From being a regional brand in the highly unorganised beauty and hair care business, Naturals, the Chennai based chain of parlours is widening its arena. The Rs 350-crore-group, having set up 510 salons across the country, stepped into Dubai last month and plans to go to America next year. The brand is also extending itself, from the salon business it is expanding its portfolio to include professional beauty care products, driven primarily by the promise of a market pegged to grow at close to 28 per cent between 2014 and 2019 (TechNavio Research). However competition from established domestic (Lakme, Enrich) and international (Jean Claude Biguine) chains is a big challenge as is the capital intensive nature of the business.
The company’s model is franchisee led. (Out of 510 salons in India, 500 are franchised out). The same model will be at work as it steps into Dubai and other markets. To build its brand in India Naturals says it will invest Rs 20 crore (2015-16). And in Dubai where it has a joint venture with Falak Holdings (majority partner) it will invest Rs 8 crore (its partner will put in Rs 22 crore) to launch 20 salons and an academy for beauty professionals. In the US, the company says it is close to signing up with a master franchisee floated by Indian entrepreneurs.
The brand’s grand plans are in tune with the pace at which the beauty and hair care industry, estimated at Rs 10,000 crore by industry insiders, has grown. Neighbourhood stores, city-wide chains, state and nation-wide franchises and even international brands have swooped in for a bite. But the business calls for heavy investments, in people and property; and established players have found their margins under pressure from nimble players operating out of a website.
Growing at home
Naturals launched its first salon in 2000 in Chennai. For the first few years it grew locally competing mostly with CavinKare’s Green Trends (owned by Naturals promoter C K Kumaravel’s brother C K Ranganathan) and numerous other small parlours. Seven years later it started operations in several Indian cities such as Pune, Ahmedabad, Delhi, Mumbai and others.
To establish itself with its new clients in the new cities, the company engaged celebrity endorsers. It has Kareena Kapoor on board already and Sachin Tendulkar and Wasim Akram, jointly inaugurated the Dubai store. Out of a total marketing budget of Rs 20 crore, Naturals has set aside Rs 10 crore as campaign-cum-endorsement fees for the coming year says C K Kumaravel, founder of the chain.
The company wants the brand to be identified with premium experiences and its commitment to keeping it all natural. This is also the plank on which its upcoming brand of professional beauty products rests. The products will be developed jointly with Arya Vaidya Pharmacy, a Coimbatore-based company. While leveraging the natural tag, the company is also looking at tailoring its parlour experience around the specific interests of a city or a locality. For the Pune market, for instance, Naturals will set up ten sports themed salons by January 2016 targeting the teenage, cricket-crazy client base. It will test market the sports format in Coimbatore with two stores later this year. For the rest of the market it will introduce organic professional products.
Harish Bijoor, CEO of Harish Bijoor Consults, says that Naturals’ biggest challenge is the franchisee model. “In such businesses, if you run your own outlets, it will be better. The question of commitment of the franchisee is key and so too how the expansion will be funded and how will these outlets are made profitable,” he says. Also, he believes that Naturals is still struggling to build the brand outside South. “This is not unique to Naturals, but to any service oriented brands,” he adds.