The largest consumer company in the world’s most populous nation has provided everyday products from detergent to instant coffee to Indians for decades.

Now Hindustan Unilever Ltd. is seeing its fortunes flag as an increasingly sophisticated consumer class with disposable incomes demands more. The Indian unit of Unilever Plc is battling a slowing rate of growth in revenue and profits while its share price is lagging.

India’s elite classes are becoming pickier consumers, fueling the success of organic personal-care brands backed by slick social media marketing campaigns. The rise of companies like local upstart Honasa Consumer Ltd, and the inroads made by global names including Estée Lauder Companies Inc. and Clinique Laboratories LLC, is forcing Hindustan Unilever to spend more on product development and advertising.

The company’s challenges mirror those of other consumer-goods giants, such as Procter & Gamble Co., L’Oréal SA and its London-based parent, which in recent years have had to acquire the niche brands taking market share from their in-house businesses.

‘Challenger Brands’

“Simply put, the large companies like Hindustan Unilever are slow to move and develop strategies compared to the newer brands that are far more agile,” said Arvind Singhal, chairman of consulting firm Technopak Advisors Pvt. “The power of large brands is decreasing by the day because there are challenger brands coming up at every price point. They offer better margins to retailers and the local shopkeeper is happy to try them out.”

Hindustan Unilever declined to comment because it is in an earnings quiet period, a spokesperson said.

India’s personal-care sector is estimated to become a $33 billion market by 2027 from $20 billion in 2022, according to Redseer Management Consulting Pvt.

The competition for wealthier customers comes as the maker of Dove soaps and Magnum ice cream has also had to offer price cuts for its cheapest brands due to a pullback in spending among the poorer, rural consumers.

That’s squeezing the company at both ends, which is often seen as a bellwether for consumer spending in India with its household products sold in every nook and corner of the country.

The company’s revenue grew 3 percent during the first nine months of the fiscal year through December — down from 17 percent growth in the year-ago period. Likewise, net profit is sagging, increasing 4 percent to 77 billion rupees for the nine month-period ending Dec. 31, compared to 14 percent growth in the same period in the previous year.

The consumer goods maker, meanwhile, spent 48 billion rupees ($576 million) on advertising and promotional costs in the April to December period, up from 36 billion rupees during the same time last fiscal year.

In January, Emkay Global Financial Services Ltd. and Centrum Broking Pvt. cut their earnings expectations for Hindustan Unilever. The brokerages had concerns profit margins will be pinched further as it’s forced to devote more resources to fend off new brands in the premium segment.

The company has for long benefited from its entrenched on-the-ground supply chain that can fill up shelves at mom-and-pop stores, as well as supermarkets across the country.

Direct Sales

But niche competitors selling directly to consumers online circumvent the distribution network, according to Nitin Gupta, an analyst at Emkay Global.

“Even when HUL does launch a premium product, they have been late to the market,” Gupta said. “Innovation has not kept pace with the consumer.”

The stock is down by 15 percent since the start of this year, lagging the 4.5 percent decline in the broad index of consumer stocks in India. The market benchmark, S&P BSE Sensex, has advanced in 2024.

Hindustan Unilever is struggling to offer new products in the premium segment that create market buzz, said Vidushi Agrawal, an independent brand consultant based in Mumbai.

Tapping Influencers

Its new-age competitors are marketing products to specific demographic groups — such as young people or new parents — and tapping social media influencers to spread the word about their brands.

Hindustan Unilever personal-care brands such as Simple or Love, Beauty and Planet — launched a few years ago — are just now gaining some social media traction. Still, each one has garnered less than 92,000 Instagram followers, for example. Mamaearth — a personal-care brand from newcomer Honasa Consumer — has more than 1.3 million followers on the platform.

Mumbai accountant Karthik M said he now skips by most HUL items on store shelves. When he’s shopping for personal grooming products, he’s looking for products from Bombay Shaving Co. and Marico Ltd.-backed Beardo.

“I research quite a bit on the science behind shampoos and soaps and what chemicals I want on my face,” he said. “Other than Pears soap, I don’t buy any of the other products for hair and beard” from Unilever’s India unit.

Recasting Businesses

Hindustan Unilever has introduced a slew of new body care products in the last two years, and in December split its personal care division in two in order to do better specialised marketing.

More than 80 percent of the company’s product lines are either growing or maintaining brand identity among consumers, Hindustan Unilever chief executive officer Rohit Jawa said on a January call with analysts.

The premium beauty business unit — created three years ago — is generating more than a billion rupees in annual recurring revenue, the company said. It does not disclose profit for the unit.

Still, the company’s fight to maintain its decades-long stranglehold on Indian consumers looks set to intensify. Nimble challengers are offering shoppers more variety and retailers more profits, said Laxmichand Gada, owner of Mumbai retail chain Society Stores.

This means he’s stocking fewer Unilever personal-care products on his shelves and more of local and foreign niche brands.

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If you’ve heard of Deciem at all, it’s almost certainly for its low-price skincare brand The Ordinary. Only true beauty fanatics would be able to name even a few of the more than 10 other brands the company has released since its 2013 launch. That was by design. Deciem went all-in on The Ordinary after it took off in 2017, eventually shutting down all but two other lines.

Now, Deciem, which was acquired by The Estée Lauder Companies in 2021, is dusting off one of those less-talked-about brands.

Originally launched in 2015, NIOD (an acronym for Non-Invasive Options in Dermal Science) is the chalk to The Ordinary’s cheese. The Ordinary’s branding is all about simplicity, with products often named after a single active ingredient, packaged in sterile and lightweight materials, and sold for prices as low as $4.70.

NIOD marketing and brand messages verge into Kafkaesque territory. Some products are named for multiple raw ingredients, such as copper amino isolate serum 3 1:1 (the brand provides the helpful acronym “CAIS3″). Others are more cryptic: an antioxidant serum is called Survival 0; Sanskrit Saponins is a cleanser. The longer names come with prices to match, with a tiny bottle of eye serum costing $70.

NIOD’s technical product names and tagline “Your skin is intelligent. Optimise accordingly” fit neatly into the ever-growing crop of “science-backed skincare” brands elbowing for room on Sephora’s shelves. They’re also straight out of The Ordinary’s playbook (or perhaps the other way around, as NIOD launched a full year before its lower-priced sister brand).

But Estée Lauder could use a hit. The Ordinary is successful enough to have its own dedicated Reddit and Facebook fan forums, and is a persistent bright spot in its parent company’s otherwise dreary earnings - chief executive Fabrizio Freda name-checked the brand multiple times in its second quarter 2024 results, saying it had “extraordinary success,” with net sales growth in every region.

With NIOD, new products, new distribution lines and a marketing push will soon roll out, and an external PR agency has been hired for the brand.

It’s rare for lightning to strike twice in the skincare industry. But NIOD has a shot, said Dr. Julian Sass, a cosmetic developer and content creator. He described the brand as embodying many of the traits consumers love about The Ordinary, but with a promise of better results.

“So many of [NIOD’s] products are so much better than The Ordinary, both in terms of the quality of the formulas and the raw material,” he said.

A Return to Roots

NIOD was Deciem’s first skincare brand, but as orders for The Ordinary’s affordable products began to fly in, production of NIOD’s more-complex products had to slow down (even its packaging is manually assembled).

“In any business, you have to make difficult decisions,” said Nicola Kilner, Deciem’s co-founder and chief executive. “If we needed 1,000 [of NIOD’s hyaluronic acid serum], but we also needed 100,000 of The Ordinary’s version, that always got priority on the production line.”

While the brand was never officially put on pause, no new NIOD products have been released since 2020. Now, the company is in a better position to satisfy increased demand, having invested in more machinery, and improved its supply chain. Its fill rate – the percentage of orders that can be fulfilled based on existing inventory – is 96 percent, whereas a few years ago, it was 50 percent at best.

Kilner said the last half decade hasn’t been wasted, describing NIOD’s customer base as “very engaged.” It’s much smaller, however: NIOD has 18,000 Instagram followers, to The Ordinary’s 2.4 million.

Complex on Purpose

It’s possible that NIOD was simply ahead of its time.

The Ordinary led with hero ingredients like hyaluronic acid and niacinamide that, while sometimes a mouthful, could be quickly explained by a Google search. NIOD’s acronyms and lengthy product names required an extra level of skincare literacy.

Nearly a decade later, you’re as likely to see The Ordinary’s products in a beauty editor’s bathroom cabinet as you are in that of a twenty-something bachelor who doesn’t own a bed frame.

The in-the-know skincare aficionados have levelled up, and NIOD is targeted at those early adopters. Kilner described NIOD’s range having a focus on pre-cursors, ingredients that can spur the skin’s own regenerative processes.

Deciem is hoping that the burgeoning longevity movement will provide a fresh customer base. A subsect of wealthy consumers have become more interested in wellness services and products designed to enhance lifespan.

For a consumer well-versed (or at least, willing to learn) about biomimicry and other health hacks, NIOD offers an appealing proposition. But a casual shopper may not know what to make of Survival 0, an antioxidant serum described as part of a “range of four networked protection systems,” offering protection against “the superoxide radical, nitrogen radicals and carbonyl radicals.”

“I only know a lot of what these products do because, firstly, I make products and also I know people who could help me interpret it,” Dr. Sass said.

Dr. Sass added that when he’s made content about NIOD products, he has to break things down in order for his audience to follow along.

“When it’s too high level, then you lose people,” he said. (Dr. Sass said he has not been paid for his NIOD content and has no other financial relationship with the brand.)

Kilner said NIOD’s complexity is part of its appeal.

“We don’t need to please everyone … we’ll never dumb down our science to please a consumer,” she said.

The complex messaging is one reason Kilner said she expects NIOD sales to primarily come, at least in the beginning, through its own channels. Its top-performing bricks-and-mortar store is in Seoul, though products are for sale at Selfridges and a few other retailers. Facials will also soon be available in Harrods, the upmarket London department store.

In-House Competition

NIOD’s team will also have to convince consumers the higher price point is worth it. For instance, both NIOD and The Ordinary sell hydrating hyaluronic acid serums, but NIOD’s costs six times more. The pricier brand says it uses a different formula that is 8.25 times more expensive, containing 15 forms of hyaluronic acid compounds including precursors and mimetics, while the cheaper one contains just five.

“NIOD uses technologies so new, sometimes so new there’s only one manufacturer,” said Kilner.

NIOD is identifying new raw materials and investing in the clinical legwork to support bigger claims about efficacy. In 2023, it secured its first patent for a copper peptide blend that it says improves skin radiance and texture. The first NIOD product to use it retails at $93, but the technology has also been shared with The Ordinary, which launched a less-concentrated version for $32, its most expensive product yet.

Ultimately, Kilner says the brand will be led by what the labs provide. If they discovered important enough technologies to warrant it, NIOD “would charge $300 for a product,” said Kilner.

“We are not afraid of the price point,” she said.

The clinical claims section of the beauty market is led by ultra-premium brands like Révive, Dr Barbara Sturm and Augustinus Bader, all of which offer serums with triple digit price tags and all the grandeur to match, from tasteful packaging, evocative names and light textures.

Deciem is betting that NIOD’s customer is a little different: someone who wants the most cutting edge option at every turn, even when a cheaper alternative is available – or maybe even a more expensive one with a more luxurious feel.