HANDMADE SOAP  MANUFACTURING BUSINESS

INTRODUCTION

The beauty and personal care industry has been growing exponentially in the last five years. With masses becoming aware about the ingredients used to make personal care products, including soaps and shampoos, many homemade soap companies have gained traction.

As a soapmaker, you’ll formulate soaps and perhaps other personal cleansing and beauty products according to your own recipes. You will market your offerings along sales channels that might include ecommerce, farmers markets, arts festivals, wholesale placement in spas and boutiques, and even door-to-door sales. You’ll explore a range of options to see where you can find a loyal customer base

BUSINESS  MARKET SIZE

Handmade soaps are generally made from plant-based ingredients like natural oils & pure herbs of different flavors. They are produced by using traditional methods in small batches. Handmade soaps contain glycerin which softens and moisturize the skin. These soaps are organic in nature and free of chemical additives such as parabens, SLS, and other petrochemicals products.
 
MARKET DYNAMICS
 
Rising awareness regarding skin and beauty care coupled with high demand for chemical-free skin and hair care products across the globe is driving the market growth. Shift in customer focus towards the use of natural and safe ingredients is further fueling the market growth. Increasing demand for organic soaps from emerging markets is presumed to foster the market growth in forecasting period. The time-consuming production process is likely to hinder the market growth.
 
This detailed market study is centered on the data obtained from multiple sources and is analyzed using numerous tools including porter’s five forces analysis, market attractiveness analysis and value chain analysis.

These tools are employed to gain insights of the potential value of the market facilitating the business strategists with the latest growth opportunities. Additionally, these tools also provide a detailed analysis of each application/product segment in the global market of handmade .

Pune, June 01, 2020 (GLOBE NEWSWIRE) — The global soap market size is projected to reach USD 55.29 billion by 2027, exhibiting a CAGR of 5.0% during the forecast period. Rapid transmission of the COVID-19 infection is set to play a central role in fueling the growth of this market, states Fortune Business Insights™ in its recent report, titled Soap Market Size, Share & Industry Analysis, By Product Type (Bath & Body Soaps, Kitchen Soaps, and Laundry Soaps), Form (Solid and Liquid), Application (Household and Commercial), Distribution Channel (Hypermarkets/Supermarkets, Pharmacies, Online Channels, and Others), and Regional Forecast, 2020-2027”. According to the World Health Organization (WHO), the coronavirus spreads through respiratory droplets and physical contact. Therefore, to avoid spreading the virus through these routes, the WHO along with many other bodies such as the Centers for Disease Control and Prevention (CDC) have recommended regular washing of hands using soap and water. Comprehensive washing of hands kills the virus and this practice is currently seen as the most effective way to preventing transmission among people, especially given that a vaccine for the infection is many months away. Thus, the demand for soaps in all shapes and forms is slated to experience meteoric rise as the COVID-19 pandemic intensifies and worsens during the current year.

MARKET SEGMENTATION
 
The broad handmade soap market has been sub-grouped into method and application. The report studies these subsets with respect to the geographical segmentation. The strategists can gain a detailed insight and devise appropriate strategies to target specific market. This detail will lead to a focused approach leading to identification of better opportunities.

MARKET SIGHTS
The soap manufacturing industry is one of the oldest industries operating in the FMCG sector in India, and accounts for more than 50% of the consumer goods sector. The soap and detergent industry covers laundry and toilet soaps, and synthetic detergents in the form of liquid, powder, and bar. Bar soaps can be classified into three sections – premium, popular, and economic.

Around 50% of soaps produced are sold in rural markets. Increasing awareness of hygienic standards in rural areas is providing growth opportunities to several players. Manufacturers are introducing soaps in different sizes and ranges, targeting consumers from low-income groups. Currently, there are around 5 Mn retail outlets in India which sell soaps, out of which 3.75 Mn operate in rural areas.

Herbal soap is the fastest growing category in the soap market in India. Margo and Medimix dominate the herbal and medicinal soap segment. Government initiatives like Swachh Bharat Mission, which promotes health and hygiene, has led to the growth of the soap manufacturing industry. During FY 2017, the United Arab Emirates (UAE), Nepal, and the United States of America (U.S.A.) were the top three export destinations of soaps.

MARKET  SEGMENT INSIGHT
The soap market in India is segmented based on brands, (Lux, Dove, Pears, Santoor, etc.), category (beauty soaps, health soaps, and others), and players operating in the market (Hindustan Unilever, ITC, Wipro, and others). During FY 2017, the beauty soaps segment had a market share of ~50%, followed by the health soaps segment. Popular beauty soap brands operating in the market are Lux, Dove, Pears, Santoor, and Vivel. During the same period, Lux was the leading soap brand with a market share of ~13.5%, followed by Santoor, Vivel, and other brands.

LICENSE REQUIRED

As per the Drugs and Cosmetics Act and Rule, the Central Government and the State Government makes rule regarding issuance of licence to a person for manufacturing cosmetics. Basically it is the State Drug Authorities of respective States, who are authorized to issue manufacturing licenses.

  • Firstly, a person applying for a manufacturing licence for hand made soap needs to fill the application form 31 along with it; the person is required to pay an amount of Rs 3,500 and Rs 2,500 as a government and inspection fee of 2500 respectively.
  • Secondly, the cosmetics for which the licence is being acquired should be specified into classes of cosmetics, as has been mentioned under Schedule M-II, where the cosmetics have been classified into 10 categories.
  • A person applying for the license of manufacturing handmade soap or any other cosmetics should have passed intermediate exam with Chemistry as one of its subject or any examination which is recognised by the Licensing authority.
  • Apart from it to get a license it is required to hold a diploma in Pharmacy which should be certified and approved either under the Pharmacy Council of India under the Pharmacy Act, 1948 or under the Pharmacy Act, 1948
  • At the time of applying for the license it is required to mention other information like the lists of equipment, manufacturing facility details with minimum area required for manufacturing, Technical Competent personnel details, etc.
  • Apart from those details the licensing authority also considers before approving the license that whether the cosmetic is misbranded or is a spurious cosmetic.
  • For renewal also the manufacturer is required to categorise the cosmetics as per Schedule M-II, apart from it Rs. 1000 has to be paid as a charge for every inspection for renewal

It is mandatory for the Licensing Authority to direct an inspection of the area where manufacturing will take place, before approving or rejecting the application of license. After the inspection a report is send to the Licensing Authority on the basis of which they either approve the license application or reject it.

INVESTMENT REQUIRED

The investment required for starting a small soap manufacturing business is minimal. A soap manufacturing unit setup with an investment of about Rs.15 lacs, can generate revenues of upto Rs.50 lacs and a profit of Rs.8 lacs, if operated successfully. The breakup of the investment required and the assumptions for revenue are as under:

LAND & BUILDING

A small soap manufacturing unit requires a space of about 750 square feet of which around 500 square feet must be constructed. For the financial model, we have assumed that such a place can be obtained with an investment of about Rs.5 lakhs with the necessary power and water supply.

MACHINERY  REQUIRED

A small soap making business minimal investment in machinery. Typical list of soap making machinery required for soap manufacturing are plodder machine, miller machine, sap stamping machine and soap cutting machine. Based on the type of product to be manufactured and the scale, the type and investment required in machinery would vary. Investment in a small soap manufacturing unit can vary between Rs. 1 and Rs. 5 lacs. The typical time for setting up of a unit is about 3 to 6 months for obtaining the necessary licenses, equipment, raw material, etc.,

WORKING CAPITAL

The main working capital expenditure for a soap manufacturing unit are raw material, salaries and wages, power cost and receivables. Raw material to the tune of Rs.2.5 lakhs must be on-stock for operating a soap manufacturing unit smoothly, with additional working capital requirement of Rs.1 to 2 lacs  required for other expenditures like salaries, power and receivable. Hence, taking into a three month working capital cycle, the promoters must have about Rs.6 to 10 lacs of working capital funds to operate smoothly.

SUCCESS STORY(MOTI SOAP)

After the introduction of soap in India variety of soaps came in to the market by multinational and local players. Among these Moti was quite popular during seventies. It is thick round shaped soap positioned as luxury soap.It was a brand of Tata Oil Mills Company ( TOMCO). In 1993 after merger of TOMCO with HUL, it became the property of HUL.  Moti soap was launched keeping in mind certain points to differentiate it from other competitors. Such as its shape and thickness which was different from rest of the competitors. Its name was taken from Hindi language whose meaning is Pearl. It was introduced in different variants such as Sandal, Rose and Khus. 

At the time,Sandal, Rose and Khus were perceived to be precious and devout in our Indian society. In Hindu mythology it has been found that queens used to take bath with exotic herbs and flowers such as Rose, Khas, Sandal etc.In this way soap was positioned as exotic soap. As it was promoted as luxurious soap, it was priced around 25/- per soap in eighties competing other brand such as Dettol, Lux etc. But at the same time as it was quite big in shape so it was long lasting. Packaging was simple with respective colour of variants such as orange for sandal and pink for rose.

TWO VARIANT OF MOTI SOAP

It was promoted heavily and as name of product was “Moti”, print advertisement was giving importance to pearls. One of the popular print advertisement for magazine shows a soap anchored in big seashell on a beach, just like pearl. It also gave stress on its ingredients.

Though market share of Moti soap is very low, but still it exists and people know this brand. Moti soap is available in retail outlet, shopping mall and even on some of the popular online retail outlet such as Amazon.com. But stocks are more seasonal. Currently 150 gm soap is available for 56/-. Looking at overall journey of this brand it can be concluded that it’s a successful brand because sustaining for more than 40 years is not an easy task and that too in era of dynamic market. While it has a selected and small market,itstill has its set of loyal customers. Using Moti soap on special occasion has become a tradition and is gettingpassed on to next generations as cultural heritage in most of the Indian middle class family.

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