With a population of 1.22 billion, rising income levels and an increasing awareness of lifestyle and health, India holds significant opportunities for wellness-focused companies. A 2012 PricewaterhouseCoopers (PwC) study, Winds of Change – The Wellness Consumer, valued the country’s wellness market at INR590bn (US$11bn, €8bn £7bn) in 2011, having grown by 20 per cent from the previous year. The study, launched at a conference of the Federation of Indian Chambers of Commerce and Industry, says “the scope in the wellness market in India is immense – even a 1 per cent increase in consumer expenditure can potentially create an additional opportunity of INR6bn (US$108m, €84m, £72m) for wellness players… This evolving consumer base will provide the momentum for growth, propelling the wellness market to cross INR1 trillion (US$18bn, €14bn, £12bn) in the next four years.”

Market make up
So what does the wellness market in India consist of? PwC segments it into three categories: hygiene, enhancement and curative. Salons and beauty services as well as hair and skincare products straddle the hygiene and enhancement categories. Cosmetic treatments and spas are categorised as enhancement services. Straddling the enhancement and curative sectors are fitness equipment, slimming products and services. The curative sector features fitness services, dietary supplements, alternate therapy products and services – mostly ayurveda and homeopathy – as well as wellness food and beverages.

Who are the customers?
PwC separates wellness consumers into four sectors using a pyramid. The largest market consisting of over 700 million people (at the base) are the ‘passives’ who, according to the study, represent the largest opportunity but give least importance to wellness. This segment is “unwilling to make significant lifestyle changes or compromise on taste and convenience”. Next are the ‘beginners’ representing a potential market of around 150-200 million people. The beginners are particularly motivated by improvements in personal appearance. Both passives and believers are most likely to be influenced by celebrity endorsements – a growing trend in India. Operators are therefore “increasingly using brand ambassadors to promote their products”.

At the top of the pyramid are two segments accounting for 2 per cent of the population: the ‘actives’ representing 15-25 million people and the ‘believers’ amounting to 1-2 million people. The study says both sectors follow health and wellness information closely and are “willing to pay a premium for high quality products”. At the very top, the believers, made up of mostly urban adults and working professionals, are reportedly the fastest growing segment. They “seek solutions beyond general wellbeing, and are receptive to products and services with distinct functional benefits”. Yet “each of these consumers represent distinct opportunities for wellness solution providers”.

Where’s growth coming from?
The growth of the wellness market in India has been fuelled by a variety of factors:
- The expansion of products and services in smaller (tier 2 and 3) cities – especially cosmetic products, fitness services and salons
- The rise in new outlets – particularly salons
- The introduction of branded products and salons, such as hair and beauty chain Jawed Habib which has over 320 outlets
- New offerings – Zumba, pilates etc in fitness and body shaping in slimming services
- Gender crossover: sales in men’s grooming products have risen by 30-40 per cent while “women gym goers are no longer a minority”

Price has also been used to bolster demand with a range of cosmetic products now available at varying price points. The fastest growing sectors have been the fitness and slimming markets, the latter a result of rising obesity. Although this overall sector has grown at 25-30 per cent, slimming services have increased by 30-35 per cent.

Interestingly, despite growth and opportunities, the fitness and slimming markets are highly fragmented, with few large or pan-Indian players. The merger and acquisitions activity in the overall wellness sector has occurred mainly in the food and beverage segment, with some international companies entering the market. PwC report four deals in total – three acquisitions and one joint venture from August 2011 to July 2012. Private equity interest has also been low, with three reported investments in the same period, each under US$20m (€16m, £13m) terms of deal value. Two of these deals were in the rejuvenation segment (salons and beauty) and one in the online health sector.

The same trends which have influenced the growth of wellness in the West are present in India – increasing health awareness, the desire for prevention rather than cure and increasing affordability. It’s this last trend which is critical – “gross disposable income per household has almost doubled since 2005 to reach INR0.3m per household” reads the report. In tandem, per capita expenditure on wellness has risen from INR300 (US$5, €4, £3.6) in 2008 to INR480 (US$9, €7, £6) in 2011. Rising demand has been met with increasing supply – the top three salon operators in India now offer 456 outlets, up from 77 five years ago. That’s a compound annual growth rate (CAGR) of 43 per cent. Similarly, the top four gym operators now have 262 gyms compared with 62 five years ago (a CAGR of 33 per cent).

Like the West, India too has an ageing population. The over 40s are expected to increase from 340 million in 2011 to 676 million in 2041. This segment tends to be interested in wellness products and services to stay young and healthy – “an under-addressed segment in India today” – which is expected to contribute to the growth forecast in wellness in the future.

What lies ahead?
The extent to which growth will continue in certain sectors will depend on price sensitivity. Healthy oils for example are up to seven times more expensive than ordinary oils and consequently account for only 0.2 per cent of the Indian oil market. Therefore, investing “in product innovation to develop offerings that suit the local palate and address price sensitivity” is one of the critical factors for future growth, according to the PwC report.

While the focus on expansion in tier 2 and 3 cities is likely to continue (together these offer a population of 100 million people), price sensitivity is high in these cities. That’s why PwC suggests that in tier 2 and 3 cities operators could “introduce smaller stock-keeping units to induce trial”. Given that an important proportion of future growth is likely to result from secondary cities, PwC further recommends that operators “develop tailored propositions for tier 2, 3 and 4 cities; a one-size fits-all approach will not yield expected results”. Tailored propositions might include “appropriate pricing, consumption-led stock-keeping units, trial formals etc”.

It’s clear that to achieve the growth forecast, operators will need to invest heavily in the market – in developing “sustainable and scalable models for growth”. This will include investments in marketing and in the internet/in communications to sell to and interact with consumers to stress “the tangible benefits” of their products. In a country where brands are important, investment will be required in “communicating [brand] proposition to stay active in the minds of users”. So far, branded salons such as Enrich Salons, Naturals and Jawed Habib Hair; and gyms such as Solaris Fitness World, Gold’s Gym, Fitness First, Ozone and Talwalkars have experienced two to three times the growth of unbranded operators. There will be cost implications in meeting modern consumers’ expectations, for example investment in staff training and dealing with the highly fragmented nature of India’s retail sector – consisting of over 12 million retail outlets.

As lives become increasingly busier, PwC believes operators will need to create convenient wellness solutions – for example spa treatments in cabs for “on-the-go consumers” or ready-to-go cereals for those having breakfast on the move. Niche categories are also predicted to emerge and PwC feels there’s an opportunity for operators to offer “niche functional benefits”, as are available globally. For example, anti-cellulite products are currently experiencing growth rates of over 40 per cent in India. These niche products will, however, require significant investment – in management capabilities, cost and time to reach a critical mass.

In summary, according to PwC, health and wellness has become a mainstream concept today but price will continue to play a significant role in determining demand for the majority of consumers. According to the report significant “investment and a long-term focus” are needed to properly exploit the opportunities offered by the tier 2, 3 and 4 cities. Significant investment is required in order to move the largest potential market – ‘the passives’ up the pyramid by “creating awareness and educating consumers about long-term health benefits”, with “frugal innovation” and encouraging customer trials to “reduce barriers to usage”. Moving the ‘beginners’ up the ladder will require increasing frequency of purchase – particularly in the “looking good” area.