Consumer Spending On Personal Care Isn't Surging Back Yet, Says RSH Global

Consumption in personal care is unlikely to normalise until the festive season since Indians are keeping a tight watch on their spending as inflation continues to pressurise income, according to RSH Global Pvt.'s Sunil Agarwal.

"Demand is still a combination of push and pull. It's not a pull-oriented demand totally," Agarwal, chairman of RSH Global, which is known for brands such as Joy, X-Men, and Karis, told BQ Prime. "The industry continues to push discounts and higher promotions to generate demand in the highly inflationary environment. And while there is value growth due to premiumisation, volumes remain under pressure," he said.

The Kolkata-based company derives about 65% of its total sales from tier 2 towns and beyond, while the remaining comes from metros. Consumer spending is recovering in an imbalanced way, with the mass category not seeing growth, Agarwal said. But a gradual pickup is expected in the second half of the year as inflation cools. During this time, RSH Global will also expand its footprint.

"We have a winter-heavy portfolio, and the demand-heavy months for us, which are October–December, saw a dip in consumption in the absence of a harsh winter ... Then the January-March quarter also didn't see any growth," said Agarwal. "However, we expect things to improve this fiscal, albeit gradually, as inflation cools and sentiment revives.".

The personal care products maker aims to grow by about 25% annually to touch a turnover of Rs 1,000 crore in three years. In FY24, RSH Global expects to clock revenues of Rs 650 crore, up from Rs 500 crore in the last fiscal.

The growth would come primarily from strengthening its foray into its focus markets and gaining traction in online sales.

"We have identified six focus markets for the next three years— West Bengal, Maharashtra, Uttar Pradesh, Madhya Pradesh, Rajasthan, and Delhi—where we are expanding general trade," he said.

Currently, the company directly caters to two lakh outlets, and its products are available across 1 million outlets. "To go directly to rural markets is difficult for an organisation of our size, so we are onboarding sub-stockists in every major town and village to expand our reach," he said.

He expects these focused markets to contribute 30% to the topline in the coming year. The company plans to tap the Bihar and Gujarat markets as well, Agarwal said. North is currently the dominant market for RSH Global, as two-thirds of its sales come from winter products, followed by western and eastern markets. It doesn't have a presence in South India.

The homegrown company, however, is ramping up its summer portfolio and expects to take the product mix to 40:60 of summer and winter this year from 33:66 earlier, said Agarwal. "We have traditionally been a winter-heavy organisation, but now we are actively investing in facewashes and the sunscreen category," he said. The company is focusing primarily on key categories such as facewash, body lotion, moisturisers, and sunscreen.

The company intends to spend 25–30% of its revenue on marketing.

The company is partnering with local chains in each state to boost sales. It is also tapping into modern trade, which comprises 30% of the total sales.

Besides, Agarwal expects sales of Rs 125 crore from online channels this fiscal, which is nearly three times what it made in FY23.

However, the company is not actively pursuing its own direct-to-consumer channel for now. It is rather betting on third-party retailers to push sales.

"We forayed into online sales only during Covid-19 and closed last year with sales of Rs 55 crore," said Agarwal.

"Online was never a viable channel for a mass brand like us, given the high costs associated with delivery, but now we are doing some 50–60 online-only launches, focusing on premiumisation, and the offtake has been really good," he said, expecting this channel to contribute 20% to sales in 3 years.

India's personal care market size is estimated to be Rs 20,000 crore, growing at 10-12% annually, while the company has been registering almost double that growth, Agarwal said. The industry is also seeing new players with deep pockets, like Reliance Retail, as well as new-age direct-to-consumer brands, all competing to grab a greater share of the market.

But the RSH Global chairman is not concerned about competition.

"Reliance getting into FMCG is great news. ITC getting into personal care was even bigger news 15 years ago. We are a 30-year-old company, and we have faced all kinds of disruptions. But we are still surviving. So, I'm not concerned about competition," said Agarwal. "If we can grow in double digits, we shall remain ahead of the curve irrespective of competition."

RSH Global is also setting up its third manufacturing facility at Baddi, Himachal Pradesh, at an estimated investment of Rs 70 crore. This is expected to commence operations by February–March 2024.

With the new plant, the company intends to increase its total production capacity to 35,000 metric tonnes from the current 15,000 metric tonnes.