Marico’s skin care services firm, which has just opened its 100th outlet, is pulling out all stops to make the brand viable
Premium skin care brand Kaya Skin Clinic contributes just 7 per cent to Marico’s bottom line. And Chariman Harsh Mariwala believes Kaya needs to clock a turnover of Rs 400 crore before it becomes a viable venture. The current turnover is just half of that at Rs 200 crore.
Worse, Kaya has posted a loss of Rs 2 crore in the second quarter (July to September) compared to Rs 50 lakh loss in the whole of 2008-09. While the international business (mainly West Asia) is losing money, the silver lining, however, is that the domestic business is making profits.
Conventional logic in such cases would be to slow down a bit for the business to stabilise. But Kaya is on a rapid expansion mode. While the first four years saw the company setting up 45 clinics, the next three saw the addition of 55 – the latest was just a fortnight back in Guwahati. In the process, Kaya has become the world’s largest cosmetic dermatology chain. It has launched 16 clinics so far this year and a couple of more are in the offing before the calendar year ends. Of the 100 clinics, 87 are in India and the rest in West Asia.
The rapid expansion and the fact that the company spends around 15 per cent of its revenue on advertising are the main reasons for the losses. Setting up clinics is expensive – a clinic of around 1,000 sq ft costs Rs 1.2-1.5 crore. The expense is more as the company does not believe in a franchisee-led model because it dilutes quality. "One of our biggest focus areas has been service quality and we felt that franchisees would not be able to deliver that," says Kaya’s Head of Marketing Suvodeep Das.
The focus on quality service is perhaps the reason why Kaya’s revenue has been growing at over 50 per cent over the last three years. While rival Lakme struggled with its franchisee model and maintaining standardised services, Kaya had a fool-proof model in place. No surprise, therefore, that over a fourth of Kaya’s 600,000 customers has signed on in the last one year. The only competition Kaya has is in the form of neighbourhood beauty parlours and smaller chains like VLCC.
Das says the company’s strategy to expand even in the face of the recent slowdown makes sense as the skin care services space is worth Rs 1,800-2,000 crore and is growing at 18 per cent per year.
To make sure that quality isn’t compromised, Kaya has embarked on a massive training exercise. So, while the clinic's skin practitioners are trained for about 60 days, the 250-odd dermatologists undergo at least 30 days of training. In fact, "skin practitioners" are required to be trained for a mandatory 500 hours before they are allowed to deal with a customer. Sample this: Kaya conducts 8,000 man hours of training a year. According to Das, the ambience of the clinics is equally important. "We want to give customers the feeling of a spa while maintaining the efficacy of a hospital," he says.
The other area where Kaya intends to step up its investment is technology. It has already imported fractional laser technology or FRAXEL, as it is commonly called, for treating acne scars. Plans have been drawn up for strengthening its portfolio of services in hair and body as well. It has also launched Kaya LifeTM, its chain of professional weight control centres that gives better margins.
If women are coming in droves, can men be far behind? The share of male customers has grown from 18 per cent five years back to 25 per cent and Kaya hopes to increase that share on a growing base through more after-shave, face wash and moisturizer products, and a robust online delivery model.
Kaya isn’t shying away from brand building either. In 2007, research showed that many people saw its clinics as merely places to solve skin problems. Soon after, a TVC was launched that highlighted Kaya's skin lightening service.
This year, it came out with the Kaya expert campaign and advertised heavily on its "hair-free" service. It has also introduced a digital campaign where key words could be linked from Google to the Kaya website. Moreover, dermatologists in the company respond to Tweets, Yahoo Q&As and live chats on the company's website. It has also launched a clinic group on social networking site Facebook.
Such 360 degree campaigns, the company says, is unavoidable as a significant number of people are still unaware of cosmetic dermatology. Moreover, there’s a taboo associated with using machines on skin. "We needed to convince people that using machines is okay and is a part of non-invasive dermatology," Das points out.
Analysts seem to be happy with Kaya’s brand positioning. Angel Broking’s Anand Shah says Kaya will break even within the next six months. But what worries him is the high fixed costs. For Kaya to do well, the fixed costs needs to be distributed and that will happen only when it ramps up its outlets, Shah adds.
These are challenges Kaya has to overcome if it has to live up to Mariwala’s hopes that the skin clinic brand will be a key growth engine for Marico both in terms of top line as well as bottom line.
Kaya has its task cut out.