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FAIRNESS CREAM

CONTENTS

SECTION I PRODUCT CHARACTERISTICS SECTION II PRODUCT APPLICATIONS SECTION III INDIAN MANUFACTURERS SECTION IV IMPORT/EXPORT LEVEL SECTION V PRICE TRENDS SECTION VI INDIAN DEMAND SECTION VII BROAD OUTLINE OF MANUFACTURING PROCESS SECTION VIII RAW MATERIAL REQUIREMENTS, UTILITY

AND AVAILABILITY SECTION IX GLOBAL SCENARIO SECTION X DISCUSSIONS ON ECONOMIC CAPACITY,

PROJECT COST AND PROFITABILITY PROJECTIONS SECTION XI SWOT ANALYSIS SECTION XII FACTORS INFLUENCING THE POSITION FOR

A NEW INDUSTRY AND RECOMMENDATIONS

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SECTION I

PRODUCT CHARACTERISTICS

1.1. General details Basically creams and lotions are emulsions which are relatively stable mixtures of oils and fats and water. These are generally made by mixing oil soluble and water soluble substances together in the presence of an emulsifying agent The manufacture of creams and lotions dates back to the earliest times when these were prepared by digesting aromatic gum, resins, roots, flowers etc. with fats and oils. Though most of these fairness products are based on one simple formula of controlling dispersion of Melanin (the pigment that controls the skin colour), different companies are adding a number of other additives to position themselves differently from others and it is this positioning that makes the difference. 1.2. Important Categories of Creams Cosmetics creams are marketed and sold on the basis of their function which is generally advertised on the packaging which contains them. Thus consumers have come to learn what type of emulsion they can expect from a packaging marked, “Cold cream” or “Night cream”. However, this is not a particularly precise means of classification, since there are number of variations in appearance, texture, subjective feel, ease of spreading and speed of rubbing and there is a considerable amount of overlapping.

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The consumer, therefore, is likely to make his or her own judgement on the subjective features, using the manufacturer’s functional labels as a guide to end use and quality. The companies generally sell their fairness products under the categories of sunscreen lotions, vanishing creams, cold creams etc. Category

* Cold cream • Cleansing creams • All purpose creams • Emollient creams • Skin Protective and hand creams * Vanishing creams * Foundation creams --------------------------------------------------- * Liquid creams * Sunscreen lotions Usage of Talcum powder for fairness purposes was prevalent in earlier days

��Low end ��Middle end ��High end

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Examples of brand names in different category Low end Fair and Lovely

Godrej ‘Fair Glow’ and ‘Fairever Freschia Vicco Turmeric

Middle end Samara Fairness cream Lotus Fairness gel Avon VIP Fairness cream Oriflame Natural Northern Light Biotique Coconut Milk Oriflame Love A ‘Fair

High End L’Oreal Plenitude White Perfect range Lancome’s Blanc Cristal range YSL’s Blanc Absolu Serum Clinique’s Active White Line Elizabeth Arden’s Visible Whitening Pure Intensive capsules Estee Lauder’s White Light.

1.3. Characteristics Creams are for the most part solid or liquid emulsions. If they set as solid, they are emulsified in the molten state by heating the ingredients to liquify them and permit them to solidify after being filled into the packages. These emulsions are either oil in water or water in oil type though the former type of emulsion predominates in the cream field. Only in a limited number of cases creams are not emulsions but mixtures closely resembling low melting ointment bases. These consist mostly of petrolactum waxes and fats and contain a negligible or a small quantity of water. The introduction of numerous new emulsification aids and cream bases has made possible in the recent years to manufacture a great variety of creams than was formerly possible.

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Characteristics of skin creams Functional Property Physico chemical Property Subjective Property

Cleansing creams Cold creams Massage creams Nigh creams

Medium to high oil content Oil in water or water in oil Low slip point oil phase Neutral pH May contain surfactants of improved penetration and suspension properties

Oily Difficult to “rub in” May be stiff Also popular as lotions

Moisturising creams Foundation creams Vanishing creams

Low oil content Usually oil in water Low slip point oil phase Natural to slightly acidic PH May contain emollients and special moisturising ingredients

Easily spreadable and “rub in” quickly Available as creams or lotions

Hand and body protective Low to medium oil content Usually oil in water Medium slip point oil phase May have slightly alkaline or acidic PH May contain protective factors especially silicones and lanolin

Easily spreadable but do not “rub in” with the ease of vanishing creams

All purpose creams Medium oil content Oil in water or water in oil

Very often slightly oily but should be easy to spread

Packaging: Stand-up tube packs have gold printing and a leaflet inside the pack that reveals information to the discerning user.

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SECTION II

PRODUCT APPLICATION Fairness cream gives fairness with an even tone, while clearing dark spots, discoloured and pigmented skin. The Fairness cream is supposed not only to impart fairness, but also remove blemishes from the skin. Its natural action involves reduction of the black melanin in the skin without changing the skin’s natural balance. No fairness cream can make the individual fairer than the skin with which the person was born. What they can do is to reverse the damage done by unprotected long exposure to the sun and protect the person against the harsh sunrays. When used regularly, it gently but effectively lightens and improves skin tone.

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SECTION III

INDIAN MANUFACTURERS 3.1. Important Fairness cream producers There are number of Fairness cream producers in India both in the organised and unorganised sector. 3.2. Important players and their brand names

Important Players

Brand name Product type

Hindustan Lever Ltd. (HLL is the only listed company that has a visible presence across all segments.) Ponds India Ltd GST Road, Chromepet, Chennai 600 044. Lakme 1st Floor, Army Navy Building M.G. Road, Mumbai-400 001.

Fair & Lovely Ponds Lakme

Cream, soap Fairness cream, Ponds cold cream, Cream, Lotion SunScreen lotion, Lakme sunscreen cream, Cream, Lotion

Emami Limited 6-A, R.N. Mukherjee Road Calcutta-700 001

Naturally Fair, Vicco Turmeric

Cream

Cavinkare Limited Formerly Beauty Cosmetics Limited, 130(New No.237), Peters Road, Chennai-600 086

Fairever

Cream

Paras Freschia

Cream

Godrej Consumer Products Ltd Pirojshanagar, Eastern Express Highway Vikhroli (W), Mumbai-400 079

Fair Glow

Soap, Cream

Procter & Gamble Hygiene and Health Care Ltd.,

Clearasil face cream

Dabur

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Dr Morepen J.L.Morison (India).

SECTION IV

IMPORT/EXPORT LEVEL 4.1. Imports Fairness cream is imported in negligible quantity 4.2. Exports Sample of individual Exports of Fairness creams (In Chennai port) Period 2002 Name of the exporters

Quantity Value in Rs. Country Date

Cavinkare Private Limited 520 BOX 1873381.27 Port Kelang Feb 2002 Cavinkare Private Limited 10 BOX 3816.00 Port Kelang Feb 2002 Cavinkare Private Limited 25 CTN 162029.45 Dubai Feb 2002 Cavinkare Private Limited 50 CTN 287104.81 Dubai Feb 2002 Cavinkare Private Limited 75 CTN 460504.74 Dubai Feb 2002 Cavinkare Private Limited 730 BOX 2660987.50 Port Kelang Feb 2002 Vale Exports (P) Ltd 1440 PCS 12342.40 Colombo APR 2002 Vale Exports (P) Ltd 2160 PCS 18513.60 Colombo APR 2002 Vale Exports (P) Ltd 576 PCS 13807.50 Spain APR 2002 Vale Exports (P) Ltd 720 PCS 32847.37 Spain APR 2002 Saree Museum 12 PCS 406.55 Johannesburg MAY 2002 Saree Museum 6 PCS 145.20 Johannesburg MAY 2002 Cavinkare Private Limited 300 BOX 1032290.75 Kuala Lumpur MAY 2002 Cavinkare Private Limited 1800 CTN 2631410.00 Port Kelang MAY 2002 Cavinkare Private Limited 30 CTN 8775.00 Yangon MAY 2002 Cavinkare Private Limited 225 CTN 698994.02 Yangon MAY 2002 Cavinkare Private Limited 150 CTN 517122.84 Yangon MAY 2002 Cavinkare Private Limited 270 CTN 519522.02 Yangon MAY 2002 Afsan Exports, 160 PCS 11679.84 Singapore MAY 2002 Cavinkare Private Limited 50 CTN 139083.75 Colombo MAY 2002 Cavinkare Private Limited 100 CTN 285298.09 Colombo MAY 2002

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SECTION V

PRICE TRENDS Basic price Rs.28/- for 25 gms Rs.49/- for 50 gms Rs.5 for 9 ml sachet Generally, the sachet packs of fairness creams, are retailed at a lower price per gram than larger pack sizes. It is claimed by the companies that savings in packaging costs are passed on to the users. The size and price strategy is a win-win situation for consumers and the companies. It increases volumes while maintaining margins and at the same time, provides the consumer the flexibility of lower purchase cost and the opportunity to try new products.

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SECTION VI

INDIAN DEMAND 6.1. General details Turnover of Indian fairness cream market Around Rs.710 crores Growth rate in demand for Fairness cream Around 10% per annum 6.2. Men/Women classification of consumers

6.3. `Number of players Number of fairness cream brands in the National market Around 7

Men32%

Women68%

According to industry estimates, growth rate in the fairness cream market slowed down to three percent in 2001, against 8 to 10 percent earlier. This probably explains why players are turning aggressive in pushing their respective brands. Source: Business Line dated 10.7.2002

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Regional market Many more in the regional market 6.4. Fairness Cream market Market Size of Indian cosmetic and toiletries industry Around Rs.3000 crores Market size of skin care segment Around Rs.1200 crores Market size of Fairness creams Around Rs.710 crores Market share of skin care segment Around 60% Specialty creams such as sunscreen lotions, moisturisers and toners, cleansing lotions, under-eye dark circle removing creams and cold creams contribute the rest. Market segmentation for fairness creams Sales value (Rs. in crore) Growth, %

Aug’2000 to

July 2001 Aug;1999 to July’2000

All India 711.33 619.82 14.76 North Zone 185.56 164.32 12.93 East Zone 129.02 106.02 22.54 West Zone 163.73 145.83 12.27 South Zone 232.13 203.65 13.98 Metro 135.30 118.50 14.17 6.5. Market share of major players Company

Brand Market share in %

Hindustan lever Ltd. Fair and Lovely 53 Cavinkare Ltd. Fair Ever 12 Godrej Soaps Godrej FairGlow 3.4 Emami Gold Turmeric and

Naturally Fair 1 to 2

Revlon Fair & Glow 1 to 2

Others Niveas Torrel’s Pond’s Some other marginal players

Visage Freya Fairness Dream Fairness cream

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6.6. Growth trend Be it a fairness cream or a soap or a tablet, every product in this segment is witnessing growth larger than the overall personal care product category. The bottom-line is that Brands are products that are distinguished from others. Brands constantly evolve. Successful brand proprietors manage to anticipate market shifts and reposition and develop their brands accordingly. Cosmetic companies are growing at a faster pace as indicated below. 2001 (In.Rs.crore)

2000 (In.Rs.crore) Growth (%)

HLL (personal products) 2212.08 1763.87 25.41 J.L. Morison 50.63 41.00 23.49 Emami 210.09 148.1 41.86 Fem Care Pharma 34.05 27.59 23.41 Modicare 180 130 38.46 Amway 500 250 100 Growth trends In percentage Value growth Volume growth Price growth

Skin creams 11 6 5 Lipsticks 13 3 9 Source: ORG-MARG 6.7. Growth Prospects – Highlights of ORG Marg study An ORG Marg study reveals that while most FMCG products were affected by the general slowdown, the cosmetic segment witnessed relatively good growth in volume and value in 2001.

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Not only have more people started using cosmetics, they are also willing to pay more to look and feel good. Skin care segment The penetration rate is higher in the skin care segment compared to lipsticks. In the skin care segment, price and volume play an equal role in value growth. Lipsticks segment: While volume growth has remained low, at 3%, in the case of lipsticks, much of the value growth has come from price rises. Change pattern There is constant upgradation from mass to premium products. Though mass products still constitute a major portion of the cosmetic market, a certain segment is obviously ready to upgrade to the next category, as disposable incomes rise. Increased media exposure, the willingness to spend more on personal care, consciousness about looks and advertisements and promotions targeting various consumer segments are some reasons for these trends in consumption and penetration. Cosmetics are still seen as elitist products and may be the last thing on an average Indian consumer’s mind. Though the low penetration levels for most cosmetic products suggest much potential, the market for cosmetic products may remain a niche market, accessed by a small proportion of the consumers. Despite the tall claims, the actual growth prospects would be limited to this extent

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SECTION VII

BROAD OUTLINE OF MANUFACTURING PROCESS 7.1. General details Emulsions in the form of creams and lotions form a very important part of the cosmetics market and much time is spent in the development of new raw materials by both suppliers and cosmetic companies. The raw materials include water, petroleum oil derivatives, oils, fats and waxes as derivatives, humectants and emulsifying agents. Oils and fats and waxes and derivatives therefrom comprise an essential portion of a cream.. Glyceride oils are derived from vegetable oils and mineral oils and hydrocarbons are derived from petroleum oil. Fats like cocoa butter or stearin are also glycerides containing fatty acids of higher molecular weight. They also exhibit chemical properties similar to vegetable oils. Paraffin waxes and petroleum jellies also have higher molecular weight. They also exhibit chemical properties similar to vegetable oils. Paraffin waxes and petroleum jellies also are higher homologs of mineral oil and hence they also act in the same way chemically as the mineral oil do. Waxes used in creams and other cosmetics include bees wax, carnauba wax, candelilla wax, montan wax, ceresin, ozokerite, Japan wax and spermaceti, out of which beeswax and spermaceti are of animal origin and cariauba, candelglla and Japan wax are of vegetable origin.. Out of these waxes, bees wax, ceresin and spermaceti are the most important for cosmetics.

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7.3. Manufacturing process of creams When a borax solution is mixed with molten beeswax, the sodium salts of the waxy fatty acid will be formed at the oil water interphase. By using less than the theoretical quantity of borax this gives a more stable textured cream. Usually bees wax to the extent of 5-6% by weight is used. The amount of borax neutralised bees wax in a cold cream can vary from 5 to 16%. With lower percentages softer creams are produced which can be stiffened if required by incorporating other waxes. For the preparation of creams, the oils, fats and waxes are melted to a clear solution. Borax is slowly added under stirring, the temperature being maintained at 68 to 72 deg. The selected perfume is added while cooling at 45 to 50 deg. and the mass is well stirred. The cream is poured at 42 deg.C. Sometimes, the cream is stirred until cold, allowed to set for a day, perfumed, passed through an ointment mill and packed warm. Skin nourising creams Night or massage creams are designated to be left on the skin for several hours or to remain mobile on the skin even after vigorous rubbing. These are therefore composed with a substantial oil phase which will spread easily without disappearing but also without rubbing off onto clothing or bed linen in use. Such creams generally have a high oil content and are water in oil type having a soft solid or viscous liquid characteristics. Massage has a valuable part to play in skin that vigorous rubbing of the skin helps to prevent the build up of excessive numbers of dead surface cells and keeps the epidermal blood supply in good condition. The term moisturising has also been applied to water in oil creams of this type. With the advances in scientific research on skin care which have taken place during the recent years. The concept of moisturising has broadened beyond the simple occlusive skin barrier principle, many modern moisturising creams are comparatively light and easy to rub as compared with those of the overnight and massage type, although there still remains a market for the moisturising creams. Besides the constituents which can be shown to have a moisturising effect or a UV filtering effect, claims have been made, from time to time that materials have been discovered which have a beneficial effect on the skin and these often find their way into night or massage creams. Prominent among these are ‘natural’ products particularly vitamins.

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Other predominant oil phase constituents in massage and night creams are petrolactum, mineral oil, lanolin and low melting point waxes such as beeswax and low melting point miner waxes (ceresins and paraffin). Esters such as isopropyl palmitate, isopropyl myristate and purcellin oil are reserved for higher ‘vanishing cream’ types of product. 7.4. Source of technology * National Research Development Corporation,

(A Government of India Enterprise), Anusandhan Vikas, 20-22, Zamroodpur Community Centre, Zamrudpur, Kailash Colony Extn., New Delhi- 110 048.

Plant and machinery equipment Blender and mixer ACE Pack Machines

23, V.N. Industrial Estate Bharathi Colony, Near Athiparasakthi Temple Peelamedu, Coimbatore-641 004 Chemfilt 1304/A, GIDC V.U. Nagar-388 120, Gujarat

Packaging machinery A S & T India Ltd. C-30, Neeti Bagh, Khel Gaon Marg, New Delhi-110 049

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SECTION VIII

RAW MATERIAL REQUIREMENTS, UTILITY AND AVAILABILITY

Raw material requirement Basis : 200 kgs per day of Fairness cream (Moisturising lotion) Utility Installed power: 40 H.P. 8.1.Formulations for night and massage creams Skin food cream In percent Liquid paraffin wax 51.8 Lanolin 4 Beeswax 6.2 Spermaceti 4 Borax 1 Water 33 Perfume Small quantity Biological cream Liquid paraffin wax 25 Lanolin 25 Beeswax 7.5 Spermaceti 6 Borax 0.5 Water 36 Perfume Small quantity Massage cream Liquid paraffin wax 15 Lanolin 4

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Beeswax 30 Spermaceti 30 Borax 6 Water 15 Perfume Small quantity Night cream In parts Stearic acid 40 Cetyl alcohol 123 Mineral oil 281 Lanolin 126 Olive oil 45 Triethanolamine 110 Spermaceti 64 Water 400 Preservative 10 Perfume Small quantity First water is heated to about 70 deg.C, then triethanolamine is added to it in a vessel. Then in another vessel olive oil, lanolin, mineral oil, stearic acid, spermaceti and cetyl alcohol are heated to 70 deg.C. Then mix both mixtures in a vessel with continuous stirring till temperature reduces to 50 deg.C. Then add preservative and perfume and stir for complete mixing. 8.2. Moisturising creams and lotions In parts Lanolin 5 Acetylated lanolin 5 Mineral oil 80 Stearic acid 30 Glycerolmonostearate (self emulsifying type) 30 Iso propyl palmitate 20 Glycerin 35 Propylene glycol 25 Triethanolamine 2 Water (softened or distilled) 768 1000 Perfume 0.5% Methyl parahydroxybenzoate 0.1% Propyl parahydroxybenzoate 0.05%

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Cream Cetyl alcohol 20 Glyceryl monostearate 75 Mineral oil 75 Isopropyl myristate 10 Polyethylene glycol 400 monostearate 110 Lanolin 15 Sodium lauryl sulphate 2 Glycerin 25 Propylene glycol 50 Sorbitol (70%, solution) 15 Water 603 1000 Perfume 0.5% Methyl parahydroxybenzoate 0.15% Propyl parahydroxybenzoate 0.05% Lotion Isopropyl palmitate 75 Propylene glycol monostearate 60 Polyethylene glycol 50 Triethanolamine 5 Glycerin 25 Propylene glycol 25 Water (softened or distilled) 760 1000 Perfume 0.3% Methyl parahydroxybenzoate 0.15% Propyl parahydroxybenzoate 0.05% Lotion for hands, face or body Mineral oil 100 Woolwax alcohols 2 Cetyl alcohol 2 Stearic acid 20 Sorbitan sesquioleate 2 Glycerin 7.5 Sorbitol (70% solution) 2.5 Propylene glycol 5 Triethanolamine 5

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Water (softened or distilled) 854 1000 Perfume 0.5% Methyl parahydroxybenzoate 0.15% Propyl parahydroxybenzoate 0.05% 8.3. Vanishing creams Vanishing creams are oil in water type emulsions of stearic acid in water containing soap. The basic ingredients are stearic acid, water, alkalies (caustic soda, caustic potash, borax, soda ash, potash, triethanolamine etc.) and glycerine. A part of stearic acid is taken and mixed with alkali to saponify and the soap obtained is emulsified with the bulk of the acid. Stearic acid forms 15 to 25% of the mixture and 15 to 35% of it is saponified. Stearic acid 23.5 Potassium hydroxide 1 Glycerine 5.5 Diglyed stearate 6 Water 64 Process of manufacturing First stearic acid is melted and heated to about 85 deg.C, then an aqueous solution is prepared containing the alkali and glycerine, it is also heated to 85 deg.C. Then both stearic acid and aqueous solution are slowly mixed with continous stirring. A curdy, jelly like viscous mass is obtained which is turned over from time to time until the crust formation ceases. The cream is left overnight and then perfume is mixed with that and homogenised. The product is filled into containers. The final product acquiries the required body a few days after packing. Vanishing cream (with lanolin) Stearic acid 188 Glycerin 27 Lanolin 20 Triethanolamine 10 Water 800 Preservative 10 Perfume Small quantity Process of manufacturing

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Stearic acid and lanolin are melted together and heated to 176 deg.F. Then prepare a mixture of water, glycerine and triethanolamine and heated to 176 deg.F. Then this and first mixture are mixed together with constant stirring upto 1 hour. Add preservative when temperature reduces to 140 deg.F and then add perfume when temperature reduces to 104 deg.F. Formulations of vanishing foundation creams Formulation 1 Glycerol 10 Stearic acid 25 Potassium hydroxide 1 Perfume 0.05 Water 63.5 Formulation 2 Glycerol 9.5 Stearic acid 22.5 Mineral oil 1.9 Lanolin 1.1 Sodium hydroxide 0.5 Potassium hydroxide 0.5 Perfume 1 Water 63 Formulation 3 Glycerol 5 Lanolin 5 Mineral oil 5 Cetyl alcohol 0.5 Stearic acid 20 Triethanolamine 2 Perfume 0.5 Water 62 Formulation 4 Glycerol 8.5 Cetyl alcohol 0.5

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Sodium hydroxy 0.4 Stearic acid 19.5 Triethanolamine 1.2 Water 69.9 Formulation 5 Glycerol 6 Lanolin 4 Stearic acid 15 Potassium hydroxide 2 Water 73 8.3. Raw material availability

The raw material are required in small quantity and therefore can be procured from trading houses. There is no constraint in the availability of raw material

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SECTION IX

GLOBAL SCENARIO

Global cosmetic market 4.3 billion US$ Pattern of market (in Percentage) Active ingredients 6.7 Speciality additives 16.1 Processing aids 16.2 Flavours and fragrances 20.4 Cleansers and foamers 20.3 Emollients and moisturises 20.3 Global trend The pace of change in cosmetics is brisk, embracing the performance of formulations as well as the packaging, advertising and pricing of the products. During the past decade, an unprecedented explosion of cosmetics based on newly discovered or rediscovered ingredients filled the market Innovation is certain to continue. Skin aging starts at about 20 years, the largest part of human life is aging, which would need to increased demand for fairness cream.

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SECTION X

DISCUSSIONS ON ECONOMIC CAPACITY, PROJECT COST AND PROFITABILITY PROJECTIONS

Economic capacity 200 kgm per day Project cost Rs.73 lakhs Assessment of project cost 1. Land S.No. Description Cost

Rs.in lakhs 1.1

Cost of land of 0.5 acre at Rs.5.5 per acre 2.75

1.2 Cost of levelling, laying internal roads/fencing and compound wall

0.28

Subtotal 3.03 2. Building S.No. Description Cost

Rs.in lakhs 2.1 Factory building of area 100 sq.m. at Rs.3200/sq.m. 3.2 2.2 Non-factory building of area 20 sq.m.at Rs.4500/sq.m. 0.9 Subtotal 4.1 3. Cost of Plant & Machinery S.No. Description Cost

Rs.in lakhs 3.1 Cost of basic plant and machinery 10.00 3.2 Instrumentation and control 0.75 3.3 Pipelines and valves 1.00 3.4 Structurals for erection 0.50

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Subtotal 12.25 3.5 Octroi, excise duty, sales tax, etc.at 12%� 1.47 3.6 Packaging and insurance charges (2%) 0.25 3.7 Transportation charges (2%) 0.25 3.8 Machinery stores and spares (2%) 0.25 3.9 Foundation charges (2%) 0.25 3.10 Installation charges (2%) 0.25 Total cost of plant and Machinery 14.95 4. Technical know-how fees Rs.1.5 lakhs 5. Miscellaneous fixed assets S.No. Description Cost

Rs.in lakhs 5.1 Electrification 0.6 5.2. Steam boiler and auxillaries - 5.3. Water storage tank, borewell etc. 0.6 5.4. Fuel storage tank - 5.5. Laboratory equipment 0.4 5.6. Office machinery & equipment 0.6 5.7. Material handling equipment, packaging machinery,

weigh balance, etc. 0.4

5.8. Diesel generator - 5.9. Effluent treatment 0.6 Total 3.2 6. Preliminary & Pre-operative expenses: S.No. Description Cost

Rs.in lakhs 6.1. Preliminary expenses 0.2 6.2. Pre-operative expenses:- 6.2.1 Establishment 0.2 6.2.2 Rent rates and taxes 0.2 6.2.3 Travelling expenses 0.2 6.2.4 Interest and commitment charges on borrowings 1.2 6.2.5 Insurance during construction period 0.2 6.2.6 Other preoperative expenses and deposits 6.2.7 Interest on deferred payment Total 7. Provision for contingency Rs.1.64 lakhs 8. Working capital margin Rs.42.21 lakhs 9. Total project cost Rs.73 lakhs

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Say Rs. lakhs

10. Means of Finance Promoter's contribution Rs.29 lakhs Term loan from financing institutions Rs.44 lakhs Total project cost Rs.73 lakhs 11. Financial statements Cost of production A Variable cost

Rs. in lakhs

Raw material and utilities 413.49 Spares and maintenance 0.9 Selling expenses 26.88 Total variable cost (A)

441.26

B Fixed cost

Salaries and wages 15.00 Interest on term loan and working capital loan 13.56 Depreciation 2.02 Administrative expenses 16.13 Total fixed cost (B)

46.71

C. Total cost of production C (A+B)

487.98

D. Selling price per kg. (in Rupees)

1120

E. Annual sales turnover E

537.60

F. Net profit before tax (E-C)

49.62

G. Breakeven point in %

48

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SECTION XI

SWOT ANALYSIS

Strength Growing market due to improving economic conditions

Weakness High cost of product

Opportunity Technical innovation

Threat Competition from multinational companies

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SECTION XII

FACTORS INFLUENCING THE POSTION FOR A NEW INDUSTRY AND RECOMMENDATIONS

Market penetration Market penetration is higher in the skin care segment compared to lipsticks. In the skin-care segment, price and volume play an equal role in value growth. The factors contributing to market penetration are strong brand promotion, good distribution and quality improvement, the ability to provide a variety of products and introduce affordable products without compromising on quality. It is niche market and the scope for rising volumes is low. That does not mean the market is not growing. The growth in the premium segment is usually because of people upgrading from the mass to the premium rather than a growth in consumption per se. The rural market has not been reached adequately, which is a very big market in itself. The urban market itself is largely unexploited. India, consumes less of cosmetics than most Asian countries. In India, skin-care is still at a nascent stage. So this is the actual growth area. Driving factors for demand and strategies for growth While some strategies are tested and have been successful in the Indian market, the others are nascent concepts and their bearing on the growth will be viable a couple of years down the line. The cosmetics industry is one of the rapidly growing fast moving consumer goods segments. But it has not been without blemishes for the players. The cosmetics market has been constantly changing colours to suit Indian tastes and pockets and its players

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have had to regularly work out new and innovative strategies to retain their hold on the market and establish a niche market for themselves. That explains the success of this market segment. Fair & Lovely is the market leader in the fairness cream market. Cosmetic companies are spending considerably on research for ingredients that block melanin production. The strong growth in the demand and success of new players in the market has prompted existing players to venture into cross categorization. Ponds did attempt cross categorization when it l0aunched its Fairness cream under the same brand as its vanishing and cold cream but it failed to do big. The market however continued to be dominated by F&L. As of now, the scenario is encouraging for a number of players who have the opportunity to cash on. The market is not restricted to an HLL or a Godrej alone. What is important is the positioning and the style of the appeal for "making consumers fairest of all" that will make the difference. Today’s beauty care market is totally brand driven. Indian companies sell their brands primarily with high profile advertising campaigns. Growing acceptance * Fairness of the skin and the appreciation factors * It is also found that women who have used fairness cream for several years, have got habituated to it and would continue to use it regardless of their age. * Today, it is not only women but also a significant number of men who use the fairness cream Factors towards growth of Fairness Cream * Media exposure * Growing consumerism and the move towards personal grooming are the key to the growth. * The increase in number of working women who are conscious about their looks is a big reason for the growth. * Traditionally, Indians have favoured fair skinned complexion and considered it as important criteria in judging beauty. This has been a significant cause for the success of Fair & Lovely which has the largest market share among skin care products. * Within the skin care category, penetration levels vary across different sub-categories. Fairness creams (including cold cream) and vanishing cream continue to be the dominant category accounting for nearly 50% of the total market.

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* The lotion category is the new and emerging area which is slowly replacing creams. Lotions include moisturising toners, astringent item till recently a small market., but companies are focussing their efforts here. * Price apart, distribution and retailing are likely to be the key factors. * Multinational companies will compete effectively in Speciality Products such as sun-protection and antistress cream, where a higher price may be justified in the consumer’s mind due to the specific value addition.