Can India’s digital beauty brands break through the growth ceiling?

Rising acquisition costs and offline expansion are testing startup models.

India’s digital-first beauty and personal care brands face tougher growth hurdles as they move from online-led expansion into physical retail and bigger-scale operations, according to Kearney.

Brands typically rely on a few popular products, third-party manufacturers, direct-to-consumer channels, and e-commerce marketplaces during their early stages, Kearney said in an August report.

India’s expanding digital economy has helped these brands reach consumers at relatively low cost. Data prices have fallen from about ₹200 ($2) to less than ₹9 ($0.09) per gigabyte, connecting more than 800 million users, including those in Tier 3 and Tier 4 towns, according to a March report by market research firm IMA India.

The first major hurdle comes at about ₹100 crore ($10.4m), when digital-led growth begins to lose momentum, Kearney said. Early expansion is typically supported by low market penetration, concentrated digital audiences, and performance marketing.

Growth becomes more expensive beyond ₹200 crore ($21m) as brands seek more consumer groups. Ad and promotion spending can exceed half of revenue, with Heavenly Secrets Private Ltd., which owns Pilgrim, at 57%; Bad Habit Mediacorp Private Ltd. at 55%; and Foxtale Consumer Private Ltd. at 53%, Kearney said.

The next hurdle comes at about ₹600 crore ($63m), when brands need to shift from a digital-first model to an omnichannel business.

Physical retail accounts for about 75% to 80% of India’s beauty and personal care market, making offline expansion important for bigger brands. Direct distribution to the country’s 50 largest cities can take 12 to 18 months before becoming profitable, Kearney said.

Honasa Consumer Ltd. achieved profitability in 2024 with about 59% of sales online and 36% offline. Brands above ₹400 crore ($42m) typically stabilise marketing spending at 30% to 36% of revenue, Kearney said.

Honasa spent 36%, Mosaic Wellness Private Ltd. 36%, Pureplay Skin Sciences (India) Private Ltd., which owns Plum, 35%, and Uprising Science Private Ltd., which owns Minimalist, 34%.

Scaling also requires changes in management. Kearney said brands need enterprise-level executives, including chief revenue officers experienced in fragmented distribution networks and senior supply chain leaders.

Technology must also expand beyond digital marketing. Kearney identified centralised business intelligence, algorithmic demand planning, and visibility across sales channels as priorities. A unified customer data platform combining retail point-of-sale information with D2C data can take six to nine months to implement.

At ₹1,000 crore ($104m), brands face another transition as they compete with established global companies. Kearney said the organic growth model that takes a brand to ₹600 crore is rarely enough to push it beyond ₹1,000 crore.

Mergers and acquisitions become a primary growth tool at that stage, allowing companies to acquire offline distribution networks or specialised research and development capabilities, Kearney said.

Questions to ponder

1. Can digital-first beauty brands maintain growth without sharply increasing marketing costs?
2. How should brands balance online expansion with physical retail?
3. Will acquisitions become necessary for the biggest beauty startups to keep growing?