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Brazil Now World’s Top Market for Fragrances

Fernanda Bonifacio

Brazil has overtaken the U.S. to become the world’s largest market for fragrances, according to a report recently released by Euromonitor International. While U.S. sales of fragrance stood at $5.3 billion, Brazilian sales rose 33% to $6 billion in 2010. Data from the Brazilian Association of the Cosmetic, Toiletry & Fragrance Industry (ABIHPEC) indicates that the fragrance market grew about 18% in 2010.

Besides the sharp growth in consumption, results were also impacted by the appreciation of the Brazilian real (R$) against the U.S. dollar.

“Fragrance sales in Brazil are concentrated primarily on mass market brands, which now account for 93% of revenue,” said Euromonitor analyst Marcel Motta, who noted the leading companies are Natura and O Boticário, which combined account for a market share of 60%.

Despite the sector’s positive performance, there is still a huge market yet to be conquered by fragrance brands. A survey conducted by O Boticário shows that only 61% of the Brazilian population wears perfumes on a regular basis. In other words, there is still a potential market of nearly 40% to be explored.

Jequiti to Retail Lauder Fragrances

The Estée Lauder Companies partnered with direct sales retailer Jequiti to retail Lauder’s Unforgivable and Unforgivable Woman fragrances in Brazil. Although all raw materials are to be imported, both fragrances will be manufactured in Brazil by Lange Cosmetics.

Since 2009, Estée Lauder has been studying the Brazilian door-to-door market, and the company’s CEO Fabrizio Freda has declared his interest in seeking acquisitions in the country as part of a strategic effort to transform the company into a more globalized business. According to Freda, it would be a challenge for Estée Lauder to compete in a market where approximately 95% of sales are controlled by mass channel sales.

Through the successful performance of the brands MAC and Clinique, Estée Lauder claims to have achieved a 12% market share in the Brazilian prestige segment. Nevertheless, the company’s operations in Latin America represent only 2% to 3% of the global market and still have much room to grow.

With investments of R$15 million, Jequiti expects to grow 40% by the end of 2011. In 2010, the company recorded revenues of R$360 million, up 88% over 2009.

Brazilian Subsidiary Among Nivea’s Top Performers

Since 2006, Nivea’s Brazilian subsidiary jumped from the 11th to the 4th position in the company’s global ranking, overtaking markets such as Russia and the U.K. Now, Nivea Brazil’s president Nicolas Fischer expects the country to surpass France and Italy and become the second largest subsidiary in terms of sales.

“Nivea Brazil’s average increase over the past five years was 15%,” said Fischer. “In 2009, we recorded the highest percentage growth among the company’s operations worldwide,” he said. According to projections by Nivea, Brazil tends to present the best performance in the block of developing countries.

Besides Nivea, Beiersdorf Group’s brands are directing their attention to the Brazilian market. In spite of its upmarket prices, luxury skin care brand La Prairie is estimated to have a 1–2% share of Brazilian women as consumers, and the brand has set a goal to reach 5% penetration by the end of 2011. The brand’s products are as much as 50% more expensive in Brazil than abroad.

Natura Plans to Start Manufacturing Overseas

With 6.3% growth in the first quarter of 2011, Natura is investigating the possibility of adding manufacturing capabilities outside of Brazil to supply domestic Brazilian demand. The appreciation of the real (R$) combined with high tax burdens are among the reasons for exploring the possibilities, the company noted. The company paid approximately R$1.5 billion in taxes on its R$5.13 billion 2010 net revenues.

“In a globalized world, it is essential to ensure high productivity at reasonable costs,” said Alessandro Carlucci, CEO, Natura.

Natura currently manufactures in Brazil and Argentina (through an outsourced factory). Starting in 2011, the company will also produce shampoos, makeup and fragrances in Colombia and Mexico. “We are committed to manufacturing close to consumers in order to reduce costs, carbon emissions and also to accelerate the delivery of products,” said Carlucci.

Natura’s revenues in Argentina, Chile and Peru totaled R$255 million in 2010, with an increase of 17% over the previous year. According to Carlucci, the company is among the top three cosmetic suppliers in those countries.

Nail Polish Market Grows 23%; Competition Intensifies

With a sales growth of 23% in 2010, the nail polish market reached revenues of R$800 million (with approximately 600 million units sold), according to data from Nielsen.

While the Risqué (Hypermarcas) and Colorama (L’Oréal) brands lost market share, Impala’s market share grew from 10.9% to 13.8%. According to Brazil’s IPCA, the country’s consumer price index, there was a 13.83% rise in prices of nail care products, which was above the inflation rate of 5.91% registered in the same period.

Retailer Acquires Beauty Brand

The Globalbras holding company, which in 2009 purchased the traditional cosmetics chain Água de Cheiro, recently acquired the Akakia brand. At least 300 products will be incorporated to Água de Cheiro’s portfolio, and 100 new points of sale will be added—totaling 620 Água de Cheiro outlets throughout Brazil. According to Globalbras’ president Henrique Alves Pinto, the acquisition will also help Água de Cheiro’s goal of attracting new franchisees.

Fernanda Bonifacio is a Brazilian journalist who focuses on the beauty industry, and has been published in the U.S. and Europe. During 2002–2008, she represented ABIHPEC and its member companies globally.

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