There are very few product categories left where home-bred Indian companies still hold sway. Agreed, the two-wheeler market is dominated by Indian players, but the growing influence of Honda and Suzuki cannot be ignored. Multinational corporations lord over most other segments. One exception is that of hair oil. The entire market is controlled by Indian companies like Marico, Dabur India, Bajaj Consumer Care and Emami. But is it worthwhile? Ask any of them and you will be told that hair oil profits are second to no other fast-moving consumer good.
If the category had slipped off your radar screen, here are some numbers that will surprise you: The hair oil market in the country is worth Rs 3,000 crore, way ahead of the Rs 2,300-crore market for shampoos including anti-dandruff conditioners. And if you thought this was an old-economy product which people stop using once they move up the income chain, look at its annual growth: Around 25 per cent per annum, in spite of the fact that many working women don’t use it as regularly as before.
It is not so that multinational corporations have not tried to enter this market. It is an open secret that Keki Dadiseth, when he was the head of Hindustan Unilever, wanted to buy Marico to get into the hair oil business with a bang. But Harsh Mariwala refused to sell. Hindustan Unilever then launched its own brand of hair oil called Nihar. Ironically, it was subsequently bought by Marico.
So, what has kept multinational hair-care companies from launching hair oil? To begin with, there are strong entry-barriers. One, women are the principle consumers of hair oil across the country. And they are extremely loyal customers. Their habits are extremely difficult to change, any marketer will tell you. What this means is that there is no guarantee, whatsoever, that a new brand may succeed even if you pump in hundreds of crores into promoting it.
Two, there are well-entrenched Indian brands which have built their equity over decades. The hair oil market has four categories: Coconut, amla, light and cool. Each category, it so happens, has a different dominant brand. In the coconut category, the largest segment of the hair oil market, Marico’s Parachute is by far the leader. With its other brand, Nihar, its share of the market is close to 50 per cent. Dabur has now made a foray into this segment with Vatika.
In amla hair oil, Dabur rules the roost with its Dabur Amla which has a market share of 72 per cent. Amongst light and fragrant hair oils, Bajaj Almond Drops leads the pack. And in cool hair oil, Kolkata-based Emami sits on half the market with Himani Navratna. Emami had acquired the brand was some time in the late 1970s and has positioned it as not just a hair oil but a cure for sleeplessness, headache and tension. Unlike the other three, men are the primary users in this category.
In addition, there are dozens of local brands in each category. But these are essentially price-warriors where the producers thrive on excise evasion. But these cannot hope to become national brands. In this scenario, it is an uphill task for any company, local or multinational, to build a new hair oil brand from scratch. The only option is to buy a national brand and then build on it.
For a multinational corporation, this poses another issue. Most of them — Unilever, Procter & Gamble, L’Oreal and Garnier — work on a global product strategy. They work on products which can be sold across the world and not just in one or two geographies. The reason is very simple. Unless there is scale to leverage, it is not worth the effort to spend large sums of money on product and brand development. Multinational corporations are increasingly looking at common brands across continents for obvious synergies.
Hair oil clearly does not fit the bill. It is used largely in the Indian subcontinent and not even in the developing markets of Africa. It is only in India that people feel that oil nourishes and strengthens hair, whereas shampoo only cleans it. This perhaps is the reason why Hindustan Unilever decided to exit the hair oil market and sold Nihar to Marico. It even extended the Sunsilk brand to light hair oil but it all came to nought.
One new hair care segment that has recently opened up for multinationals is gel for men. From scratch a few years ago, this market has grown to about Rs 150 crore — five per cent of the hair oil market. Indian companies have been quick to join the bandwagon. Marico has a gel under its Parachute brand and Dabur is observing the market closely.
While multinational corporations have to be content with watching all the action (growth, brand wars etc) from the sidelines, there is a huge upside waiting for Indian hair oil companies to tap. At the moment, as much as 50 per cent of the hair oil market is unbranded. Housewives, especially in rural markets, use coconut oil (in the South and West) and mustard oil (the North and East) bought for cooking on their hair as well. With the right value proposition (price, position, package etc), these consumers can be converted to brands. The odds are stacked in favour of Indian companies.
