Indian Salon Industry Report

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Beauty consciousness has dawned due to rising affluence of consumers. With an increase in the number of households upgrading to a higher consumption lifestyle, there is an accelerated growth in the Indian beauty space. Branded salons have emerged as a key growth constituent. Growing affluence has resulted in increased experimentation and the desire to look better. This has accelerated the growth of beauty products and services. Salons are at the centre of that growth. With this industry perspective salon chains like Jawed Habib, Lakmé, VLCC etc. are speeding up to establish their presence across the country. In addition to home grown players, foreign chains like Jean-Claude Biguine, Saks, Toni & Guy are also setting up salons to groom the Indian consumer.Clearly, the predominantly unorganized locally run beauty salon market is at an inflection point. The mushrooming of branded chains is expected to completely change the landscape a few years down the line, ushering in a new era of trained salon personnel, offering services based on global insights and professional products with the latest international technologies.The current size of the salon market in India is estimated to be around Rs. XX Bn in 2010, which has grown from Rs. XX Bn in 2005 at a CAGR of XX% p.a. The urban market has been growing at a faster pace of XX% p.a. from 2005-–2010 compared to the rural market which has been growing at a CAGR of XX%.Currently Delhi and Mumbai put together constitute more than XX% of the organized salon industry size in India. Among the tier 2 cities, Ahmedabad is the largest market followed by Surat, Nagpur and Chandigarh.However, as with any other industry, it is not without challenges. The scarcity of trained professionals is the biggest challenge in the industry due to the less number of training institutions. This supply-demand gap is leading to an upward salary cost for trained professionals coupled with higher attrition. Industry players find it extremely difficult to scale up because of lack of bank funding. The higher rentals in cities are acting as an impediment to growth.Recently the sector has witnessed a lot of interest from private equity funds; with funds like Everstone, Helion etc. investing in companies in this domain for further growth. The urban salon market in India is spending Rs. XX billion annually on salon services. This is far lower than the world standards. We are expecting this number to grow to Rs. XX billion by 2015. Similarly the total market as per our estimates is expected to cross Rs. XXX billion by 2015. The roughly Rs. XX billion organized salon market is growing at XXX% every year. At this rate, it has the potential to become a Rs. XX billion by 2015.

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Reevolv Advisory Services
Private Limited
Indian Salon Industry Report
This document has been prepared by Shilpa Bhattar and Kaustubh
Kulkarni. For any queries or detailed information contact us on
+91 22- 60022001 or email at [email protected]
Beauty consciousness has dawned due to rising affluence of
consumers. With an increase in the number of households
upgrading to a higher consumption lifestyle, there is an
accelerated growth in the Indian beauty space. Branded
salons have emerged as a key growth constituent.
May 2013
Indian Salon Industry Report

2



Table of Contents
Particulars
Page Nos.
1. Executive Summary 4
2. Wellness Industry Overview
2.1. Background 5
2.2. The Wellness Cluster 6
3. Indian Salon Industry Overview
3.1. Market Opportunity 7
3.2. Growth Drivers 10
3.3. Nature of Industry 13
3.4. Porters Five Force Analysis 15
3.5. Key Challenges of the Industry 18
3.6. Business Model 20
3.7. Key Success Factors 23
3.8. Unit Economics 26
4. Geographic Overview
4.1. City-Wise Market Size, Key Players and Number of Outlets 27
4.2. Pricing Analysis 29
5. Private Equity Interest in the Industry
5.1. YLG Salons (R&R Salons Pvt. Ltd) 30
5.2. VLCC (VLCC Health Care Ltd.) 31
5.3. Enrich (Enrich Hair and Skin Solutions Pvt. Ltd.) 32
Indian Salon Industry Report

3



6. Player Profiles
6.1. Summary 33
6.2. Affinity 35
6.3. Anoo’s 39
6.4. b:blunt 41
6.5. Belleza 44
6.6. Enrich 46
6.7. Green Trends 51
6.8. Jawed Habib 54
6.9. Juice 59
6.10. Lakmé 62
6.11. Looks 66
6.12. Naturals 68
6.13. Strands 71
6.14. VLCC 74
6.15. YLG 78
6.16. International Players in India 82
7. Global Players
7.1. Regis Corporation 83
7.2. Other Global Players 86
8. Annexure 87


Indian Salon Industry Report

4



1. Executive Summary

Beauty consciousness has dawned due to rising affluence of consumers. With an increase in the number of
households upgrading to a higher consumption lifestyle, there is an accelerated growth in the Indian beauty
space. Branded salons have emerged as a key growth constituent. Growing affluence has resulted in
increased experimentation and the desire to look better. This has accelerated the growth of beauty products
and services. Salons are at the centre of that growth.
With this industry perspective salon chains like Jawed Habib, Lakmé, VLCC etc. are speeding up to establish
their presence across the country. In addition to home grown players, foreign chains like Jean-Claude Biguine,
Saks, Toni & Guy are also setting up salons to groom the Indian consumer.
Clearly, the predominantly unorganized locally run beauty salon market is at an inflection point. The
mushrooming of branded chains is expected to completely change the landscape a few years down the line,
ushering in a new era of trained salon personnel, offering services based on global insights and professional
products with the latest international technologies.
The current size of the salon market in India is estimated to be around Rs. XX Bn in 2010, which has grown
from Rs. XX Bn in 2005 at a CAGR of XX% p.a. The urban market has been growing at a faster pace of XX%
p.a. from 2005-–2010 compared to the rural market which has been growing at a CAGR of XX%.
Currently Delhi and Mumbai put together constitute more than XX% of the organized salon industry size in
India. Among the tier 2 cities, Ahmedabad is the largest market followed by Surat, Nagpur and Chandigarh.
However, as with any other industry, it is not without challenges. The scarcity of trained professionals is the
biggest challenge in the industry due to the less number of training institutions. This supply-demand gap is
leading to an upward salary cost for trained professionals coupled with higher attrition. Industry players find it
extremely difficult to scale up because of lack of bank funding. The higher rentals in cities are acting as an
impediment to growth.
Recently the sector has witnessed a lot of interest from private equity funds; with funds like Everstone, Helion
etc. investing in companies in this domain for further growth.
The urban salon market in India is spending Rs. XX billion annually on salon services. This is far lower than
the world standards. We are expecting this number to grow to Rs. XX billion by 2015. Similarly the total
market as per our estimates is expected to cross Rs. XXX billion by 2015. The roughly Rs. XX billion
organized salon market is growing at XXX% every year. At this rate, it has the potential to become a Rs. XX
billion by 2015.



Indian Salon Industry Report

5



2. Wellness Industry Overview
2.1. Background











2.2. The Wellness Industry Cluster



Fig 1: The Wellness Industry Cluster
Diagram










Indian Salon Industry Report

6



3. Salon Industry Overview
3.1. Market Opportunity



3.2. Growth Drivers




3.3. Nature of Industry

3.3.1. Unorganised

3.3.2. Organised
Fig 11: Comparison of Unorganised and Organised Salons
Parameter Unorganised Organised
Service Quality
Training/SOPs
Hygiene
Product Quality
Customer Engagement
Location & Infrastructure
Proximity
Ambience
Pricing
Indian Salon Industry Report

7



3.4. Porters Five Force Analysis
Fig 12: Porters Five Force Analysis of Salon Industry



Diagram
No Five Forces Remarks Counter Strategies
1. Power of Supplier
a.  Product
 No. of suppliers
 Switching cost
 Availability of unique
service/product
 Price differentials

b  Manpower
 No. of trained
professionals
 Attrition
 No. of professional
training institutes

2. Availability of Substitutes

 Substitutes’
performance
 Cost of switching
 Buyer willingness

3. Entry Barriers

 Time & cost of entry
 Knowledge
 Economies of scale
 Cost advantages
 Technology

Indian Salon Industry Report

8



4. Power of Customers (High)
 No. of customers
 Price elasticity
 Switching costs

5. Competitive Rivalry (High)
 No. of competitors
 Exit barriers
 Differentiation
 Industry
concentration
(Scattered)
 Diversity of
competitors
















Indian Salon Industry Report

9



3.5. Key Challenges of the Industry








3.6. Business Model
Fig 13: Typical Salon Business model
Diagram

Fig 14: Franchising model of the leading salon brands
Name
Store Area
(Sq. ft.)
Investment
(Rs.
million)
Upfront
fee (Rs.
million)
Royalty
Franchise
Term
Payback
Period of
capital
ROI (%)










Indian Salon Industry Report

10



3.7. Key Success Factors

Diagram






3.8. Typical Unit Economics

Fig 16: Store level unit Economics for a typical unorganised and organised player

Unorganised Organised
Average area


Typical number of service points
1



Revenue per month per service point (INR)


Commission to employees (as a %age of sales)


Rentals*


Per chair no. of employees


Salary cost per employee per month (INR)


Salary cost as a %age of sales (excl.
commission)

Raw material (as a %age of sales)


Other cost (as a %age of sales)


Operating margin (as a %age of sales)


Capital expenditure


ROCE %





Indian Salon Industry Report

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4. Geographic Overview
4.1. City-Wise Market Size, Key Players and Number of Outlets
Cities
Population
(2011)
(million)
(1)

Population
(2020)
(million)
(2)

Population
Growth
Rate %
(2011–
2020)
GDP
(2005)
USD
billion
(3)

GDP
(2020)
USD
billion

(3)

GDP
Growth
Rate %
Average HH
Income* -
2007-08 (INR)
(4)

Est. Size
of the
Salon
Market
(Rs.
million)
Key organized players
No. of
Centers
Tier 1


Delhi

Mumbai

Kolkata

Chennai

Bangalore

Hyderabad

Pune



* Average Household (HH) Income is on an annual basis
Note- Population numbers are rounded off to two decimals. The population growth rate has been calculated without rounding off the population numbers
Source — (1) - Census 2011, (2) - World-Bank, (3) - City Mayors Foundation, (4) - Future Capital Research - The Next Urban Frontier: Twenty Cities to Watch
Indian Salon Industry Report

12



Cities
Population
(2011)
(million)
Population
(2020)
(million)
Population
Growth
Rate %
(2011–
2020)
GDP
(2005)
USD
billion
GDP
(2020)
USD
billion
GDP
Growth
Rate %
Average HH
Income -
2007-08 (INR)
Est. Size
of the
Salon
Market
(Rs.
Million)
Key organized players
No. of
Centers
Tier 2

Ahmedabad

Surat

Jaipur

Kanpur

Lucknow

Nagpur

Indore

Coimbatore

Bhopal

Ludhiana

Allahabad

Amritsar

Raipur

Chandigarh


Indian Salon Industry Report

13


4.2. Pricing Analysis
Tier 1 Female Haircut Female Style Change
Price Range Less than Rs. 400 Rs. 400–Rs. 600 More than Rs. 600 Less than Rs. 600 Rs. 600–Rs. 800 More than Rs. 800
Affinity

Anoo's

B:blunt

Bellezza

Enrich

Green trends

Jawed Habib

JCB

Juice

Lakmé Salon

Lakmé Studio

Lime Lite

Looks

Naturals

Saks

Strands

VLCC

YLG

Tier 2 Female Haircut Female Style Change
Price Range Less than Rs. 250 Rs. 250–Rs. 400 More than Rs. 400 Less than Rs. 300 Rs. 300–Rs. 500 More than Rs. 500
Anoo's

Bellezza



Enrich



Green trends



Jawed Habib

Lakmé Salon

Naturals



Strands



VLCC

Source — Reevolv Research
Indian Salon Industry Report

14


5. Private Equity Interest in the Industry
5.1. YLG Salons (R&R Salons Pvt. Ltd)
Year Investor
Amount
invested
Instrument Equivalent stake
Current
stake



Deal Multiples


FY2011 (Trailing)
FY2009
(1 yr forward)
FY2010
(2 yr forward)
Pre-money (Rs. Million)
Post-money (Rs. Million)
EV/Sales
PE
*NM — Not Meaningful as it is in loss.
























Source — Company Filings
Source — Company filings and Reevolv calculations
Indian Salon Industry Report

15


5.2. VLCC (VLCC Health Care Ltd.)
Year Investor Amount invested Instrument Equivale
nt stake
Current Stake
(%)





Deal Multiples


FY2006
(Trailing)
FY2007
(1 yr forward)
FY2008
(2 yr forward)
Pre-money (Rs. million)
Post-money (Rs. million)
EV/Sales*

PE*






























Source — Company filings
Source — Company filings and Reevolv calculations
* — based on standalone numbers of VLCC Health Care Limited


Indian Salon Industry Report

16


5.3. Enrich (Enrich Hair and Skin Solutions Pvt. Ltd.)

Year Investor Amount invested Instrument Equivalent/ Current
stake
Pre-money
Valuation



Deal Multiples
FY2010 (Trailing) FY2011 (1 yr forward)
Pre-money (Rs. million)
EV/Sales
PE





Source — Company filings and Reevolv calculations
Source — Company filings
Indian Salon Industry Report

17


6. Player Profiles
6.1. Summary
Name of Salon Operating Since Owned By No. of outlets Category Wellness Segments Target Segment Concentration
Affinity
Anoo's
b:blunt
Belleza
Enrich
Green Trends
Limelite
Jawed Habib Hair & Beauty
Jawed Habib HairXpreso
Juice
Lakmé
Looks
Naturals
Strands
VLCC
YLG





Source — Company filings
Indian Salon Industry Report

18


6.2.

6.2.1. Overview
Parameter Description
Company Name
Profile
Wellness Segments
Owned by
No. of Outlets
Business Model
Products
Target Customer Segment
Brands
Future Plans
Source: Company Website and Reevolv Research

























6.2.2. Locations
North East West South Total
No. of Cities
No. of Outlets Tier 1
No. of Outlets Tier 2
No. of Outlets Tier 3 and below
Total – Outlets
Major States/Cities





Source — Company website
Indian Salon Industry Report

19


6.2.3. Pricing

Haircut
Facial (Starts from Rs.)

Cities Female Male
Starts from
(Rs.)
Style Change
(Rs.)
Starts from
(Rs.)
Style Change
(Rs.)
Tier 1

Tier 2

Tier 3

Source : Reevolv Research


6.2.4. Talent Sourcing


















\





Indian Salon Industry Report

20


6.2.5. Financials – whether data is available
Profit & Loss Account for the year ended 31st March (Rs. Mn)
FY2008 FY2009 FY 2010 FY 2011 FY 2012
Total Revenues
Total Expenditure
PBT
PAT

Balance Sheet as at 31st March (Rs. Mn)
FY2008 FY2009 FY 2010 FY 2011 FY 2012
Share Capital

Reserves & Surplus

Shareholders’ funds

Secured Loan

Unsecured Loan

Loan Funds

Total Liabilities

Gross Block

Depreciation

Net Block

Investments

Loans & Advances

Other Current Assets

Total Current Assets & Advances

Current Liabilities

Total Current Liabilities & Provisions

Net Working Capital excl. Cash & Bank

Cash & Bank

Net Working Capital incl. Cash & Bank

Total Assets

Source: Company Filings, Totals may not tally due to rounding off

Key Ratios
FY2008 FY2009 FY 2010 FY 2011 FY 2012
PBT %
PAT %
ROE %

Source: Company Filings, Reevolv Research





Indian Salon Industry Report

21


6.3. International Players in India
Name Description



















Indian Salon Industry Report

22


7. Global Players
7.1.
7.1.1. Overview
Name Description
Company Name
Overview
Target Market
Brands


Geographic
locations


Training

7.1.2. Regis — Typical Acquisition Pricing
Prototypical Acquisition: Salons











Source — Company presentations
Indian Salon Industry Report

23


7.1.3. Financials
Profit & Loss Account for the year ended 30 June (USD. Mn)
FY2008 FY2009 FY2010 FY2011 FY2012
Service
Product
Royalties and fees
Sale of space advertisement
Other Income
Total Revenues
Cost of service
Cost of product
Site operating expenses
General and administrative expenses
Rent
Total Expenses
EBITDA (excl. goodwill impairment)
EBIT (excl. goodwill impairment)
PBT (excl. goodwill impairment)
PAT (excl. goodwill impairment)
PAT (incl. goodwill impairment)

Balance Sheet as at 30 June (USD. Mn)
FY2008 FY2009 FY2010 FY2011 FY2012
Shareholders’ Funds
Loan Funds
Total Liabilities
Net Block
Goodwill, other intangibles and other Assets
Investment in and loans to affiliates
Net Working Capital excl. Cash & Bank
Cash & Bank
Total Assets
Source: Company Filings, Totals may not tally due to rounding off
Key Ratios
FY2008 FY2009 FY2010 FY2011 FY2012
EBITDA %
EBIT %
PBT %
PAT %
ROCE %
ROE %
Source: Company Filings Reevolv Research


Indian Salon Industry Report

24


7.2. Other Global Players
Name of
Company
Operating
Since
No.
of Centres
Brands Geography Started by Other Details























Indian Salon Industry Report

25


8. Annexure
Key Ratios
Direct Cost %
Material +Other Direct Expenses – increase/decrease in Stock
Total Revenues
X 100
Personnel Expenses %
Personnel Expenses
Total Revenues
X 100
Selling & Distribution Expenses %
Selling & Distribution Expenses
Total Revenues
X 100
Rent, Rates & taxes %
Rent, Rates & taxes
Total Revenues
X 100
EBITDA %
EBITDA
Total Revenues
X 100
PBT %
PBT
Total Revenues
X 100
PAT %
PAT
Total Revenues
X 100
ROCE %
EBIT
Capital Employed
X 100
ROE %
PAT
Net Worth
X 100
Capital Employed Total Liabilities – Cash & Bank
(Liabilities = Shareholders funds + Loan Funds + Deferred Tax + Minority Interest)












Indian Salon Industry Report

26


About Reevolv
Reevolv is a boutique consulting and investment banking company offering a "One Stop Shop" in the areas of
business strategy, financial advisory and operations consulting to corporates and private equity funds.
We service our clients in their constant re-evolution process through our in-depth industry research, domain
understanding, our timely and superior execution capabilities and strong network to provide customized
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With a host of implementation focused services spanning across functions, we ensure that our clients reach
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Operational needs of the clients on a regular basis to ensure adaptability and flexibility to suit the market and
industry dynamics.
Founded in 2008, Reevolv is a team of CAs, MBAs and Engineers with functional and industry expertise and
diverse background of investment banking and management consulting.



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This report is published for information only. Reevolv Advisory Services Pvt. Ltd. or any of its affiliates, group
companies, directors, employees, agents or representatives shall not be liable for any loss or damages
whether direct or indirect that may arise from or in connection with the use of the information in this document.
This document is the sole property of Reevolv Advisory Services Pvt. Ltd. and prior permission is required for
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Contact Details
For any queries or detailed information contact us on
+91 22- 60022001 or email at [email protected]
Address: No. B/002,Vision Court Staney Fernandes Wadi CHS Ltd., Plot no. 746, MTNL Exchange
Lane, Dadar (West), Mumbai 400 028
You can also email the research analyst at
Shilpa Bhattar
[email protected]
Kaustubh Kulkarni
[email protected]

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