The Hindu Business Line : `India, a challenging market for global perfume brands'

INDIA and CHINA are two of the most challenging markets for the global perfume industry to crack open on account of regulations, tax burden and inadequate retail network.

According to Mr Olivier Desmaison, Export Manager, Inter Parfums, the Indian market has proved challenging for a number of reasons. The company has been retailing its fragrances in India since 1997.

But the retail business was not developed enough to enable international brands to make their presence felt here and supply the product to the Indian market. Though the situation has improved since, with key retailers upgrading the retail environment, making inroads into the Indian market remains difficult.

The other deterrent to entry was the taxation structure of the Indian market, which raised costs by about 100 per cent. However, most international perfumers are offering fragrances at somewhat lower rates than in the European Union, as their activities in India are in keeping with a long-term business perspective. Mr Desmaison was in town to promote the launch of Burberry Brit, a fragrance for women.

Mr Desmaison said the tax structure had also prevented the company from "applying proper marketing strategies". However, the need to make its presence felt here, and building on its existing `brand exposure' was a strategic decision. So, while the entry was costly, and expensive investments had to be made, the company was entering more or less virgin territory with enormous potential.

These investments were likely to prove rewarding in the long-term, because the average Indian consumer today expected the same assortment of goodies available in the international market.

He added that despite absorbing the costs, the Indian operations were breaking even, pointing to the brand's popularity. Burberry's fragrances were equally popular among men and women in India, while globally women bought 70 per cent of the fragrances.

Regarding the upgradation of customers in India to premium brands, 15-20 per cent of the costs were accounted for by the training of sales personnel, who are key in convincing consumers to upgrade.

According to Mr Hemansu Kotecha of Baccarose, from 1997 to 2003, sales have grown 30 per cent year-on-year, the performance improving mainly on the back of a strong economy and higher disposable incomes among the middle class and the growth of the retail sector.

China is a similar market. However, according to Mr Desmaison, a long registration process and high tax burden have slowed the entry of many brands. Perfumers are hoping that taxation levels in India and China will slide to reasonable levels.

Interestingly, Burberry Brit was launched in six markets, including the US at the end of last year.