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Latin America: Beauty, The In Business
By: Briony Davies
Posted: November 7, 2006, from the November 2006 issue of GCI Magazine.
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Skin care, alongside fragrances, is one of the largest and fastest-moving sectors in the region. Key technological advances drove the sector forward, with the growth of antiaging products with added value properties helped lift unit prices. In Brazil, manufacturers developed active formulas, offering results through the combination of natural ingredients with advanced biotechnology. Natura and Avon launches in 2005 illustrate this new generation of antiagers in skin care lines.
Venezuela and Argentina also enjoyed strong growth from a continuing stream of new product launches in 2005. While the key growth drivers in these markets—nourishers/antiagers and firming/anticellulite body care—are relatively new, they quickly are becoming an integral part of beauty regimens.
In 2005, fragrances displayed double-digit growth in Latin America for the fifth consecutive year. Mass fragrances remained the more dynamic category, with five times the sales of premium. Fragrances also benefited from the prevalence of direct-selling companies. Avon, Natura and O Boticario hold the top three places. Their dominance derives from the ability to provide products that are perceived as high quality at affordable prices.
Brazil’s strengthening economy has set the scene for significant growth in per capita spending across all sectors of the cosmetics and toiletries industry. The greatest increases are expected in fragrances, hair care and high-end products as consumers trade-up in line with their growing incomes. With a majority of the population earning between $2,500 and $5,000 per month, manufacturers would do well to target the masstige price category to maximize profitability.
Consumers in lower income brackets should not be ignored. While manufacturers are likely to generate strong value and volume sales in the masstige category, cheaper product ranges for the discount market should be lucrative as well. Discount stores currently take a negligible share of cosmetics and toiletries sales in Brazil, but with 16% of the population earning less than $1,000 in 2005, this particular distribution channel and price segment could show considerable potential for growth. Volume sales will be impressive for manufacturers that can successfully win over this demographic.