Global Cosmetics Industry Prospects 2009 Euromonitor 08 09
Global Cosmetics Industry Prospects 2009 Euromonitor 08 09
Global Cosmetics Industry Prospects 2009 Euromonitor 08 09
Global Cosmetics and Toiletries: Industry Prospects for 2009 and Beyond
August 2009
1
Global Snapshot
Regional Overview Category Review Channel Analysis Competitive Environment Global Prospects Appendix
2
Global Snapshot
Key Findings
Buoyed by continued strong growth in emerging markets, the global cosmetics and toiletries market suffered but a slight slowdown in 2008 despite a full fledged global recession by the end of the year. The leading markets of the US and Japan saw declines that will persist over the forecast years. Elsewhere, the effects of the recession on CT spend, will be far more evident in 2009. Growth of only 0.7% in real prices is forecast for the global CT sector in 2009, driven by skin care and men's grooming products. Consumers are sacrificing luxury brands for mass or masstige alternatives and premium cosmetics are bearing the brunt of the economic downturn. In 2009, consumers globally are expected to reduce their premium CT spend by 1.3%, while hair care will be the only category to see negative growth (-0.3%). Against the backdrop of tightened consumer purses, resilient and dynamic sectors are being skin care (antiagers), men's grooming products (undeveloped sector with untapped opportunities), sun care (education and rising awareness of anti-ageing benefits), baby care (high population growth and rising incomes in emerging regions; unwillingness to sacrifice on baby needs by parents in developed markets) and deodorants (as replacement for fragrances). By 2010, all categories as well as premium, will see renewed expansion. Despite being less dynamic than other categories, hair care, fragrances and colour cosmetics, will be key contributors to global absolute value growth over the forecast period, by virtue of sheer size. Skin care, on the other hand, will be of critical importance, being both amongst both dynamic as well as the largest category. The Asia Pacific region, excluding Japan, and Latin America are the key growth markets of the future, particularly, BRIC countries, China, Brazil and India. Success strategies for international manufacturers will need to incorporate geographic expansion and product share gains in key categories such as skin and hair care markets and China and Brazil, while laying the seeds in "frontier" markets with highest potential. The CT consumer base is increasingly sophisticated and global. It is both keen on preventing ageing through scientific progress, and ethically and environmentally conscious. To succeed, manufacturers thus also need to invest in efficacious, technologically advanced formulations, as well as be innovative in their marketing/packaging, addressing consumer concerns and adding clear value/benefits to their purchases.
3
Global Snapshot
Beauty is merging with health and well-being and becoming more holistic not just internal appearance but also physical and spiritual well-being. CT products are taking new forms from jars to foods. Interest in nutricosmetics and functional foods is complementing the traditional beauty industry.
The economic downturn is making shoppers more value conscious. The "at home" beauty care market is benefitting as a cheaper substitute to costly out-of home services such as salons/spas (hair colorants, perms/relaxants, depilatories, nail polish), or dentist visits (teeth whitening and professional oral hygiene kits).
Consumers are increasingly concerned about the safety and purity of products they consume, as well as their effect on the environment. Products that have claims of being "natural", "organic" and/or eco-friendly are growing in popularity across regions, and becoming mainstream. Greatest impact is on baby and body skin care, and bath and shower. The organics trend is also spreading to products where efficacy has been a priority, such as facial skin care, hair care and colour cosmetics.
4
Global Snapshot
7 5 4 3 2 1 0 2005
Premium CT
2006
% CT growth
2007
% premium growth
2008
% value growth 5
Global Snapshot
% change 2007-08
% change 2006-07
Global Snapshot
Regional Overview Category Review Channel Analysis Competitive Environment Global Prospects Appendix
7
Regional Overview
CT Regional Performance
120 2008 US$ billion 100 80 60 40 20 0 -1.0 Australasia -0.5 0.0 0.5 1.0 1.5 2.0 Eastern Europe Middle East and Africa 2.5 3.0 3.5 4.0 4.5 5.0 North America Western Europe Asia Pacific Latin America
2008-13 CAGR
Bubble size represents US$ value sales in 2008
Regional Overview
200
US$ 150 100 50 0 Asia Pacific Eastern Europe Latin America Middle East Africa North America Western Europe
14 12 10 8 6 4 2 0 -2
Per capita CT spend (2008, US$) % Change in CT Spend 2007-08 % CAGR in CT spend 2008-13
Note: 2007-08 % change figures are in current prices, whereas projected CAGRs are in real prices that exclude inflation. Eastern Europe, Latin America and Middle East Africa's 2007-08 % change figures contain significant inflation.
Regional Overview
Brand loyalty is generally high in premium cosmetics, though firm separation from the mass market remains critical in order to preserve product pricing. Premiumisation will continue to be an important global trend over the longer term. Premium brand sales constituted 22% of the global market in 2008. Key sector drivers include improved wealth in developed and emerging economies, a growing middle class in BRIC, further value-adding product enhancements via R&D, the launch of new and highly priced products (niche markets, especially in Western Europe), and increased availability through select mass channels.
10
Regional Overview
Major branded manufacturers are responding differently across countries and sectors, as price points fall with new launches (US, premium cosmetics), or innovations in mature sectors such as hair care and skin care underpin unit price growth in the Netherlands and Germany, or greater consumer segmentation reaps aboveaverage value growth in Spain (+5 % in 2008). North America and Western Europe Performance 2003-2013
120,000 100,000 80,000 60,000 40,000 20,000 0
2003 2004 2005 2006
NA
5 4 3 2 1 0 -1 -2 -3
2007
WE
2008
2009
2010
2011
2012
2013
% NA growth
% WE growth
% value growth 11
US$ million
Regional Overview
USA 16%
12
Regional Overview
3
2 1 0
Regional Overview
0
China India Thailand Market Size (US$ bn) Philippines Indonesia Malaysia
Regional Overview
Russia 47%
Poland 16%
In 2008, CT markets contracted in Ukraine (-0.4%), Czech Republic, Hungary and Latvia, while Russia slowed down sharply. Poland, stands out as a bastion of stability, with steady, even if, low growth (+2% 2008). Romania's CT market also did well (+4% 2008). For the region as a whole CT sales will grow a modest 1% in constant prices in 2009, recovering over the forecast period, driven by Russia, Ukraine and Poland. Annual growth will average 2% over the next five years, one of the lowest amongst emerging market peers.
4 2 0
% growth
15
4.0
Regional Overview
Fragrances 18%
16
Regional Overview
12 10 8 6 4 2 0 -2 -4 % growth 17
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Regional Overview
2008
US$ billion
18
Regional Overview
Regional Overview
Regional Overview
8%
6% 4% 2% 0% -1%
Colour cosmetics
0%
4%
5%
Bubble size shows sector's share of cosmetics & toiletries market, ranged displayed: 1.20-19.3%
21
Regional Overview
Regional Overview
After the region's 2002 financial crisis, most countries (except Argentina, Venezuela) followed orthodox policies, thus Latin America is well placed to withstand the global economic downturn. Brazil, will contract in 2009 on external demand factors, but swiftly return to growth in 2010. Mexico's reliance on the US (76% of exports) will slow its economic recovery. Latin America's CT market grew the fastest globally in 2003-08 (12.3% CAGR), and in absolute terms (US$23 bn to US$52 bn). Hair care continued to dominate CT spend (23% of total). The hair care market, is relatively mature and slowing in the recessionary environment. In Brazil, rising use of progressive blow-dry in beauty salons, that requires reduced frequency of hair washing to achieve smooth and straight hair, is dampening demand for shampoos, conditioners and colourants (an estimated 65% of Brazilian women have curly or afro hair type). The increasing quality of mass fragrances (86% of total), climate and cultural factors, and innovative marketing and segmentation, will drive fragrance sales in 2008-13. In 2009, specialist retailer O Boticario, successfully launched Capricho Day&Night targeting teen girls with two fragrances that create a third when mixed, and introduced a winning Capricho cosmetics range. Direct seller Avon has developed two skin care ranges to target low-income women (Ageless Results), and middle-to-high income (mainly older) women (Avon Renew Ultimate), while adding nourishing/anti-ageing benefits to its colour cosmetics ranges.
23
Brazil 55%
US$ billion
2008
2013
% CAGR 2008-13
% CAGR 2003-08
Global Snapshot
Regional Overview Category Review Channel Analysis Competitive Environment Global Prospects Appendix
24
Category Review
Category Review
16 14 12 10 8 % y-o-y change 26
2
0 -2 -4 2007 2008 2009 2010 2011 2012 2013
20
10 0
Western Europe
EE % change NA % change
AP % change
LA % change WE % change
AU % change
MEA % change
Category Review
2006
2007
2008
2009
2010
2011
Body care
2012
Hand care
2013
Facial care
Nourishers/anti-agers
27
Category Review
Category Review
90%
80%
70% 60% 50% 40% 30% 20% 10% 0%
North America Middle East and Africa Latin America Eastern Europe Australasia Asia Pacific
29
Category Review
35
% growth 25 15 5 -5 2004 2005 2006 2007 2008
Category Review
60
Category Review
% y-o-y change
2008
2009
2-in-1 products Colourants
2010
2011
Conditioners Salon hair care
2012
2013
Styling agents US hair care market
32
Category Review
Category Review
12 10
6 4 2
-2 -4
Eastern Europe Middle East and Africa Western Europe EE % change MEA % change WE % change
% y-o-y change 34
Category Review
Geographic expansion into emerging markets together with novel products and designs are imperative. Battery-operated mascara is one such example, while colour palettes and textures suited to skin tones in emerging markets is as yet untapped.
Growth Rates of Global Colour Cosmetics Sales 2004-2008
8 7 6 5 4 3 2 1 0 2004 2005
Facial make-up
% y-o-y growth
2006
Eye make-up Lip products
2007
Nail products
2008
35
Category Review
Latin America was the growth engine, strong across categories, especially women's (premium +17.6%, mass +16.7%). Brazilian sales rose by 14.9% to US$5.3 billion (60% of Latin America); the strongest growth was in Venezuela (35.5%) and Argentina (27.0%).
Sector growth rates will cool as the narrowing margin of disposable income from the past economic growth phase will weigh on volume sales, especially in the western world. Producer response will be on smaller packaging (Este Lauder's 'Beautiful'), limited editions, and a continuation of 'masstige' such as celebrity fragrances. These require no advertising budgets and cost less to manufacture. Mid-ranging fragrances will see more price pressure. Exclusive perfumes (Roja Dove's Enslaved at 350/100ml, Le Exclusif) will maintain a limited consumer base.
8 7 6 5 4 3 2 1 0
Mass fragrances
% y-o-y growth 36
US$ billion
Category Review
8 6 4 2 0 -2 -4
US$ billion
2008
2003-08 CAGR %
2008-13 CAGR %
DYNAMIC Bar soap Liquid soap Body wash/ shower gel Latin America Eastern Europe
% CAGR 37
Category Review
10 % y-o-y change 38 8 6
2
0
The most important product distribution outlet for men's grooming lines is grocery stores via which 53% of all male-specific CT globally are sold. World brand leaders are Procter & Gamble 36.1% (Gillette Mach 3, Fusion, Series, Sensor), Unilever 10.0% (Axe/Lynx, Rexona), Energizer 5.5% (SchickWilkinson sword) and Beiersdorf 4.8% (Nivea for Men). P&G is clear leader in men's grooming given its 'Gillette' superbrand, capturing well over a third of the world market. Unusually high brand loyalty in men's grooming (unlike the women's market) strengthens the value of these market share figures.
Category Review
Unilever is undisputed global market leader with 31% share (brands: Rexona, Axe/Lynx, Dove), and is the #1 player in Western Europe and Latin America (combined 62% of world market); the #2 player is Procter & Gamble with 10% market share. New product launches ('hair-minimising' formula for Dove: 24h anti-perspirant, skin care benefits, slower rate of underarm hair growth) could boost sales for the group, though its response to price hikes by competitors to offset higher production costs could challenge market share.
4 3 2 % CAGR 39 1 0 -1 -2 -3 -4
7 6 5 4 3 2 1
0
Sprays Roll-ons Sticks Pumps Creams Wipes (+9.2%) (+9.5%) (+5.0%) (+4.7%) (+0.0%) (+0.1%) Note: Brackets indicate % y-o-y growth for 2008
-5
Category Review
2010
2011
2012
2013
Self-tanning (US$710mn)
Category Review
22 18 % CAGR 41 14 10
4
US$ billion 3 2 1 0 Asia Pacific Australasia Eastern Europe Latin America Middle East and Africa North America Western Europe
6 2 -2
Category Review
2003-08 CAGR %
2008-13 CAGR %
% CAGR 42
Global Snapshot
Regional Overview Category Review Channel Analysis Competitive Environment Global Prospects Appendix
43
Channel Analysis
44
Channel Analysis
30
20 10 0
World
Asia Pacific
Eastern Europe
Latin America
45
Channel Analysis
Frugal
Green
% value share
Cocooning
Online
Consumer behavioural shifts in cold economic climate support the growth of non-store retail
46
Channel Analysis
40 30 20 10 % CAGR 47
1
0 World Asia Pacific Australasia Eastern Europe Latin America Middle East Africa North America Western Europe
0
-10
Global Snapshot
Regional Overview Category Review Channel Analysis Competitive Environment Global Prospects Appendix
48
Competitive Environment
L'Oral performed well thanks to increasing coverage of the emerging markets and being positioned in some of the fastest growing segments, such as anti-agers, men's skin care and sun care. L'Oral is well-placed in China's skin care sector, that will be contributing the most to global CT growth. Its boost in share was also helped by the acquisition of Yves Saint Laurent.
Strong performance in Brazil's colour cosmetics sector helped Avon increase overall global CT market share. Colour cosmetics in Brazil is predicted to grow at a faster rate than global cosmetics and global colour cosmetics markets, even if it is one of the slower growing areas in Brazil. To maintain share gains in the long-term, Avon needs to reverse market share losses in China's skin care sector, and in other sectors predicted to grow fast such as Brazil fragrances and Brazil skin care. Brazilian company Natura has expanded throughout Latin America, with a strong "latin" ethos and products that highlight the South American identity such as the 2008 launches of fragrances named Amor America Paramela and Amor America Palo Santo. It has developed strong branding as an environmentally friendly producer, and its packaging has reflected this successfully. It is the leading CT player in Brazil, thanks to top positions in baby care, fragrances and skin care, and holds 2nd largest share in other sectors.
Hypermarcas of Brazil, formerly in household care and food packaging, entered the cosmetics and toiletries market via acquisitions in the hair care and colour cosmetics sectors (h Cosmticos' company; the Aquamarine, Juvena and Bozzano's brands from Revlon; and Niasi, all in 2008).
Competitive Environment
Strengths Weaknesses
Opportunities Threats
West Europe's high growth categories
WE accounts for 65% of YSL's portfolio. Premium cosmetics' 2nd highest predicted absolute growth is in WE. YSL can help L'Oral capture growth via online sales, by tapping into men's grooming or with new products to compete with the likes of Lancme's Turbo Lash mascara.
Competitive Environment
51
Competitive Environment
Procter & Gamble Co, The L'Oral Groupe Unilever Group Colgate-Palmolive Co Avon Products Inc Este Lauder Cos Inc Beiersdorf AG Johnson & Johnson Inc Shiseido Co Ltd Kao Corp
Competitive Environment
Weakness
Lost share in China's skin care and Brazil hair care.
Opportunities
Threat
L'Oral in China skin care and direct sellers in Brazil
Recommendation
L'Oral
P&G should focus on Should focus on China skin care China skin care through new product launches. L'Oral has been on Lost market share Hair care in China Shiseido in China's right track focusing on in Brazil skin care and skin care in Brazil skin care. China's skin care market. L'Oral in Brazil hair care and Procter & Gamble in China hair care Unilever is focused on limited categories and should expand to fast growing skin care Beiersdorf is rightly increasing its market share in China, but focus on product development in hair care China.
Unilever
Unilever operates Market penetration Skin care in China in limited Chart/image area in emerging markets and Brazil categories.
Beiersdorf
Increased market Skin care China and share in skin care Lost market share Hair Care China and China, but remains a in hair care China Brazil small player Skin care and hair care Brazil, although it has Asian orientation Mass fragrances Brazil
Shiseido
Although, Brazil offers L'Oral in skin care opportunity, Shiseido China is better off focusing on China skin care Natura, Botica and Mass fragrance Brazil Avon in Brazil offers good growth mass fragrances opportunity for Coty. 53
Coty
Amongst the leading Limited presence company in global in Brazil mass mass fragrances fragrance, category
Competitive Environment
Brazil - where consumers spend three times as much on personal care as consumers do elsewhere - is a key market for direct sellers, particularly in the fragrances category (18% of CT spend, versus 11% globally). Avon and Natura the top two global mass fragrance manufacturers - are amongst the overall top three in the Brazilian CT market. More importantly, they achieved share gains during 2008, together with local beauty retailer Botica, while the vast majority of leading international manufacturers lost market share.
25
20 15 10 5 0
1997
1998
1999
2000
2001
2002
2003
2004
Australasia North America
2005
2006
2007
2008
54
Global Snapshot
Regional Overview Category Review Channel Analysis Competitive Environment Global Prospects Appendix
55
Global Prospects
Global Prospects
Firms well placed in markets projected to grow have a head start to benefit from future growth prospects. For example, L'Oral is a top ranking firm in both skin and hair care. However, how well the companies actually perform will depend on how effectively they can diversify regionally.
0.5
0.0 -0.5 2009
Total CT
2010
Hair care Colour cosmetics
2011
2012
Fragrances
2013
Skin care
57
Global Prospects
Baby care
Skin care Men's grooming products Fragrances Deodorants COSMETICS AND TOILETRIES Oral hygiene
2.8%
2.4% 2.2% 2.0% 1.9% 1.8% 1.5%
1,145
9,466 3,041 4,103 1,645 30,292 2,625
Colour cosmetics
Bath and shower products Depilatories Hair care Premium cosmetics
1.4%
1.3% 1.3% 1.2% 0.7%
3,151
1,887 247 4,056 2,707
Note: Categories expected to consistently grow above the sector average every single year are marked in green, those below in red . 58
Global Prospects
35
30
25 US$ billion
20
15
10
Global Prospects
Countries whose 2008-13 CAGR is negative or worsens markedly vs. the 2003-08 CAGR
Absolute Growth
Peru 8.7% vs. 6.3% Brazil 4.7% vs. 8.4% Chile 3% vs. 3.2% Colombia 2.1% vs. 2.1%
USA -0.6% vs. -1.1% Argentina 2.2% vs. 10.9% Venezuela 3.1% vs. 9.0% Uruguay 1.9 vs. 4.2%
Global Prospects
CAGR 2008-2013
US$ billion
9 61
Global Prospects
Resilience to recession
Global Prospects
Ingestible beauty
Global Snapshot
Regional Overview Category Review Channel Analysis Competitive Environment Global Prospects Appendix
64
Appendix
Definitions
All values expressed in this report are in US$ terms, using a fixed 2008 exchange rate. All forecast data are expressed in constant terms; inflationary effects are discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into account. Cosmetics and Toiletries (CT) coverage: Cosmetics Colour cosmetics Fragrances Skin care Toiletries
Baby care
Bath and shower products Deodorants Depilatories Hair care Men's grooming products Oral hygiene Sun care BRIC (Brazil, Russia, India and China) Middle East and Africa (MEA)
65
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