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BW Businessworld

Hair's The Money

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In  1979, Shivarama Bhandary, all of 14, would never have dreamt of one hell of a hair-raisin' run of luck when he left Karkala, near Mangalore, for Bombay. Thirty two years on, earthly gods bow to ‘Shiva' for a smart snip or to get their dreadlocks done at a ‘Stylo' in Mumbai's suburbs. It has grown from a hole-in-the-wall barber shop he set up in Thane's Wagale Estate in October 1988. Today, the Rs 5-crore Shiva's Hair Designers has four salons, it keeps 100 pairs of hands busy, 79 of hair stylists.

Bhandary has made it big in Mumbai. To make it bigger, he has headed south — a salon each in Bandra, Worli and Walkeshwar in a little over two years. And bet big on franchisees. "We should have more than 25 salons across Mumbai in about four years". He also knows premium in the looks' business is skin deep — pale can make your accounts glow pink. "The salon in Bandra (it will open by this year end) will employ only Europeans," says Bhandary.

Meet Dharmendra Manwani. Five years ago, he quit his job at MindSpring Consulting in the US to get into a completely different line of business. As the Mumbai-based chief executive of JCB Salons in India, he holds the exclusive rights for the Paris-based Jean-Claude Biguine salon and spa. "It has not been easy taking a 60-per cent pay cut, but it has paid off," says Manwani. He runs six salons, and intends to open 40 more over the next three to four years and, hopefully, notch a salon-century.

Manwani has invested Rs 40 crore in the business so far. Yes, you read it right. "It takes Rs 80-90 lakh to set up a JCB salon. At the operational level, break-even happens in four months," says Manwani, who pockets Rs 3-4 crore annually from a salon. It takes bread to set up shop at the right kerb, and Manwani, like other salon owners, wants to make sure that customers travel only 4-5 km from under their roofs to the salon.

JAWED HABIB promoter, Jawed Habib Hair & Beauty (BW Pic By Subhabrata Das)

Jawed Habib's grandfather was a barber for Lord Mountbatten. His father and brothers still run the family salon in Delhi. JH has 225 salons across 62 cities in India. Habib has split his business into three verticals: the full-fledged Hair and Beauty salon, HairXpreso ( regular haircuts) and an academy. On an average, there are 40 cuts in a day at each of his HairXpreso salons, which charges Rs 99 for a cut. The academy chips in a tiny part.

"The academy is for creating our own bench strength. At any given point of time, we have 150 students ready to service us," says Habib. Here too, his cost is lower — a full-time hair stylist with JH earns a maximum Rs 8,000 per month, far lower than the industry average of Rs 12,000-15,000 a month. Now, to achieve optimal operational efficiency, JH plans to integrate all outlets. "I will be acquiring the software from TCS," says Habib. Every "JH" salon will be linked up. That will keep a real-time check on every cut or service.

Like Bhandary and Manwani, 48-year-old Jawed Habib too has made it big tapping the hair economy. His firm, Jawed Habib Hair and Beauty (JH), is taking an interesting route to find invesment. It expects to raise Rs 60 crore from the public. Habib plans to dilute 25 per cent stake through a fresh issuances of shares — it will value his company at Rs 240 crore. As on November 2010, JH had revenues of Rs 28.5 crore and a profit of Rs 5.4 crore. "We are scouting for an acquisition. If talks work out, we would acquire a local boutique before the IPO," says Habib. He wants to play off brand "JH". It now uses L'Oreal and Wella hair-products. But from April 2012, the scissors and combs used at his outlets will have "JH" embossed on them (see ‘Running With The Hair' on page 52).

Making The Cut
There is a lot of money to be made in the business. Says Shiva: "Forty to 50 per cent of our revenues directly add up to profits." Mumbai-based 2S Consulting estimates the hair and beauty industry to have grown to around Rs 6,900 crore from Rs 1,500 crore six years ago. Says Rajeev Surana, partner at 2S Consulting: "It is expected to reach Rs 29,800 crore by 2015 and get to Rs 98,500 crore by 2020." Fatter wallets will drive annual per capita spend to $5 by 2015 from $1.2 now, and triple it to $15 by 2020. Says Manwani: "Even in B-category cities, the money paid per service has gone up to Rs 600-800, against Rs 200 earlier."

Equity has started to beget private equity. Asit Kotecha, chairman of the ASK Group in 2007 gave a valuation of around Rs 42 crore to the Indian franchisee of JCB when he picked up 72 per cent for Rs 30 crore, even before JCB rolled out its first salon. "We were betting on the Indian consumer story. Increasing consumers spends has been the reason," says Kotecha. Similarly, Nimesh Kampani's JM Financials have reportedly invested about Rs 45 crore in Mumbai-based Enrich Salon. A year ago, Brand Global invested Rs 12 crore in JH, valuing the company at Rs 133 crore. This was when JH's profit was Rs 69 lakh.

Cutting crews such as Just Cuts and Toni & Guy have gone the full monty. "Professionalism has made for a huge difference," says Leena Shoor, marketing manager at L'Oreal Professionnel. "The best way hair styling is delivered is in a controlled service environment by experts," says Anil Chopra, CEO at Lakme Lever. The company has 150 salons in 34 cities across India, and opens a Lakme Salon at a run-rate of one a week. Lakme has also dashed the hopes of wannabe Captain Kirks — there will be many Lakme Ivana unisex salons soon — the first upped its shutters in New Delhi last month.

The Scissor Cuts
Satyan, who hails from Telangana in Andhra Pradesh, has been in this profession for 20 years now, but only has a four-seater salon to show. "Earlier, I used to employ eight. I now struggle to have four," he wails. It is not that the likes of Satyan hang by the hair. Haircare is a highly personalised business. To sink into a chair at your favourite salon, to slip into a well-worn suit — both are comforts some will tear their hair out for. Aircool at Churchgate in Mumbai is one such place. For others, a barber is a keeper of secrets, next only to a butler. If you have a content clientele, you can scale up from a hole-in-the-wall salon. The flip-side: it will add to the bill. Not everyone will avail of or pay for new services. "You have to be ahead of the curve. One has to be dedicated and consider one's customer as God, such that there is always a strong recall for you and your service in his mind," says a God-fearing Bhandary.

Dexterous hands are hard to come by. Manwani points to the high attrition levels: "It is at 35 per cent." The generational handover is not on anymore. Satyan has kept his children away from the business. Customers prefer young stylists. It explains why a Juice and b:blunt with four to five — or at the most eight — salons have set up hair academies. So, too, has Bhandary.

Adds Chopra: "It (talent) is a critical enabler of growth. If it is not there, it can reverse your growth." A salon-a-week at 10 hands for each means Lakme Lever has to get 520 artistes a year. In July, it went in for a hairdo with Pivot Point, the world's largest training school for hair and beauty in New Delhi.

L'Oreal coiffures it differently. It does not charge for education, but links it to purchases. "You buy our products and we teach you how to use them. Worldwide, this has been our business model — of being a distributor to salons. These are our soldiers. They learn from our products and, thereafter, influence salons to get into L'Oreal products," explains Shoor.

Players such as Habib may well spoil this party, but for now, she is chirpy: "It is the reason why the L'Oreal salon division is growing at 32 per cent when the market is growing at 15 per cent." L'Oreal Professionnel trains 78,000 people across 20,000 salons through three brands: Matrix, which operates at the lower-end in C & D cities, L'Oreal in the mid-end, and Kerastase at the top-end.

Shoor sees the "professional barber market" as the next challenge. "The men's salon industry is much more unorganised than women's." It seems to be a reference to the scores of dhoop-chavs (barbers who vend their trade under a shade) by the wayside. "It is up to us to help upgrade and convert," says Shoor. She claims L'Oreal has a 27 per cent market share in India. It will be over a third by the end of the year. "Through Matrix, we plan to go into 50,000 salons in the three years."

What is one to make of the hair business? It has a fair bit of thrust and parry, but it will not harm a hair on your head. It has turned the fable of Samson and Delilah — on its head, what else. Hair or no hair, on your head or someone else's, you are still a Samson. Bhandary, Habib and Manwani know that is the Delilah of it!


(This story was published in Businessworld Issue Dated 05-09-2011)