Bowled over by the passion and energy of young entrepreneurs, I often find myself believing that the future of entrepreneurship is with the youth. But then, every once in a while, I come across seasoned professionals like Raja Varathraju who remind me of the value that experience and maturity bring to the entrepreneurship table.
Think of this – Raja spent 4 years at CavinKare (the company that revolutionized FMCG packaging with Chik shampoo in a sachet) where he learnt the basics of the personal care market under mentoring from the company’s chairman - CK Ranganathan. Then he learnt how global brands are launched at Ford India, where he led the INR 100 cr launch of Fiesta. From there, a 3 year stint culminating in a national marketing role at Henkel’s cosmetics business (brands like Schwarzkopf & Fa). And finally, a 4 year ongoing stint as promoter of Identiti Design where he has contributed to this advertising & creatives company scaling 10X. Now that certainly seems like a solid background to launch Syona Cosmetics, a company that is looking to carve its niche in the $4.6 bn Indian cosmetics industry!
It’s all about strategy
$4.6 bn may sound really lucrative for market size, especially when it is growing at around 20% pa. But this is a complex industry. First, it is highly segmented into hair-care, skin care, colour cosmetics etc., each of which have their own sub-segments with market leaders, premium brands and mass-market products. Then there is gender bifurcation, which gets even more complicated when a women’s product like Fair & Lovely receives significant share of sales from male customers. Brands really matter and advertising budgets are huge (personal care products contribute nearly a fifth of overall TV ad spending). Led by global majors like Unilever, P&G and L’Oreal, the market sees internal competition within brands from the same company. Eg: Lakme competes with Ponds in skin care, while facing competition from Elle 18 in lipsticks and nail enamel – all 3 brands are owned by Unilever!
So how does a small, bootstrapped startup like Syona seek to create its niche in this market of Goliaths? According to Raja, it’s all about strategy – “Consumption of cosmetics can be broken into 3 channels – salon, post salon and retail. Breaking directly into retail is extremely tough. Syona’s strategy is to target in-salon products, also known as professional products. These are highly effective products but require an expert (salon beautician) to administer them.” Through this, they aim to get into post salon, ie, products sold at salons for personal use, on the recommendation of the beautician. It is only after they have established a critical mass in the salon and post salon segments, and identified the best performing products, that they plan to enter the retail market.
Hearing it from Raja, this strategy seems to make a lot of sense. Looking back at Kotler’s 4 Ps of marketing, the focus on Price and Promotion in retail can be a major challenge. On the other hand, Product and Place in the salon segment are easier and more effective to address. In terms of Product, Raja explained that established players like L’Oreal already dominate professional care products in the hair-care segment, but the dynamics for skin care are very different. On one end, you have the really expensive imported products, which set back the salon by at least INR 500-600 for a simple facial. On the other end are local products made by unorganized players that cost nearly a tenth. This creates a huge gap that Syona is targeting – branded, high quality, affordable skin-care products. In terms of Place, salons work really well as one does not need as extensive a distribution network as is required for retail. At the same time, when a consumer sees a particular product being used/ recommended by their salon, there is immediate acceptance of it as a high quality, high effectiveness product.
Pricing does continue to be a very important factor and that is where Syona is leveraging another important marketing concept – having products in various price segments. In its in salon skin-care product range, Syona has come with 3 different price points in order to target the entire spectrum of salons and also ensure that the salons have multiple options that they can offer to customers. They have also introduced both bulk and single use packaging to appeal to different salons. Small packages (ranging from 50 grams to 100 grams) are a key aspect of the strategy as products currently available in the market are at least 0.5-1 kg. Raja explains, “When salons buy in large quantities, a major portion goes waste, because the freshness and effectiveness are lost.”
Breaking ground through innovation
Two aspects of innovation are extremely critical in the cosmetics space – formulation & packaging. As an example, Unilever spent Euro 1 bn on R&D in 2012 and has over 6,000 scientists, engineers, chefs and technicians working across 31 global and 90 regional development centres. For Syona, Raja brought in Balaji Balasubramanian to drive R&D. Balaji has over 20 years of experience in product formulation, quality and production with companies like Unilever, Emami & Clarion. He was working as a freelance formulation expert when Raja invited him to join Syona.
In addition, Syona has struck strategic alliances across Europe, USA and Middle East for formulations, training methodologies, salon management programs & community partnerships. The focus is on developing products with international quality but specifically adapted for Indian skin, especially from the perspective of melanin management. According to Raja, “Innovation will be a strategic growth pillar in Syona’s Blend-in and Stand-out strategy. As a new player, Syona will look to blend in with highly innovative products in existing categories but will lead with their combination of international quality at effective price points. This is because you can’t expect people to accept completely break-through products from an unknown player. However, once we establish ourselves, we will come out with some very innovative products.”
Raja touched upon this entire aspect of innovative products so frequently during my conversation with him that I just had to beg him for a quick peek. After some coaxing, Raja explained – “The typical consumer goes to a salon where he/ she is recommended certain pre-fixed packages which address specific aspects such as ageing, skin tone, skin texture etc. But what if the customer has early wrinkles, dry skin and a dark skin tone that they want to lighten?” Syona aims to introduce a more assessment based, customized approach to prescribing treatments that involves varying dosages and combinations of treatments.”
‘Skinning’ the market – road ahead
Syona launched its first products under the brand – Estrella Professional – only in September this year. Raja roped in Bollywood celebrity makeup artist - Ayesha Wadiwala – for the launch event called Indian Bridal Vogue 2013. Looking to cash in on the upcoming wedding season, the event was attended by over 600 professional estheticians in Chennai. Following the launch, Syona has already signed up with over 300 salons in Chennai alone. Helping Raja in training, relationship management and marketing is another seasoned professional, Anuradha Balasubramanian. She comes with almost a decade of experience in companies like CavinKare, Vodafone, and an education venture called HeyMath!Raja quoted reports from consulting firms like PWC that peg the salon market in India at INR 1,000 cr, growing at 15-20%; Syona will target at least a 10% market share. In the coming year, Syona will continue to work on “empowering the salon” by extending its salon partnerships across the top 15 Indian cities. They currently have 30 products and are looking to launch another 20 in the next 6 months. After evaluating the performance of these products in the test markets, they will look at a pan India expansion and also enter the post salon segment. For their expansion, Syona, which is completely bootstrapped as of now, will be looking to raise money from Angels and VCs.
A full-blown retail launch can be expected in another 1.5-2 years after which Syona will target overseas markets like UAE, South Africa and East Asia, through strategic tie-ups. In the next 5 years, Syona aims to clock revenues of INR 600-700 cr. Of this, 30-40% will come from salons, 15-20% from retail and the rest from overseas markets.
Words of wisdom
Raja comes from a fairly humble background. His father was a government servant and Raja attended a government-aided school in Madurai. While his career journey seems very well thought out in hindsight, Raja shared that it was only 7 years ago that he thought about entrepreneurship for the 1st time. What led him to this was the quest to always do something more in life. In Raja’s words, “Push yourself to do something higher, even if it is painful. At Henkel, when people asked me what they could do to retain me, I told them they could not as I have a need for a higher calling. Life is about enjoying the journey; excitement lies in creating something new, generating value and enabling inclusive growth.”
Raja’s 2 cents for others are, “The world is changing. Access to technology has created a new paradigm. What was impossible a few years back is possible now. If you have an idea, just go ahead and do it!”
Check out Syona Cosmetics here