Beauty and Cosmetics is a multi-billion dollar industry that is seeing enormous growth with rising social media and influencer culture. Amongst all this, Sugar Cosmetics was launched in 2015 and became the favourite brand of Gen Z and millennials in India. The products are designed according to the needs of Indian users and are quite affordable from the price point of view. Let’s delve deeper into Sugar Cosmetics’ business model and explore what differentiates them from their competitors.
About the Founder
Sugar is a direct-to-consumer brand founded by Kaushik Mukherjee and Vineeta Singh. They both are alumni of IIM Ahmedabad, where they met first. Vineeta Singh is a part of the famous Indian reality TV show Shark Tank India, where she has invested in numerous businesses.
About the Products
Sugar Cosmetics is a makeup brand that offers a range of beauty products, including lipsticks, eyeliners, kajal, mascara, blush, foundation, and more. Sugar Cosmetics is known for its high-quality, cruelty-free, vegan makeup products that suit different skin tones and types. The brand’s products are formulated with safe, skin-loving ingredients and are free from harmful chemicals like parabens, mineral oil, and lead.
The brand has gained a large following in India and expanded its reach to other countries. Sugar Cosmetics has won several awards for its innovative and high-performing products and is considered one of the leading makeup brands in India.
Pricing Strategy
Sugar Cosmetics’ pricing strategy is value-based and competitive. The brand’s products are priced higher than drugstore makeup brands but are more affordable than high-end luxury brands. The brand also offers regular discounts and promotions to incentivize purchases and create a sense of urgency among consumers. Sugar Cosmetics’ pricing strategy aims to create a perception of high-quality and premium products accessible to a wider audience.
SWOT Analysis of Sugar Cosmetics
SWOT analysis is a strategic planning tool used to evaluate the Strengths, Weaknesses, Opportunities, and Threats of a business or product. Following is the SWOT analysis of Sugar Cosmetics:
Strengths of Sugar Cosmetics’ Business Model
- One of the key strengths of Sugar Cosmetics’ business model is its focus on catering to the needs and preferences of its target audience. The brand’s products are designed to be versatile and inclusive, with a wide range of shades and formulas that suit different skin tones and types.
- Sugar Cosmetics’ online presence is also a major strength, with the brand’s website and social media channels serving as key platforms for marketing, outreach, and customer engagement.
- Another strength of Sugar Cosmetics’ business model is its pricing strategy. The brand’s value-based pricing approach creates a perception of premium quality without being prohibitively expensive, making its products accessible to a wider audience.
- Sugar Cosmetics’ regular promotions and discounts also incentivize purchases and create a sense of urgency among consumers.
Weaknesses of Sugar Cosmetics’ Business Model
- One potential weakness of Sugar Cosmetics’ business model is its reliance on online channels. While the brand has established offline stores in major cities in India, its distribution network is still largely online. This may limit the brand’s reach to consumers who prefer physical stores or live in areas where online shopping is not as prevalent.
- Another potential weakness of Sugar Cosmetics’ business model is its narrow product line. While the brand offers a range of makeup products, its product line is still relatively limited compared to other beauty brands. This may limit the brand’s appeal to consumers who prefer a wider range of products or are looking for specific makeup products.
Opportunities for Sugar Cosmetics’ Business Model
- One opportunity for Sugar Cosmetics’ business model is its potential for international expansion. The brand has already established partnerships with retailers in the United States and the United Kingdom and could expand its distribution network to other countries. This would allow the brand to tap into new markets and reach a wider audience.
- Another opportunity for Sugar Cosmetics’ business model is its potential for product diversification. This would allow the brand to offer its customers a more comprehensive range of products and further differentiate itself from its competitors.
Threats to Sugar Cosmetics’ Business Model
- One potential threat to Sugar Cosmetics’ business model is the highly competitive nature of the beauty industry. The brand competes with various other makeup brands, both established and emerging, and must continuously innovate and differentiate itself to stay relevant and appeal to consumers.
- Another potential threat to Sugar Cosmetics’ business model is the potential for changing consumer preferences and trends. The beauty industry constantly evolves, and consumer preferences and trends can shift quickly. Sugar Cosmetics must stay attuned to these changes and adapt its products and business model accordingly to remain competitive.
Sales and Revenue of Sugar
Sugar Cosmetics is D2C (direct-to-consumer) brand. They use an omnichannel approach to sell their products. It enables Sugar to promote its products on eCommerce sites like Amazon, Nykaa, etc. Sugar has its own website as well. The brand has also established offline stores in major cities in India, including Mumbai, Bangalore, and Delhi. In addition to its own online and offline channels, Sugar Cosmetics has partnered with other retailers to expand its distribution network.
The company is currently spending more than its earning. The Sugar Cosmetics operational income climbed by 22%, rising from Rs 103.71 crore ($12.58 Mn) to Rs 126.36 crore ($15.33 Mn). Domestic sales, which accounted for 93.1% of the company’s sales, increased by 34.1% from Rs 87.7 crore ($10.64 Mn) to Rs 117.61 crore ($14.26 Mn).
Advertising and sales promotion charges made up 32.5% of the overall budget for spending. From Rs 34.36 crore in FY21 to Rs 97.54 crore in FY22, the cost grew by 2.8X. Another significant expense during FY22 was purchasing cosmetics from manufacturers, which increased by around 63% to Rs 66.35 crore.
The well-known Indian cosmetics supplier increased its EBITDA margins, which helped it reduce losses from $3.42 million to $2.55 million over the year. But their losses surged in FY22 to $9.23 million, which is almost 3.6x to FY21.
Conclusion
The innovative business strategy of Sugar Cosmetics has contributed to the brand’s success in the cutthroat beauty market. The brand’s success has largely been attributed to its emphasis on serving the requirements and preferences of its target market and its value-based pricing strategy and online presence. The brand’s business strategy may have certain vulnerabilities, but there are also chances for growth and product diversification that might support the brand’s future success.
Overall, Sugar Cosmetics is a case study of how a business may effectively stand out in a competitive industry by focusing on its customers and upholding a dedication to excellence and innovation.
