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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.

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What is most striking about Brazil’s new era of consumption culture is that demand for beauty and personal care is climbing at both ends of the price spectrum. While the so-called C-class explosion is driving sales of commodity toiletries, such as deodorants and soaps, there is also a burgeoning premium goods market being fueled by a new generation of high net worth individuals, particularly in São Paulo. In 2010, for example, sales of super-premium beauty and personal care products in Brazil grew by 9% at constant U.S. dollar prices, which was one of the highest growth rates in the world according to data from Euromonitor International.

Brazil’s appetite for premium goods reflects, on the one hand, the expansion of an aspirational middle-class and, on the other, a deep-rooted predisposition to spending rather than saving (this is a throwback to the days of hyperinflation). It is significant, for example, that the high-end jeweler Tiffany & Co operates more stores in São Paulo than in any other city in the world. São Paulo is also where LVMH generates some of its most attractive profits per square foot. Indeed, last year, in a bid to strengthen its Brazilian footprint, LVMH entered into a majority (70%) acquisition of online beauty retailer Sack’s [additional information on this acquisition is available through a keyword search on www.GCImagazine.com]. It is a deal that should act as a value-enhancing springboard for the company’s Sephora beauty chain.

At the discount end of retail distribution, the country’s leading personal care retail specialist O Boticário moved into direct selling in 2010, with operations rolling out in the northeast region. The focus of direct selling is on lower-income consumers, and it is where Avon has built a formidable business platform in Brazil—though Avon lost some momentum in Brazil in 2010 due to logistical problems related to a new distribution center in Cabreúva. As competition intensifies to win over Brazil’s lower-income consumers, Avon can ill afford any further hiccups this year. Indeed, as so much of the world’s consumption culture becomes defined by its e-commerce potential, Brazil is a reminder that old-school distribution techniques should not be overlooked in the emerging markets.

Global Scales of Consumption Tip From North to South America

Over the next five years, global retail sales of bath and body care products are forecast to generate more than US$8 billion of new business, of which Brazil is projected to fuel around one third. India, Russia and China are tipped to be the next three biggest growth stories in absolute terms, but their combined incremental retail value is still forecast to be around US$1 billion less than in Brazil, according to new forecast data from Euromonitor International. What is striking is that in the emerging world order of fast-moving consumer goods, it is rare for China to be held so firmly off the top growth position. That alone is a measure of the dynamism of Brazil’s bath and body care market.

Of the world’s developed markets, Germany is forecast to put in the strongest performance to 2015, with compound annual growth of 1.4%, fueled by commodity toiletries, especially deodorants. Spray formats, notably, ought to continue picking up down trade activity from fragrances. In the U.S. and the U.K., the prognosis looks much bleaker. Both are projected to leak value (in real terms), reflecting the likelihood of an entrenched period of down trading and discounting. The industry’s growth table, in short, continues to be cluttered with first- and second-tier emerging markets, consolidating a tipping point in the scales of global bath and body care consumption.