THE ACQUISTION OF INDULEKHA

HUL signs agreement with Mosons Group for acquisition of of its flagship
‘Indulekha’ brand on 17-12-2015 .
Hindustan Unilever Limited (HUL) announced that it has signed an agreement with
Mosons Group to acquire its flagship brand ‘Indulekha’. The proposed acquisition
is in line with HUL’s strategic intent to strengthen its leadership position in Personal
Care by providing an impetus to its play in the evolving Premium Naturals segment.
The deal envisages the acquisition of the trademarks ‘Indulekha’ and ‘Vayodha’,
intellectual property, design and knowhow, for a consideration of Rs. 330 crores,
payable upon closing of the transaction and a deferred consideration of 10% on the
domestic turnover of the brands each year, payable annually for a 5 year period
commencing FY18.
The transaction is subject to fulfillment of certain conditions and the parties will
work together to complete this over few months. Mosons will continue to manage
the business until the completion of the transaction.
Sanjiv Mehta, CEO & Managing Director of HUL, said: “The acquisition of Indulekha
brings to HUL a premium brand with strong credentials around Ayurveda that will
complement our existing portfolio and strengthen our presence in the Hair Care
category. We are excited by the strong equity that the brand enjoys among
consumers and see an opportunity in leveraging it’s ‘naturals’ and therapeutic
positioning.”

Indulekha was first launched in 2009 as a premium Ayurvedic hair oil. Over the
years ‘Indulekha Bringha Oil’ has carved out a niche for itself supported by
endorsements and sustained investments in brand building. Indulekha was
relaunched in 2014 with a unique comb like cap that aids direct application of oil
on the scalp, an innovation that has delighted consumers since its introduction. The
brand, with a strong presence across Kerala, Tamil Nadu and Karnataka and a
recent foray into Maharashtra, had a turnover of Rs.100 crores and an EBITDA
margin of around 30% for the year ending March 2015.
The acquisition was of brand and also Intellectual Property and technical knowhow
and HUL, with this, can manufacture these products in its own facility.
Once HUL starts production, from 2017-18, 10 per cent of the sales revenue would
be given to Mosons Group for five years.
Indulekha: Common man's premium product

launched in 2008-9, followed by Indulekha Gold Hair Oil, which was renamed and
relaunched in 2010-11as Indulekha Bringha Oil, now the group’s flagship. The fine-
tuning helped. As they marketed the brand as a 100% ayurvedic and medicinal
brand rather than a cosmetic product and stressed on its main content, bringha.
Today, the brand has 10 products in the hair and skin care segments.
This premium brand in Kerala on the proposition that hair fall and hair loss cuts
across demographic lines and hence the price should not matter. A 100 ml bottle
of Indulekha Bringha Oil costs Rs 432. By 2012, the company had roped in Carat
Media as it expanded to other areas including Maharashtra and the Middle East.
In 2014, the company worked over possible innovations and introducing a product
differentiator. That is when the selfie comb bottle happened.

The bottle with a patented combshaped cap has been popular since its launch in
2014, with sales rising at a 30% pace since then. The company had drawn up plans
for expansion to other Indian cities when it caught HUL’s attention.Now it’s the
premium FMCG from HUL.
MARKET DYNAMICS AND CONSUMER INSIGHTS

TRENDS IN THE HAIR CARE INDUSTRY INDICATE PROMISING POTENTIAL AS BOTH

URBAN AND RURAL AREAS ARE LOOKING FOR MORE THE BEAUTY MARKET IS
LETTING ITS HAIR DOWN.
 Men consider hair the most important aspect of beauty, beating the second
most important aspect of physique by as much as 2.5 times.
 One of every two rural consumers is seeking entry-level hair nourishment
products, resulting in the rural market contributing 54% to the segment. On
the other hand, two of every five consumers in urban areas are looking for
problem-solving products, leading to urban markets contributing 44% to the
segment.
 Premiumisation is a clear avenue for growth in the hair care industry; the
current growth of the premium segment is between 1.3 and 1.6 times as
compared to overall hair care category.
 Sub-segmenting (e.g., offering solutions for specific problems) is key to
innovation and renovation in the hair care industry.

The new individual identity has found its home in a head full of hair. From a
mohawk to a fringe, hair can define an individual’s personality. In a Nielsen
study on beauty conducted in the second half of 2017, with over 5,000
respondents, most consumers said they think of hair when they think of
beauty. As a result of growing interest, the battle for better hair has gained
considerable traction in an age when appearance affects reputation. While
both men and women are increasingly placing more importance on their
hair, it’s the men who consider hair a priority when defining beauty. Women,
on the other hand, look at beauty more holistically, and they have their sights
set on various aspects of beauty such as face, skin and more.
HAIR CARE PROVIDES THE OPPORTUNITY FOR GROWTH IN BEAUTY
In the race for beauty, the hair care industry has evolved to a base of INR
22,500 cr (US $3.3 billion). Categories operating in the business have
experienced a 9.6% value compound annual growth rate 1 (CAGR) . New-age
segments have championed this growth; compared with the overall hair care
industry, colorants are growing at 1.5 times and conditioners are growing at
1.2 times.

17% of respondents said Healthy Hair is the attribute that comes to mind
when you think of personal beauty.The varied preferences noted by
respondents in terms of product benefits they seek leads to a mix of
opportunities. A few of the hair care products still reside in the basic
maintenance or nourishment space, while two in every five of the hair care
retail sales is attributed to problem-solving products. This sets a good base
to drive consumption for the category.
Demand for hair care products is increasing in both rural and urban markets,
leading to rising opportunity throughout India. Consumers in urban areas
spend 3 times as much on hair care products as those in rural areas, providing
significant scope for brands to grow in the hinterlands. Meanwhile,
consumers in urban markets aren’t just thinking about basic hair care
anymore. Many have moved to problem-solving products. Trade channels
are riding on this momentum, as chemists in urban areas are stocking more
problem-solving and styling products. On the other hand, the industry should
not overlook the rural market. Recent sales data indicates that consumers in
these areas continue to seek out entry level hair care products providing
nourishment brands with a sizeable opportunity. Both ends of the market
spectrum, consequently, are groomed for growth, with a higher momentum
favouring rural India.
Demand is increasing for hair care products, and the market is poised for
growth. This scenario has facilitated many new launches in the hair care
industry, with new products and brands appearing to capitalise on the
opportunity. But the success stories are limited to just a few, as the size of
innovation and renovation in the category is minimal in comparison to the
value of new launches across other personal care categories.

The opportunity for hair care to address specific consumer needs, in the way
the personal care industry has, is substantial. A sliver of this success can be
seen in certain brands that have solved specific issues such as covering grey
hair. Beyond that, even dry and damaged hair segments have seen a few
winning stories worth retelling. Therefore, new launches that are committed
to innovation are much more likely to tap into this opportunity and profit
from it.
Problem solving and styling products on store shelves are indicative of the
consumers’ inclination to spend more for a better hair day; this trend is
particularly driven by consumers in urban markets. Rural markets, on the
other hand, are thriving on mass pricing, and consumers want to meet basic
hair care needs with nourishment at the core. While there is an expansion in
both ends of the market, there is a clear opportunity to tap into the potential
to premiumise, and the path is through the incremental cost coupled with
the specific consumer needs being addressed.

It is clear that the hair care category is evolving and trends are focused on
products that solve hair problems. While urban consumption is higher
among these types of products, both urban and rural exhibit high
opportunity. As lifestyle changes and pollution rise, so does the potential to
innovate to solve these problems. Moreover, through the growth in demand
and the gaps in meeting them, hair care companies willing to evolve can
benefit significantly. The hair care industry is on the rise as the world turns
to the beauty market for their personal needs. The spotlight is on the
evolving consumer, as both men and women are looking to have their hair
care needs met.
Qualitative view of the Industry