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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.
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In contrast, Asia-Pacific is one of the smallest regions for fragrances, accounting for less than 7% of global U.S. dollar value sales in 2005. With the exception of highly Westernized societies, such as Hong Kong and Singapore, where a high proportion of sales are made to expatriates, per capita usage remains limited due to the perception of fragrances as extravagant luxury items. In countries such as India, sales are further hindered by the wide presence of black market and counterfeit goods, as well as the enduring popularity of traditional indigenous perfumes, such as attar. In China too, counterfeiting is an issue. Fragrances are also a relatively novel concept to both China and Japan, where they have a somewhat unsavory image, due to their association with the elimination of body odor.
Sales of fragrances in Asia-Pacific grew by 5.2% in U.S. dollar terms in 2005, a slight improvement on the previous year. Growth was driven primarily by advances made in developing markets, such as China, Vietnam and India, underpinned by rising affluence, especially among white collar workers. In addition, enhanced media exposure, in the form of cable television and fashion magazines, raised consumers’ awareness of the various international premium fragrance brands while disseminating Western beauty norms.
Looking forward, the Chinese market will be a major source of growth in the region, driven by rising disposable incomes and improved distribution. International specialists such as Watson’s, Sa Sa and Sephora have all indicated their commitment to further expansion in China. In addition, the problem of counterfeiting is being taken seriously by the Chinese government, due to the lobbying efforts of leading manufacturers and the EU governments. Finally, the tariff on premium fragrances was reduced from 30% to 10% at the beginning of 2005, encouraging new brands to enter the market. One way to ensure success here, and in Asia-Pacific in general, is to follow the example of Yves Saint Laurent’s Young Sexy Lovely fragrance by creating products specifically for Asian tastes.
Manufacturers have been focusing on the opportunities offered by the BRIC countries (Brazil, Russia, India and China) for sometime. The news has improved for Asia-Pacific as Indonesia as well as Turkey recently have been added to the list of countries that are deemed fundamental to long-term marketing strategies. This is due to their forecasted economic development that will see them eclipse some of the world’s largest economies by 2050.
Indonesia has been one of the fastest-moving markets in cosmetics and toiletries globally with average annual growth of 12% since 2000. This high growth is expected to be sustainable to 2010 with plenty of opportunity for manufacturers. Players in premium cosmetics are likely to prosper as the country is among the top 10 most vibrant globally. The teen market also is ripe for exploitation —Indonesia’s adolescent population is larger than that of the U.S. Companies such as L’Oréal Group with its Gemey Maybelline Pure nonshine makeup for young consumers, and Unilever, whose Dove Campaign for Real Beauty is extending to include young girls, pre-teens and teenagers, are likely to fare well.