Beauty @ Digital

Impact of Digital on Beauty and Hygiene

12 February, 2016
Executive Summary

Online: Rise of the 2nd India

650M people online by 2020; rural, women, mobile to be growth drivers

Beauty & Hygiene: The future is digital

B&H to be ~$17Bn (2020); 2/3rd sales digitally influenced; 20% sold online

Digital households: Leading the way

Digital households spend 2x vs non-digital; Emerging category penetration 2-3x

Digital Influence: On the rise

Leverage digital differentially to accelerate growth

Attention! Disruption ahead

Established business models are being disrupted. FMCGs yet to tap digital full
potential

The time is now, get ready for a long ride

Plot your digital transformation journey – what are your no-regret moves
India is moving online…
200M+
Women
BY 2020, INDIA WILL ADD ~300M NEW
INTERNET USERS = POPULATION OF USA

200M+
Screenagers

250M+
Rural Users

650M
90%+
On mobile
~350M

40%
transacting
online
2015 2020
Source: Adding to Cart (Bain-Google Study, 2015)
with consumers spending more time on internet

50%
online at least once a day1

1.5x
time spent on smartphones vs. TV2

1/4th
online while watching TV

Note: 1Refers to total surveyed population, N = 5000 – Consumer Barometer 2015; 2N = 4000 smartphone users - Ercisson Consumer labs survey
Source: Consumer Barometer 2015
 FMCG expected to witness high Digital Impact

1/3rd 8-10%
($35Bn) FMCG spends
FMCG sales
to be digitally
to move online*
influenced

* By 2020. Revised upwards from the previous estimate

Source: Adding to Cart (Bain-Google Study, 2015); Bain analysis
with Beauty & Hygiene to be doubly impacted

CAGR
2/3rd
10% ($11Bn) B&H spends to be
digitally influenced

20%
~$17Bn ($3Bn) B&H sales
to move online
~$10Bn

2015 2020 10%

(130M) Indians to buy
B&H online
Source: Bain analysis
Digital households are 2x more valuable for B&H

Spend more on Are early adopters of

Established categories Emerging2 categories

2x 2-3x
Spend vs Penetration vs
Non digital Households1 Non Digital Households

Note: 1Total spend per digital HH on a basket of 20 FMCG categories vs Non digital HH; 2Face wash, Hand wash, Deo specific examples
Source: IMRB Kantar Worldpanel 2015; Bain Analysis
Rising digital influence evident in high share of searches
3rd largest in shopping searches and growing the fastest

Share of shopping searches (2015)

Apparel and
accessories
Mobile Beauty and
24% phones personal
Consumer
care
17% electronics
14%
10%

Growth
rate
28% 7% 33% 25%

Source: Google Search data from Jan-Dec 2015. Growth rates are for growth in search volumes in Oct-Dec 2015 over 2014
And rising demand for beauty video content

5X DIY & 95%

increase in YouTube of global YouTube
viewership, Easy/Quick content owned by
videos most popular
10x
increase in
on YT
Beauty creators, not
vernacular content1 brands

Note: 1 Increase in viewership over 2 years (2015 over 2013)

Source: YouTube viewership data from Jan-Dec 2015; Beauty on YouTube 2015 (YouTube Pixability study)
The consumer journey is increasingly moving online

Hair Care

PLANNING THE
89% 93%
PURCHASE

1 out of 4 2 out of 3

RESEARCHING
ONLINE
25% 64%
1 out of 8 1 out of 2

BUYING ONLINE
3% 33%

Source: Consumer Barometer 2015

With category-specific nuances
Share of B&H searches
Branded Share Top Searches
(2015)1

Hair Care 41% 1/6 hairstyles

hair loss

24% 2/5 fairness

Skin Care
skin care

19% 2/3 bridal makeup

Makeup
eye makeup

Male shaving styles

12% 2/5 hair removal
Grooming

Note: 1 3% oral care and 2% feminine hygiene

Source: Google Search data from Jan-Dec 2015
Digital can be differentially leveraged to unlock growth

High
Use digital to …
Drive adoption Drive Premiumization
Brands/ products Searches

Skin Cream Shampoo

Deos Shaving Facewash
Color
Cosmetics Hair Oil

Depilatory Hair Color Sanitary Toothpaste

(Creme) products
Toilet
Soaps
Talcum
Powder
Mouthwash Handwash
Educate Maintain Saliency
Low High
Penetration

Note: Positions within a specific quadrant are representative

Source: IMRB Kantar Worldpanel 2015; Bain Analysis
Online purchase becoming important for both regular
and premium categories

Regular B&H Premium B&H

categories categories

~65% women; 80%+ women between

Who 75% under 35 22-35 years

>50% of bill volume, ~4x ABV

How ~25% of average basket of Regular B&H
much value (ABV)

Personal Wash Cosmetics

What Shampoo Fragrances
Oral Care Skin Care

Convenience Information
Deals Assortment
Why Assortment Genuine

Source: Based on insights shared by an online grocery retailer and a beauty ecommerce player
Digital is disrupting established ways of doing business

Brand building Seamless integration Using data

by co-creating on digital of online and offline to power growth

Joint NPD and promotion

with vloggers
Discovering new ways to Comprehensive data
connect collection and application
5 months from concept to
launch

High quality, personalized

Building trust, solving for Digital for marketing,
shopping experience –
‘touch and feel’ via online inventory, payment
offline and online

Note: Nyx – US based cosmetics brand; Sephora – French based cosmetics retailer; Jahwa – China based skin care co
Indian FMCGs are gearing up to address this fast–
paced change

E-COMMERCE SALIENCE: ~3% DIGITAL SPEND: UP BY ~2X

Salience of online1 Spend on digital (% of total ATL1)

~6-8%

For lead
categories such
as makeup

~8-10%

~2-3%
~1-2% ~5%

2014 2015 Adding to Cart 2015

Note: 1Illustrative, data for sample set of leading CPG Cos in India with material presence in Beauty and Hygiene
And looking for solutions to address concerns

DIGITAL ROI SHOPPER EXPERIENCE THE DIGITAL ORG

“The biggest problem with
Digital spend is that there are
no ways to measure its
effectiveness.”
BU Head, leading FMCG
“Beauty categories pose the
limitation of touching and
feeling the products before any
purchase is made.”
CEO, leading Personal Care FMCG
“Currently, Digital is synonymous
with E-Commerce. CPGs should be
thinking about Digital more
expansively”
ED – Personal Care , leading FMCG

Consumer Insights
Ad Effectiveness Tests educating user-
Fulfilment
customers generated
Sales Impact Tests content

YouTube Brand Lift Brand building

Survey

Source: CPG Co interviews; Bain analysis

FMCGs must plot their digital transformation journey,
begin with no regret moves
Beginner Intermediate Expert
Digital
transformation
journey
Online marketing Integrate online Consumer-led co-
and sales system and offline creation

Real time design

R&D & Supply Online feedback for C2B
upgrades Flexible supply chain
chain

Digital branding Digital store KOL marketing

Marketing and
CRM Online BTL Online communities
Consumer created
brands

Online stores 3P sites Own site Social eCommerce

Channel Portfolio, pricing Exclusive Synchronized Early online release

Inventory Isolated Integrated DCs Store level integration

Source: Bain & Company

 The Bain Brand AcceleratorSM is a proven approach
that can help companies realize digital’s full potential

DELIVER &
Overall STOP AND CHOOSE WHERE DEFINE RE-ALLOCATE
SUSTAIN
approach RETHINK TO FOCUS SUCCESS RESOURCES
CHANGE

Implication Ensure digital Organize

Uncover Wisely choose
for Digital reinforces Budget for around
category’s the digital
brand digital consumers,
digital truths battlefields
strategy not screens

•  Integrate
•  Seamless •  Shift media
digital across
•  Digital’s online and •  Clarity on how spends –
the value
impact based offline digital fits follow your
chain
on actual experiences within the consumer
consumer brand’s •  Invest in new
•  Sources of •  Invest in
behavior strategy capabilities
digital technology/
and
differentiation IT/ Analytics
partnerships

Source: Bain & Company