Services next big idea for consumer goods firms

Two Indian consumer goods firms reinforced their commitment to services last week. Hair care major Marico launched Kaya Life Clinic, a chain of professional weight control centres, its second diversification into services following 48 outlets of Kaya Skin Clinics across Asia.

South-based CavinKare announced plans to expand its salon brand, Green Trends, from the current 35 to 70 by the end of 2007 and 140 by end-2008.

"About 40 per cent of people in the urban areas are obese and there is a great demand for such services," said Marico Chairman and Managing Director Harsh Mariwala at the launch of Kaya Life.

FMCG majors such as Hindustan Unilever have  forayed into consumer services through the franchisee model. The Rs 12,000 crore (Rs 120 billion) HUL would not be making too much money from services at present.

But brand consultants said, "HUL makes image profits from Lakme Beauty Salon and financial profits on the brand fee paid by franchisees."

Although HUL's Surf Laundry Service was rejected by the Indian consumers, the company has increased its presence in the beauty and therapy space.

The company currently has 40 branches of Ayush Ayurvedic health care centres all over India and more than 100 Lakme Beauty Salons compared with 88 last year. Global beauty care major L 'Oreal has also associated with the company with certified hair care salon chain, Enrich, in Mumbai.

The profit margins that FMCG companies derive from consumer services are 2.3-2.6 times higher than their mainstream products business, according to brand consultant Harish Bijoor.

Marico expanded its consumer services through Kaya Life because it saw a huge opportunity. "The market for Kaya Life that we are targetting is about Rs 1,500 crore (Rs 15 billion)," said Kaya Skin CEO Rakesh Pandey.

In 2006-07, Kaya Skin registered a turnover of Rs 75 crore (Rs 750 million) compared with Rs 48 crore (Rs 480 million) in the previous financial year. CavinKare claims to have clocked revenue of Rs 15 crore (Rs 150 million) from its beauty services business last year.

"Kaya Life will also have similar profit margins as Kaya Skin," added Marico Chairman Harsh Mariwala, at the launch of Kaya Life. Marico has plans to open an additional 15-20 clinics in India and West Asia in FY08.

However, market research majors feel that the market is still under-exploited. Most companies providing services are targetting the upper-middle class income group and, hence cater to a niche audience. But, a need exists across all income levels, say research experts.

AC Nielsen, a market research company, surveyed 25,408 internet users in 46 markets spread across Europe, the Asia-Pacific, North America and West Asia on their personal grooming habits.

Of every five consumers who bought personal care products,  three invested in personal grooming to feel better about themselves.