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Brazil Breathes New Life Into Global Bath and Body Care

By: Rob Walker, Euromonitor International
Posted: July 13, 2011, from the July 2011 issue of GCI Magazine.

Over the past 10 years, first- and second-tier emerging markets have been at the forefront of growth in the global bath and body care category, offsetting lackluster performances in the traditionally higher value markets of North America, Japan and Western Europe. And Brazil has stood out among the crowd, driving the biggest absolute growth rates year-on-year in the world. In 2010, Brazil’s bath and body care category posted real growth of 11%. This was the equivalent of more than US$900 million of incremental retail business.

Lower-middle Income Brazilians Drive First-class Growth

Globally, retail sales of bath and body care products grew by 2% in 2010, at constant U.S. dollar prices. However, when Brazil is excluded, the growth rate shrinks to less than 0.5%, according to new data from Euromonitor International. Brazil, in short, is propping up the global market. To put the performance into context, Brazil’s sales of bath and body care products were less than a third the size of the U.S. market at the turn of the millennium, yet fast forward to 2011 and sales in the U.S. have grown a mere 10% since 2000, and Brazil is on course to dethrone the U.S. as the biggest bath and body care market in the world by 2013. The Brazilian currency (real) has surged against the U.S. dollar over the past two years, which impacts the comparative value picture. But, that does not detract from what has been, in effect, a fundamental revitalization of Brazilian domestic demand.

Brazil’s new era of domestic demand pivots around a massive expansion of the lower-middle income base, especially in the northeast region, and no other fast-moving consumer goods industry illustrates more clearly its retail value upside than personal care. Millions of households that were on the margins of formal retailing have now come into the mainstream, fueling a hunger for commodity toiletries. This so-called “C-class,” comprised of consumers who earn approximately US$350–600 a month, bulged from approximately 65 million in 2005 to upwards of 93 million in 2010. Its rejuvenation has been little short of a socioeconomic revolution.

It is worth recalling that when Goldman Sachs first came up with the BRIC acronym in 2003, there were economists who were dubious about Brazil’s credentials to be singled out over Mexico, the region’s only other trillion dollar economy. The proof is in the pudding—between 2003 and 2010, the value of retailing in Brazil grew by 59% at constant U.S. dollar prices, which was more than six times the growth rate in Mexico, according to the latest data from Euromonitor International. Over the corresponding period, the retail value of bath and body care products grew by 99% in Brazil (at constant prices) compared, for example, with 41% in China, 4% in Mexico and a contraction of 5% in the U.S.

Demand at the Top and Bottom of the Price Pyramid

General purpose body care was a key driver of Brazilian growth in 2010, fueled by local player Natura, which grew its category share from 30% to 33%. Brand loyalty, however, remains something of a nascent concept among Brazil’s newest generation of lower-middle income shoppers, which means there is everything to play for going forward. What seems clear is that innovation in packaging and product ingredients will become increasingly important as companies look to build stronger positions. For example, competitively priced small-size presentations have proved a hit in deodorant sprays. And there is evidence of upbeat demand for products made from natural ingredients, such as fruit-based body lotions and milk-based hydration creams.