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Asia-Pacific: Stepping Up the Pace

By: Briony Davies, Euromonitor International
Posted: August 12, 2008, from the January 2007 issue of GCI Magazine.

The region’s historic performance has been somewhat marred by the sluggish growth exhibited in Japan that accounts for almost half of cosmetics and toiletries sales. However, as the report in the August issue of GCI magazine explained, the country cautiously heralded the end of its long deflationary era in 2005, with a number of positive economic indicators and the highest recorded cosmetics and toiletries growth in five years. When this is viewed in parallel with China’s emergence as an economic hotspot, high-ranking growth forecasts for the smaller markets including Indonesia and Thailand and the longer term potential in India, it explains the region’s draw.

As the industry strives to pull itself out of a slump caused by over reliance on the high-value but maturing markets of Western Europe and North America, Asia-Pacific alongside Latin America and Eastern Europe will be fundamental to future success. Euromonitor International analyses key sectors and markets within the competitive landscape, making recommendations for successful exploitation of the region’s potential.

Global Skin Care Leader

Asia-Pacific continues to be the most valuable region in the world for skin care, chiefly due to heavy usage in the large and affluent Japanese market, where beauty routines follow a more complex process than in the West. In Japan, skin care routinely will involve five or more stages of application, whereas in North America or Western Europe women tend to follow a three-step regimen. High-end brands are huge here, with more than half of all skin care sales being made in the premium segment. Asia-Pacific saw a moderate sales increase of 8% in 2005, with China, the second largest market in the region, being the largest contributor to growth. Skin care sales in China increased by 19% in 2005, underpinned by rising levels of consumer affluence, especially in the big cities. Like the Japanese, Chinese women attach considerable importance to the quality of their skin, and increasingly have the disposable income to purchase up-market goods.

In the dominant facial care subsector, growth was attributable to increased segmentation, with the development of technologically advanced products with whitening, moisturizing, balancing and antiwrinkle properties. A prime example of this strategy is Procter & Gamble, whose Olay brand offers a range of products with different functions. In 2005, Procter & Gamble expanded the Olay portfolio further to include Olay Nature Science, a new skin care range containing herb extracts, seaweed and fruit essence. The brand, endorsed by popular Taiwanese artist Angela Chang, targets lower-income and younger consumers.

Dermatologist-endorsed brands, such as Curél from Kao, are also gaining popularity and the stage is set for the entrance of so-called doctor brands. To tap into this market, manufacturers need to put careful consideration into their strategy—the decision to have a Western or Asian expert could make or break a brand. In-depth consumer research will be key to success. In contrast, the body and hand care subsectors remained comparatively underdeveloped in Asia-Pacific, accounting for 4% and 1% of total skin care sales respectively in 2005. Companies need to work hard to convince consumers of the benefits of body care. They are likely to have luck with advanced value-added products that have antiaging and anticellulite benefits than basic moisturizers.

Mixed Fortunes in Fragrances