hair oil note - on a slippery slope.pdf

7/24/2019 Hair Oil Note - On a Slippery Slope.pdf

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Sector Outlook Cautious

Thematic NoteOn a Slippery Slope

Thematic Note on Indian Hair Oil Category

On a slippery slope

March 2014

Find Spark research on Bloomberg (SPAK ), Thomson First Call, Reuters Knowledge and Factset 1


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FMCG Index vs. Sensex

Executive Summary

Performance (%)

1m 3m 12m

Sensex 5% 4% 18%

Nifty 6% 5% 17%

BSE FMCG 6% 1% 19%

Market data

BSE SENSEX 22095

Nifty 6601

BSE FMCG 6954

Date Mar 27, 2014

Tejash [email protected]+91 22 4228 8155

Gnanasundaram [email protected]+91 44 4344 0062

On a slippery slope

As Indian consumer begins to emulate west, we have witnessed several traditional categories in the Indianbeauty and personal care (BPC) space struggling for survival. Notably a few categories have not only survivedthis western consumerism onslaught but also managed to find global acceptance. Though sporadic in usage,

several categories such as hair oils have begun to emerge on a global platform as MNCs have begun to showrenewed interest in these offerings.

Indian hair care space continues to be dominated by hair oils despite emergence of several other substituteofferings in terms of gels, serums and conditioners. Coconut Hair Oil (CHO) continues to be the largest sellinghair oil, with growth in this category being driven by conversion from unorganized market. However the shareof coconut hair oil has been stealthily on the downward trend as Value Added Hair Oils (VAHO) have madeinroads into the coconut oil market. We see that VAHO has a definitive advantage considering they are lessexposed to raw material vagaries and command better pricing power than CHO. Given the establishedconversion pattern from CHO to VAHO, it was least surprising that the competitive intensity in the VAHOcategory has increased manifold. Not only did several regional players venture into the category, but MNCs(HUL,LOreal, etc) also began to show renewed interest and launched several brands to have a pie of the VAHOcategory. The early entrants though enjoy unabated market leadership in their respective VAHO categories(Dabur in Amla hair oil, Bajaj Corp in Light Hair Oil (LHO) and Emami in Cooling hair oil) driven by their superior brand strength, value for money offering and wide established reach.

Marico: Marico with a strong presence in the CHO category has begun to feel the pinch as conversion to VAHO gainsmomentum. Limited pricing power due to wide unorganized market and heavy copra cost vagaries is weighing downCHO market. Though present in VAHO markets, market leadership edge as in CHO could be lost in conversion theme.

Dabur: Dabur is the market leader in the Amla hair oil platform, with presence in CHO and LHO too. Dabur Amlagaining prominence as usage and reach of Amla based hair oils increase. Being present vertically across other haircare categories, to end up as key beneficiary if there is a shift away from hair oils to other categories.

Bajaj Corp: Would be one of the key beneficiary of this conversion to VAHO. Market leader in LHO under its BajajAlmond drops (ADHO) brand, it has miniscule presence in Amla and Cooling hair oil space. Heavy reliance on singlebrand ADHO (97% to revenues) could be fatal with competition intensifying in the LHO space.

Emami: Market leader in the Cooling hair oil through its brand Navratna, which contributes to ~25% of its revenues.Though medicinal in nature, wider availability (Salons) and affordability (Sachets) have made them widely popular.

Coverage Universe View: On a relative basis we prefer ITC to HUL among the large caps and prefer Bajaj Corp(BJCOR), Emami (HMN) and Jyothy Labs (JYL) among the small & mid-cap. Stock Calls: ITCBuy (TP:Rs.389), HUL-Reduce (TP:Rs.526), BJCOR-Buy (TP:Rs.253), Emami Buy (TP:Rs.502), DaburReduce (TP:Rs.165), ZYWLReduce (TP:Rs.502), JYL-Buy (TP:Rs.246), GCPL-Reduce(TP:Rs.717), GSKCHAdd(TP:Rs.4632), MaricoReduce(Rs. 214) CLGT- Sell (TP:Rs.991)

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mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Hair quotient in global context

Hair Care as % of global Beauty & Personal Care CY13

Source: Industry , Spark Capital Research

In the global hair care space, conditioner & oils recording strongest growth


Global Per capita consumption in terms of $ remains in favor of hair care


Global top 10 hair care brands and their market share CY13


Skin Care23%

Hair Care17%

Cosmetics13%Fragrances

10%

Oral Care9%

Bath and Shower9%

Others19%

5.2%

5.2%

5.6%

5.7%

5.7%

5.9%

6.1%

6.7%

6.7%

6.8%

7.1%

Bath and Shower

Depilatories

Hair Care

Fragrances

Oral Care

Skin Care

Cosmetics

Sun Care

Deodorants

Men's Grooming

Baby Products

0.7

1.3

2

2.9

5.4

5.8

5.8

6.1

7.7

10.6

14.1

Depilatories

Sun Care

Baby Products

Deodorants

Bath and Shower

Oral Care

Men's Grooming

Fragrances

Cosmetics

Hair Care

Skin CareBrand Company Market share (%)

L'Oral Paris L'Oral 7.6

Pantene Procter & Gamble 7.0

Garnier L'Oral 5.1

Schwarzkopf Henkel 4.4

Sunsilk Unilever 4.2

Head & Shoulders Procter & Gamble 4.0Clairol Procter & Gamble 2.7

Dove Unilever 2.3

Wella Professional Procter & Gamble 1.8

TRESemm Unilever 1.5

Hair care remains a

prominent part of theglobal BPC market,

In a dove hair care

study 75% of the

participants agreed

hair care products

are used to feel

more attractive

(Click for additional

data)

3


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What led to rise of hair oils on a global platform


Rise of the oils - G lobal ly

Since CY2010 hair care markets in Western

Europe and Nor th Amer ican witnessed massive

slowdow n pressure (Click for additional data)

Ever since prominence of Asia Pacific andLatin America is on the rise. Industry

sources predicted 80% of hair care growth inthe next 5 years to come from these markets.

Innovation in line with emerging regioncultural habits

Saloon treatment alternate to priceconscious consumers

HAIR OIL(as ingredient and format)

Garniers Olia oilhair dye

Coconut Oil Argan Oil

Moroccan oiltreatment

LOreal MythicOil Shampoo

Dove hair oiltherapy

Sunflower oil Olive Oil

Conditioners (oils included) recorded the strongestgrowth among hair care offerings as a wide posit ive

response was witnessed in developed markets to oilas ingredient and finished product.

Brands as Mythic oil from LOreal professionnel,Kerastaces Elixir Ult ime and Moroccan Oil recordedimpressive volume offtakes.

Hair oils fast replacing the serums, as oils come withan additional promise of protection and nourishmentwithout compromising on the glossy looks

Customising offerings ataffordable prices remained

the challenge

=

0.3%

2.3%

2.5%

6.0%

6.1%

6.2%

8.6%

0.0% 5.0% 10.0%

Others

2-in-1

Salon

Hair Loss

Colourants

Shampoos

Conditioners & oil

2010 -13 hair care categories CAGR

Sourc e: Indus try , Spark Capital Research

4


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GCC

Wide market for hair

oils, given the largeIndian Diaspora.Market beyond theIndian diasporaremains miniscule

(Click for addit ional

data)

Latin America

Given the high salon

pattern in markets as

Brazil, Salon styled

serums and hair oils

typically tend to do

better (Click for

addition al data)

North America

U.S. consumers seem

more comfortable with the

idea of oil for the hair than

for the skin, because hot-

oil hair treatments have

been on the U.S. market

for years(Click for

additio nal data)

Europe

One in five women in Europe now regularly

use a hair oil to do everything from washing off

hard-to-r inse product to condit ioni ng frazzled

hair and giving a glossy finish LOreal study

(Click for addition al data)

Source: Industry sources, Spark Capital research

Africa

Huge unbranded and un-organised market thoughconsidering the availability of

various oils as Argan oil,Olive oil Castor oil, jojoba oil,avocado oil, virgin coconutoils (Click for addition al data)

Hair oil has taken off globally though usage remains sporadic

5


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18%

29%

30%

30%

47%

50%

54%

0% 10% 20% 30% 40% 50% 60%

Hair care

Color Cosmetics

Deodrants

Mens Grooming

Oral Care

Bath & Shower

Skin care

2

3

34

6

7

9

11

12

15

0 2 4 6 8 10 12 14 16

Baby

Men's Grooming

CosmeticsOral Care

Deodorants

Depilatories

Skin Care

Bath

Fragrances

Hair Care

India - Hair care significance in Beauty and Personal care(BPC)

Haircare remains a key constituent of the Indian BPC market (CY13)

Source: Industry data , Spark Capital Research

CY10-13 revenue CAGR of hair care in line with most emerging categories


15 players occupying the top 2/3rd of the hair care market (CY13)


Indian Hair care market leader commands 17% share (CY13)


Bath28%

Hair Care26%Oral Care

13%

Skin Care12%

Men's Grooming7%

Others14%

10.7%13.5% 13.9%

18.4% 19.3% 20.1%22.0%

26.9% 27.4%

39.9%

high number of subcategories within thehair care space, has

led to lot more playersoccupying 2/3rd of the

market

6


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Hair oils continue to be the dominant force in Indian hair care

Acceptability and reach makes hair oil the largest category


Consolidated hair care segment grew ~20% CAGR from CY10-13.


Rural expansion in hair care is limited and presents a great opportunity


Penetration too except in coconut hair oils and shampoo remains low


Shampoo31%

Value addedhair oil30%

Coconut hair Oil21%

Conditioner2%

Colorants

16%

20%40% 35%

5% 10%

80%

60% 65%

95% 90%

0%

10%20%

30%

40%

50%

60%

70%

80%

90%

100%

Shampoo Coconut hair Oil Value addedhair oil

Conditioner Colorants

Rural Urban

57%

89%

30%

2% 5%

37%

83%

25%

0 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Shampoo Coconut hair Oil Value addedhair oil

Conditioner Colorants

Urban Penetration Ruralpenetration

15.9%14.4%

21.1%

8.5%

25.0%

20.7%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Hair care Shampoo Perfumed Oil Coconut Oil Conditioner Colorants

7


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Value added hair oils beginning to emerge larger than coconut hair oil

Light Hair Oil gaining traction


CY10-13 growth rates suggest that other hair oils growing much faster


Share of unbranded has remained largely limited in other hair oil categories


Strong market leadership across the four categories.


Coconut hair Oil42%

Light hair oil18%

Amla hair Oil17%

Cooling hair Oil11%

Other hair oil12%

8.5%

22.5%

27.7%

14.1%

17.8%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Coconut hairOil

Amla Based Oil LHO Cooling hair Oil Other hair oil

98%

63%

95% 95% 90%

2%

37%

5% 5% 10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Light Hair Oil Coconut Oil Amla Oil Cooling Oil Others

Branded Unbranded

Category# share(CY13)

Company Leading Brands

Coconut Hair Oil(CHO) 56% Marico Parachute & Nihar

Light Hair Oil(LHO) 59% Bajaj Corp Bajaj Almond Oil

Amla Hair Oil 60% Dabur Dabur Amla

Cooling Hair Oil 55% Emami Navratna Oil, Extra Thanda

VAHO =Light hair oil +Amla hair Oil +

Cooling hair oil +Other hair oil

8


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Hair Oil Industry - Overview

Hair Oil (Rs.810bn)

Usage pattern

COCONUT HAIR OIL (~42%)

Daily/ Weekly

AMLA HAIR OIL (~17%)

Daily/ Weekly

LIGHT HAIR OIL(~18%)

Daily

COOLING HAIR OIL(~11%)

Medicinal

Gender appeal Unisex Unisex Unisex Predominantly Male

Geographicalprominence

South, West North, West North,West, East East, South

Land-scapeorientation

Rural - Urban Rural - Urban Urban All

User Class

Across spectrum, mainly SecC & D Mainly Sec B, C & D Mainly SEC A,B Across Classes

Positioning Nourishment, Prewash Nourishment, Prewash Lifestyle, Post-wash Medicinal. Prewash

Slicing/Dicing of the category salience

9



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OrganisedCoconut hair oil

based market(Rs.~34bn)

Unorganisedhair oil market

(Rs.~15bn)

Light hair oil

market

Amla hair oil

market

Other hair oil(Herbal/

Fragrance)

Cooling hair oilCompeting

Substitutes

Triggers

Non sticky value proposition

Rising propensity to spend

Rising niche needs in haircare

Emergence of post washusage pattern

Triggers

Risingdisposableincome

Risingaspirations

Urbanisation

Increasing LUPofferings

Better availability

Serums

Conditioners

Shampoo

Styling gels

Complimentary proposition

#1 Conversion/Premiumization - Conversion to be a key theme in hair oils

10

Sourc e: Spark Capital Research


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Hair care inIndia

Hair oil inhair care

Popularvariants

Weakeningconsumption

Emergenceof

substitutes

Solution liesin getting

light

Hair has always assumed a key role in Indian beauty context. Anecdotes on hair and beauty evident

in Indian scr iptures

However hair care has predom inantly meant only h air oi ls, oi ls were extensively

used as nour ishment c ondi t ioners.

Popular i ty and us age were dependent on avai lable oi ls, Coconu t

in South Ind ia and Amla in Nor th Ind ia

Usage patterns ho wever got weaker as oi ls led

to greasy looks

Forcing hair oi ls to be largely

pre wash proposi t ion

Light Hair Oi l

breaks the j inx

#1 Conversion/Premiumization - Evolution of hair care

11

Sourc e: Spark Capital Research


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12.7%

13.6%

13.0%

15.0%

16.0%

18.0%

15.7%

15.7%

15.0%

15.0%

15.0%

17.0%

10.6%

11.2%

12.0%

12.0%

11.0%

11.0%

61.0%

59.6%

60.0%

58.0%

58.0%

54.0%

FY08

FY09

FY10

FY11

FY12

FY13

Light Hair Oil Amla Hair Oil Cooling Hair Oil Coconut based Hair Oil

Weakness Strength Weakness Strength

Value Added hair oil Coconut Oil

#1 Conversion/Premiumization - Light hair oil seems key beneficiary

12



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Toilet Soap 95.7% Rs.110bn

Specific bath

& showerofferings

15% One bar forentire family

Body wash,

Hair wash,Hand wash

Laundry 90.2% Rs.150bnMatic and

conditioners10%

Largely Barand powder

Fabricconditioners

Hair Oil 74.5% Rs.81bnNew usage

patterns18% Pre wash Light hair oils

Toothpaste 72.8%Rs.55bn

Niche

offerings16%

Daily, low

awareness

Sensitiveofferings,

Mouthwash

Shampoo 60.4% Rs.49bnVariantslaunch

20%Sachets anddaily usage

Anti Hair fallpackages

TalcumPowder

51.0% Rs.18bnSpecific

positioning14%

Cheapersubstitute fordeodorants

Cool talc,Deodorants

Highly penetrated categories beginning to look for alternate niche categories for growth.


Category ~# penetration ~Market Size ~FY11-13 growth New Growth d rivers Usage pattern Niche new categories

Emergence of Newand Niche categories

Given the VFM mind-set, pricing increasescould lead to share

loss

Unorganised & MNCprice wars though

limit pricing flexibility

Despite highpenetration per capitavalue usage remains

low.

LUPs though havealso led to lower

margins

High penetrationachieved through

LUPs and distribution

#1 Conversion/Premiumization - Failing to innovate is Innovating to fail

13


14/42



#2 Sourcing/Pricing power - Integrated supply in CHO pressurizing margins

Raw materials are either agri-based or commodity based

Source: Industry & Spark Capital Research

Measure Coconut Hair Oil (CHO) Light Hair Oil (LHO) Amla Hair Oil Cooling Hair Oil

Key Raw Material Copra Light Liquid Paraffin Oil (LLPO) Vegetable Oil Mentha Oil

Agri / Chemical Agri commodity Chemical Agri based Agri Commodity

Key Driver Coconut/Copra Brent Crude Palm/soya Mentha Leaves

Imported Local Local Imported Local/Imported Local

Imported From NA Imported by smaller players Imported by smaller players

Production: India world (73%),

China (18%) followed by Braziland US.

Locally sourced atIndividual farmers and Coconut

Development Board (CDB)NA NA

UP, Punjab, Haryana , Himachal& Bihar.

Re impact No Yes Yes No

Policy Impact MSP Import Duty bound Import Duty bound Yes

IntegratedSuppliers

Yes No No Yes

Producers Kerala, Tamil Nadu Imported by smaller players Imported by smaller players Traded commodity in MCX, India

14


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0

1020

30

40

50

60

70

80

90

Jun-09

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Mar-11

Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Sep-12

Dec-12

Mar-13

Jun-13

Sep-13

Dec-13

Rs/KG

Vegetable Oil price trend

Source: Bloomberg, Spark Capital Research

#2 Sourcing/Pricing power - How have the commodities behaved?

Coconut oil price trend


Light Liquid Paraffin price trend


Mentha Oil price trend


0

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Rs/100kg

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Rs/kg

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Rs/kg

Prices have been high over the past fewmonths due to lower supply, Pricesthough could ease as supplies from

Kerala CBOT hit market.

LLP prices at record high levels,BJCOR management though

indicated that price would correctdownwards as we move along CY14.

Continuous decline of demand andincreasing supply from mint users to leadto prices surging in the next 12 months

Vegetable oil prices are expected toslightly increase on palm oil price rise,Rupee stabilisation to cushion the impact

15

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Copra price have doubled, but price rise has been limited

Source: Bloomberg, Company filings, Spark Capital Research

Price increases have always been lower than copra price rise, indicatinglimited pricing power


Vegetable oil prices have increased ~15% each year in the past 3 years


Price increases in Amla hair oil have been limited


34 4052

64 67 60 5447 41 41 41 46 45

53

74

20 2124

27 27 27 27 27 27 27 27 2625

23

27

0

5

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3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

ParachutePrice/100ml

CopraPrice/KG

Copra price 100ml Parachute Coconut Oil price

-40%

-20%

0%

20%

40%

60%

80%

100%

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

Copra price increase 100ml Parachute Coconut Oil price increase

50 51 58 64 62 68 70 80 80 85 80 80 72 71 76

36 36 36 36 36 36 36

38 38 38 38 38 38

40 40

34

35

36

37

38

39

40

41

0

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4QFY13

1QFY14

2QFY14

3QFY14

D

aburamlaprice/100ml

Veget

ableoilpriceRs/Kg

Vegetable oil price 100ml Dabur Amla Oil

-20%

-10%

0%

10%

20%

30%

40%

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

Vegetable oil price growth 100ml Dabur Amla Oil price growth

#2 Sourcing/Pricing power Pricing power remains weak in CHO

16

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Bajaj Almond drop light hair oil prices have increased in line with LLP price


Price increases have overall been in line with cost increase


Soft menthe oil prices providing the necessary price cushion


Price increases have been constant and steady over time period


-20%

-10%

0%

10%

20%

30%40%

50%

60%

70%

80%

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

LLPO price increase 100ml Bajaj Corp Almond Oil Price Increase

5765 66

7586 86 83 81 80 81 79 74 74 75 76

42 42 42 42

4246 46 46 46

50 5055 55 55 55

0

10

20

30

40

50

60

0

10

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40

5060

70

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90

100

1QFY11

2QFY11

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4QFY12

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3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

BajajAlmondOilp

rice/100ml

LLPOP

rice

/kg

LLPO price 100ml Baja j Corp Almond Oil Price

772957

48 48 48 50 50 50 5055 55 55 55

60 60 60 60

0

10

20

30

40

50

60

70

0

500

1,000

1,500

2,000

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1QFY11

2QFY11

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4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

NavratnaOil/100ml

Menthaoilprice/Kg

Mentha Oil price 100ml Emami Navratna Cool hair oil price

-40%

-20%

0%

20%

40%

60%

80%

100%

1QFY11

2QFY11

3QFY11

4QFY11

1QFY12

2QFY12

3QFY12

4QFY12

1QFY13

2QFY13

3QFY13

4QFY13

1QFY14

2QFY14

3QFY14

Mentha Oil price Increase 100ml Emami Navratna Cool hair oil price increase

#2 Sourcing/Pricing power LHO pricing power though unabated

17

Th ti N tOn a Slippery Slope


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23 20 33 22

100

395

470 485

44

103

123 121

0

100

200

300

400

500

600

Coconut Oil Amla Oil Cooling Oil Light Hair Oil

Rs/100ml

Range=Rs.

463

Range=Rs.

77 R

ange=Rs.3

75

Range=Rs.4

37

#2 Sourcing/Pricing power - Pricing ranges of various categories

Light hair oil category exhibitthe widest pricing range as

base ingredient of the

offerings differ widely, themost popular among them

though is the almondoffering. Bajaj Almond is the

market leader in thecategory with ~59% share

Seasonal cooling oil, giventheir complimentary natureare priced higher than thetraditional variants. Market

leader Emami Navratna ispriced at the lower end.Despite the presence ofseveral regional players,

salon based usage enablespremium pricing.

Prices in the amla oilsegment remain on thelower end given their

constant attempt to lurecoconut oil consumers,Therapeutic Amla oil pricesthough on the higher end

given their additionalayurvedic benefits. Market

Leader Dabur Amla operatesat the lower end of the

pricing pyramid.

Given the hugeunorganised market,

pricing remainsunder pressure in thecoconut oil segment,

despite beingconstantly exposedto vagaries of copra.

Though marketleader commands~56% share in thebranded market,

Parachute has beenjudicious in its price

increases. LowerLUPs to convert fromunorganised market

keeps the entrypricing low.

Source: Indus try Data, Spark Capital Research

18

Th ti N tOn a Slippery Slope


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Ayurvedics

Extensions

Local

MNCs

Niche

Regional

SalonAspirational Quadrant (Pan IndiaAcceptance with Pricing power)

#3 Competitive Landscape Players vying to be on Aspirational quadrant

Pan IndiaRegional

Pricin

gscale

Premium

Sourc e: Indus try Data, Spark Capital Research

19



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#3 Competitive Landscape Regional brands and their aspirations

Trichup(West

India)

Founded: 1980

Group : VasuHealthcare

Products: Hair oils,herbal OTCofferings.

Chairman: Mr.V. B.Ukani

Managing Director:Mr. Haribhai Patel

InternationalMarkets: North

America, South

America Europe,South East Asia,Middle East, Asiaand Africa.

Hair oil launch: 1990

Hair care products:Shampoo, Oil,capsules andHenna.

Hair oil offerings:Anti dandruff, antihairfall, long &strong and hair

enhancer.

Head office:Vadodra.

CavinKare(SouthIndia)

Founded: 1983

Group : Cavin Kare Products: Personalcare products, foodand Dairy products.

Chairman & MD: Mr.C.K.Ranganathan

JMD: Mr. TD Mohan

Markets: Tamil Naduand Andhra Pradesh


Hair care products:

Shampoo, Oil andHenna.

Hair oil offerings:Coconut Hair oil at 4SKUs

Head office:Chennai

Manufacturinglocations: 8locations acrossIndia.

Other hair oils:

Meera did attempt toventure into otherhair oils in 2004 inNorth India, howeverfaced limitedsuccess.

KeoKarpin(EastIndia)

Founded: 1957

Group : Deysmedicals

Products: Hair oils,herbal OTCofferings.

Promoters: Mr. BNDey

Currentmanagement:Mr.Gautam Dey, Mr.Ranajit Dey, Mr.Subharthee Dey,Mr.Ushanath

Banarjee, Mr. AdityaBanerjee

Hair oil offerings:Keo Karpin almond,olive variants,massage oil and hairvitalizer.

Strengths: Firsteffective anti hair fallsolution, strongregional loyalty,Solid distributionnetwork,

Inexpensive Presence in: Sixteenbranches located inall major capitalcities.

VVDGold(So

uthIndia)

Founded: 1942

Group : VVD & Sons Products: Hair oils,edible oils, foodpreparation andspices.

Promoters: Mr. V.V.Danushkodi

Currentmanagement:Mr.Niranjan andMr.Kabilan

International

Markets: Malaysia,Singapore andmiddle east.

Distribution: 650distributors and retailoutlets

Presence in: TamilNadu, AndhraPradesh, Karnataka,Kerala, Orissa,Chattisgarh,Maharashtra,Madhya Pradhesh,Bihar, Jharkhand,West Bengal and

Assam

Going forward:Expansion into North& West

Himgange(Ea

stIndia)

Founded: 1984

Group : G. K.Burman Herbal(India) PrivateLimited

Products: HimgangeAyurvedic hair oils

Promoters:Mr.Gautam KumarBurman

Currentmanagement:Mr.Neeraj KumarBurman and Mr.

Vikram KumarBurman


Marketshare - ~30%in the cooling hairoil.

Dominance: UttarPradesh, Bihar,Madhya Pradeshand Chhattisgarh

Manufacturing plant:Haridwar.

Going forward:Launch in south,Launch of Kerlinacoconut oil.

Sourc e: Company Data, Spark Capital Research

20



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#3 Competitive Landscape MNCs renewed interest in Hair Oil category

MNC variants in India


1993

Hindustan Unilever take control of brand Nihar when it acquired TOMCOfrom TATAs.

2000

Hindustan Unilever extends All clear brand into Oils under Anti dandruff

proposition.

2006

Hindustan Unilever sells brand Nihar to Marico for a consideration ofRs.2.16bn (~1.8x sales, 10x EBITDA)

2008 Hindustan Unilever extends Clininc Plus brand into Oils

2011 LOreal launches Garnier Ultra Doux - Extracts of Almond and Coconut

2012

Hindustan Unilever launches Dove Elixir, a premium hair oil proposition in3 variants.

2013 Hindustan Unilever introduces Clinic Plus Vita An almond variant.

2014

LOreal launches 6 Oil Nourish, Combination offering of Shampoo,Conditioner and Hair oil.

Paul Polman, CEO UnileverWe will continue to sell non-core, underperforming brands

and buy attractive bolt-onbrands when possible

We want to attack the marketwith brand new technologies

and products in all categories.We are not interested in

making small improvements toexisting products LOreal

MNC variants in India


Company Varaints Proposition

LOreal Paris 6

Oil Nourish LOreal 1

Shampoo, Conditioner and 6 Oil Nourish

Oil.

Dove ElixirHindustanUnilever

3

(1) Rose & Almond Oil (hairfall rescue)(2) Hibiscus & Argan Oil (nourishedshine) and(3) Lavender & Olive Oil (dryness care)

Garnier UltraDoux

LOreal 1 Extracts of Almond and Coconut

Clinic PlusHindustanUnilever

2 Clinic Plus and Clinic Plus Vita Oil

All ClearHindustanUnilever

1 Anti Dandruff proposition

Pricing matrix


Bajaj CorpAlmond Oil

ParachuteAdvansed hair oil

Dabur AlmondHair Oil

LOreal Paris 6 Oil Nourish 2.6 4.2 2.6

Dove Elixir 2.7 4.4 2.7Garnier Ultra Doux 0.4 1.0 0.4

Clinic Plus -0.2 0.1 -0.2

All Clear 0.1 0.6 0.1

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SOUTH INDIA

Beauty-conscious urban

consumers aged between 18

and 32 are the most active

consumer group.

Higher dual income families to leadto premium offerings as VAHO

gaining momentum.

Traditional values though keep them

slightly restrained.

#4 South India - South remains the tough nut to crack for LHO

CoconutBased Oil

(Inc. Others)72%

Cooling HairOil

12%

Amla Hair Oil13%

Light Hair Oil3%

Breakup of the south India hair oil market


Coconut is just more than oil in South India.


Cheaper prices and wideavailability

Humid conditions

Wide perception that

heavy hair oil is better

Strong purchaseinfluencers in family

Emotional attachment

towards coconut

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#4 South India - South is converting but on its own pace...

South India

Socio Demographic Profile (Cl ick fo r addi t ional data)

Conversion of potential to demand

Complimentary Replacement

User Profile

JWT 18.3 (Cl ick fo raddi t ional data)

Light Hair Oi l

Categories that havemanaged to crack south

Amla hair oil andCoconut Oil

Cooling oil andCoconut Oil

Light hair oil andCoconut Oil

Amla hair oil andCoconut Oil

Cooling oil andCoconut Oil

Light hair oil andCoconut Oil

Despite tropical nature air care productshave higher acceptance. Personal

categories as Anti ageing creams, mouthwash, depilatories too have higher per

capita spend in south

Marketing to south the way it likesholds the key whether the light hair

oil space cracks the coconut.

Socio demographic profile of south comfortably aligns with identified lighthair user profile, we understand that though there is high apprehension

towards first time usage. We also see that availability of light hair oilproducts in the rural markets in south remains abysmal.

Conversion to LHO isinevitable in South India

given the favourable

1.Socio demographic profile

2.Higher disposable income

3.Increasing propensity to

spend towards personalcare in south India

4.Increasing consumerneeds for better looks

Conversionthough might

be slower thanROI due to

1.Strong affiliation towardscoconut oil

2.Solid purchase influencers

3.Wide perception that LHOis not healthy

4.Tropical and Humidclimate may not requirepost wash oil as in ROI.

Source: Indus try Data, Spark Capital Research

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I use hair oil becauseWhatsapp focus group study

To lookbetter

Otherwise,my hairwould

become dryand fall off

I need togrow my

hair back

It retainsmoisture

andpreventsdryness

It is anessential

nutrient tokeep my

hairhealthy and

strong

It's

nutritiousfor hairthetextureimproves

To improvethe

effectivenessof shampoo

Hates hairoils and usesthem rarelywhile styling

hair

As it makesthe hair feel

lighter and is aremedy forhair fall

Dunno Why, buthave been using itsince childhood

It isgreat formassage

As it is keepshead cool and

because motheradvises on a daily

basis

As itreducesheat andincreases

hair growth

User feelshair oil hastremendousbenefits to

maintain thelength andhealth of

hair

Keeps hairsmooth andmaintainstexture

To preventdryness andgreying of

hair

It is of utmostimportance as werequire water tosurvive same goes

with hairs it requiresNourishment!

As oil helps yomaintain healthyhair growth and

calms one's mind

#4 Whatsapp - Focus group study Combing views

Source: Spark Capital Research

24



25/42


pp y p

Hair oil usage pattern Scuttlebutt (Channel check) Notes

Gender Based Age BasedRegion Based

UsageObservations

Conversion

observations

Threats No threat from serums

Across users, most noted that serums andconditioners as complementary offeringsand can never replace hair oils.

No threat from serums Though ROI did acknowledge the clash

between conditioner and LHO offerings,they believe the usage reasons differ.

Emerging threat from serumsFew users above 25 years did acknowledge intrying out serums and conditioners asreplacement

Male:

Main reasons for usage were to keep scalphealthy and to prevent early hair fall.

The usage pattern was generally limited to3-4 times a week and the usage pattern hasremained constant.

Female: Nourishment and silky look were the key

reasons women used hair oils. Several users did note that the usage of

hair oil has reduced in the past 5 years dueto lifestyle changes

South India:

Parachute was the most popular brandfollowed by Dabur Amla.

Healthy hair, scalp cooling and traditionalhabit were the reasons attributed for usage.Several users pointed to being conditionedto use hair oil since childhood.

Rest Of India: Hair oils are used to Moisturise, maintain

texture and help in strengthening the hair Parachute and Bajaj Almond were the most

preferred among the users

Less than 25 years old:

Parent influence on brand choice and usagepatterns of hair oils was evident

Nourishment to prevent hair fall, stylingneeds and hair strength were noted as keyreasons for hair oil patronage.

More than 25 years old: Need to maintain scalp and relaxation were

attributed pointed towards usage. Usage was also significantly higher in this

group as they believed it also protects fromharmful chemicals in shampoos.

Male: Conversions were generally tepid, however

key reasons pointed out for shift by fewwere down to non-stickiness.

Female: Most pointed out that they have not shifted

hair oils though usage pattern has changed. Niche needs and non-greasy looks were

key reasons pointed out by those who haveshifted to LHO

South India: Users in south exhibited strong propensity

to change to superior offerings. Though no certain reasons could be

attributed, niche needs proposition wasprominent..

Rest Of India: Preference for non-sticky proposition was

widely visible, Non greasy and No smellseems too have led to LHO growth.

Less than 25 years old: Either due to parental influence or not being

economically dependent, only a few hadnoted changing brands in the past 5 years.

More than 25 years old: Move towards premium offering clearly

visible as specific hair needs emerge. Higher disposable income also contributes

to this up-gradation. Increasing need to lookyounger drives niche offerings.

#4 Whatsapp - Focus group study Combing views


25



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pp y p

Bajaj corp fortunes are heavily aligned towards hair oil

Source: Company filings, Spark Capital Research

Contribution of various hair oil categories to revenues*

*Value added hair oil =(Amla hair oil + light hair oil+ cooling hair oil+ other hair oil) Source:

Company filings, Spark Capital Research

Presence in complementing/substitute categories


Majorly catering to the Indian diaspora


Shampoo Conditioner SerumsStyling

AgentsHair color

Marico - - Livon Setwet Livon

DaburDaburVatika,Dabur

- - - -

Bajaj Corp - - - - -

Emami - - - - -

#5 Impact - How are each player positioned to drip the hair oil market

25%

99%

15%

44%

0% 20% 40% 60% 80% 100%

Emami

Bajaj Corp

Dabur

Marico

1%

1%

19%

62%

77%

97%

4%

99%

2%

38%

0% 20% 40% 60% 80% 100%

Emami

Bajaj Corp

Dabur

Marico

Coconut hair oi l Amla hair oil Light hair oi l Cooling hair oi l Value Added Hair Oi l

26

11%

1%

30%

24%

0% 5% 10% 15% 20% 25% 30% 35%

Emami

Bajaj Corp

Dabur

Marico



27/42

Sector Outlook Cautious#5 Impact - How the categories stack up against each other in positioning

Playing to one strengths has been the key until now

Marico

Dabur

BajajCorp

Emami

Coconut Hair Oil Amla Hair Oil Light Hair Oil Cooling Hair Oil Other Hair Oil


27



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Sector Outlook Cautious#5 Impact - Economic Moat Index Qualitative Index

Marico Dabur Bajaj Corp Emami

% of unorganized

Exposure tocommodity RM

LUP

RegionalCompetition

MNC Competition

Th

reats

Opportunities

Category penetration

opportunity

Brand loyalty

Pricing power

Market Leadership

Portfolio acrosshair oil categories

RANK 3 3 21

28



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Dabur

Impact from Amla to be limited: With Dabur Amla hair oil contributing to ~12% of revenues, we believe the impactof conversion would be minimal on Dabur.

Key Domestic categories: Management believes that dwindling inflation would assist in driving the otherwisesubdued urban consumption. Given the transformed focus towards urban, Dabur has announced Project Core aninitiative to increase the number of chemist touch-points in urban market. Management targets to reach to ~125000chemists from current ~75000 chemists in the next one year. We believe this init iative would not only assist inexpanding urban footprint but also enable to drive consistent growth and premiumization in Healthcare and OTCportfolio which should augur well for customer profile diversification and margin improvement. Margins to gradually

expand to 17%-18% on increasing premiumization, improving gross margins and lower A&P spends. Namaste and MENA to lead growth: Though political instability could continue to affect performance in Bangladesh

and Egypt, growth in international geographies to be led by increased expansion in Africa and Middle east countries.

View & Valuations: Change in geographical and product mix coupled with expansion in international geographies toassist growth momentum. we though are on a reduce stance with a TP of Rs.165, because of demanding valuationsand volatile macro headwinds.

Bajaj Corp

Market Attractiveness: Light hair oil remains the fastest growing hair oil segment. Structural shift from heavycoconut based hair oils to light hair oils is gaining momentum. This category is estimated grow in excess of ~15%CAGR of the next 3 years (in value terms)

Low competitive intensity: BJCORs nearest competitor is just ~16% market share and is showing minimal signs ofaggression, whatsoever. Hence we believe there is almost no threat to BJCOR's leadership status.

Strong Market leadership: BJCORsADHO remains the unassailable leader in the light hair oils category, strengthof the brand can be gauged by its negative working capital cycle, premium positioning and strong pricing.

Multiple initiatives to diversify single brand risk: 1.Launch of a cooling hair oil brand Kailash Parbat last year,2.Expansion into Bangladesh. 3. Acquisition of Nomarks, anti-marks cream from Ozone Ayurvedics. 4. BJCOR,armed with a cash surplus of Rs.~4bn, continues to scout for ideal brand / product for acquisition.

Views & Valuation: We remain buoyant as valuation comfort in comparison to peers, leadership in its flagship brand,strong pricing power and increasing benefits from geographic (Bangladesh & UAE)/ Product (Kailash Parbat /Nomarks) diversification makes BJCOR better placed among stocks in coverage. We have a target Price of Rs.243

Bajaj Corp

TP 253

CMP 213

Recommendation BUY

Returns (%) 1m 3m 12m

BJCOR 6% -2% -2%

Sensex 5% 4% 18%

BSE FMCG 7% 6% 18%

Financials FY14e FY15e FY16e

Sales 6,811 7,878 9,274

EBITDA 1,866 2,051 2,375

PAT 1,758 1,883 2,193

EPS 11.9 12.8 14.9

P/E 14.6 13.6 11.7

ROE 34.8% 34.7% 37.7%

Dabur

TP 165

CMP 174

Recommendation REDUCE


Dabur 3% 3% 32%

Sensex 5% 4% 18%

BSE FMCG 7% 6% 18%


Sales 71,174 83,116 95,572

EBITDA 11,783 14,355 16,521

PAT 9,014 11,089 12,964

EPS 5.2 6.4 7.4

P/E 33.6 27.3 23.4ROE 37.8% 37.3% 35.4%

Financials in mn, except EPS,P/E.ROE

#5 Impact - Hair oil contribution and its potential impact

29



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Marico

Parachute remains the key: Increasing rural focus remains the key driver for Parachute sales, however recent pricehikes to combat increasing copra prices could keep volumes muted. Value added hair oil volumes seem to beaffected due to unfavourable mix however MRCOs increasing focus should assist in near term growth.

Urban natured categories to remain impacted: Saffola sales is expected to be better in near term, however giventhe discretionary nature of the brand, macro pressures could impact volumes. Skin care & personal productssegments should continue to gain share and maintain strong growth momentum.

International operations to be a mixed bag: Bangladesh business continues to be impacted by unstable politicalclimate while macro economic pressures in South Africa and South East Asia (inflation) should keep growth under

check. MENA and Egypt growth though should begin to see revival in near term.

Copra prices on the rise: Copra prices that were benign throughout last year have increased ~78% y-o-y thisquarter. Costs of other raw materials as Safflower and Rice bran though remain soft, selective price increasescoupled with lower operating costs should see EBITDA margins sustaining at ~14%-15%

Views & Valuations: Given the increasing macro headwinds in driving volume growth and current high valuationswe maintain negative stance on MRCO with a reduce rating and a TP of Rs.214 (25x FY15E)

Marico

TP 214

CMP 202

Recommendation REDUCE


MARICO -3% -7% -3%

Sensex 5% 4% 18%

BSE FMCG 7% 6% 18%


Sales 47,572 53,195 61,439

EBITDA 7,142 8,018 9,552

PAT 4,796 5,511 6,498

EPS7.4 8.5 10.1

P/E 27.1 23.6 20.0

ROE 22.3% 22.1% 22.5%

#5 Impact - Hair oil contribution and its potential impact

Emami

Navratna Cooling Oil: Navratna cooling oil contributes to ~25% of HMN revenues, The brand continues to gaintraction on expansion and LUPs. Given the subdued mentha oil prices and superior pricing power, we see marginsfrom Navratna too improving in near term.

Low penetration in the key categories: Emami has built strong brands around categories that have minimalpenetration and have immense potential to become large. Diversifying into new unexplored categories backed bystrong celebrity endorsements have enabled HMN to maintain market leadership in these categories despitecompetitive intensity inching up. We believe HMN would be the key beneficiary as these niche categories expand tobecome larger propositions.

Brand Extensions: HMN currently has 4 power brands in Navratna, Boroplus, Zandu and Fair & Handsome. Withthese brands having become household names, we believe brand extension opportunities into complementingcategories presents an exciting growth opportunity.

Views & Valuation: Penetration potential in the key categories, brand extensions of the power brands and growthopportunity in the Zandu portfolio, keeps us excited on Ayurvedically hedged Emami. We initiate coverage with aBUY rating and a Target Price Of Rs. 502 (16% upside to CMP, ~21x FY16E EPS)

Emami

TP 434

CMP 502

Recommendation BUY


Emami -7% -10% 11%

Sensex 5% 4% 18%

BSE FMCG 7% 6% 18%


Sales 18,738 21,781 25,294

EBITDA 4,417 5,215 6,132

PAT 3,899 4,679 5,422

EPS 17.4 20.6 23.9

P/E 25.0 21.1 18.2

ROE 43.5% 40.4% 37.0%

Financials in mn, except EPS,P/E.ROE

30



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Strong market leadership across the four categories.


Category Marico Dabur Bajaj Corp Emami

FY13-16E Revenue CAGR 10% 16% 15% 14%

Gross Margin (FY14E) 50.0% 52.3% 58.8% 61.4%

A&P/ Sales (FY14E) 13.0% 14.3% 14.5% 15.2%

Number of retail outlets reached 4.0 mn 5.8 mn 2.6 mn 4.0 mn

EBITDA Margin (FY14E) 15.0% 16.6% 27.3% 23.6%

PAT Margin (FY14E) 10.3% 12.7% 25.8% 20.8%

ROE 22.3% 37.8% 34.8% 43.5%

ROCE 17.8% 26.6% 35.6% 39.0%

Working Capital Days 48 35 -1 27

Debt/Equity 0.3 0.4 - 0.1

FCF Yield 3.3% 3.1% 3.9% 4.3%

Dividend Yield 1.2% 1.3% 3.2% 1.4%

FY13-16E EPS CAGR 20.4% 19.1% 9.4% 19.3%

#5 Impact - Economic Moat Index Quantitative Index

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Appendix

32



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Sector Outlook CautiousWhat women want? Hair care remains a focus area

Among products used to feel more attractive, hair care remains prominent

Source: Dove global beauty trends, spark capital research

21% of people surveyed wanted to change hair care appearance


Developing countries had a higher emphasis in changing their hair looks


Americans were in favour of hair care being integral part to attractiveness


4% 5%

11% 12% 12%14%

21% 24%

33%

45%

10% 11%12% 13%

17%

21% 22%

31%34% 34%

36%

0%

5%

10%

15%

20%

25%

30%

35%

40%

9%

21%

46%

67%

68%

70%70%

74%

75%

82%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Skin-lightening products

Skin-tanning products

Nail care products

Hair coloring

Make-up/color cosmetics

Body moisturizerFacial care products

Perfume

Hari Care product

Deodorant

65% 66% 67% 67% 67%74%

82% 84% 85%86%

Return to Page 2

33


R P 3


34/42


Australasia

Market Size: $~1bn

CY10-13 growth: 11.8%

Leading Brand:Schwarzkopf (Henkel)13.8%Per capita usage: $41

HC/BPC : 16.1%

Latin America

Market Size: $~16bn

CY10-13 growth: 11.5%

Leading Brand: Sunsilk(Unilever) 10.9%Per capita usage: $26.7

HC/BPC : 20.6%

North America

Market Size: $~12bnCY10-13 growth: 2.6%

Leading Brand: Pantene(P&G) 8.1%Per capita usage: $35

HC/BPC : 15.4%

Western Europe

Market Size: $~15bnCY10-13 growth: 2.6%

Leading Brand: LOreal Paris (LOreal) 15.5%

Per capita usage: $31.6HC/BPC : 17.3%

Asia

Market Size: $~20bn

CY10-13 growth: 8.4%

Leading Brand: Pantene

(P&G) 7.3%Per capita usage: $5.3

HC/BPC : 17.4%

Source: Industry data, Bloomberg and Spark Capital research

Africa & Middle East

Market Size: $~4bn


Leading Brand:Pantene (P&G) 6.6%

Per capita usage: $3.1

HC/BPC : 17.5%

Eastern Europe

Market Size: $~5bn


Leading Brand: Schwarzkopf (Henkel) 17.8%

Per capita usage: $14.7

HC/BPC : 17.5%

Global hair care trends

34

Return to Page 3


R t t P 5


35/42

Sector Outlook CautiousRise of the oils - G loba lly

The naturaltrend

The trend for morenatural ingredientshas been strong inhair care, with mostof MNCs launchingranges usingnatural or nature-inspiredingredients.

Giving rise to theuse of oils from flaxseed to grape seedoil, coconut oil andargan oil,

At Hometreatments

Hair oil were usedto nourish the hairand scalp deeply,keeping hairhealthy andprolonging the timeneeded betweenhair salon visits,thus saving money.

Proposition hadchanged fromcleansing tonourishment.

West MeetsEast

Companieslaunching productsthat weresuccessful in Asiainto Westerncountries

As western worldbegins to embraceproducts from east,prominentcategories as hairoils are witnessingglobal acceptance.

Key growth drivers of hair care globallly Popular brands across the globe

LOreal Offerings under Professionnal, Garnier and Kerastace brands

Moroccan oil Liz earle

Unilever offerings under Tressemme and Dove brandsP&Gs Pantene oiloffering

Sourc e: Indus try , Spark Capital ResearchSourc e: Indus try , Spark Capital Research

35

Return to Page 5

S t O tl k C ti


H i il th l b Return to Page 5


36/42

Sector Outlook CautiousHair oils across the globe

How hair oils fare in Europe

Officially becoming the fastestselling product in the multi-millionpound hair industry

Perception change was the keyto usage

Hair Oil replacing serums

Marketing terms used tosell hair oil1. Greasy hair bouncy2. Alternate to salon

treatment3. Protection against

damaging blow dries4. Sweet smelling5. Home dye conditioner

6. Multi tasking as hairstyling andconditioning.

Given the rising inflation,

more consumers are lookingto lessen the number of saloonvisits, however prefer keepingtheir hair glossy andnourished Mintel publications

One in five women nowregularly use a hair oil to doeverything from washing offhard-to-rinse product toconditioning frazzled hair andgiving a glossy finishLatest findings from LOreal

The key to the popularity ofthese products is that they areso versatile - whether your hair

is dry, flat, curly or fine, thereis an oil to suit Tracy Rogers,salon manager at Gina ConwayAveda in London

Celebrity Followers1. Scarlett Johansson2. Lady Gaga

3. Jessica Biel

Popular Brands1. LOreal Professionnel

2. LOreal Krastase3. Garnier Olia4. Aveda Beautifying

composition

Threats1. Premium priced2. Popular only in few

countries

36

Return to Page 5

S t O tl k C ti


H i il th l b Return to Page 5


37/42


How hair oils fare in US

Oils are increasinglybecoming a hair cum skincare proposition in US

Hair oil treatments usingargan based Moroccan oilmost popular

Popular perception against oil in US1. Greasy look2. Clogs pores

3. Does not absorb4. Heavy proposition

"We've been trained to think ofoil as heavy or thick or bad,Terry Darland, president ofChristian Dior Perfumes NorthAmerica

U.S. consumers seem more

comfortable with the idea of oilfor the hair than for the skin,because hot-oil hairtreatments have been on theU.S. market for yearsVirginia Peandro, manager ofskin-care product innovation forGarnier

"A lot of customers are feelingthis pull back to basics,"Maren Giuliano, global WholeBody coordinator for WholeFoods Market Inc.

Marketing Drab

Neutrogena foreverpromoting oil-free look,

dubbing oil as greasy

P&G renames oil of olaybrand as Olay

What is making hair oilclick?1. Anti ageing propositions

2. Natural care3. Noursihment4. Lighter proposition

Popular Brands1. LOreal Professionnel2. Moroccon Oil3. Garnier Fructis

Threats1. Usage is limited2. Multipurpose usage

37

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Hair oils across the globe Return to Page 5


38/42


How hair oils fare in other geographies

Africa: Breakage prone hair, thus hair care protection and use of hair care

products is common for African people. However off-late hair extensions becoming popular, saving

consumers the money and time spent in maintaining hair. LOreal Carson hair oil treatments and Dabur Vatika hair oil

variants are popular among the branded players. Huge unbranded and un-organised market though considering the

availability of various oils as Argan oil, Olive oil Castor oil, jojobaoil, avocado oil, virgin coconut oils.

Traditional market, where MNCs have found it difficult to breakinto traditional categories, similar to India.

GCC: Wide market for hair oils, given the large Indian Diaspora. Market

beyond the Indian diaspora remains miniscule. Dabur Amla hair oi l is the largest hair oil brand in the GCC and

commands more than 50 per cent of the market. Dabur VatikaHair Oil, another key Dabur brand, is the market leader in thevalue-added pure coconut hair oils category

Dabur is continuously though scouting to break open the middleeast consumer by launching variants as Olive Oil.

Latin America: Small hair oil market, the market dominated with hair care

offerings from Unilever, P&G and LOreal.

Given the high salon pattern in markets as Brazil, Salon styledserums and hair oils typically tend to do better.

However inflation led Latin American markets growth to slowdownin coming years.

Sourc e: Indus try , Spark Capital Research

38

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Is there a market at all for LHO in south? Return to Page 23


39/42

Sector Outlook CautiousIs there a market at all for LHO in south?

Light hair oil user profile

- Unisex

- 60% users aged between 15 and 39

- 2/3rd Urban

- Economic class SEC A1,A2,B1,B2

27.5%

26.5% 26.7%

South India ROI India

% of population aged between 18-32

1.00

0.930.94


Sex Ratio

83.8

79.780.4


Literacy

73.2

69.170.1


% of number of nuclear families

9.5

4.86.0


Mobile Ownership (%)

3.82

4.033.98


Average household size

70.1

39.747.2


Television Ownership (%)

58.9

59.1 59.1


% of houses with more than 2 rooms

78754

54493 59966


Average Per Capita Spend (Rs. pa)

41.2%

28.5% 31.2%


Urban %

39

Return to Page 23

Source: Census India, Spark Capital Research



Where has it been going wrong? Return to Page 23


40/42

Sector Outlook CautiousWhere has it been going wrong?

Proudly South

ExperimentationShattering the myth

New cool Social Change Humbly Speaking

Intellectual

superiority

Character vitalAdapting Traditions

Portraying southas world beaters,acknowledgingand rewarding

South'sexcellence inrelevant fields

Using south celebrity asnational brandambassadors does the

trick

The region iscrafting an

independent styleaesthetic. Creating a

wave that spansacross art, fashion &

entertainment

South is no morestereotyped asthe docile andquiet, socialawareness

questioning takesprominence

South has beenaverse to

exhibitionistculture, riches

and fame to co-exist withhumility.

South still seemsstrongly

associates itselfwith its

traditional habitsand customs

South Indiansthough likes theiradvertisements to

reflect a slice of life,aesthetic appeal,style quotient is

essential

One of the mostexperimenting

consumers,however sticking

to typicalapproach may failto strike a chord

It is clearly mind andbody when it comes

to south, brandstrying temptation

quotients have notbeen successful

Brands that haveassociated in

portrayingcharacters for its

identity have donewell in connecting

with consumer.Light hair oils syncingmodern practices withtraditional values have

stuck the chord.

Light hair oils positioningthemselves as lifestyle

options are beginning toattract better traction

Deodorant brands catchthe attention aplentygiven their traditional

style quotients

Wanting for a change mightgo well with light hair oils

given they attempt to break atraditional habit

Light hair oils could breakthe coconut jinx

challenging the southconsumer to experiment

Light hair oils positioningthemselves as alternate to

serums /styling agents couldidentify with south

Acknowledging the need forpost wash nourishment withstyling might do the trick for

light hair oils

Illustrating light hair oilusers with virtues of

confidence and courage.

40

g

Source:JWT, Spark Capital Research




41/42


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compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representativesshall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions oractions taken in reliance on the report or the inability to use or access our service in this report or for any loss or damages whether direct or indirect, incidental, special or consequentialincluding without limitation loss of revenue or profits that mayarise from or in connection with the use of or reliance on this report.

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Absolute Rating Interpretation

Buy Stock expected to provide positive returns of >15% over a 1-year horizon

Add Stock expected to provide positive returns of >5%


42/42

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The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the researchanalysts compensations was, is or will be, directly or indirectly, related to the specific recommendation or views expressed in the report.

Additional Disclaimer for US Institutional Investors

This research report prepared by Spark Capital Advisors (India) Private Limited is distributed in the United States to US Institutional Investors (as defined in Rule 15a-6 under the Securities

Exchange Act of 1934, as amended) only by Decker & Co, LLC, a broker-dealer registered in the US (registered under Section 15 of Securities Exchange Act of 1934, as amended). Decker &Co accepts responsibility on the research reports and US Institutional Investors wishing to effect transaction in the securities discussed in the research material may do so through Decker & Co.All responsibility for the distribution of this report by Decker & Co, LLC in the US shall be borne by Decker & Co, LLC. All resulting transactions by a US person or entity should be effectedthrough a registered broker-dealer in the US. This report is not directed at you if Spark Capital Advisors (India) Private Limited or Decker & Co, LLC is prohibited or restricted by any legislationor regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Decker & Co, LLC and Spark Capital Advisors (India) Private Limited arepermitted to provide research material concerning investment to you under relevant legislation and regulations;

Disclosure of interest statement Yes/No

Analyst ownership of the stock No

Group/directors ownership of the stock No

Broking relationship with the company covered NoInvestment banking relationship with the company covered No

42

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