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BRIC: Promises and Caveats

By: Irina Barbalova, Euromonitor International
Posted: November 5, 2008, from the November 2008 issue of GCI Magazine.

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Despite high levels of low-income households—80% of the population fall into the C, D and E categories—Brazil has a high per capita spend of $115, which will continue to grow due to Brazilian consumers’ preoccupation with beauty.

While the market in Brazil is booming, it is mass products—such as the country’s locally sourced and mid-priced Natura brand—that are the key drivers, while premium offerings are failing to have an impact. Premium products account for only 1.3% of total sales, compared to 28% in the U.S. and 41% in Japan. Despite rising purchasing power, brought about by an increase in the minimum wage and economic reforms, premium brands are still well out of reach for the majority. However, this does leave potentially lucrative opportunities for premier brands looking to exploit a small market of wealthy consumers.

Brazil’s economy is slowing, which may affect the market in the long term, but, because of the prioritization of beauty, the cosmetics and toiletries sector looks set to thrive for the foreseeable future. Sales are expected to grow by 43% during 2007–2012 to reach a total value of $31 billion —driven by product development, aggressive advertising campaigns and a growing young population, according to Euromonitor International.

Russia Set to Slow

Russia is the most sophisticated and westernized of the four BRIC countries, and stands in the top 10 of the world’s cosmetics and toiletries markets in terms of value sales. In 2007, its total market value stood at $9.8 billion, and, like Brazil, growth in the 2002–2007 period was extremely strong, at an average of 19% a year.

Despite high inflation, little can deter the spending of the Russian consumer, which stands at $69 per capita, and has grown 41% since 2002. Confidence in the economy means Russians are spending lots and saving little, and recent media emphasis on health and beauty is influencing consumers and driving sales in the sector. Unlike Brazil, premium products feature highly, standing at 13% of total cosmetics spend, behind skin care at 36% and hair care at 19%, according to Euromonitor International. Premium products look set to be the focus for the market in the future as consumers become more sophisticated, the retail structure modernizes and disposable incomes rise.