Competition, costs, and losses could force Chairman B.D. Topiwala to, eventually, pull out of the colours market.

By Chhaya

Six months ago, Bhikhubhai Dahyabhai Topiwala, the 65-year-old CEO of the Rs 21.17-crore Paramount Cosmetics, suddenly had an unusual caller at his Mumbai home: an investment banker. Who had a strange request to make: he wanted some confidential information on Tips & Toes (T&T), the enamel and lipstick brand that Topiwala has carefully manicured for years.

When he quizzed his visitor about his intentions, the cosmetics-manufacturer was amused from tip to toe. ''I don't remember his name, but he suggested that I put my company up for sale,'' recollects Topiwala, who has, so far, refused to join hands with any transnational if he was denied majority control in the joint venture.

Six months later, Topiwala may be less amused. For, T&T is definitely in danger of losing its sheen. While he had just one competitor, Lakme, in 1992, Topiwala now has 4 more transnationals-the $11-billion L'Oreal, the $5-billion Avon, the $2.30-billion Revlon, and the £90-million Oriflame-treading on his toes.

What could also trip T&T is the aggressive, new avatar of its old foe, Lakme, now owned by the Rs 8,528.50-crore Hindustan Lever. Laughs Topiwala's son, Hitesh, 32, Director, Paramount Cosmetics: ''Size matters only in movies like Godzilla. The market still belongs to Lakme and T&T-and we are happy being No. 2.''

Yet, the continuing flurry of transnational brand launches, rising marketing costs, and imitative low-end strategies may force Topiwala to weigh the costs and benefits of being a strategic investor instead of continuing as an owner-manager. Not that there will ever be a dearth of suitors. Admits Meghna Modi, 24, the Executive Assistant to her father-Chairman, U.K. Modi, at Modi-Revlon: ''If there is an offer, we will consider it.''

THE BRANDS BARRIER. Without distribution networks and brand salience, transnationals find it difficult to penetrate the Rs 850-crore cosmetics market, which includes skin-care and colour cosmetics. While the former is growing at 29 per cent, the latter-where Paramount Cosmetics has a 20 per cent share-is clocking growth-rates of only 15 per cent per annum. Unless the market grows even faster, Topiwala may have reason to worry.

Little wonder, then, that Paramount Cosmetics has used its retail muscle to debut in the skin-care segment. Three years ago, it launched the Enriche range of skin-care cosmetics, followed by the Instinct range in the men's grooming segment. But Enriche has not made a splash, and while Instinct is doing well, the market it belongs to is valued at just Rs 40 crore.

THE COSTS BARRIER. The costs of competition have been stiff for a small player like Paramount Cosmetics. Both Instinct and Enriche have soaked up marketing costs of Rs 2 crore each per annum. Four years ago, Paramount's ad-spend was Rs 1.13 crore; today, its budget of Rs 4 crore is not proving enough to battle the transnationals. Disagrees Hitesh: ''We don't relate ad-spend with the success of a product.''

Either ways, Paramount Cosmetics' health does not permit much profligacy. Between 1996-97 and 1997-98, its sales dropped by 25 per cent: from Rs 28.20 crore to Rs 21.01 crore. After incurring a loss of Rs 2.68 crore in 1995-96, it bounced back with net profits of Rs 63 lakh in 1996-97 before slumping to Rs 43 lakh in 1997-98. Still, the Topiwalas could stay smug in the hope that the low-end colour cosmetics segment will remain uncrowded, with just 2 players. Agrees Modi-Revlon's Modi: ''T&T is clearly a mass market brand. Revlon does not have the same target audience.''

Denying the rumours of a sellout, Topiwala says: ''If that were true, we would not be repackaging our products.'' Such a cosmetic change means little for a tiny company that needs to reinvent itself to beat back the transnationals. And the prohibitive cost of such a face-lift may prove to be as disturbing to Topiwala as the visit of the mysterious investment banker 6 months ago.

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