
Ever since prominence of Asia Pacific and

Latin America is on the rise. Industry
sources predicted 80% of hair care growth in
the next 5 years to come from these markets.
0.0%
5.0%
10.0%
Saloon treatment alternate to price

conscious consumers
Customising offerings at
affordable prices remained
the challenge
Conditioners (oils included) recorded the strongest

growth among hair care offerings as a wide positive
response was witnessed in developed markets to oil
as ingredient and finished product.
Brands as Mythic oil from LOreal professionnel,

Kerastaces Elixir Ultime and Moroccan Oil recorded
impressive volume offtakes.
Hair oils fast replacing the serums, as oils come with

an additional promise of protection and nourishment
without compromising on the glossy looks
Innovation in line with emerging region

cultural habits
HAIR OIL
(as ingredient and format)
Sunflower oil
Olive Oil
Coconut Oil
Argan Oil
Garniers Olia oil

hair dye
Moroccan oil
treatment
LOreal Mythic
Oil Shampoo
Dove hair oil

therapy
On a Slippery Slope
Thematic Note
Hair oil has taken off globally though usage remains sporadic
Sector Outlook
Cautious
Europe
One in five women in Europe now regularly
use a hair oil to do everything from washing off
hard-to-rinse product to conditioning frazzled
hair and giving a glossy finish LOreal study
(Click for additional data)
North America
U.S. consumers seem
more comfortable with the
idea of oil for the hair than
for the skin, because hotoil hair treatments have
been on the U.S. market
for years (Click for
additional data)
Latin America
Given the high salon
pattern in markets as
Brazil, Salon styled
serums and hair oils
typically tend to do
better (Click for
additional data)
Africa
Huge unbranded and unorganised market though
considering the availability of
various oils as Argan oil,
Olive oil Castor oil, jojoba oil,
avocado oil, virgin coconut
oils (Click for additional data)
GCC
Wide market for hair
oils, given the large
Indian Diaspora.
Market beyond the
Indian diaspora
remains miniscule
(Click for additional
data)
Source: Industry sources, Spark Capital research
On a Slippery Slope
Thematic Note
India - Hair care significance in Beauty and Personal care(BPC)

Haircare remains a key constituent of the Indian BPC market (CY13)
Sector Outlook
Cautious
CY10-13 revenue CAGR of hair care in line with most emerging categories
39.9%
Others
14%
Men's Grooming
7%
Bath
28%
26.9%
18.4%
10.7%
Skin Care
12%
13.5%
20.1%
19.3%
27.4%
22.0%
13.9%
Hair Care
26%
Oral Care
13%
Source: Industry data , Spark Capital Research
15 players occupying the top 2/3rd of the hair care market (CY13)
Indian Hair care market leader commands 17% share (CY13)
Hair Care
15
Fragrances
12
Bath
Skin care
54%
Bath & Shower
50%
11
Skin Care
Oral Care
Depilatories
Deodorants
high number of sub

categories within the
hair care space, has
led to lot more players
occupying 2/3rd of the
market
Oral Care
Cosmetics
Men's Grooming
Baby
2
Mens Grooming
30%
Deodrants
30%
Color Cosmetics
29%
Hair care
2
0
47%
10
12
14
16
18%
0%
10%
20%
30%
40%
50%
60%

On a Slippery Slope
Thematic Note
Hair oils continue to be the dominant force in Indian hair care

Acceptability and reach makes hair oil the largest category
Sector Outlook
Cautious
Consolidated hair care segment grew ~20% CAGR from CY10-13.

30.0%
Conditioner
2%
25.0%
Colorants
16%
25.0%
21.1%
Shampoo
31%
20.7%
20.0%
15.9%
15.0%
Coconut hair Oil

21%
14.4%
8.5%
10.0%
Value added
hair oil
30%
5.0%
0.0%
Hair care
Shampoo Perfumed Oil Coconut Oil Conditioner
Colorants
Rural expansion in hair care is limited and presents a great opportunity
Penetration too except in coconut hair oils and shampoo remains low
100%
90%
80%
70%
60%
60%
65%
80%
95%
50%
90%
40%
30%
20%
10%
40%
35%
20%
0%
Shampoo
Coconut hair Oil Value added

hair oil
Rural
Urban
5%
10%
Conditioner
Colorants
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
89%
83%
57%
37%
30%
25%
2%
Shampoo
Coconut hair Oil Value added

hair oil
Urban Penetration
Conditioner
5%
2%
Colorants
Ruralpenetration
On a Slippery Slope
Thematic Note
Value added hair oils beginning to emerge larger than coconut hair oil
Light Hair Oil gaining traction
Sector Outlook
CY10-13 growth rates suggest that other hair oils growing much faster
30.0%
Other hair oil

12%
27.7%
25.0%
22.5%
20.0%
Cooling hair Oil

11%
VAHO =
Light hair oil +
Amla hair Oil +
Cooling hair oil +
Other hair oil
Cautious
Coconut hair Oil

42%
17.8%
14.1%
15.0%
10.0%
Amla hair Oil

17%
8.5%
5.0%
Light hair oil
18%
0.0%
Coconut hair Amla Based Oil
Oil
LHO
Cooling hair Oil Other hair oil
Share of unbranded has remained largely limited in other hair oil categories
Strong market leadership across the four categories.
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2%
5%
5%
10%
Category
# share
(CY13)
Company
Leading Brands
Coconut Hair Oil(CHO)
56%
Marico
Parachute & Nihar
Light Hair Oil(LHO)
59%
Bajaj Corp
Bajaj Almond Oil
Amla Hair Oil
60%
Dabur
Dabur Amla
Cooling Hair Oil
55%
Emami
Navratna Oil, Extra Thanda
37%
98%
95%
95%
90%
63%
Light Hair Oil
Coconut Oil
Amla Oil
Branded
Unbranded
Cooling Oil
Others
On a Slippery Slope
Thematic Note
Slicing/Dicing of the category salience
Sector Outlook
Cautious
Hair Oil Industry - Overview

Hair Oil (Rs.810bn)
COCONUT HAIR OIL (~42%)
AMLA HAIR OIL (~17%)
LIGHT HAIR OIL(~18%)
COOLING HAIR OIL(~11%)
Daily
Medicinal
Daily/ Weekly
Daily/ Weekly
Gender appeal
Unisex
Unisex
Unisex
Predominantly Male
Geographical
prominence
South, West
North, West
North,West, East
East, South
Land-scape
orientation
Rural - Urban
Rural - Urban
Urban
All
User Class
Across spectrum, mainly Sec

C&D
Mainly Sec B, C & D
Mainly SEC A,B
Across Classes
Positioning
Nourishment, Prewash
Nourishment, Prewash
Lifestyle, Post-wash
Medicinal. Prewash
Usage pattern
On a Slippery Slope
Thematic Note
#1 Conversion/Premiumization - Conversion to be a key theme in hair oils
Organised
Coconut hair oil
based market
(Rs.~34bn)
Light hair oil

market
Amla hair oil

market
Triggers
Other hair oil

(Herbal/
Fragrance)
Sector Outlook
Cautious
Cooling hair oil
Competing
Substitutes
Complimentary proposition
Non sticky value proposition

Rising propensity to spend
Triggers
Rising
disposable
income
Rising niche needs in hair

care
Emergence of post wash
usage pattern
Serums
Conditioners
Shampoo
Styling gels
Rising
aspirations
Urbanisation
Increasing LUP
offerings
Better availability
Unorganised
hair oil market
(Rs.~15bn)
Source: Spark Capital Research
10
On a Slippery Slope
Thematic Note
#1 Conversion/Premiumization - Evolution of hair care
Hair care in
India
Sector Outlook
Cautious
Hair has always assumed a key role in Indian beauty context. Anecdotes on hair and beauty evident
in Indian scriptures
Hair oil in
hair care
However hair care has predominantly meant only hair oils, oils were extensively
used as nourishment conditioners.
Popular
variants
Popularity and usage were dependent on available oils, Coconut

in South India and Amla in North India
Weakening
consumption
Usage patterns however got weaker as oils led

to greasy looks
Emergence
of
substitutes
Forcing hair oils to be largely

pre wash proposition
Solution lies
in getting
light
Light Hair Oil

breaks the jinx
11
On a Slippery Slope
Thematic Note
#1 Conversion/Premiumization - Light hair oil seems key beneficiary

Light Hair Oil
FY08
12.7%
FY09
13.6%
FY10
13.0%
FY11
FY12
FY13
15.7%
18.0%
60.0%
12.0%
15.0%
17.0%
Coconut based Hair Oil
59.6%
12.0%
15.0%
Cautious
61.0%
11.2%
15.0%
16.0%
Cooling Hair Oil
10.6%
15.7%
15.0%
Amla Hair Oil
Sector Outlook
58.0%
11.0%
58.0%
11.0%
54.0%
Value Added hair oil
Weakness
Strength
Coconut Oil
Weakness
Strength
12
On a Slippery Slope
Thematic Note
#1 Conversion/Premiumization - Failing to innovate is Innovating to fail
Sector Outlook
Cautious
Highly penetrated categories beginning to look for alternate niche categories for growth.
Category
~# penetration
~Market Size
~FY11-13 growth New Growth drivers
Usage pattern
Niche new categories
One bar for

entire family
Body wash,
Hair wash,
Hand wash
Toilet Soap
95.7%
Rs.110bn
15%
Specific bath
& shower
offerings
Laundry
90.2%
Rs.150bn
10%
Matic and
conditioners
Largely Bar
and powder
Fabric
conditioners
Hair Oil
74.5%
Rs.81bn
18%
New usage
patterns
Pre wash
Light hair oils
Daily, low
awareness
Sensitive
offerings,
Mouthwash
Toothpaste
72.8%
Rs.55bn
16%
Niche
offerings
Shampoo
60.4%
Rs.49bn
20%
Variants
launch
Sachets and
daily usage
Anti Hair fall

packages
14%
Specific
positioning
Cheaper
substitute for
deodorants
Cool talc,
Deodorants
Given the VFM mindset, pricing increases

could lead to share
loss
Emergence of New
and Niche categories
Talcum
Powder
Rs.18bn
51.0%
High penetration
achieved through
LUPs and distribution
LUPs though have

also led to lower
margins
Despite high
penetration per capita
value usage remains
low.
Unorganised & MNC

price wars though
limit pricing flexibility
13
On a Slippery Slope
Thematic Note
#2 Sourcing/Pricing power - Integrated supply in CHO pressurizing margins
Sector Outlook
Cautious
Raw materials are either agri-based or commodity based
Measure
Coconut Hair Oil (CHO)
Light Hair Oil (LHO)
Amla Hair Oil
Cooling Hair Oil
Key Raw Material
Copra
Light Liquid Paraffin Oil (LLPO)
Vegetable Oil
Mentha Oil
Agri / Chemical
Agri commodity
Chemical
Agri based
Agri Commodity
Key Driver
Coconut/Copra
Brent Crude
Palm/soya
Mentha Leaves
Imported Local
Local
Imported
Local/Imported
Local
Imported From
NA
Imported by smaller players
Production: India world (73%),

China (18%) followed by Brazil
and US.
Individual farmers and Coconut

Development Board (CDB)
NA
NA
UP, Punjab, Haryana , Himachal

& Bihar.
No
Yes
Yes
No
Policy Impact
MSP
Import Duty bound
Import Duty bound
Yes
Integrated
Suppliers
Yes
No
No
Yes
Producers
Kerala, Tamil Nadu
Traded commodity in MCX, India
Locally sourced at
Re impact
Source: Industry & Spark Capital Research
14
On a Slippery Slope
Thematic Note
#2 Sourcing/Pricing power - How have the commodities behaved?

Coconut oil price trend
10000
Cautious
Light Liquid Paraffin price trend
Prices have been high over the past few

months due to lower supply, Prices
though could ease as supplies from
Kerala CBOT hit market.
12000
Sector Outlook
90
80
70
LLP prices at record high levels,

BJCOR management though
indicated that price would correct
downwards as we move along CY14.
Rs/kg
Rs/100 kg
60
8000
6000
50
40
30
4000
20
2000
10
0
Source: Bloomberg, Spark Capital Research
Vegetable Oil price trend
Mentha Oil price trend
90
3000
Vegetable oil prices are expected to

slightly increase on palm oil price rise,
Rupee stabilisation to cushion the impact
80
2500
Continuous decline of demand and

increasing supply from mint users to lead
to prices surging in the next 12 months
70
2000
50
Rs/kg
Rs/KG
60
40
1500
1000
30
20
500
10
Dec-13
Sep-13
Jun-13
Mar-13
Dec-12
Sep-12
Jun-12
Mar-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
15
On a Slippery Slope
Thematic Note
#2 Sourcing/Pricing power Pricing power remains weak in CHO
46
45
10
53
10
Copra price
0%
-20%
-40%
3QFY14
2QFY14
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
1QFY11
20%
100ml Parachute Coconut Oil price
Copra price increase
100ml Parachute Coconut Oil price increase
Source: Bloomberg, Company filings, Spark Capital Research
Vegetable oil prices have increased ~15% each year in the past 3 years
Price increases in Amla hair oil have been limited

41
40%
40
30%
Vegetable oil price growth
39
38
50
38
40
37
30
36
36
36
36
36
36
36
36
20
10
35
50
51
58
64
62
68
70
80
80
85
80
80
72
71
76
3QFY14
2QFY14
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
34
1QFY11
20%
10%
0%
-10%
-20%
2QFY13
38
1QFY13
38
100ml Dabur Amla Oil price growth
4QFY12
38
3QFY12
38
2QFY12
38
1QFY12
60
4QFY11
Vegetable oil price Rs/Kg
70
3QFY11
40
2QFY11
100ml Dabur Amla Oil

40
1QFY11
Vegetable oil price
80
Dabur amla price/100ml
90
3QFY14
41
3QFY14
41
2QFY14
41
2QFY14
47
1QFY14
54
40
40%
1QFY14
74
60
4QFY13
34
67
4QFY13
52
64
60%
3QFY13
30
15
3QFY13
40
80%
2QFY13
20
100%
1QFY13
25
50
20
30
4QFY12
21
23
3QFY12
20
25
2QFY12
26
27
1QFY12
27
4QFY11
27
3QFY11
27
2QFY11
27
1QFY11
Copra Price/KG
27
24
70
60
27
Parachute Price/100ml
80
27
Cautious
Price increases have always been lower than copra price rise, indicating
limited pricing power
Copra price have doubled, but price rise has been limited
27
Sector Outlook
16
On a Slippery Slope
Thematic Note
#2 Sourcing/Pricing power LHO pricing power though unabated
81
80
81
79
74
74
75
76
20
10
LLPO price
1QFY11
3QFY14
2QFY14
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
1QFY11
LLPO price increase
100ml Bajaj Corp Almond Oil Price
100ml Bajaj Corp Almond Oil Price Increase
Soft menthe oil prices providing the necessary price cushion
Price increases have been constant and steady over time period
60
80%
30
20
500
10
Mentha Oil price
100ml Emami Navratna Cool hair oil price
3QFY14
2QFY14
1QFY14
4QFY13
3QFY13
2QFY13
1QFY13
4QFY12
3QFY12
2QFY12
1QFY12
4QFY11
3QFY11
2QFY11
1QFY11
20%
0%
-20%
-40%
Mentha Oil price Increase
1QFY14
957
772
40%
4QFY13
1,000
40
3QFY13
1,500
60%
2QFY13
50
1QFY13
50
4QFY12
50
100%
3QFY12
50
70
2QFY12
50
60
1QFY12
48
60
4QFY11
48
60
55
3QFY11
48
55
2QFY11
Mentha oilprice/ Kg
2,000
55
1QFY11
60
55
Navratna Oil/100 ml
2,500
3QFY14
83
3QFY14
66
86
2QFY14
65
57
86
2QFY14
30
75
1QFY14
40
4QFY13
50
80%
70%
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
3QFY13
60
2QFY13
50
1QFY13
50
4QFY12
42
46
3QFY12
42
46
2QFY12
42
46
Cautious
Price increases have overall been in line with cost increase
1QFY12
LLPO Price/kg
42
46
55
4QFY11
42
55
3QFY11
100
90
80
70
60
50
40
30
20
10
0
55
2QFY11
55
Bajaj Almond Oil price/100ml
Bajaj Almond drop light hair oil prices have increased in line with LLP price
Sector Outlook
100ml Emami Navratna Cool hair oil price increase
17
On a Slippery Slope
Thematic Note
Sector Outlook
Seasonal cooling oil, given

their complimentary nature
are priced higher than the
traditional variants. Market
leader Emami Navratna is
priced at the lower end.
Despite the presence of
several regional players,
salon based usage enables
premium pricing.
Prices in the amla oil

segment remain on the
lower end given their
constant attempt to lure
coconut oil consumers,
Therapeutic Amla oil prices
though on the higher end
given their additional
ayurvedic benefits. Market
600 Leader Dabur Amla operates
at the lower end of the
pricing pyramid.
Cautious
Light hair oil category exhibit

the widest pricing range as
base ingredient of the
offerings differ widely, the
most popular among them
though is the almond
offering. Bajaj Almond is the
market leader in the
category with ~59% share
485
470
500
395
200
100
Range = Rs.437
Range = Rs.375
300
100
Range = Rs. 463
400
Range = Rs. 77
Given the huge

unorganised market,
pricing remains
under pressure in the
coconut oil segment,
despite being
constantly exposed
to vagaries of copra.
Though market
leader commands
~56% share in the
branded market,
Parachute has been
judicious in its price
increases. Lower
LUPs to convert from
unorganised market
keeps the entry
pricing low.
Rs/100 ml
#2 Sourcing/Pricing power - Pricing ranges of various categories
103
123
121
22
44
23
20
33
Coconut Oil
Amla Oil
Cooling Oil
Light Hair Oil
Source: Industry Data, Spark Capital Research
18
On a Slippery Slope
Thematic Note
#3 Competitive Landscape Players vying to be on Aspirational quadrant
Sector Outlook
Cautious
Premium
Aspirational Quadrant (Pan India

Acceptance with Pricing power)
Pricing scale
Niche
Salon
Ayurvedics
Local
Extensions
MNCs
Regional
Regional
Pan India
19
On a Slippery Slope
Thematic Note
#3 Competitive Landscape Regional brands and their aspirations
Sector Outlook
Cautious
Group : G. K.
Burman Herbal
(India) Private
Limited
Group : VVD & Sons
Group : Deys
medicals
Group : Cavin Kare
Group : Vasu
Healthcare
Products: Himgange
Ayurvedic hair oils
Promoters:
Mr.Gautam Kumar
Burman
Current
management:
Mr.Neeraj Kumar
Burman and Mr.
Vikram Kumar
Burman
Hair oil launch: 1987
Marketshare - ~30%
in the cooling hair
oil.
Dominance: Uttar
Pradesh, Bihar,
Madhya Pradesh
and Chhattisgarh
Manufacturing plant:
Haridwar.
Going forward:
Launch in south,
Launch of Kerlina
coconut oil.
Products: Hair oils,

edible oils, food
preparation and
spices.
Promoters: Mr. V.V.
Danushkodi
Current
management:
Mr.Niranjan and
Mr.Kabilan
International
Markets: Malaysia,
Singapore and
middle east.
Distribution: 650
distributors and retail
outlets
Presence in: Tamil
Nadu, Andhra
Pradesh, Karnataka,
Kerala, Orissa,
Chattisgarh,
Maharashtra,
Madhya Pradhesh,
Bihar, Jharkhand,
West Bengal and
Assam
Going forward:
Expansion into North
& West

herbal OTC
offerings.
Promoters: Mr. BN
Dey
Current
management:
Mr.Gautam Dey, Mr.
Ranajit Dey, Mr.
Subharthee Dey,
Mr.Ushanath
Banarjee, Mr. Aditya
Banerjee
Hair oil offerings:
Keo Karpin almond,
olive variants,
massage oil and hair
vitalizer.
Strengths: First
effective anti hair fall
solution, strong
regional loyalty,
Solid distribution
network,
Inexpensive
Presence in: Sixteen
branches located in
all major capital
cities.
Products: Personal
care products, food
and Dairy products.
Chairman & MD: Mr.
C.K.Ranganathan
JMD: Mr. TD Mohan
Markets: Tamil Nadu
and Andhra Pradesh
Hair care products:
Shampoo, Oil and
Henna.
Hair oil offerings:
Coconut Hair oil at 4
SKUs
Head office:
Chennai
Manufacturing
locations: 8
locations across
India.
Other hair oils:
Meera did attempt to
venture into other
hair oils in 2004 in
North India, however
faced limited
success.
Trichup (West India)
Founded: 1980
Cavin Kare (South India)
Founded: 1983
Keo Karpin (East India)
Founded: 1957
VVD Gold (South India)
Founded: 1942
Himgange (East India)
Founded: 1984

herbal OTC
offerings.
Chairman: Mr.V. B.
Ukani
Managing Director:
Mr. Haribhai Patel
International
Markets: North
America, South
America Europe,
South East Asia,
Middle East, Asia
and Africa.
Hair care products:
Shampoo, Oil,
capsules and
Henna.
Hair oil offerings:
Anti dandruff, anti
hairfall, long &
strong and hair
enhancer.
Head office:
Vadodra.
Source: Company Data, Spark Capital Research
20
On a Slippery Slope
Thematic Note
#3 Competitive Landscape MNCs renewed interest in Hair Oil category

MNC variants in India
Hindustan Unilever take control of brand Nihar when it acquired TOMCO
from TATAs.
2000
Hindustan Unilever extends All clear brand into Oils under Anti dandruff
proposition.
2006
Hindustan Unilever sells brand Nihar to Marico for a consideration of

Rs.2.16bn (~1.8x sales, 10x EBITDA)
Company Varaints
LOreal Paris 6
Oil Nourish
Shampoo, Conditioner and 6 Oil Nourish

Oil.
Hindustan
Unilever
(1) Rose & Almond Oil (hairfall rescue)

(2) Hibiscus & Argan Oil (nourished
shine) and
(3) Lavender & Olive Oil (dryness care)
LOreal
Extracts of Almond and Coconut
Clinic Plus
Hindustan
Unilever
Clinic Plus and Clinic Plus Vita Oil
All Clear
Hindustan
Unilever
Hindustan Unilever launches Dove Elixir, a premium hair oil proposition in

2012 3 variants.
2013
Anti Dandruff proposition
2014
LOreal
Hindustan Unilever extends Clininc Plus brand into Oils
LOreal launches Garnier Ultra Doux - Extracts of Almond and Coconut
Hindustan Unilever introduces Clinic Plus Vita An almond variant.

LOreal launches 6 Oil Nourish, Combination offering of Shampoo,
Conditioner and Hair oil.
Garnier Ultra
Doux
Pricing matrix
Bajaj Corp
Almond Oil
Paul Polman, CEO Unilever

We will continue to sell noncore, underperforming brands
and buy attractive bolt-on
brands when possible
Proposition
Dove Elixir
2011
Cautious
MNC variants in India
1993
2008
Sector Outlook
We want to attack the market

with brand new technologies
and products in all categories.
We are not interested in
making small improvements to
existing products LOreal
Parachute
Dabur Almond
Advansed hair oil
Hair Oil
LOreal Paris 6 Oil Nourish
2.6
4.2
2.6
Dove Elixir
2.7
4.4
2.7
Garnier Ultra Doux
0.4
1.0
0.4
Clinic Plus
-0.2
0.1
-0.2
All Clear
0.1
0.6
0.1
21
On a Slippery Slope
#4 South India - South remains the tough nut to crack for LHO
Coconut is just more than oil in South India.
Humid conditions
Thematic Note
Sector Outlook
Cautious
Breakup of the south India hair oil market
Light Hair Oil

3%
Amla Hair Oil

13%
Cheaper prices and wide

availability
Coconut
Based Oil
(Inc. Others)
72%
Cooling Hair
Oil
12%
Wide perception that

heavy hair oil is better
Strong purchase
influencers in family
Emotional attachment
towards coconut
SOUTH INDIA
Beauty-conscious urban
consumers aged between 18
and 32 are the most active
consumer group.
Higher dual income families to lead
to premium offerings as VAHO
gaining momentum.
Traditional values though keep them
slightly restrained.
22
On a Slippery Slope
Thematic Note
#4 South India - South is converting but on its own pace...
Sector Outlook
South India
Light Hair Oil
Socio Demographic Profile (Click for additional data)
Socio demographic profile of south comfortably aligns with identified light

hair user profile, we understand that though there is high apprehension
towards first time usage. We also see that availability of light hair oil
products in the rural markets in south remains abysmal.
Conversion of potential to demand
Complimentary
Cautious
Replacement
User Profile
Marketing to south the way it likes

holds the key whether the light hair
oil space cracks the coconut.
JWT 18.3 (Click for

additional data)
Despite tropical nature air care products

have higher acceptance. Personal
categories as Anti ageing creams, mouth
wash, depilatories too have higher per
capita spend in south
Categories that have

managed to crack south
Conversion to LHO is
inevitable in South India
given the favourable
Amla hair oil and

Coconut Oil
Amla hair oil and

Coconut Oil
1.Socio demographic profile
Cooling oil and

Coconut Oil
Cooling oil and

Coconut Oil
3.Increasing propensity to
spend towards personal
care in south India
Light hair oil and

Coconut Oil
Light hair oil and

Coconut Oil
2.Higher disposable income
1.Strong affiliation towards

coconut oil
2.Solid purchase influencers
Conversion
though might
be slower than
ROI due to
3.Wide perception that LHO

is not healthy
4.Tropical and Humid
climate may not require
post wash oil as in ROI.
4.Increasing consumer
needs for better looks
23
On a Slippery Slope
Thematic Note
#4 Whatsapp - Focus group study Combing views
To prevent
dryness and
greying of
hair
Keeps hair
smooth and
maintains
texture
It is of utmost
importance as we
require water to
survive same goes
with hairs it requires
Nourishment!
Hates hair
oils and uses
them rarely
while styling
hair
As it makes
the hair feel
lighter and is a
remedy for
hair fall
As oil helps yo
maintain healthy
hair growth and
calms one's mind
As it
reduces
heat and
increases
hair growth
User feels
hair oil has
tremendous
benefits to
maintain the
length and
health of
hair
Sector Outlook
As it is keeps
head cool and
because mother
advises on a daily
basis
Otherwise,
my hair
would
become dry
and fall off
I need to
grow my
hair back
I use hair oil because

Whatsapp focus group study
It is
great for
massage
To look
better
Dunno Why, but

have been using it
since childhood
It's
nutritious
for hair
the
texture
improves
Cautious
It retains
moisture
and
prevents
dryness
It is an
essential
nutrient to
keep my
hair
healthy and
strong
To improve
the
effectiveness
of shampoo
24
On a Slippery Slope
Thematic Note
#4 Whatsapp - Focus group study Combing views
Sector Outlook
Cautious
Hair oil usage pattern Scuttlebutt (Channel check) Notes
Age Based
Male:
Main reasons for usage were to keep scalp
healthy and to prevent early hair fall.
The usage pattern was generally limited to
3-4 times a week and the usage pattern has
remained constant.
Female:
Nourishment and silky look were the key
reasons women used hair oils.
Several users did note that the usage of
hair oil has reduced in the past 5 years due
to lifestyle changes
South India:
Parachute was the most popular brand
followed by Dabur Amla.
Healthy hair, scalp cooling and traditional
habit were the reasons attributed for usage.
Several users pointed to being conditioned
to use hair oil since childhood.
Rest Of India:
Hair oils are used to Moisturise, maintain
texture and help in strengthening the hair
Parachute and Bajaj Almond were the most
preferred among the users
Less than 25 years old:

Parent influence on brand choice and usage
patterns of hair oils was evident
Nourishment to prevent hair fall, styling
needs and hair strength were noted as key
reasons for hair oil patronage.
More than 25 years old:
Need to maintain scalp and relaxation were
attributed pointed towards usage.
Usage was also significantly higher in this
group as they believed it also protects from
harmful chemicals in shampoos.
Male:
Conversions were generally tepid, however
key reasons pointed out for shift by few
were down to non-stickiness.
Female:
Most pointed out that they have not shifted
hair oils though usage pattern has changed.
Niche needs and non-greasy looks were
key reasons pointed out by those who have
shifted to LHO
South India:
Users in south exhibited strong propensity
to change to superior offerings.
Though no certain reasons could be
attributed, niche needs proposition was
prominent..
Rest Of India:
Preference for non-sticky proposition was
widely visible, Non greasy and No smell
seems too have led to LHO growth.
Less than 25 years old:

Either due to parental influence or not being
economically dependent, only a few had
noted changing brands in the past 5 years.
More than 25 years old:
Move towards premium offering clearly
visible as specific hair needs emerge.
Higher disposable income also contributes
to this up-gradation. Increasing need to look
younger drives niche offerings.
Threats
Usage Observations
Region Based
Conversion
observations
Gender Based
No threat from serums

Across users, most noted that serums and
conditioners as complementary offerings
and can never replace hair oils.
No threat from serums

Though ROI did acknowledge the clash
between conditioner and LHO offerings,
they believe the usage reasons differ.
Emerging threat from serums

Few users above 25 years did acknowledge in
trying out serums and conditioners as
replacement
25
On a Slippery Slope
Thematic Note
#5 Impact - How are each player positioned to drip the hair oil market
Bajaj corp fortunes are heavily aligned towards hair oil
Sector Outlook
Contribution of various hair oil categories to revenues*

Marico
Marico
62%
44%
Dabur
Dabur
Cautious
38%
19%
77%
4%
15%
Bajaj Corp
Bajaj Corp
1%
Emami
1%
97%
2%
99%
Emami
99%
25%
0%
0%
20%
40%
60%
80%
100%
Coconut hair oil
20%
40%
Amla hair oil
Light hair oil
60%
80%
Cooling hair oil
100%
Value Added Hair Oil
Source: Company filings, Spark Capital Research
*Value added hair oil =(Amla hair oil + light hair oil+ cooling hair oil+ other hair oil) Source:
Company filings, Spark Capital Research
Presence in complementing/substitute categories
Majorly catering to the Indian diaspora
Shampoo Conditioner
Marico
Serums
Styling
Agents
Hair color
Livon
Setwet
Livon
Marico
24%
Dabur
Dabur
Bajaj Corp
Dabur
Vatika,
Dabur
30%
Bajaj Corp
1%
Emami
Emami
11%
0%
5%
10%
15%
20%
25%
30%
35%
26
On a Slippery Slope
Thematic Note
#5 Impact - How the categories stack up against each other in positioning
Sector Outlook
Cautious
Playing to one strengths has been the key until now
Marico
Dabur
Bajaj
Corp
Emami
Coconut Hair Oil
Amla Hair Oil
Light Hair Oil
Cooling Hair Oil
Other Hair Oil
27
On a Slippery Slope
Thematic Note
#5 Impact - Economic Moat Index Qualitative Index
Sector Outlook
Marico
Dabur
Bajaj Corp
Cautious
Emami
Category penetration
opportunity
Opportunities
Brand loyalty
Pricing power
Market Leadership
Portfolio across
hair oil categories
RANK
% of unorganized
Exposure to
commodity RM
Threats
LUP
Regional
Competition
MNC Competition
28
On a Slippery Slope
Thematic Note
#5 Impact - Hair oil contribution and its potential impact
Cautious
Bajaj Corp
Bajaj Corp
TP
253
CMP
213
Recommendation
BUY
Financials FY14e
FY15e
Sales
EBITDA
PAT
EPS
P/E
ROE
Sector Outlook
6,811
1,866
1,758
11.9
14.6
34.8%
7,878
2,051
1,883
12.8
13.6
34.7%
Market Attractiveness: Light hair oil remains the fastest growing hair oil segment. Structural shift from heavy
coconut based hair oils to light hair oils is gaining momentum. This category is estimated grow in excess of ~15%
CAGR of the next 3 years (in value terms)
Low competitive intensity: BJCORs nearest competitor is just ~16% market share and is showing minimal signs of
aggression, whatsoever. Hence we believe there is almost no threat to BJCOR's leadership status.
Strong Market leadership: BJCORs ADHO remains the unassailable leader in the light hair oils category, strength
of the brand can be gauged by its negative working capital cycle, premium positioning and strong pricing.
Multiple initiatives to diversify single brand risk: 1.Launch of a cooling hair oil brand Kailash Parbat last year,
2.Expansion into Bangladesh. 3. Acquisition of Nomarks, anti-marks cream from Ozone Ayurvedics. 4. BJCOR,
armed with a cash surplus of Rs.~4bn, continues to scout for ideal brand / product for acquisition.
Views & Valuation: We remain buoyant as valuation comfort in comparison to peers, leadership in its flagship brand,
strong pricing power and increasing benefits from geographic (Bangladesh & UAE)/ Product (Kailash Parbat /
Nomarks) diversification makes BJCOR better placed among stocks in coverage. We have a target Price of Rs.243
FY16e
9,274
2,375
2,193
14.9
11.7
37.7%
Returns (%)
1m
3m
12m
BJCOR
Sensex
BSE FMCG
6%
5%
7%
-2%
4%
6%
-2%
18%
18%
Financials in mn, except EPS,P/E.ROE
Dabur
Dabur
TP
165
CMP
174
Recommendation
REDUCE
Financials FY14e
FY15e
Sales
EBITDA
PAT
EPS
P/E
ROE
71,174
11,783
9,014
5.2
33.6
37.8%
83,116
14,355
11,089
6.4
27.3
37.3%
Impact from Amla to be limited: With Dabur Amla hair oil contributing to ~12% of revenues, we believe the impact
of conversion would be minimal on Dabur.
Key Domestic categories: Management believes that dwindling inflation would assist in driving the otherwise
subdued urban consumption. Given the transformed focus towards urban, Dabur has announced Project Core an
initiative to increase the number of chemist touch-points in urban market. Management targets to reach to ~125000
chemists from current ~75000 chemists in the next one year. We believe this initiative would not only assist in
expanding urban footprint but also enable to drive consistent growth and premiumization in Healthcare and OTC
portfolio which should augur well for customer profile diversification and margin improvement. Margins to gradually
expand to 17%-18% on increasing premiumization, improving gross margins and lower A&P spends.
Namaste and MENA to lead growth: Though political instability could continue to affect performance in Bangladesh
and Egypt, growth in international geographies to be led by increased expansion in Africa and Middle east countries.
View & Valuations: Change in geographical and product mix coupled with expansion in international geographies to
assist growth momentum. we though are on a reduce stance with a TP of Rs.165, because of demanding valuations
and volatile macro headwinds.
FY16e
95,572
16,521
12,964
7.4
23.4
35.4%
Returns (%)
1m
3m
12m
Dabur
Sensex
BSE FMCG
3%
5%
7%
3%
4%
6%
32%
18%
18%
29
On a Slippery Slope
Thematic Note
#5 Impact - Hair oil contribution and its potential impact
Cautious
Emami
Emami
TP
434
CMP
502
Recommendation
BUY
Financials FY14e
FY15e
Sales
EBITDA
PAT
EPS
P/E
ROE
Sector Outlook
18,738
4,417
3,899
17.4
25.0
43.5%
21,781
5,215
4,679
20.6
21.1
40.4%
Navratna Cooling Oil: Navratna cooling oil contributes to ~25% of HMN revenues, The brand continues to gain
traction on expansion and LUPs. Given the subdued mentha oil prices and superior pricing power, we see margins
from Navratna too improving in near term.
Low penetration in the key categories: Emami has built strong brands around categories that have minimal
penetration and have immense potential to become large. Diversifying into new unexplored categories backed by
strong celebrity endorsements have enabled HMN to maintain market leadership in these categories despite
competitive intensity inching up. We believe HMN would be the key beneficiary as these niche categories expand to
become larger propositions.
Brand Extensions: HMN currently has 4 power brands in Navratna, Boroplus, Zandu and Fair & Handsome. With
these brands having become household names, we believe brand extension opportunities into complementing
categories presents an exciting growth opportunity.
Views & Valuation: Penetration potential in the key categories, brand extensions of the power brands and growth
opportunity in the Zandu portfolio, keeps us excited on Ayurvedically hedged Emami. We initiate coverage with a
BUY rating and a Target Price Of Rs. 502 (16% upside to CMP, ~21x FY16E EPS)
FY16e
25,294
6,132
5,422
23.9
18.2
37.0%
Returns (%)
1m
3m
12m
Emami
Sensex
BSE FMCG
-7%
5%
7%
-10%
4%
6%
11%
18%
18%
Financials in mn, except EPS,P/E.ROE
Marico
Marico
TP
214
CMP
202
Recommendation
REDUCE
Financials FY14e
FY15e
Sales
EBITDA
PAT
EPS
P/E
ROE
47,572
7,142
4,796
7.4
27.1
22.3%
53,195
8,018
5,511
8.5
23.6
22.1%
Parachute remains the key: Increasing rural focus remains the key driver for Parachute sales, however recent price
hikes to combat increasing copra prices could keep volumes muted. Value added hair oil volumes seem to be
affected due to unfavourable mix however MRCOs increasing focus should assist in near term growth.
Urban natured categories to remain impacted: Saffola sales is expected to be better in near term, however given
the discretionary nature of the brand, macro pressures could impact volumes. Skin care & personal products
segments should continue to gain share and maintain strong growth momentum.
International operations to be a mixed bag: Bangladesh business continues to be impacted by unstable political
climate while macro economic pressures in South Africa and South East Asia (inflation) should keep growth under
check. MENA and Egypt growth though should begin to see revival in near term.
Copra prices on the rise: Copra prices that were benign throughout last year have increased ~78% y-o-y this
quarter. Costs of other raw materials as Safflower and Rice bran though remain soft, selective price increases
coupled with lower operating costs should see EBITDA margins sustaining at ~14%-15%
Views & Valuations: Given the increasing macro headwinds in driving volume growth and current high valuations
we maintain negative stance on MRCO with a reduce rating and a TP of Rs.214 (25x FY15E)
FY16e
61,439
9,552
6,498
10.1
20.0
22.5%
Returns (%)
1m
3m
12m
MARICO
Sensex
BSE FMCG
-3%
5%
7%
-7%
4%
6%
-3%
18%
18%
30
On a Slippery Slope
Thematic Note
#5 Impact - Economic Moat Index Quantitative Index
Sector Outlook
Cautious
Strong market leadership across the four categories.
Category
Marico
Dabur
Bajaj Corp
Emami
10%
16%
15%
14%
Gross Margin (FY14E)
50.0%
52.3%
58.8%
61.4%
A&P/ Sales (FY14E)
13.0%
14.3%
14.5%
15.2%
Number of retail outlets reached
4.0 mn
5.8 mn
2.6 mn
4.0 mn
EBITDA Margin (FY14E)
15.0%
16.6%
27.3%
23.6%
PAT Margin (FY14E)
10.3%
12.7%
25.8%
20.8%
ROE
22.3%
37.8%
34.8%
43.5%
ROCE
17.8%
26.6%
35.6%
39.0%
Working Capital Days
48
35
-1
27
Debt/Equity
0.3
0.4
0.1
FCF Yield
3.3%
3.1%
3.9%
4.3%
Dividend Yield
1.2%
1.3%
3.2%
1.4%
FY13-16E EPS CAGR
20.4%
19.1%
9.4%
19.3%
FY13-16E Revenue CAGR
31
On a Slippery Slope
Thematic Note
Sector Outlook
Cautious
Appendix
32
On a Slippery Slope
Thematic Note
What women want? Hair care remains a focus area

Among products used to feel more attractive, hair care remains prominent
Deodorant
Return to Page 2
Sector Outlook
Cautious
21% of people surveyed wanted to change hair care appearance

45%
82%
Hari Care product
75%
Perfume
33%
74%
Facial care products
70%
Body moisturizer
70%
Make-up/color cosmetics
21%
11%
68%
Hair coloring
4%
67%
Nail care products
12%
12%
24%
14%
5%
46%
Skin-tanning products
21%
Skin-lightening products
9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Source: Dove global beauty trends, spark capital research
Americans were in favour of hair care being integral part to attractiveness
Developing countries had a higher emphasis in changing their hair looks
82%
74%
65%
66%
67%
67%
67%
84%
85%
86%
40%
34%
35%
34%
36%
31%
30%
25%
21%
17%
20%
15%
22%
10%
11%
12%
13%
10%
5%
0%
33
On a Slippery Slope
Thematic Note
Return to Page 3
Global hair care trends
Western Europe
Market Size: $~15bn
CY10-13 growth: 2.6%
Leading Brand: LOreal Paris (LOreal) 15.5%
Per capita usage: $31.6
HC/BPC : 17.3%
Sector Outlook
Eastern Europe
Market Size: $~5bn
Leading Brand: Schwarzkopf (Henkel) 17.8%
HC/BPC : 17.5%
Cautious
Asia
Market Size: $~20bn
Leading Brand: Pantene
(P&G) 7.3%
HC/BPC : 17.4%
North America
Market Size: $~12bn
Leading Brand: Pantene
(P&G) 8.1%
Per capita usage: $35
HC/BPC : 15.4%
Latin America
Market Size: $~16bn
CY10-13 growth: 11.5%
Leading Brand: Sunsilk
(Unilever) 10.9%
HC/BPC : 20.6%
Africa & Middle East

Market Size: $~4bn
Leading Brand:
Pantene (P&G) 6.6%
HC/BPC : 17.5%
Australasia
Market Size: $~1bn
CY10-13 growth: 11.8%
Leading Brand:
Schwarzkopf (Henkel)
13.8%
Per capita usage: $41
HC/BPC : 16.1%
Source: Industry data, Bloomberg and Spark Capital research
34
On a Slippery Slope
Thematic Note
Rise of the oils - Globally
Return to Page 5
Key growth drivers of hair care globallly
Cautious
Popular brands across the globe
The natural
trend
At Home
treatments
West Meets
East
The trend for more

natural ingredients
has been strong in
hair care, with most
of MNCs launching
ranges using
natural or natureinspired
ingredients.
Hair oil were used

to nourish the hair
and scalp deeply,
keeping hair
healthy and
prolonging the time
needed between
hair salon visits,
thus saving money.
Companies
launching products
that were
successful in Asia
into Western
countries
Giving rise to the

use of oils from flax
seed to grape seed
oil, coconut oil and
argan oil,
Proposition had
changed from
cleansing to
nourishment.
As western world
begins to embrace
products from east,
prominent
categories as hair
oils are witnessing
global acceptance.
LOreal Offerings under Professionnal, Garnier and Kerastace brands
Moroccan oil
P&Gs Pantene oil

offering
Sector Outlook
Liz earle
Unilever offerings under Tressemme and Dove brands
35
On a Slippery Slope
Thematic Note
Return to Page 5
Hair oils across the globe
Sector Outlook
Cautious
How hair oils fare in Europe
Celebrity Followers
1. Scarlett Johansson
2. Lady Gaga
3. Jessica Biel
Officially becoming the fastest

selling product in the multi-million
pound hair industry
Perception change was the key
to usage
Hair Oil replacing serums
Given the rising inflation,
more consumers are looking
to lessen the number of saloon
visits, however prefer keeping
their hair glossy and
nourished Mintel publications
Marketing terms used to

sell hair oil
1.
Greasy hair bouncy
2.
Alternate to salon
treatment
3.
Protection against
damaging blow dries
4.
Sweet smelling
5.
Home dye conditioner
6.
Multi tasking as hair
styling and
conditioning.
One in five women now

regularly use a hair oil to do
everything from washing off
hard-to-rinse product to
conditioning frazzled hair and
giving a glossy finish
Latest findings from LOreal
The key to the popularity of
these products is that they are
so versatile - whether your hair
is dry, flat, curly or fine, there
is an oil to suit Tracy Rogers,
salon manager at Gina Conway
Aveda in London
Popular Brands
1. LOreal Professionnel
2. LOreal Krastase
3. Garnier Olia
4. Aveda Beautifying
composition
Threats
1. Premium priced
2. Popular only in few
countries
36
On a Slippery Slope
Thematic Note
Return to Page 5
Sector Outlook
Cautious
How hair oils fare in US
Oils are increasingly

becoming a hair cum skin
care proposition in US
What is making hair oil

click?
1. Anti ageing propositions
2. Natural care
3. Noursihment
4. Lighter proposition
Hair oil treatments using

argan based Moroccan oil
most popular
"We've been trained to think of

oil as heavy or thick or bad,
Terry Darland, president of
Christian Dior Perfumes North
America
Popular perception against oil in US

1.
Greasy look
2.
Clogs pores
3.
Does not absorb
4.
Heavy proposition
Popular Brands
1. LOreal Professionnel
2. Moroccon Oil
3. Garnier Fructis
U.S. consumers seem more

comfortable with the idea of oil
for the hair than for the skin,
because hot-oil hair
treatments have been on the
U.S. market for years
Virginia Peandro, manager of
skin-care product innovation for
Garnier
Marketing Drab
Threats
1. Usage is limited
2. Multipurpose usage
"A lot of customers are feeling

this pull back to basics,"
Maren Giuliano, global Whole
Body coordinator for Whole
Foods Market Inc.
Neutrogena forever
promoting oil-free look,
dubbing oil as greasy
P&G renames oil of olay
brand as Olay
37
On a Slippery Slope
Thematic Note
Return to Page 5
Sector Outlook
Cautious
How hair oils fare in other geographies
Africa:
Breakage prone hair, thus hair care protection and use of hair care
products is common for African people.
However off-late hair extensions becoming popular, saving
consumers the money and time spent in maintaining hair.
LOreal Carson hair oil treatments and Dabur Vatika hair oil
variants are popular among the branded players.
Huge unbranded and un-organised market though considering the
availability of various oils as Argan oil, Olive oil Castor oil, jojoba
oil, avocado oil, virgin coconut oils.
Traditional market, where MNCs have found it difficult to break
into traditional categories, similar to India.
GCC:
Wide market for hair oils, given the large Indian Diaspora. Market
beyond the Indian diaspora remains miniscule.
Dabur Amla hair oil is the largest hair oil brand in the GCC and
commands more than 50 per cent of the market. Dabur Vatika
Hair Oil, another key Dabur brand, is the market leader in the
value-added pure coconut hair oils category
Dabur is continuously though scouting to break open the middle
east consumer by launching variants as Olive Oil.
Latin America:
Small hair oil market, the market dominated with hair care
offerings from Unilever, P&G and LOreal.
Given the high salon pattern in markets as Brazil, Salon styled
serums and hair oils typically tend to do better.
However inflation led Latin American markets growth to slowdown
in coming years.
38
On a Slippery Slope
Thematic Note
Return to Page 23
Is there a market at all for LHO in south?
% of population aged between 18-32
Average Per Capita Spend (Rs. pa)
41.2%
27.5%
26.5%
South India
Urban %
ROI
Sector Outlook
28.5%
ROI
India
Television Ownership (%)

70.1
78754
31.2%
54493
59966
ROI
India
39.7
India
South India
South India
South India
1.00
ROI
0.94
Unisex
60% users aged between 15 and 39
2/3rd Urban
Economic class SEC A1,A2,B1,B2
4.8
South India
% of number of nuclear families
Average household size
73.2
83.8
South India
ROI
India
9.5
India
Literacy
79.7
ROI
Mobile Ownership (%)
Light hair oil user profile
South India
47.2
26.7%
Sex Ratio
0.93
Cautious
4.03
80.4
India
69.1
South India
ROI
ROI
6.0
India
% of houses with more than 2 rooms
3.98
59.1
59.1
ROI
India
70.1
58.9
3.82
India
South India
ROI
India
South India
Source: Census India, Spark Capital Research
39
On a Slippery Slope
Thematic Note
Return to Page 23
Where has it been going wrong?
Proudly South
Adapting Traditions
New cool
Shattering the myth
Portraying south
as world beaters,
acknowledging
and rewarding
South's
excellence in
relevant fields
Using south celebrity as
national brand
ambassadors does the
trick
Social Change
Experimentation
Intellectual
superiority
South is no more
stereotyped as
the docile and
quiet, social
awareness
questioning takes
prominence
Light hair oils positioning

themselves as lifestyle
options are beginning to
attract better traction
Wanting for a change might

go well with light hair oils
given they attempt to break a
traditional habit
South Indians
though likes their
advertisements to
reflect a slice of life,
aesthetic appeal,
style quotient is
essential
Light hair oils syncing

modern practices with
traditional values have
stuck the chord.
Deodorant brands catch

the attention aplenty
given their traditional
style quotients
One of the most

experimenting
consumers,
however sticking
to typical
approach may fail
to strike a chord
Light hair oils could break
the coconut jinx
challenging the south
consumer to experiment
Cautious
Humbly Speaking
The region is
crafting an
independent style
aesthetic. Creating a
wave that spans
across art, fashion &
entertainment
South still seems

strongly
associates itself
with its
traditional habits
and customs
Sector Outlook
Character vital
South has been

averse to
exhibitionist
culture, riches
and fame to coexist with
humility.
Light hair oils positioning
themselves as alternate to
serums /styling agents could
identify with south
It is clearly mind and

body when it comes
to south, brands
trying temptation
quotients have not
been successful
Acknowledging the need for
post wash nourishment with
styling might do the trick for
light hair oils
Brands that have

associated in
portraying
characters for its
identity have done
well in connecting
with consumer.
Illustrating light hair oil
users with virtues of
confidence and courage.
Source:JWT, Spark Capital Research
40
On a Slippery Slope
Thematic Note
Sector Outlook
Cautious
Absolute Rating Interpretation

Buy
Stock expected to provide positive returns of >15% over a 1-year horizon
Add
Stock expected to provide positive returns of >5% <15% over a 1-year horizon
Reduce
Stock expected to provide returns of <5% -10% over a 1-year horizon
Sell
Stock expected to fall >10% over a 1-year horizon
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41
On a Slippery Slope
Thematic Note
Sector Outlook
Cautious
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On a Slippery Slope

Thematic Note on Indian Hair Oil Category

Mar 27, 2014

FMCG Index vs. Sensex

Hair quotient in global context

Hair Care as % of global Beauty & Personal Care CY13

Hair care remains a

Bath and Shower

Bath and Shower

Source: Industry , Spark Capital Research

Source: Industry , Spark Capital Research

Global Per capita consumption in terms of $ remains in favor of hair care

Procter & Gamble

Head & Shoulders

Procter & Gamble

Procter & Gamble

Source: Industry , Spark Capital Research

Market share (%)

Source: Industry , Spark Capital Research

Rise of the oils - Globally

What led to rise of hair oils on a global platform

Since CY2010 hair care markets in Western

Ever since prominence of Asia Pacific and

Saloon treatment alternate to price

Conditioners (oils included) recorded the strongest

Brands as Mythic oil from LOreal professionnel,

Hair oils fast replacing the serums, as oils come with

Innovation in line with emerging region

Garniers Olia oil

Dove hair oil

Source: Industry , Spark Capital Research

Source: Industry sources, Spark Capital research

India - Hair care significance in Beauty and Personal care(BPC)

Source: Industry data , Spark Capital Research

Source: Industry data , Spark Capital Research

Indian Hair care market leader commands 17% share (CY13)

Bath & Shower

high number of sub

Source: Industry data , Spark Capital Research

Hair oils continue to be the dominant force in Indian hair care

Consolidated hair care segment grew ~20% CAGR from CY10-13.

Coconut hair Oil

Shampoo Perfumed Oil Coconut Oil Conditioner

Source: Industry data , Spark Capital Research

Source: Industry data , Spark Capital Research

Rural expansion in hair care is limited and presents a great opportunity

Coconut hair Oil Value added

Source: Industry data , Spark Capital Research

Coconut hair Oil Value added

Source: Industry data , Spark Capital Research

Other hair oil

Cooling hair Oil

Coconut hair Oil

Amla hair Oil

Cooling hair Oil Other hair oil

Source: Industry data , Spark Capital Research

Source: Industry data , Spark Capital Research

Strong market leadership across the four categories.

Coconut Hair Oil(CHO)

Parachute & Nihar

Light Hair Oil(LHO)

Bajaj Almond Oil