When Kahlil Gibran said, “We live only to discover beauty”, little did he realize that an entire market would flourish for aeons upon this premise. The personal care sector arose because of the need to combat nature’s ravages on skin, and it is indeed ironic that we are looking back to nature for ingredients to fuel this sector. As personal care markets throughout the world reach saturation, it is up to emerging markets such as India and China to breathe new life into what is fast becoming a disillusioned industry.

The Indian personal care active ingredient sector is a dynamic market with burgeoning potential to emerge into an established market. Opportunities are numerous, and are being driven by the growth of the personal care end-use market. The market for personal care ingredients is broadly classified into commodity, fine chemical and speciality chemical ingredients. The latter are further classified into active and inactive ingredients based on their functionality in the consumer product. The Indian market for active personal care ingredients has been witnessing increasing growth over the past 10 years, primarily spurred by changing consumer attitudes and regulatory scenarios.

The active line up:
The Indian market for personal care active ingredients is primarily split into the sectors of anti-aging ingredients, exfoliators, conditioning agents, skin lightening agents, and others (botanical extracts, etc). Following is an introduction to this line up:
● Anti-aging ingredients benefit the skin by preventing biological aging, which leads to wrinkling and roughness.
● Exfoliating agents aim to remove and clean dead cells, thereby revealing fresh new cells.
● Conditioning agents consist of humectants, emollients, and occlusives. These are agents that are able to retain water, retard water loss, and prevent the deterioration of skin collagen.
● UV ingredients are defined as speciality ingredients that work to reduce the production of melanin, a pigment forming agent, in the skin. By restricting melanin production, the skin is given a lighter hue, while protecting it from harmful UV radiation.
● Other active ingredients used in personal care formulations include botanical actives, antimicrobials, and skin lighteners.

Market dynamics:
The market for active ingredients in India is an emerging sector. A variety of factors ranging from innovation to legislation has diverse effects on its growth. Such factors restrain, drive or challenge market growth. Some of the most pertinent market dynamics are listed below:

Challenges: One of the most challenging aspects of operating in the Indian personal care active ingredients market is the absolute lack of established standards. The Indian market for personal care active ingredients is characterized by a lack of uniformity in its laws of operation, allowing for much confusion and malpractice in the industry. Under Indian law, companies manufacturing and selling cosmetic actives ascribe to the Drugs and Cosmetics Act. According to this act, manufacturers are required to disclose ingredients used in formulations. However, it is not compulsory to reveal the exact percentage of ingredients utilized, unless a product claims to possess therapeutic properties. Tax benefits are calculated based on a company's possession of a drug or a cosmetic license, causing products to be licensed based on tax benefit advantages.

Drivers: A primary driver for this market is the growing demand for these ingredients. Active ingredients are considered to be marketing miracles for personal care products due to the consumers’ ability to easily relate to such products. Actives are usually the basis on which the product is popularized and its mind share claimed. India is naturally rich in active ingredients with its impressive array of botanical actives that have given the global cosmetic industry some of its signature products such as Ashwagandha. This demand has been reflected in the development of products such as Thal'ion ingredients from seaweed extracts by Uttam Biotech and Indian firm Sabinsa Corporation's Curcumin C complex produced from turmeric.

Restraints: Active ingredients are highly unstable in formulations due to their biodegradability and property of disintegrating easily in complex formulations containing various ingredients. Thus, the adaptation of active ingredients into such formulations is a cost intensive and highly risky process. The incorporation of an active ingredient requires that the ingredient does not negatively react with any other component of the formulation.

It is also dependent on the surrounding pH, heat transfer occurring within the ingredients, and flow characteristics of the formulation. Such a gamut of characteristics that could cause degradation has given rise to highly sophisticated delivery systems that are not always within the reach of local producers due to the inability to pass on product prices to consumers. The continued instability of active ingredients causes a loss of product efficiency, unless significant investments are made in the same.

Market metrics:
In 2008, the Indian personal care active ingredients market was valued at $138.1 million. The revenue growth rate in 2008 was 7.8 per cent. Market growth is attributed to the increasing demand for bioactive personal care products. This is resulting in the development of these ingredients. The CAGR from 2008 to 2014 is forecast to be 8.6 per cent. . As a result, the market is expected to experience steady growth from 2008 to 2014, with some sectors emerging and others witnessing high growth.

Competitive structure:
The Indian personal care active ingredients market is highly fragmented. Competition is becoming intense as participants aim to establish their market positions. The market can be divided into two sectors. One consists of large international personal care ingredients (PCI )manufacturers, while the other consists of local small and medium-sized PCI suppliers. At present, Indian companies outnumber international companies with more than a 50 per cent market share. However, their production is mainly domestic-focused due to lack of investment and the inability to meet international regulatory standards. On the contrary, multinationals are strengthening their presence in India. For example, BASF, Akzo Nobel, and, very recently, DSM, and Rohm and Haas have ventured into manufacturing in India. Others, such as Cognis, prefer importing. However, the imports are in smaller quantities.

In 2008, there were more than 2,000 manufacturers of active PCIs in India, and these suppliers targeted the medium to low value market. International brands are constantly trying to increase their market share by introducing sophisticated formulations for active delivery, a sector that Indian manufacturers are almost absent in. This focus has allowed these participants to obtain over 20 per cent of the market share.

Opportunities for growth:
The Indian market for active ingredients is at various growth stages. Anti-aging ingredients are at an extremely nascent stage, while others such as conditioning agents are at the market penetration stage. Market penetration and product development are recommended as vital strategies to enhance growth for conditioning agents. However, in emerging markets such as UV ingredients and exfoliating ingredients, market expansion and diversification are viable strategies. The biggest weapon at the disposal of this market is the trend towards natural. Unlike the west, where the trend towards natural equals, expensive costs such ingredients are cost effective and easily available in India. Manufacturers must focus on the demand for natural ingredients in order to stay ahead of both national and international competition.

Conclusion
The Indian market for active ingredients is a vibrant market that has spawned the rise of a new era of manufacturers emphasizing on India’s rich biodiversity. The entry of global companies providing elevated technological and quality standards and a growing brand conscious consumer segment is further driving market growth. If advances can be made to promote the efficacy and reliability of the quality of active ingredients, expansion can be expected to continue in the market. However, the lack of clear legislations and the absence of governmental controls are diluting manufacturers’ credibility. Regulatory measures will ensure the credibility of these products.

In addition, a number of factors have the potential to determine the development of the market, such as price stability and raw material availability. At this stage of market development, the frequency of mergers and acquisitions is high due to backward integration. An increasing number of mergers with and acquisition of local raw material suppliers are expected to facilitate international entry into the Indian market. This process could be catalysed by reduction in import duties and increasing product differentiation, which is likely to increase demand for products from the organized sector. Along with some consolidation that is expected in the organized sector, the top participants in the industry are expected to gain a significant market share in the future. The market for personal care active ingredients is a market to watch out for, as increased interest both national and international strives to establish a profitable industry.

-The author is Senior Research Analyst, Chemicals, Materials and Foods,
Frost & Sullivan