Top 5 Cosmetic Stocks 2024 by Market Cap: Risk & Advantages

Introduction

Recession or Inflation, irrespective of the economic condition, there is one sector that never has a dull moment  Cosmetics. The Indian Beauty & Personal Care market has seen a major evolution with an increase in digitalisation. Cosmetics have become part of the lives of the common people more than ever. The emergence of E-commerce in this segment has also acted as a catalyst in the growth of the Beauty and personal care segment. 

This also calls for the grooming of your portfolio as well. So, let’s look at some top 5 cosmetic stocks that can make your portfolio look good. 

Why Cosmetic Stocks are must have in a portfolio? 

Earlier, the beauty & personal care segment was a mere product of hygiene and looking good on family occasions. Now, personal care means more than hygiene and people want to look good & feel good about themselves. This shift in mindset is the major reason that has made beauty & personal care one of the fastest-growing markets in India. 

People have also become brand-conscious and are ready to pay higher prices for brands that produce chemical-free & environment-friendly products. This has led the way for new-age cosmetic brands to enter the market which would further increase the industry size. As compared to the US market, the Indian Beauty & Personal Care market is still very under-penetrated which leaves a huge scope for both new and existing players. 

 

 

Industry Challenges

Though the market is growing at a faster pace, certain challenges are inevitable for cosmetic companies. 

Low Customer Loyalty:

Cosmetic products are something that has low brand loyalty of customers. The customers in this segment can be both price-sensitive & quality-sensitive. Price-sensitive customers will shift brands for even a lower price difference. On the other hand, quality-sensitive customers will shift to a new product if that product is better marketed. The easy access to different cosmetic brands because of e-commerce has further given a wide range of options to customers for comparison. 

Competition from Unorganised Market:

The Cosmetic Market is highly unorganised with fewer entry barriers. This gives stiff competition to already existing big market players. Also, establishing a cosmetic brand requires massive spending on advertisement to fight the increasing competition. 

 

Advantages of Investing in Cosmetic Stocks

• These are all-weather stocks that are unfazed by the recession or economic slowdown.

• This is one the fastest growing markets in India so adding such stocks in your portfolio can increase the overall return. 

• Demand for cosmetic products is going to increase dramatically in the next few years which will be reflected in the stock prices. 

• The Indian Beauty & Personal Care market is expected to grow at a CAGR of 10% by 2027. 
  
  

Risks of Investing in Cosmetic Stocks

• With more & more new entrants, it is becoming difficult for brands to differentiate their products. So, investing in a particular cosmetic stock will become risky with low brand loyalty. 

• Beauty & Personal Care industry is highly dependent on the Speciality Chemicals industry. Indian companies were highly dependent on China for the import of speciality chemicals pre-covid. This has changed post covid with an increase in domestic manufacturing of these chemicals. However, the speciality industries are India are still at a development stage and any disruption in this industry can cause a serious problem for cosmetics manufacturers.

 

 

Top 5 Cosmetic Stocks by Market Cap

Here are the Top 5 Cosmetic Stocks based on Market Cap. 

1.Hindustan Unilever Ltd. 

There is not a single household in India which has used the personal care product of HUL. It is one of the largest FMCG companies in India which draws around 40% of its revenue from Personal Care products. The popular brands in this segment include Ponds, Lux, Vaseline, Tresemme, Dove, Lifebuoy and Lakme. The Company has established its strong distribution network and brand presence over the years. The Company is present in the segment of Skin Cleansing through its brands Lux and Hamam, in the Hair care segment through Clinic Plus & Indulekha, in Skin and Colour Cosmetics through Ponds and Vaseline and in Oral care through its brand Closeup. The Brands Ponds and Vaseline are better-performing brands with double-digit quarterly growth. 

2.Dabur India

Dabur India caters to Oral care and Hair Care in the Personal Care segment. The Company enjoys around 16% market share in Oral Care and 17% market share in the hair care segment. The popular brands in these segments include Red Paste, Vatika Naturals and Amla Hair Oil. The Company enjoys market leadership in Hair Oil, Hair Gel, Hair Cream and Hair Mask in countries such as Saudi Arabia, Egypt, and UAE. 

3.FSN E-Commerce

FSN E-Commerce which is commonly known by its brand name Nykaa is one of the new age internet companies that is engaged in D2C business. The Company offers beauty and fashion products through both online and offline modes. Apart from selling the brands of other companies, it also offers cosmetics under its own homegrown brand “Nykaa”. It is also a private label manufacturer for Kay Beauty which is a brand owned by Katrina Kaif. With an increase in e-commerce purchases, the company has been witnessing a positive double-digit growth in its Gross Merchandise Value (GMV). The Company draws around 80% of its revenue from the Beauty & Personal Care segment.

 

 

4.Gillette India

Gillette India is a subsidiary of P&G USA. It is mainly present in the men’s grooming segment and offers products that cater to both mid-range and premium-range customers. The Company has also forayed into female grooming with its brand Venus. The Company has revamped its branding campaigns through changes in advertisement and packaging. This has positively contributed to the top line. The Company enjoys a lion’s share in the Blades and Razors category in the Grooming segment. 

5.Emami

Emami is one of the oldest cosmetics companies that manufactures ayurvedic-based cosmetic products. The Flagship brands of this company include Boroplus, Fair and Handsome, Mentho Plus, Zandu, Navratna, Dermicool and Kesh King. The Company has been facing tough competition from the new age brands. This has led Dabur to make strategic investments in companies like The Man Company, Brillare and Axiom Ayurveda. Although the company is combating with domestic competition, it is enjoying a double-digit growth in the International business in the SAARC & CIS countries. 

Conclusion

The cosmetics industry is largely dependent on the customer preference which are bound to change over time. At the same time, it cannot be denied that this industry is experiencing some massive tailwinds. This makes this industry attractive for investors in the long term where short-term risks of changing customer preferences can be neutralised.

 

 

Disclaimer: This information is for informational purposes only and should not be considered as investment advice. Always do your research and consult with a financial advisor.