India has experienced significant growth and development over the past six decades, transforming from a country dependent on grain imports into a global agricultural powerhouse and net food exporter. It has also emerged as a major player in industries such as pharmaceuticals, steel, and technology. However, India still faces issues such as a high public deficit, inflation, and bureaucracy that can deter foreign investment. Kiko Milano, an Italian cosmetics brand, should consider establishing a joint venture manufacturing plant in Maharashtra, India to produce and sell products locally, capitalizing on India's large and growing cosmetics market and lower costs while mitigating risks through a local partner.
2. With 1.2 billion people and the world’s fourth-largest economy,
India’s recent growth and development has been one of the
most significant achievements of our times. Over the six and
half decades since independence, the country has brought
about a landmark agricultural revolution that has transformed
the nation from chronic dependence on grain imports into a
global agricultural powerhouse that is now a net exporter of
food. Life expectancy has more than doubled, literacy rates
have quadrupled, health conditions have improved, and a
sizeable middle class has emerged. India is now home to
globally recognized companies in pharmaceuticals and steel
and information and space technologies, and a growing
voice on the international stage that is more in keeping with its
enormous size and potential.
6. 10th in the world by
nominal GDP
3rd in the world by
purchasing power
parity
2nd in G20 economies
by GDP growth
The economy of India is the tenth-largest in the world by nominal GDP that it’s expanded 5.63 percent in
the last quarter of 2014 over the same quarter of the previous year. GDP Annual Growth Rate in India
averaged 5.82 percent from 1951 until 2014.
0
2
4
6
8
10
12
Indian GDP growth rate from 2008 to 2018
7. In the last years, the Indian GDP growth is greatly slackened, however, it is still greater than the growth of
world GDP. Moreover, future forecasts seem to indicate the achievement of passed results.
-10,0
-5,0
0,0
5,0
10,0
15,0
20,0
China
India
World
USA
Europe
8. FDI inflows to India increased 17,32 per cent in 2013 to reach 28 billion US$.
Foreign investments add a great deal to India’s economy and the continuous inflow, clearly shows the
faith that overseas investors have in the country's economy.
Despite a surge in foreign investments, in the past, rigid FDI policies were a significant hindrance. But over
time, India has adopted a number of FDI reforms. India's liberalized its FDI policy in 2005, allowing up to a
100% FDI stake in ventures. Industrial policy reforms have substantially reduced industrial licensing
requirements, removed restrictions on expansion and facilitated easy access to foreign technology and
foreign direct investment.
The most important thing is that the Government is still committed to ensure further improvements for FDI.
This means that India is a pro investment environment.
As per an industry study, Foreign investment inflows are expected to increase by more than two times and
cross the US$ 60 billion mark in the next years as foreign investors start gaining confidence in India’s new
government.
2010 2011 2012 2013
27,3
36,4
23,9
28,1
Indian FDI inflows Bln US$
9. India has a young population with around 60 per cent in the age group of 15–59 years and a median age
of about 26.7 years. India will soon have the largest and youngest workforce the world has ever seen.
India benefits from the burgeoning domestic demand created by this young demographic whose
consumption is driving the middle class. By 2025, the country is expected to become the world’s fifth
largest consumer market.
The second official language is English and this offers a considerable advantage to the country.
English speakers in India are estimated to be in the range 9 percent of its total population to 33 percent.
India has third largest pool of
scientific and technical
manpower
in the world
Over 60
6,9%
15-59 years
58,7%
0-15 years
34,4%
10. As a lot of eastern countries, India shows considerable cost advantages compared to Western and
European economies.
A recent report by the Boston Consulting Group argues that India is one of the most competitiveness
country in the world if we think about the manufacturing cost index.
Especially when we are talking about this index, we are considering four drivers: labor productivity (value
added economic output per worker); wages (average hourly wages for manufacturing workers); energy
costs (electricity and natural gas import costs); and exchange rates. The score for each country is expressed
relatively to the US$, who’s manufacturing cost index is 100.
The chart proves once again that India is a pro investment environment.
83
87
91
91
96
100
109
109
111
121
123
124
124
125
130
Indonesia
India
Thailand
Mexico
China
USA
Spain
UK
Japan
Germany
Italy
Brazil
France
Switzerland
Australia
11. •"With more than one
billion people still to be
connected, India is just
at the beginning. It is
not only a challenge for
Facebook but for
everybody"
Zuckerberg
•“There’s so much energy
here, in India. I find the
country and people
energizing… It’s better and
faster. The reason why
we’re making such a big
investment in India is
because of the evidence
of success”
Bezos
•"From an iPhone point of
view...we saw very strong
sales in several of the
emerging markets, sort of
pre-pay markets. India
was up over 400%; Turkey
and Poland were both up
over 60%. The Philippines
was up about 140%"
Cook
Coca-Cola is among the country’s
top international investors. Invested
more than US$ 1 billion in India in the
first decade. Directly employs
approximately 6,000 people, and
indirectly creates employment for
more than 125,000 people.
Hyundai Motors is the largest
passenger car exporter and second
largest car manufacturer of India.
Total production capacity is about
6,00,000 units per annum. Presently
markets 54 variants of passenger cars
across segments.
IBM India Private
Limited operating
from this country
since the year 1992.
Present in more than
200 cities.
Sony established in
India in November
1994, this company
has captured one of
the leading positions
in the field of
consumer
electronics goods.
Some interesting point
12. It seems that the Indian market is too attractive to stay out.
The main companies of the world are already there and
who do not yet, it is because they are going to develop
projects investment in the coming future.
That's the reason why I decided to change the title from "is
it possible to do" into "how to do business in the Indian
market for Kiko Milano”.
It’s obvious that if you want to become a great company
and face future changes, to invest in India should be a
priority.
For this reason I believe that the question, whether or not
to do an FDI through India, has a simply and expected
“yes” answer, and the real challenge concern how to
invest in this promising market.
13.
14. Founded in 1997, KIKO MILANO is an Italian
professional cosmetics brand that has revolutionized
the rules of cosmetics and won over the most
demanding beauty addicts with over 600 points of
sale in 8 countries in Europe (Italy, Spain, France,
Portugal, Germany, United Kingdom, Austria and
Switzerland) with its presence in 34 nations (thanks to
its online service delivery) and now with its new
opening in U.S.
Sales volume mln €
100
178
351
418
2010 2011 2012 2013
15. Kiko Milano offers to its
consumers, three different
typologies of products:
Make up, Skin care and
Accessories.
Makeup and Skin care
formulas are produced in
Europe and in the USA,
Accessories are
manufactured in Asian
countries where oriental
production is more
specialized.
Make up
A big variety of professional cosmetics for
creating make up
Skin care
advanced face and body care products
Accessories
Professional tools for a perfect product
application
16. Kiko Milano is constantly committed to a
single objective: to allow all costumers to
treat themselves to the most innovative
cosmetics without having to sacrifice their
budget. Quality is no longer synonymous
with high prices.
Thanks to Kiko, professional luxury is a
tangible and exciting reality. Which
anyone can afford.
Kiko’s creative spirit is deeply rooted in
"Made in Italy“ values.
“be what you want to be.” This is how Kiko
sums up its vision of beauty. They want to
allow everyone to express their own
personality with custom made products. A
variety of colors, effects and sensations
that are unique in the market to suit your
style, skin tone, skin type and specific
requirements, at every phase of your life.
17. Kiko’s marketing mix is so well managed that it is considered the phenomenon of the retail sector, able
to compete with the world giants of the business.
Thanks to the great results obtained, in the last years, Kiko has expanded the number of its brand stores
and staff.
Kiko is still very committed in the development in all over the world, and the recent new openings in the
US are the proof.
Especially Kiko has the target to set up new activities into the emerging economies.
2009 2010 2011 2012 2013 2014
107 107
172
340
487
586
65
168
147
99
70
New openings
2009 2010 2011 2012 2013
612 612
1221
2175
3396
609
954
1221
1051
Staff increase
20. I decided to focus this project on six different points:
Project summary
Target market
Competitors
Product and its marketing mix
Investment mode
Strategy
21. As already mentioned, Kiko is present in 34 different countries and recently started selling its products also in the
US market.
It’s logical to think, as the great results show, that they want to extend their business over European borders.
In my opinion it could be a good idea to start new projects through economies that show fast growth, as
developing countries.
Set up a new activities in India can be the right answer to improve results and to catch lot of opportunities.
Besides, can be a starting point to develop business activities in the Asian area, that it seems very promising.
India has some cultural affinities with Italy, and it is very attracted by made in Italy products.
Furthermore, it’s important to focus on this point: India in recent years has become known to the world as a
manufacturer of "good quality low price“ products, the same motto that Kiko shows on its business.
JOINT
VENTURE
How the
investment
will take
place?
Joint venture corporation
with an Indian cosmetics
company, where Kiko will
own 51% of ownership.
It is an excellent way for entering in a huge and tricky market as it may be the Indian cosmetic industry. To have
an Indian partner, who already knows the market and who is used to operate with suppliers and consumers, is a
good strategy for success and it can drive through considerable savings.
The 51% owned by Kiko guarantees joint venture’s control, and it allows to produce with brand Kiko Milano, a
product that we still want to have "made in Italy" characteristics.
22. Why joint
venture?
We want to have high control on investment
We want to start to produce directly in India to
take advantage from market size and economies
of scale
The cultural and social problems of India cause
legal uncertainty to foreigners investor, and for this
reason it’s required an high involvement of capital
We don’t want to pay high customs tariffs to sell
products in the market (import tariff is around 40%)
23. JOINT
VENTURE
How the
investment
will take
place?
• Establishment of a
manufacturing plant in
Maharashtra
• My choice is to produce
directly to selling directly in
India.
In this way, Kiko products, might not be named as
“made in italy”, but using the same brand through
the Indian market, consumers vision will remain
related to Italian values. (fashion, style…)
• Starting to open concept
stores in the main city
(Mumbai, Delhi, Bangalore, Hyderabad,
Chennay…)
The state of Maharashtra has capital in Mumbai and
it is located in the western region of India.
Maharashtra leads in terms of gross state domestic
product. It accounts for 14% of the total GDP of
India. It is among the most prosperous states in India
with a GDP per capita of 2014 USD.
This is my choice because key industries in the state
include pharma and petrochemicals, as well as
biotech, IT, electronics, engineering, auto and auto
Components.
• Among the top two states in India in terms of
industrial investments and among the top
destination for FDI in India.
• Among the most investment friendly and
deregulated states in India.
• Large pool of skilled and unskilled labour by virtue
of being one of the most industrialized states in
India.
• Excellent road and port infrastructure facilities.
24. • High quality – low price
• Young target
• Italian product seen as
fashion
• Concept store
• On-line selling
• Distribution
• Only women as main
consumers
• Few and scattered
stores
• Global expansion
• Most male involvement
• Sales increase
• Top and low competitors
• New competitors
• More management
trouble due to
expansion
25. Beauty and makeup products is being used since olden days and nowadays it appear like a booming
economy in India, which would be the largest cosmetic consuming country in a next few decades.
While the demand of beautifying substances are growing day by day, a large number of local as well as
international manufacturers gradually extend their ranges and products in different provinces of India.
Since 90s with the liberalization and the crowning of many Indian women at international beauty
pageants, the cosmetic industry has come into the limelight in a bigger way. Subsequently there has
been a change in the cosmetic consumption and this trend is fueling growth in the cosmetic sector.
Main reasons for this growth are increased purchasing power and rising fashion awareness due to media
and other exposures amongst the people.
Increased advertising creates and captured the imagination and awareness of the people. The
Bollywood factor or the Indian movie industry and its changing fashion also create an impression and
cause purchases to be expedited to match the images people hold close to their ideals.
26. The market size of the cosmetics industry in India is estimated to be worth 1.5 billion US$, and is expected
to double to billion US$3 by 2020, market studies said.
Annual growth in the Indian beauty and cosmetics markets is estimated to remain in the range of 15-20
per cent in the coming years, twice as fast as that of the US and European markets.
Over the last five years, cosmetics products have seen a growth of 60 per cent. Skin care cosmetics
have experienced a relatively slower growth and products such as anti-wrinkle creams, cleansers and
toners are not as popular as facial creams, moisturizers and fairness creams in this genre.
The beauty industry is seeing a per capita annual spend of 1.2 US$ which is expected to grow to 6.2 us$
in the next years.
+15-20 %
every
year
1,5 billion
US$ in 2013
market size
1,2 US$ annual
spending per capita
6,2 US$ next
years forecast
More than 7
billion US$
Market size
27. Narendra Modi, BJP Hindu nationalist party leader and ex governor of Gujarat, has
won the 2014 election. The majority of seats in the lower house ensures to him, a
stronger government ability than his predecessors. It expected a greater
commitment in terms of liberalizations, since the economic model that has made
the richest state of Gujarat in India, it has been driven by Modi.
It is possible an increase of internal tensions between ethnic and religious
minorities.
Economic performance continues to improve thanks to dynamic growth in key
sectors. The main problems are: high public deficit, volatility of exchange rate,
and the high rate of inflation, although measures implemented by India’s
central bank have managed to limit this phenomenon.
The banking system is dominated by public banks and the private sector loans
sector is underdeveloped The operational environment is generally business
friendly but bureaucracy and widespread corruption tend to deter direct
foreign investments.
0
2
4
6
8
10
Jan Feb Mar Avr May Jun Jul Aug Sep Oct Nov Dec
India inflation rate 2014
320,3 Bln
US$
external
debt
14,5%
of
GDP
28. Traditional Indian society is sometimes defined by social hierarchy. The Indian caste
system embodies much of the social stratification and many of the social restrictions
found in the Indian subcontinent. Social classes are defined by thousands of
endogamous hereditary groups, often termed as jātis, or "castes".
Hinduism, with over 800 million adherents (80.5% of the population), was the largest
religion in India; it is followed by Islam (13.4%), Christianity (2.3%), Sikhism (1.9%),
Buddhism (0.8%), Jainism (0.4%), Judaism,.
It’s important to underline that business culture is often influenced by their religious
heritage.
Life expectancy in India is at 68 years with life expectancy for women being 69.6
years and for men being 67.3.
The literacy rate in 2011 census was 74.04%: 65.46% among females and 82.14%
among males.
Corruption is present in the nation and it’s not a phenomenon to be underestimated.
The status of women in India has been subject to many great changes over the
past few millennia. From equal status with men in ancient times through the low
points of the medieval period, to the promotion of equal rights by many reformers.
In modern India, women have held high offices in India including President and
Prime Minister. However, women in India continue to face atrocities such as rape,
acid throwing, dowry killings, and the forced prostitution of young girls.
Female infanticide in India have caused a discrepancy in the sex ratio, as of 2005 it
was estimated that there were 50 million more males than females in the nation.
One of the reasons for this situation is the payment of Dowry, although illegal,
remains widespread across class lines.
However the recent report from 2011 shown improvement among the gender
ratio.
29. In India there are local and multinationals cosmetics manufacturers.
For this reason is very important to develop new and innovative
technologies, able to guarantee success in the business as Kiko has
showed in the Italian and European cases.
30. LAKME’
•Is the Indian brand of cosmetics, owned by Unilever. It started as a
100% subsidiary of Tata Oil Mills, part of the Tata Group. This
company holds significant share in the market and it is probably the
most trusted over generations. It is also the first makeup brand to
launch an array of skin and face products for woman in India.
REVLON
•One of the first international brands to its set foot in India, it offers a
wide range of high quality products. Pricing is done for the mid-
level consumers as it neither too high nor too low priced. The
company owns approximately 20-25 % of the domestic color
cosmetic market share.
L’OREAL
•L’Oreal is one of the giants in the cosmetic segment in the world.
The Company has been present in India for about 20 years. In 2013
the company grew at a commendable rate of 70% . it has strong
market base in Shampoo, hair color and related to Kiko’s products ,
skin care category.
Saloon
providing
beauty
services
Mid level
price
Advertise
d by the
most well
known
faces of
the world
31. MAYBELLINE
•It’s owned by L’oréal. One of the major factors that have helped this
brand to carve its niche is being reasonably priced in spite of having
an international appeal. The Maybelline Colossal range was a huge
hit in India which made the brand more popular.
AVON
•This brand has emerged in India and is very well known for direct
marketing. It has paved the way for introduction of a huge variety of
cosmetics and skin products which is easily available sitting at home
via the hands of the direct selling agents.
MAC
•This is undoubtedly the most famous luxury international cosmetic
brand now widely marketed and loved in India as well. This is
especially loved by most backstage makeup artists since its quality. It
offers a wide range of face products.
COLOR BAR
•Color bar Cosmetics is one of the leading brands of cosmetics in
India. It was founded in 2004. The brand is known for its bright peppy
colors and has a number of products to add color to nails, eyes, lips
and face.
ELLE 18
•Best choice cosmetic brand in India for teens and college girls. This
lively brand has always come up with something innovative to suit
the likeness and style of the young people. Products are affordable
Competiti
ve prices
Direct
selling
method
Luxury
products
Wide
range of
products
Cool and
famous in
the young
people
32. Kiko products are presented as “high quality low price” products. Their most important characteristic is
that for each typology of product, you can find many different varieties.
This way ensures to meet costumer personal preferences in every case. Furthermore it provides a
customized shopping experience to the client.
COLORS
many different colors
and texture
INNOVATION
the latest innovations in
the field of cosmetics
CERTAINTY
products are submitted
to several clinical tests
TREND
fashionable and design
products
HIGH QUALITY
LOW PRICE
KIKO does not make or commission animal tests
33. I think that cosmetics products don’t need changes to be sold in another market.
As seen, the Indian market shows some particular points, but cosmetics products are very similar in
every part of the world, and I think that these can be considerate as standard products.
R&D studies and activities are not moved from Italian market, because I want that products
keeping the made in Italy characteristics.
Probably it will be convenient to move R&D activities to India, when the business it will be
consolidated and when it will be useful to think to start product differentiation which follows
country requirements.
It doesn’t mean to offer the lower market price, but it means to study a policy’s prices that it is
able to guarantee, at the population majority, the possibility to buy Kiko products.
As it happened for the new openings in the US, my objective is to reproduce the concept stores
and its great e-commerce service that Kiko offers in many countries.
These two activities are the strengths of the marketing mix of Kiko, and there is no reasons to
change them.
The innovative concept store enable customers to play with infinite shades, experimenting with
make up and reinvent their look in freedom. In each store, you can also learn about and test the
benefits of different treatment lines, consciously choosing products that are closest to your
requirements.
To enter in Kiko concept stores means not only enjoy a moment of shopping, but to spend a
unique shopping experience.
The e-commerce service where consumers can find and delivery to their house, every typologies
of products, supports and complete sales activity.
34. Since India adopted liberalization in 1991, the Indian regulatory environment for foreign investment has been
consistently eased to make it increasingly investor-friendly.
Routes for obtaining
approval for foreign
investment in India
Automatic route FIPB route
No prior approvals are required for
investing in certain
sectors, under delegated powers
exercised by the Reserve Bank of
India.
In cases of foreign investment
where the project does not
qualify for automatic approval,
prior approval is required
From the Foreign Investment
Promotion Board (FIPB) under
The Ministry of Finance.
Automatic
route is it
possible for our
project and
cosmetic sector
35. A foreign company looking to set up operations in India, can either operate as an Indian company or a
foreign entity.
Entry strategy
Operating as an
Indian company or
corporate
entity
Operating as a
foreign company or non
corporate
entity
Joint venture corporation
with an Indian cosmetics
partner, where Kiko will own
51% of ownership.
36. Once a company has been registered and incorporated in India, it is subject to laws and regulations as
applicable to other domestic companies in India.
Incorporation of
a
company
Private company Public company
with a minimum of two
members and a minimum
paid-up capital of 100,000
Indian Rupee or a higher
paid-up capital as may be
prescribed.
37. • Most male
involvement in
selling products
• Increase the
sales volume
• Become top 10
major brand in
India
• Open new stores &
e-commerce service
• Show with
commercial and
new openings of
concept stores the
main features of the
products: “they are
for everybody and
they present the
features of the Italian
fashion style”
• Low cost & high
quality strategy
• Innovations and
ongoing
development
• Support to the
business with
sponsorship,
public relations,
advertising digital
strategy and
promotions
• Indian market as
the starting point
for a future
expansion through
Asian markets
38. Despite the current rough winds in the Indian economic climate, the long-term growth story of the
Indian market continues to remain intact. India is expected to continue on the growth trajectory,
and is likely to maintain its position as among the fastest growing economies in the world. India is a
market that no global company can afford to ignore and offers significant opportunities for Italian
companies.
In the context of the current economic climate globally, there is an increasing need to provide
further impetus to the participation of Italian and foreign businesses in the India story.
The increased trade with Italy, especially over the last two years, along with the growing number of
Italian companies investing in India, further reiterate the importance that India occupies for the
Italian business community and the potential for Italian businesses in India.
For these and the others reasons that I showed in this project, I believe that Kiko will have a great
incentive to become active in the Indian market.
Giacomo Caleffi