Beauty and Personal Care Q3 2017 Quarterly Update: What does India’s Goods and Services Tax Mean for the Industry?

Unilever and L’Oréal reported a slowdown in India in the last quarter, due to trade stock levels thinning ahead of implementation of the Goods and Services Tax (GST) on July 1st 2017. In anticipation of the reform, many retailers and wholesalers were apprehensive about the lack of clarity around its potential impact. However in the long term, the reform could see some key players in India’s staple beauty and personal care arena reaping rewards.

A recent Euromonitor International Report based on forecast GDP revisions and Euromonitor’s Macro Industry Forecast Model entitled Beauty and Personal Care: Quarterly Statement Q3 2017, reveals that India was the beneficiary of some of the most significant forecast upgrades in the previous quarter, and also one of the few markets globally where the oral care category was upgraded. The GST in India will decrease the prices of staple products, largely oral care, bar soaps and hair oils, which will be taxed at a lower 18%, from a previous levy of around 24%.

 Retail Value Sales in India, Real US$ mn, 2016-2021 CAGR %: Sun Care, Depilatories, Mass Beauty and Personal Care, Skin Care Men's Grooming, Fragrances, Baby and Child-specific Products, Colour Cosmetics, Hair Care, Bath and Shower, Oral Care, Deodorants

In India, everyday commodities, such as oral care products, are highly price elastic and easily substitutable for cheaper alternatives, such as neem sticks or toothpowders, especially in rural communities. Apart from the basic necessity products such as oral care, hair oils, bar soaps and henna hair colourants, the beauty and personal care industry mainly targets the urban consumers. Therefore discretionary items, such as sun care, are more inelastic because they remain niche and in the domain of consumers who can access it, afford it and see its value.

With this in mind, the new tax structure should benefit players including Colgate-Palmolive, leader by some distance in toothpaste in India with a 54% market share, Hindustan Unilever and local powerhouses such as Patanjali, as price is a fundamental purchase motivator even in the most basic of products.

 

To find out more about this topic and other key industry activity in Q3 2017, you can access the full report. For more details on GST, Euromonitor International will be publishing an extensive report entitled The Impact of the 2017 Goods and Services Tax (GST) on Beauty and Personal Care in India in September 2017.