Bajaj Consumer Care Limited

15th Annual Report 2020-21

Management Discussion & Analysis

Economic Review under ‘Self-reliant India’ movement to revive the country’s

Calendar Year (CY) 2020 marked an unprecedented collapse economic activity. The economic package is for different
in the global economy as the outbreak of novel Coronavirus strata of the economy including industries, MSMEs, common
(COVID-19) pandemic towards the end of CY 2019 inflicted people with the aim to cover land, labor, and liquidity
severe humanitarian costs on the world. To tackle the health related issues. The organizations have been assisted with
emergency, all major economies announced nationwide collateral free loans for businesses to revitalise the economy.
lockdowns, border shut down and social distancing norms, With the government’s focus on “Make in India” initiative,
bringing economic life to a standstill. This resulted in a custom duty has been increased on import of electrical
global economic growth to contract by 3.3% as against appliances, to de-incentivize their imports.
2.8% growth witnessed in CY 2019, marking one of the
The Reserve Bank of India (RBI) continued with the
worst financial crises. Global prospects continue to remain
accommodative monetary stance by bringing key repo rate
uncertain one year into the pandemic. Substantial fiscal and
and reverse repo rate to 4% and 3.35% respectively to provide
monetary stimulus packages released by the governments
monetary stimulus and trigger economic growth back to the
and central banks across the globe are playing a pivotal
earlier trajectory. The fiscal and monetary stimulus provided
role in this recovery. Successful vaccination program is
by the government and RBI would assist greatly in the
expected to further boost investor sentiments leading to
recovery of the economy.
kick-start in private capital inflows and fixed capital
formation. Backed by the improving macro-economic
The government re-opened the economy in a phased
indicators, the IMF estimates the global economy to grow at
manner since June 2020 with strict standard operating
6.0% in CY 2021.
procedures. Despite the challenges posed by the pandemic
(https://www.cnbc.com/2020/03/20/analyst-anticipates- in FY 2020-21, the outlook for FY 2021-22 seems promising.
worst-crisis-since-1929-amid-recession-fears.html) This is largely attributed to mass vaccination drives,
normalising business activities, the government’s thrust
Indian Economy on reviving infrastructure sector, revival in housing demand
backed by historically low-interest rates, improving banking
In line with the global economy, India witnessed major
balance sheet and India’s increasing prominence in the
economic disruptions in Financial Year (FY) 2020-21, as the
global supply chain.
outbreak of COVID-19 perversely impacted human health
and safety of the country’s inhabitants. This prompted (Source: https://www.businesstoday.in/current/economy-politics/
the government to undertake one of the worlds tightest india-steps-out-of-recession---gdp-grows-xx-in-dec-quarter/
lockdowns, bringing manufacturing and trade activities to story/432461.html )
a screeching halt. Prolonged lowdown exacerbated existing
vulnerabilities of the country including the weakened Inflation and CPI Inflation Trajectory
financial sector, private investments, liquidity constraints Inflation is directly linked to purchasing power. Consumer
and consumption demand. Mobility restrictions and social Price Index (CPI) and Wholesale Price Index affect the
distancing led to unparalleled supply-chain disruptions and monetary policy, which in turns affects the interest rates on
consumer demand fallout. This forced the Indian GDP to savings and borrowings/loans. It also directly affects saving
contract by 8.0% in FY 2020-21 as against a growth of 4.0% in capacity and plays a key role in planning the investments.
FY 2019-20, marking a recession since 1980. The inflation increased to 5.0% in February after having
(Source: IMF World Economic Outlook, April 2021) eased to 4.1% in January 2021. Most of the food sub-groups
are witnessing double digit inflation. Although the fuel
The government announced a special comprehensive inflation has somewhat eased, however, the core inflation is
package of ` 20 Trillion, equivalent to 10% of India’s GDP registering a generalized hardening to 6%.

58
 Corporate Overview Statutory Reports Financial Statements
02-09 10-76 77-159

The evolving CPI inflation trajectory is likely to be subjected year. Despite the regular intervention in forex markets by
to both upside and downside pressures. The bumper food RBI to control the volatility, rupee managed to appreciate to
grains production in FY 2020-21 should sustain softening 72.5 levels within a year. India’s foreign exchange reserves
of cereal prices going forward. While the prices of pulses, increased by US$ 99 billion during the year and currently
particularly tur and urad, remain elevated, the incoming stand at US$ 577 billion at the end of March’21.
harvest arrivals in the markets and the overall increase in
domestic production in FY 2020-21 should augment supply USD / INR Prices
which, along with imports, should enable some softening of
75.10 75.62 75.51 74.81 73.62 73.76 74.11 74.11 73.07
72.95 73.47 73.11
these prices going forward. While edible oils inflation has
been ruling at heightened levels with international prices
remaining firm, reduction of import duties and appropriate
incentives to enhance productivity domestically could work
towards a better demand-supply balance over the medium-
term. Taking into consideration multiple factors, headline
inflation is expected to hover around 5% for FY 2021-22.

Crude Oil Price Movement

Crude-oil in FY 2020-21 have seen a sustained rise in
prices. Crude-oil prices which had fallen to US$15 levels
at the start of pandemic in March’20 witnessed sustained
Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21
rise to more than US$65 levels by March’21. The production
cuts implemented by OPEC plus countries caused the
crude-oil prices to rise under the backdrop of reopening
of the global economy after the lockdown imposed in most Industry Overview and Developments
of the countries. Given the current global demand-supply Fast moving consumer goods (FMCG) is the fourth largest
balance, international crude-oil prices are likely to remain sector in the Indian economy. There are three main segments
firm above US$60 levels for rest of the year. in the sector, i.e., food and beverages which accounts for 19%
share; health care accounting for 31% share; and household
Brent Crude Oil Price $ per Barrel and personal care accounting for 50% share.
(Source: IBEF).
66.1
63.5
55.9 The government has allowed 100% Foreign Direct Investment
51.8 (FDI) in food processing and single-brand retail and 51% in
47.6
45.3 multi-brand retail. This would boost employment, supply
43.3
41.2 41.0
35.3
37.5 chain and high visibility for FMCG brands across organised
retail markets which in turn would drive consumer spending
25.3 and product launches. The sector witnessed healthy FDI
inflows of US$ 17.8 billion from April 2000 to September 2020.

Fast moving consumer goods have a high inventory turnover

and are contrasted with specialty items which have lower
sales and higher carrying charges. Many retailers only
Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

carry FMCGs particularly hypermarkets, big-box stores,

and warehouse club stores. Small convenience stores also
stock fast moving goods; the limited shelf space is filled with
higher turnover items.
USD INR movement
Rupee has witnessed extreme volatility during the financial The COVID-19 pandemic has caused an unprecedented
year. Rupee had depreciated above 75 levels at the outbreak impact on the global economy. It has disabled global
of COVID-19 pandemic in March’20. However due to series of trade and cross border transactions like never before. The
swift actions by Central bankers across the world including lockdown of countries and economies has resulted in the
RBI to support the economy, the volatility in financial markets overnight evaporation of demand for all industries. Global
subsided. Due to solid capital flows in Indian economy, supply chains have been hindered and it is expected that
Rupee started witnessing gradual appreciation over the consumption will pick up gradually where it was disrupted.

59
Bajaj Consumer Care Limited
15th Annual Report 2020-21

The pandemic has contributed to two other interesting The Hair Oil Industry
phenomena across the industry –one, shift in consumer Hair oils are considered an essential source of hair care and
channel preference towards omni channel approach and
treatment and have been consistently consumed by a major
second, an acceleration in the adoption of digital technology,
population of the country. The growth of the hair oil market
whereby even the general trade shopkeeper is using basic
is driven by fluctuations in hairstyle trends, rapid increase in
technologies such as WhatsApp to reach out to consumers.
disposable income, rapid population growth and a rise in air
Coronavirus pandemic and its subsequent lockdown has pollution across the world. Hair oils stimulate hair growth by
brought many significant innovations in the FMCG sector, getting deep into the follicles.
putting the worst behind, and posing optimism for 2021.
Adapting to the new normal and digitalization has made the The hair oil category has a negative growth in FY 2020-21
sector learn, innovate, and rise from disruptions. The rising compared to the previous two years, with a value growth of
sale of essential food items, hand sanitisers and disinfectants -7.0% and a volume growth of -4.3%. This was led by decline
supported to the sector’s performance. in H1 due to lockdown, the industry rebounded in H2 and
(Source: https://www.allresearchjournal.com/archives/2020/ growth is back on the long-term historical trend (Source:
vol6issue10/PartE/6-9-137-377.pdf ) Nielsen Offtake Nos. MAT Feb’21).

Overall Hair Oil Market

Overall Hair Oil Market - Volume Overall Hair Oil Market - Value

Vol (000’ Kltr) In ` Crs.

2.5 %
350 CAGR 317 314
16,000
301
285 14,000 13,518 13,720
300 269 R8 .3% 12,759
255 264 CAG
247 254
236 238 12,000 11,294
250
9,928 10,103
10,000 9,390
200 8,676
7,867
8,000 6,981
Growth 11.2%
Growth -5.3%

Growth -0.2%

Growth -0.9%

Growth -4.3%

150
Growth 1.2%

Growth 3.9%

Growth 8.7%

Growth 3.9%

Growth 8.0%

5,728
6,000
Growth 21.9%

Growth 12.7%

Growth 10.3%

Growth 11.8%

Growth 19.7%

Growth -7.0%
Growth 8.2%

Growth 5.7%

Growth 1.8%

Growth 1.5%
100
4,000
50 2,000

0 0
10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 MAT 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 MAT
FEB FEB
21 21

Industry Trends
Hair oil market continued to stabilize in Jan-Feb’21, with value growth at 1% and volume growth at 3%. Volume growth continues
to outpace Value growth as cheaper brands, especially, the Amla category has rebounded the fastest. All subsegments in the
category have started growing in Q4.
Value Growth % Vs YA
Hair Oils Mar 20 Q1 Q2 Q3 Jan+Feb YTD (Year to date)
All India (U+R) 1.5 -25.3 -1 -1.4 0.9 -7.6
All India (U) 2.5 -30.6 -7.7 -5.8 -3 -12.7
All India (R) 0.4 -18.5 7.9 4.5 6.2 -0.9

Volume Growth % Vs YA
Hair Oils Mar 20 Q1 Q2 Q3 Jan+Feb YTD (Year to date)
All India (U+R) -0.9 -21.5 1.6 1.5 3 -4.7
All India (U) 0.1 -26.9 -5.7 -3.2 -1.2 -10.1
All India (R) -2.1 -15.4 10.3 7.2 8 1.8
Source: Nielsen Retail Audit Report, Feb 2021, All India
U- Urban, R- Rural, YA- Year Ago

60
 Corporate Overview Statutory Reports Financial Statements
02-09 10-76 77-159

Rising Demand for Value-Added Hair Oil the fashion industry has also drastically driven the market
Value-added hair oils are hair oils that are specially designed growth. The online retail segment is growing at a fast pace
to provide extra care for hair. A significant share of Indian and is turning out to be a major sales channel for hair oils.
consumers is switching to value-added hair oils for hair-
Rise in disposable Income
related problems such as hair fall, and damage caused by
factors such as hair coloring. Moreover, rising affordability Rise in disposable income and growing middle class
factors is increasing the market cap for value-added hair oils population drives the demand for value-added hair care
as they are premium products and highly priced. Value-added products. The trend of color treated hair requires specialty
hair oil is gaining high popularity also because of the benefits hair oils that protect the color treatment as well as nourishes
they offer through the inclusion of natural ingredients in hair like traditional oils.
the formulation.
Wide Range of choices
Routine Application of Hair Oil Among Indian The availability of a wide range of hair oil products and
Consumers benefits about the products are attracting consumers
Traditionally, hair oil has a strong prevalence in the Indian towards the market. Major players are investing in various
market as applying oil on the hair has always been a routine R & D activities for further improvement and enhancement
of hair oil to meet the changing consumer demand. However,
measure followed by several Indians for ages. More than
the easy availability of non-oil hair care products may
35% Indians are believed to use hair oil daily which is a key
restraint the growth of the hair oil market.
contributor to the hair oil market in the country. Moreover,
consumers are known to use the hair oil for several benefits
High demand for quick and easy hair solution
such as healthy hair, conditioning and to combat dry scalp.
High demand for quick and easy hair-care solutions to
Growth Drivers and Opportunities address specific hair concerns is the key driver of the hair
oil market across key geographies. Hair oils containing
Inclination towards Organic Products
essential vitamins, antioxidants, and hydrating ingredients
The inclination of consumers towards natural and organic are widely preferred by millennial consumers to strengthen,
hair care products is the key driver that is surging the growth repair, and moisturize scalp and hair.
of the hair oil market. Growing consumer preference toward
origin-specific ingredients encourages women to spend
more on organic hair care products, which will further boost Growing
the hair oil market. preference for
Origin-specific
ingredients
Increasing concern on hair growth
The growing concern regarding maintaining hair growth and
the rising hair problems such as dryness, breakage, and hair Rise in
Quick and
fall due to poor lifestyle habits will increase the demand for Easy hair disposable
hair oil products in the market. solutions Incomes

High Social Media Presence

The high social media presence of a large youth population,
who constantly keep up with the changing hair care trends
are influencing the growth of the market. Various trends
glorified by many celebrity bloggers and stars also promote Rising concern
High Social Media
many hair care methods and therapies using hair oils. about hair
preference quality and
Celebrity endorsement of individual hair oil brands coupled
maintenance
with the growing adoption of professional hair products in

61
Bajaj Consumer Care Limited
15th Annual Report 2020-21

Business Overview owns the Nomarks Brand in India. The brand continues to
Bajaj Consumer Care Limited (herein referred to as ‘The maintain strong dominance on the distribution front and is
present across 42.6 lacs outlets as of March 2021.
Company”) is one of India’s well-established companies in
the Beauty Care Industry. The Company leverages science
The overseas business of the Company is increasing its global
and aesthetics to produce products that accentuate the
footprints with a focus on international business in terms of
beauty and create fascination. These brands are household
penetration, accessibility & availability of the brands to the
names and are found everywhere, from small shops in
consumers. The Company markets personal care brands in
villages to Modern Retail outlets and e-commerce websites. more than 30 countries, with primary focus in SAARC, Gulf &
It has undergone a huge transformation over the years, while Middle East, ASEAN, and African regions.
creating an impact by touching people’s lives in significant
ways. Today, it has been established as a dominant player In this negative growth phase, Bajaj Almond Drops has been
in India’s hair oil industry, with a pan-India presence, well- able to maintain the market on value 9.8%. (MAT FEB’21)
diversified product basket and multiple brands.
In the LHO category, the brand has continued to increase its
The Company’s flagship brand, Bajaj Almond Drops Hair Oil, dominance, and the value market share has increased by
is a leading name in the Hair Oil market. The Company also 1.9% to 62.5%. (MAT FEB’21)

ADHO - Value MS % ADHO - Volume MS %

In % In %
9.9% 9.7% 9.7% 9.8% 9.8%
10.0% 9.5% 9.5% 9.7% 9.7% 9.0%
7.8%
8.5% 8.0% 7.4% 7.3% 7.3% 7.5%
7.1% 7.2%
8.0% 7.7% 7.0% 6.6% 6.7%
5.8%
6.0%
6.0% 4.7%
5.0%
4.0%
4.0%
3.0%

2.0%
2.0%
1.0%

0.0% 0.0%
10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 MAT 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 18-19 19-20 MAT
FEB FEB
21 21

Key focus areas of the Company to be updated for future preferences. It constantly adopts
Research and Development Initiatives newer techniques and mechanisms to optimise its
productivity and optimally utilise resources focused on
The Company constantly aims to meet the evolving needs
delivering products that are value for money and keeping
of its customers and delight them through innovative and
pace with the demand.
value-for-money products. Advanced research techniques
have enabled the Company to innovate new product
A few such R&D initiatives in FY 2020-21 are as follows:
categories, providing simple, yet tangible benefits to its
consumers. It achieves this through its two state-of-the art • Upgrade of ADHO: New Formulation with 6x Vitamin E.
and modern R&D facilities which is supported by advanced • Rural Distribution: Pan India initiative taken to increase
instrumentation and pool of experienced scientists. Direct Distribution in Rural India through Vans.

Updating is the key. • Heightened Digital Presence: Digital Marketing spends

now ~10-15% of Media Spends with presence across
The Company aims to constantly develop new products and
Social Platforms and E-commerce.
update the existing ones to keep pace with market changes.
The Company’s strategic objective is to drive successful • Relaunch of Amla Aloe Vera to gain share in the Amla
innovations in products and processes consistently and Category.

62