Beauty on a budget: Sugar Cosmetics targets Gen Z with affordable glam

Co-founder and chief operating officer Kaushik Mukherjee said in an interview that the Mumbai-based company sees a bright spot in Gen Z (born between 1997 and 2012) and Gen Alpha (born in 2012 and after) consumers, who represent a different yet interesting proposition.

“The customer base we started with in 2015 is now a decade older. We need to reinvent to touch the next decade of consumers," Mukherjee said, adding that the company wants to be known as a go-to cosmetics brand for all age groups. 

India has one of the youngest populations in the world. According to 2021 estimates by the government's Central Statistical Office (CSO), people aged 15 to 29 constitute 34% of the total population, and nearly 66% of the total population is under the age of 35.

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And according to a November 2023 study by data analytics firm Kantar, women aged 18-44 spent as much as ₹1,120 crore on makeup products in the first 10 months of 2023.

Sugar, founded by Vineeta Singh and Mukherjee in 2015, senses a massive opportunity in this emerging cohort of users. It has already introduced multiple ranges, including youth-focused Sugar Play and pocket-friendly Sugar Pop.

However, their consumption patterns differ widely from previous generations, which presents a fresh challenge.

Besides, India's about $20-billion beauty market enjoys robust investor confidence, with new brands such as Blur India, Typsy Beauty, Kiro Beauty, and Swiss Beauty looking to offer products matching international standards.

And they've also picked up the trend. Listed player Honasa Consumer Ltd, which owns skincare brands Mamaearth and Aqualogica, launched Staze, an affordable, youth-focused colour cosmetics range, earlier this year.

Swiss Beauty, based in New Delhi, told Mint in August that it was looking to grow its Gen Z-focused Craze line, starting at ₹180.

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Tough crowd

India’s beauty and personal-care market is expected to reach $30 billion by 2027, growing at a 10% compound annual growth rate between 2022 and 2027, according to a 2023 report by Redseer Strategy Consultants and Peak XV Partners. 

The country is expected to account for nearly 5% of the global growth opportunity despite a per capita category spending of $14, lower than China ($38) and a fraction of the US ($313).

It's a huge market, and young customers are spoiled for choice. A distinct characteristic of Gen Z is that they are open to experimenting with brands, making loyalty a tall ask, according to an e-commerce executive.

Mint reported in August that new-age cosmetics brands are evaluating the best ways to retain users as well as keep up with ever-changing trends.

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To this end, Sugar is working on launching at least four different product ranges across categories in 2025, with a focus on face and lips, Mukherjee said, noting that the emphasis is now on skincare-infused makeup. “A big point of difference is that the younger consumers want makeup that doesn't only look good but is also good for the skin. They won’t settle for poor-quality products, which makes thoughtful innovation so much more important.

Sugar Play saw its revenue grow more than 218% sequentially in the June quarter, Mukherjee said, adding that it is expected to be Sugar’s fastest-growing range in the next 18-24 months. He didn't share the figures.

Students and users who are just entering the workforce tend to be budget-conscious and require products that don’t burn through their pockets. Sugar is also working towards expanding its Pop range of products, which starts at ₹199.

Marketing is the key

The overcrowding in the beauty and personal-care segment in recent years is also prompting many to re-evaluate marketing strategies, said the e-commerce executive quoted above. Consumer brands tend to spend as high as 50% of their overall expenditure on marketing and promotional expenses, a component hard to overlook.

In 2022-23, nearly 32% of Sugar's overall spending was advertising and promotional costs. However, Mukherjee noted that the brand has come a long way since its inception and is hopeful that some changes in the overall strategy could result in minimal spending.

According to Mukherjee, Sugar has steered clear from implementing “fear-based marketing techniques" that typically highlight cosmetics as products to hide flaws. “For the newer generation, it’s about functionality. They are fairly secure about their flaws," he said.

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Moreover, in the age of social media, new-age cosmetic brands like Sugar could face the heat from ever-changing beauty trends, which could force them to speed up innovation.

It is also diversifying it sales channels to improve sales. “We expect a 50% jump in our monthly quick-commerce sales between now and November," Mukherjee noted. 

The cosmetic brand, which has raised upwards of $85 million so far from marquee investors, including Elevation Capital and A91 Partners, reported an operating revenue of ₹420 crore in 2022-23, up from ₹222 crore in the year-ago period. Its losses remained flat at ₹76 crore.