Indian spend on big brands remains low

By Katie Bird

- Last updated on GMT

Related tags: Economics

Despite significant growth in the Indian cosmetics and toiletries
market in recent years, per capita cosmetics consumption still
remains the lowest in Asia, according to the Associated Chambers of
Commerce and Industry of India (ASSOCHAM).

The organization says that per capita expenditure per year on international branded cosmetics products is $0.68 in India, half that of China's $1.5. Although both countries represent significant markets in terms of population size, per capita consumption remains far below the leaders in the Asian market. According to ASSOCHAM analysis Hong Kong has a per capita expenditure of $40, Japan $12, Malaysia and Taiwan $10 and the Philippines $9, all considerably larger than respective figures for China and India. Nevertheless, the industry body predicts that the cosmetics market will grow from from $950m to $1.4bn in the next 2-3 years which would bring India's per capita expenditure up to that of China's. However, even if such growth occurs the country will still lag significantly behind other countries in the region. According to ASSOCHAM's president Mr Venugopal N Dhoot, the reason for the low per capita expenditure is the small proportion of the population that use branded products from international players. He estimated that only a fifth of the population use products from brands such as Unilever and P&G, whereas the vast majority of the population are still using low-cost cosmetics and toiletries. This low penetration of international cosmetics brands can be explained by the large differences in price between imported and domestically produced products. Although India allows the entry of imported cosmetics without any restrictions the tariffs on such goods are particularly high at present, approximately 40 per cent, said the industry body. This results in a large price difference between imported and domestic products - a premium that the majority of the population is unable to pay. A number of cosmetic and toiletry manufacturers have responded by releasing their products in smaller sizes with correspondingly smaller price tags, according to ASSOCHAM, in an attempt to appeal to a wider market. India has been cited as one of the most important emerging markets in the Asian region, with a 12.6 per cent increase in sales revenue in 2006, according to a report from market research company Kline. In addition to market growth, Kline predicted increasing market sophistication as Indian consumers become more influenced by Western tastes. Nevertheless the recent analysis from ASSOCHAM suggests that international players, especially new entrants, will have to be innovative in order to succeed in this price sensitive market.

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