Magnus Brannstrom, CEO and president of Swedish direct selling company Orifame, doesn’t believe in mincing words. Founded in 1967, Oriflame has a sizeable presence in 60 plus countries, with over 3 million beauty consultants, generating annual sales of around €1.2 billion.
In India, it’s been battling headwinds since its debut in 1996. “The first 20 years were very tough in terms of profitability,” confesses Brannstrom. He claims India is now profitable but declines to share numbers, citing global policies. Asserting that India is among the Top 5 markets for Oriflame, he contends that the Indian obsession with white skin is not unique. “The grass is always greener on the other side,” he grins, adding that while Indians want to look white, Westerners are keen to get tanned.
Over 20 years in India, how has the journey been so far?
India is among the top five countries. The first 20 years were very tough in terms of striking profitability. The sales prices are very low compared to other countries. So it’s hard to make money. It has been a long journey towards profitability. But Oriflame has been able to endure because of the long-term opportunities. Now we are happy with the business; the numbers are getting better. Though demonetisation and GST implementation set it back, I reckon this is a blip. It won’t push us back into loss.
How has the concept of beauty changed over the last two decades? Have Indians become more aspirational?
When I came here for the first time in 1999, beauty was primarily about hair. Now all categories are growing. Indian women are not only more attentive but self-assured as well. They’ve started wearing global clothing, and many go for tighter fits, which means more focus on wellness, fitness and training. It’s a great positive connotation in terms of beauty. Indian women are now caring for themselves. I wouldn’t be surprised if they are stronger and more self-confident than any point in Indian history.
How difficult was selling products in India?
In the early years, it was very challenging. Very few people knew where Sweden is, and it didn’t help matters by not being on television. Another challenge was to build the brand in terms of hunting for the target consumer, who was not easy to identify. Yet another challenge was figuring out product size. Hindustan Lever had small pouches for `1 or `2 and we were able to get down to `7, but not below that.
Is the negative perception about direct selling still the biggest challenge?
It’s indeed a challenge. But a boom in e-commerce will change a lot of things, including the way people buy. Tomorrow, no one will go to the store; everyone will buy online. Earlier television advertising and billboards used to influence people’s choice. But today everybody is on the phone. So how do I influence them? Well, besides price, the most common factor driving people to buy is a recommendation. On the internet, direct selling will be very much alive because people will recommend products. Everyone will have recommenders recommending their brand: they may be called consultants, brand ambassadors or members. Everyone will be in direct selling tomorrow. Oriflame is growing because people are using social media to recommend this company or products or the business opportunities.
Does this mean social media will kill the traditional way of direct selling?
People used to say that there would be no stores because of online. In the same way, some might believe that there will be no more direct selling. The truth however lies in between. Cinema didn’t die because of Netflix. Similarly, though traditional direct selling will be reduced, it will most likely not disappear. Physical meeting between two people is still a very strong thing in spite of Skype or Facebook.
Do you consider traditional personal care and FMCG companies like Unilever to be rivals?
Everyone who sells a beauty product is a competitor. Everyone who sells for income opportunity is a competitor.
Where do you see Oriflame in the next five years in India?
We need to take the next step in infrastructure, distribution and brand building. Over the next five years, Indian operations will double in size. Almost 100% of everything sold in India is produced here.
You have had brand ambassadors. Why don’t you advertise on TV?
We haven’t seen it to be meaningful yet. TV is very expensive. You have people on their sofa watching movies, but during commercial breaks, they aren’t hooked to television. I think it’s more important to invest in people and products.
Source: Brand Equity