Beauty brands race upmarket as rising competition squeezes margins

Once defined by broad-based and mass-market products, the beauty and personal care space is now seeing a number of direct-to-consumer players launching high-end lines. The shift signals not just a bid for higher margins, but an urgent need for sharper differentiation in a market crowded with lookalikes and aggressive discounting.

Earlier this month, Mamaearth parent Honasa Consumer Ltd, launched a new venture, Lumineve, a nighttime skincare brand positioned in the prestige category, in partnership with Nykaa. “We believe this is not just a brand which will take India by surprise, but also probably help us with global expansion in the future,” Honasa’s CEO Varun Alagh said in the September quarter earnings call last week.

“We believe over the next decade, prestige skin care itself will be like a $4 billion opportunity. And as an organisation, it’s important that we participate in it as well as build capability in taking a share in that market,” Alagh noted.

Honasa joins a list of digital-first companies like Deepika Padukone-led 82°E, HUL’s Minimalist, and Unilever-backed RAS Luxury Skincare, offering more science-led products for consumers seeking better results over quantity.

Beauty retailer Nykaa highlighted its September quarter for international brand additions, including Swiss luxury skincare La Prairie and Italian cosmetics Prada Beauty, with increased shopper interest. It also plans quicker delivery for its luxury range.

Nykaa’s role

“One thing we did not foresee in the early days was that we have the ability to sell luxury products by enabling our retail stores to become hyperlocal delivery hubs and do it in a cost-effective manner. So why should we not allow customers to also get access to the best luxury products with quick delivery speeds?” Anchit Nayar, Nykaa’s beauty CEO, said during the Q2 earnings call.

RAS Luxury Skincare, an 8-year-old Mumbai brand that uses premium ingredients like 24 karat gold, pomegranate oil, and calendula, has seen its average order value exceed ₹2,000, driven by its flagship 24-kt gold radiance face serum and bakuchiol night cream, co-founder and chief marketing officer Suramya Jain told Mint.

“What we’re seeing is not indulgence but informed upgrading, and customers are asking tougher questions before they buy,” Jain added.

A91 Partners-funded beauty brand Plum Goodness is gradually expanding its range of face serums and toners, especially those that contain specialised ingredients like niacinamide, retinol, and ceramides, which target different skin issues. “Niacinamide products are top-selling in our premium range currently. The prices tend to be slightly higher than other products because the ingredients are costly and the product requires different formulation processes,” said Shankar Prasad, founder and CEO of Plum Goodness. Plum’s active ingredient range starts at ₹510 all the way to ₹1,800.

Niacinamide, retinol, and ceramides, derived from vitamins and fat molecules, have properties aiding skin health and are marketed in wrinkles-clearing, anti-ageing skin care products.

India’s beauty and personal care market is expected to grow from $21 billion in 2024 to touch $34 billion in the next four years, making it the fastest-growing in the world, according to Nykaa’s beauty trends report from last year.

Tough market

The expanding market and low barriers have led to many new entrants. About $2.4 billion has been raised over the last five years, showing investor confidence, according to Venture Intelligence.

Due to easy access to outsourced local manufacturing and sourcing of materials for products such as moisturisers, shampoos, face serums, and even lipsticks, a greater number of players have found the segment lucrative.

Industry watchers say this push into premium is as much about survival as it is about aspiration. With customer loyalty fragmenting and online marketing costs rising, brands are increasingly relying on elevated formulations, luxury cues, and targeted claims to capture consumer attention—and command a healthier margin in the process.

“Premiumisation is being driven by the need to expand the category and grow the overall business. Premium and luxury markets are smaller today, but five years out, they could be large, which is why brands are starting now,” said Rahul Chowdhri, partner at Stellaris Venture Partners. “For most players, this is not their first brand, and often it’s their fifth. They need new revenue pools, so moving into premium becomes obvious.”

Moreover, luxury brands are much harder to build, especially in the initial years, according to Chowdhri. To create the feeling of luxury, significant brand expenditure or large celebrity endorsements are essential, while ensuring that accessibility to the brand remains exclusive and limited, he added.