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- Consumer trade down to less-expensive brands and cutbacks on non-essentials were among the main reasons for reduced growth in Russian beauty.
- Though the Chinese per capita spend on beauty products will still be just $22 per person per annum in 2014, far lower than the predicted $175 per person in Brazil, there is still clear potential for China to become the largest beauty market in the world.
- With 14% compound annual growth 2004–2009, the Brazilian beauty industry is one of the fastest growing in the world.
- The Indian beauty market is still very much focused on basic hygiene products.
Growth opportunities in BRIC (Brazil, Russia, India and China) countries were identified long ago. For the beauty industry, this meant a shift in focus away from the traditional, maturing markets (predominantly those in North America and Western Europe) and a chance to reach a vast and mostly untapped consumer pool. BRIC countries are characterized by rapid urbanization, large populations with low beauty product usage and emerging middle classes. These countries have come to the fore as world economic hot spots, and are acting as prime contributors to dynamism in the global beauty products industry. With the exception of Russia, BRIC has far outgrown the 4% global growth in beauty 2008–2009, according to market research firm Euromonitor International.
Russia Hit Hard by Recession
As the most mature BRIC market, Russia was hit far worse by the global recession than the other markets, registering just 5% value growth 2008–2009, under half of the 12% seen from 2007–2008. Consumer trade down to less-expensive brands and cutbacks on non-essentials were among the main reasons for reduced growth in Russian beauty. Whereas cosmetics sales in Brazil and India are typified by sales of mass products, premium cosmetics sales make up a far greater proportion of beauty sales in Russia (accounting for 38% of fragrance sales in 2009, for example, compared to just 6% in Brazil, according to Euromonitor).This left Russia more vulnerable to trade down, and premium was especially hard hit by the downturn. Growth in premium beauty products slid down from 20% during 2006–2007 to 0% 2008–2009.
Booming China Holds Even More Growth Potential
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Sales in both Brazil and India are comprised almost exclusively of mass brands, so trade down has been far less of a possibility. China’s growth in premium beauty products is a more recent development. Its economy was able to withstand the effects of the recession, meaning consumers’ demand for prestige cosmetics was only slightly dampened 2008–2009 (13% value growth) compared to the previous year period (16%).
China is experiencing a mass exodus from its countryside to major cities as the country industrializes. By 2013, China’s urban population is forecast to swell by 200 million people from the level it was at in 2003. This results in very high absolute growth in beauty of more than $10 billion 2009–2014, according to Euromonitor research. Although China’s disposable income levels are set to roughly double 2009–2014, the per capita spend on beauty and personal care will still be just $22 per person per annum in 2014, far lower than the predicted $175 per person in Brazil. This is due to China’s culture of children financially supporting parents in old age, and means that even with a forecast value of $31 billion by 2014, there is much room for China to become the largest beauty market in the world.
Brazil Focuses on Mass Brands and Scents
According to Euromonitor statistics, with 14% compound annual growth 2004–2009, the Brazilian beauty industry is one of the fastest growing in the world. In 2009, its value sales stood at $28 billion, making it the third largest beauty market. Fragrances registered an excellent performance in 2009, with current value growth of 17%—a trend that is set to continue and will make fragrances one of the fastest-growing categories in the Brazilian beauty market. Deodorants are often used as a more affordable substitute for fragrances by lower-income consumers, and this meant, despite only accounting for 10% of total value sales in 2009, the Brazilian deodorants sector is the biggest in the world.
India Begins to Build on the Basics
The Indian beauty market is still very much focused on basic hygiene products such as shampoo, bar soap and toothpaste, contributing the bulk of value sales. Hair care, bath and shower, and oral care products accounted for a combined 71% of total market size in 2009. Emerging, however, is an emphasis on appearance, and not just cleanliness, which is the key driver behind growth in deodorants (29% value growth 2008–2009), color cosmetics (26%) and depilatories (23%) as consumers start experimenting with “less essential” product types. Frequency of use of basic skin care, including facial cleansers and moisturizers, is also rising as the twice-daily facial regime becomes more entrenched.
Outlook: BRIC to Drive Global Beauty Growth
According to Euromonitor International, BRIC holds additional major opportunities for international beauty brands, as these countries add a combined $22 billion in absolute growth. As BRIC attracts greater involvement from multinational companies, this will help to expand penetration rates and lift value sales through the introduction of sophisticated and premium beauty products, meaning these countries will continue to be instrumental in future growth in beauty.
Carrie Lennard is a research analyst at Euromonitor International.