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Multinationals Target Brazil’s Beauty Industry for Growth Despite Drop

Fernanda Bonifacio

The Brazilian beauty industry recently broke its virtuous cycle of double-digit growth in 2013, as data from the Brazilian Association of Cosmetics (ABIHPEC) showed a 4.9% increase for 2013, which is below the annual average growth rate of 10% experienced in the last 17 years. The industry’s performance was affected by persistent inflation, a lower credit supply and rising interest rates, as well as product registration delays by the regulatory body ANVISA. In an industry driven by innovation and product launches, ABIHPEC calculated a loss of R$1 billion in sales, 6,500 jobs and around R$340 million in uncollected taxes.

Among the beauty categories that reported growth in 2013 were sunscreens, deodorants and fragrances, particularly in the franchise marketplace. And despite the growth slowdown, Brazil kept its position as the world’s third largest beauty market behind China, which increased 10.8% in 2013, and the U.S., which increased 1.8% in 2013. Previously the world’s second largest beauty market, Japan dropped to fourth place after a -17.7% drop for 2013.

Coty Enters Partnership with Avon

Coty and Avon signed an agreement in which Coty’s fragrances will be marketed through Avon Brazil’s sales network of 1.5 million sales representatives. The deal goes hand in hand with Avon’s plans to increase its fragrance offerings in Brazil, now with Coty’s portfolio of celebrity and lifestyle fragrance brands such as Davidoff, Beyoncé, Lady Gaga and Calvin Klein available through its Brazilian Avon representatives.

“This commercial partnership allows Coty to expand its geographical reach and strengthen our footprint in the emerging markets, with Brazil being a key driver in our growth strategy,” said Renato Semerari, president of Coty Beauty.

Reportedly, the partnership will also extend Coty’s footprint in the Brazilian market and increase both companies’ fragrance market share, consumer loyalty and brand appeal. “Coty’s fragrances further expand our portfolio of high-quality fragrances, which will help our representatives increase their earnings and reach a broader consumer base,” said David Legher, president of Avon Brazil, of the agreement.

Unilever Announces R$2 Billion Marketing Investment

With a 12.5% increase in 2013 in Brazil, Unilever announced an investment of R$3 billion in the country, in which two-thirds will be allocated to marketing a new product development and one-third to the company’s tenth factory complex in Brazil, where operations are planned to begin by the end of 2014.

The Brazilian operation is currently Unilever’s second largest in the world. "The annual growth in Brazil is almost three times larger than the company's expansion globally," commented Fernando Fernandez, president of Unilever Brazil. In 2013, the company also took over as the largest advertiser in the country.

The strong investment will ensure Unilever will renew 70% of its portfolio in Brazil, as well as enter the premium segment with new products for the Dove, Dove Men+Care and Axe brands. The company also has reaffirmed its global goal to double in size by 2020 and halve the environmental footprint of its products.

Beauty Sales Grow More Than Medicine in Drugstores

In the first quarter of 2014, the Brazilian pharmaceutical industry recorded R$7.4 billion in sales, with a 16.74% increase in relation to the same period last year, according to data from the Brazilian Association of Pharmacies and Drug Stores (Abrafarma). But the main items responsible for this increase were not medicines. While the category grew by 15.15%, ending the quarter with sales of R$4.9 billion, the highest rise was in toiletries and beauty products, with 20% more in the year-on-year comparison, totalling R$2.5 billion.

In 2013, the non-medicines category, which includes cosmetics, toiletries and dietary supplements, also recorded the highest increase (+19.17%) compared to (+11.44%) for medicines, with a 32.51% share of total sales.

MWV to Invest R$100 million in Brazil by 2020

The MeadWestvaco Corporation (MWV) announced an investment of R$100 million in Brazil by 2020, with most resources directed toward the manufacturing of dispensing valves and sprays for the fragrance industry. The company anticipates the investment to triple its market share in Brazil from 10% to 30%.

Of the move, Eduardo Scalese, business director of MWV Home, Health & Beauty in Brazil, said, "Brazil is the fastest growing of all subsidiaries in the cosmetic and toiletries industry.”

Earlier in 2014, MWV increased its production capacity from 30 million to 80 million valves per year. In 2013, MWV’s cosmetic division grossed US$5.2 billion, which accounted for 14% of global business. In Brazil, this segment represented 4% of sales, which totaled US$600 million.

O Boticário Becomes Brazilian Fragrance Leader

The most well-loved brand among Brazilian consumers, as per a survey carried out by Centro de Inteligência Padrão, O Boticário also has become the leading fragrance brand in Brazil, leaving Natura in second place.

According to data from Euromonitor, O Boticário accounted for 28.8% of fragrance sales in 2013 (+10%), while Natura held 27.7% of the market share. According to the ABF (Brazilian Franchising Association), O Boticário also has secured its position as the largest franchise network in the country, having surpassed McDonald’s and supermarket chain Dia.

However, despite a 6% drop in net profits in the first quarter of 2014 due to increased expenditures with the depreciation of the company and the offsetting of expenses, Natura remains strong in the market and forecasts investments of R$500 million in 2014. One of the most valuable retail brands in Latin America, Natura continues to be one of the only Brazilian companies among the world’s most valuable beauty brands.

Fernanda Bonifacio is a Brazilian journalist who focuses on the beauty industry, and has been published in the U.S. and Europe. She represented ABIHPEC and its member companies globally from 2002–2008. She has also been a communications consultant for raw material manufacturer Beraca since 2009.

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