Lakme Case Study

Topics: Marketing, Cosmetics, Brand Pages: 8 (2557 words) Published: February 28, 2013

High priestess of sacred Indian temple meets English army officer who's unwittingly strayed into holy ground. They fall in love. Her orthodox father vows vengeance... That's the story of Lakmé, a 19th century opera written by Frenchman Leo Delibes, from which Simone Tata borrowed the name Lakmé (French for Lakshmi, the name of the priestess). The current size of the Indian cosmetic market is approximately US$ 600 million. Of this, the fastest growing segment is color cosmetics, accounting for around US$ 60 million of the market. Industry sources estimate a rapid growth rate of 20 percent per annum across different segments of the cosmetics industry reflecting an increasing demand for all kinds of beauty and personal care product. Growth has come mainly from the low and medium-priced categories that account for 90 percent of the cosmetics market in terms of volume.

Even with a 20 percent average growth rate, the per capita consumption of cosmetics is very low in India. Current per capita expenditure on cosmetics is approximately US$ 0.68 cents as compared to US$ 36.65 in other Asian countries. However, with changing lifestyles, higher disposable incomes, increasing advertising, penetration of satellite television, awareness of the western world and growing importance of beauty pageants, there have been significant changes and use of cosmetics is on the rise.

Lakme, a brand originally introduced by the Tata group of India, now bought over by Hindustan Unilever (HUL) of the Unilever group, Tips & Toes, another domestic player, and Revlon dominate the US$ 60 million color cosmetics market. Multinationals, Revlon of the U.S. and L'Oreal's Maybelline has a dominant share of the small premium lipsticks and nail enamels market. Mass-market products account for a major share, while the premium segment accounts only for a mere 9 per cent in lipsticks and 5 per cent in nail enamels. Lipsticks account for nearly a third of the market at US$ 21 million, while the market for nail enamels is estimated at around US$ 23 million. The color cosmetics segment is very competitive and has a high penetration level of 80 percent.

The skin care market in India is estimated at US$ 180 million. Within the last decade, this segment has seen many consumers slowly shift from the mass to the premium end of the market. The penetration rate is high in the skin-care segment as compared to color cosmetics. In the skin-care segment, price and volume played an equal role in value growth. Moisturizing lotions, fairness creams and face cleansers are the popular categories in the skin-care segment and account for approximately 60 percent of the skin-care segment. The major players in this segments are Lakme, Ponds, Fair & Lovely of the HUL group with a 50 percent market share, followed by players such as J.L. Morison that markets the Nivea range of products in India, Godrej and Revlon. Penetration levels of international cosmetics brands in India are still low. Foreign brands currently constitute only 20 percent of the market. A major reason for low penetration of international brands can be attributed to high pricing. These companies initially gained sales on their international brand image, however, repeat purchases were not forthcoming and to retain their sales growth, several foreign companies reformulated price strategies to tap the large Indian middle class. Urban women in the middle and upper income groups in the age range of 23-50 is the target group for international brands, as this group looks for better products and is willing to pay a premium for international quality products. Industry estimates suggest that there are close to 10 million such women in India.

By not following the traditional mode of advertising, Lakme Unilever, adopted different strategy for the product launches The company do not use mass media...
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