Beholder’s eye: organic beauty drawing attention in cosmetics business

Data Insight Dealspeak 14 June

Beholder’s eye: organic beauty drawing attention in cosmetics business

Honasa Consumer, parent company of skincare e-commerce brand Mamaearth, became the latest unicorn in India’s organic beauty space on New Year’s Day. It raised USD 52m at a USD 1.1bn valuation from Sequoia Global, with participation from Sofina Ventures and Evolvence.

In 2021, seven transactions worth USD 692m were announced in the country’s beauty cosmetics segment, a 25-fold increase by value on 2020’s USD 28m across eight deals. This year alone, India has seen five transactions worth USD 266m.

In the wider Asia-Pacific region, deals for cosmetic beauty brands in 2021 more than tripled in value to USD 1.86bn across 30 tie-ups versus 35 transactions worth USD 593m in 2020. So far this year, 23 deals have been inked for USD 804m. The rise in activity suggests investor interest is more than skin-deep. Within the cosmetics segment, organic beauty has been drawing a lot of admiring glances since the onset of the pandemic.

Besides Mamaearth, other India-based organic beauty brands that have raised funding in 2022 include mCaffeine owner, Pep Technologies, which landed USD 30.8m (INR 2.4bn) from Paragon Partners and others in March, and Wow Skin Science, which bagged an undisclosed sum from Singapore’s sovereign wealth fund, GIC, in May. Organic beauty has become a sector unto itself and is no longer just a sub-segment, says Prateek Ruhail, cofounder and CEO of Vanity Wagon, an e-commerce marketplace for organic beauty brands.

Making care: India’s rich tradition is helping market grow

India has its own rich tradition of beauty rooted in Ayurveda and herbal medicine, which is culturally very unique, says Sunayana Walia, founder of Raw Beauty Wellness. It is this unique factor that investors are betting on.

The country is also ingredient-rich. Many of the inputs for Indian beauty products are found locally, which helps brands and customers trust the authenticity of the product, adds Ruhail.

India’s organic personal care products market is expected to grow nearly 15% a year to USD 1.24bn in 2026 from USD 571m in 2020, according to a report by ResearchandMarkets.

Beauty call: sector consolidation lies ahead

However, current inflationary trends cannot be ignored, even by a burgeoning segment. Ruhail expects a correction in investment levels. Companies with a focus only on the top-line, but not the bottom-line are likely to have difficulty securing investors. Once the market starts becoming picky towards companies, products or brands, many will be forced to consolidate or shut up shop, he says.

Walia also expects brands to make acquisitions to weed out the competition or gain access to new markets. Some of this is already happening. Mamaearth parent Honasa has already pursued some acquisitions, most recently paying USD 3.6m for dermatologist formulated skincare brand Dr. Sheth’s last month.

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