Swedish cosmetics firm Oriflame says it has got its strategy right for India, where it sees much potential.
“Crying is for plain women. Pretty women go shopping.” — Oscar Wilde
Shop they will, and only more so, if they also happen to be Indian. Even as economists and policy-makers get a wrinkle or two on their already creased faces worrying about a stalling economy and dwindling purchasing power of the masses, there are companies out there decking themselves up in all finery and putting their best foot forward. Oriflame certainly seems to fall in this category.
The €1.5-billion Swedish cosmetics major that recently celebrated its 45th anniversary in style — it invited 5,000 of its consultants from all over the world to Stockholm last month for the launch of its Demi Moore collection — justifiably feels it is at the right place at the right time.
Available data show it’s not just wishful thinking — for instance, an Assocham study forecasts that the Indian cosmetics market will grow to about Rs 20,000 crore by 2014, from around Rs 10,000 crore currently.
And if one were to consider the fact that India’s per capita consumption of cosmetics and toiletries is 40 times lesser than that of Hong Kong, 18 times lesser than of Japan, 15 times lesser than that of Taiwan, and half of China, there is considerable potential for growth waiting to be tapped. Oriflame’s confidence does not seem misplaced.
But can a company script a success story solely on the basis of buoyant macro tailwinds? In other words, shouldn’t the ‘success’ be more internally wired? Oriflame believes ‘direct-selling’ is its secret sauce.
Says Magnus Brannstrom, CEO, Oriflame: “The direct-selling model is a cash-generating business. Very low investments not only for the company but also for the consultants. In times of trouble, this is very important: We can all live on dreams but there is need for cash as well. And, that is one of the secrets of the direct selling business.”
But does that mean the company is not impacted by the slowdown? Brannstrom is quick to dismiss that suggestion: “We live in the same world as everyone else. And, of course, we are affected. People are not increasing their beauty consumption and may even be decreasing it. But in times of challenges, you have to prepare for the next day and we know that they will change, especially in India. There is no limit to the opportunities.”
As in life, one’s strength can also be his or her weakness. So it is in the case of Oriflame too. The company, which claims to have more than 3.6 million consultants on its roster, is said to have suffered a setback on the growth of its sales force in the last year (2011), according to a Morgan Stanley report. The slowdown is more pronounced in its key markets, such as Russia, Ukraine and Belarus. Though Brannstrom declined to give country-/region-specific sales figures, according to Morgan Stanley, the company derives 90 per cent of its sales from developing markets, with 56 per cent coming from the CIS region alone.
With its top line directly linked to the strength of its sales force, the company is keen on beefing up the number of its foot soldiers.
Says Brannstrom: “For us, right now, the focus is on strengthening the team we have in India, understanding what products we are offering, and at what price point. But it is more important to ensure the direct-selling model is compelling for the Indian population. Of course, we know that in the beginning we cannot be attractive to everyone because India is so big. But we are making sure that we have a compelling offer for the growing middle class.”
Earlier, Niklas Frisk, Vice-President and Head of Oriflame South Asia and Managing Director, Oriflame India, was quoted as saying the company intended to expand its Indian consultants’ base to three lakh, from the current two lakh, by end-2012.
So, is Oriflame just warming up to India? Not quite, says Brannstrom: “We've paid a lot of attention to India. India is so big, it is a continent! There is no doubt that it is also one of the most challenging environments in that the Indian legislation is not easy for a foreigner to understand … it is always not so easy to invest. We took a long time learning the market, and clearly, there have been some ups and downs. But now we have a good team, we make money and we are growing. So I think you'll hear a lot more about us now.”
It is also quite interesting that a company which just turned 45 should focus on anti-ageing products, particularly in the Indian market. Says Branstrom: “The older we get, the younger we want to be. And it is not about being as young as I can. It is about looking and feeling young at every age.”
The company is also said to be betting big on pigmentation and cosmoceuticals, that strange place where the cosmetics industry meets medical. And what about whitening products, the perennial favourite of Indians? Chuckles Branstrom: “I don’t find this strange. I think it is the same everywhere! When I go back to work after the vacation, everyone says ‘Ooh! You look so beautiful. You are so tanned!’ The grass tends to be greener with the neighbour. If I really want to stand out in India, I have to be whiter, and in Sweden, I have to be tanner. It's a symbol of the same thing. But see me as an individual. I am a person. I have my dreams, my aspirations and I'm not the same as everyone else.’’
The correspondent visited Sweden recently at the invitation of Oriflame.