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Niche Outpaces Mass in Australia

From the GCI archives.

Valued at $3.6 billion (US$2.7 billion) in 2004, the Australian cosmetics and toiletries market ranks sixteenth largest globally. Overall sales grew 3.1% compared with 2004; comfortably in line with the country’s healthy growth pattern, though just below average global growth. Though the market is in good shape, sales increases over the last two years have been more modest as the market has felt the impact of the slight slowdown in the Australian economy, which has led to consumers curtailing personal consumption and buying cosmetics and toiletries that offered value for money above all. That said, sales remain buoyed by new product developments and stronger demand for high-end mass products priced in the mid-range level.

Niche Sectors are Most Vibrant …
Reflective of the pattern of global cosmetics and toiletries sales, the fastest-moving products sectors in the Australian market are the smallest ones, those with still low penetration. Depilatories remains the most dynamic sector, achieving current value growth of almost 6% in 2004, boosted by stronger demand for hair removers and women’s razors. Manufacturers have been working hard to break women’s habits of borrowing their partner’s shaving device by entertaining storewide promotions to effectively educate their target market and get them used to shopping for their own shaving razors and blades. Sales of men’s grooming products contribute an ever-growing slice to the pie—rising almost 5% last year to reach A$359 million, with growth coming especially from non-traditional products such as skin care, hair care and deodorants, which are appealing mostly to younger health conscious men. As awareness of the products and interest in appearance continues to rise amongst this demographic, industry observers point to the substantial future sales opportunities that exist, particularly in these three product areas with their low market penetration.

…But Mature Sectors Flourish Too
Hair care represented the largest sector in the Australian cosmetics and toiletries market last year, and though mature, it still managed impressive growth of 4%. Advancements in technology have enabled manufacturers to develop increasingly reliable and vibrant colorants, whose formulations have shifted from mostly chemical ingredients to the inclusion of more natural ingredients from flowers, fruits and herbs, perceived to be less damaging to the hair. Consequently colorants were the most dynamic area of hair care last year, but their growth also led to the development of higher priced, more specialty color care shampoos and conditioners.

Firm Growth for Skin Care
The fourth most dynamic sector last year was skin care. The A$453 million skin care market was bolstered by both increased penetration and higher spend from existing consumers, and above all, continued media focus on maintaining a youthful appearance. Anti-aging has without a doubt become the primary concern of Australian consumers in the selection of both day and night skin care products. A noticeable evolution of this trend is that the desire to stay young has now penetrated through all age categories of the skin care market. From the teenagers whose constant exposure to fashion magazines and television series has driven awareness of the need to look good, to the middle-age group trying to preserve fading youth, and to the aged population who would like to retrieve something of their twentysomething years, the Australian consumers are keeping the market strong.

Manufacturers are quick to jump to their aid with offerings whose marketing focuses on product difference and added value compared to the competition. The combination of innovative products and the efficiency of fast launches together with a careful choice of the best distribution channels that will cover the target market globally, has led the firming/anti-aging product category to create a new demand and generate sales without switching consumers from other skin care products. Consumers are increasingly demanding multi-purpose preparations that can nourish their skin and significantly reduce aging at the same time.

Product Trend Underpinned by Value-added Benefits
As in other developed markets, incorporating value-added benefits in products is a major strategy adopted by manufacturers to boost sales in the Australian market. This is particularly so in subsectors suffering from saturation in sales, such as shampoo, toothpaste, toothbrushes and men’s razors and blades. Brand lines are fast being extended to include products that offered multi-purpose functions. Extra benefits can command higher prices, thus helping manufacturers to enhance value gains.

Manufacturers of mass branded skin care and color cosmetics are adding benefits such as age-defying skin firming ingredients, sunscreen and anti-pollution protection—qualities once found only in premium products. This has led to an increase in the range of high-end mass brands in the market, creating stiffer competition for premium products. To maintain their share of the market, manufacturers of premium brands are getting their own back, expanding their consumer base by targeting younger buyers.

Unilever Australia—the Market Leader
The Australian cosmetics and toiletries market remained highly competitive and fragmented. It was characterised by the dominating presence of a large number of subsidiaries of multinational corporations. Unilever Australia and Procter & Gamble Australia led the market, each holding an 11.4% share of total sales, with third placed L’Oréal Australia closing the gap slightly last year, and the first domestic player, Creative Brands Pty Ltd., ranking only nineteenth.

Future Growth Expected to Slow
Growth in value sales of cosmetics and toiletries is expected to record slightly more lackluster performance in future, with value sales expected to reach A$4.0 billion (US$3.0 billion) by 2009. While smaller sectors such as depilatories will remain major growth areas, their small base will not be sufficient to offset slower sales in the more saturated larger categories. Growth in hair care in particular is expected to contract due to stiffer competition and saturation in shampoo sales.

Other economic obstacles include the rise in oil prices and repeated government warnings about household debt and pleas to shoppers not to overextend themselves. Messages like the one from Treasurer Peter Costello urging families to make sure they had a “happy and sustainable” Christmas are also expected to impact growth, and it is very possible that the retail sector in general faces a slightly tougher year ahead than it has experienced for the last few years.

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