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The Beauty of Latin America

By: Cristina Kroll
Posted: November 25, 2013, from the December 2013 issue of GCI Magazine.

Latin America is one of the global regions enjoying the highest all-round growth in beauty sales, with annual sales of approximately $80 billion in 2012. But perhaps more importantly, the beauty market in Latin America also seems to have a clear objective: to become the beauty industry’s second biggest market after the Asia-Pacific region.

“Emerging nations are showing some of the highest figures for growth, and Latin America is the region with the second highest,” Jaime Concha Prada, president of the Council of Associations of Latin American Cosmetics Industry (CASIC), told the news agency EFE. Concha Prada, who is also executive director of the cosmetic industry chamber within Colombia’s national business association (ANDI), pointed out the cosmetics sector in Latin America had grown 314% in the last decade, a rate of growth bettered only by Eastern Europe.

While the market appears prosperous, there are still threats, however, including those from unfair competition, smuggling and counterfeiting. There are also shifting attitudes and alliances in Latin America impacting the beauty products available there.

Brazil, Mexico Lead the Pack

In Brazil, the numbers keep on rising as far as sales of cosmetics and perfumes are concerned. According to a report from the Brazilian Association of the Cosmetic, Toiletry and Fragrance Industry (ABIHPEC), the country has seen a compound annual growth rate of 10% over the last 17 years, adjusted for inflation. And sales rose from $2.2 billion in 1996 to more than $15.4 billion in 2012.

The ABIHPEC report attributes this sustained level of growth down to several factors. Brazilian women have increased their presence in the workplace in the last two decades, while the use of new technologies and the consequent increase in productivity has enabled the beauty sector to keep price increases below those of the general economic price indexes. Also, the beauty market is in constant flux, new product launches are an everyday event and life expectancy has increased, leading to a greater demand for products that can combat the signs of aging.

According to data supplied by Euromonitor International, Brazil became the largest perfume market in the world in 2010, overtaking the United States. While U.S. sales held firm at $5.3 billion, revenue in Brazil jumped from $4.5 billion in 2009 to $6 billion in 2010, an increase of 33%.

Product launches also have seen great leaps in Brazil. Coty, for example, announced the launch of its Adidas range with special products to celebrate Brazil’s status as host nation for the World Cup in 2014.

ABIHPEC does recognize the regulatory challenges for Brazil can be daunting. However, “The main challenge is to ensure that the sector retains the position it has achieved. Today, we are the third biggest market in the world for personal care products, and our aim is to improve our position and overtake the current number two, [which is] Japan,” an ABIHPEC statement noted.

In Mexico, CANIPEC, the Mexican personal care industry’s national chamber and association, noted there are 64 companies operating in the market, which is reportedly worth approximately $14 billion. Additionally, the industry has attracted $6.2 billion in direct foreign investment in the last decade. And CANIPEC predicts growth of 7–8% for the beauty market in Mexico in 2013 (the value of the market was $9.975 million in 2012, which represented 0.87% of the country’s total GDP.

As for opportunities to strengthen the industry, the chamber informed GCI it intends to boost communication to ensure the beauty, cosmetics and toiletries industry is considered a strategic sector in Mexico when it comes to negotiating international trade agreements. CANIPEC also intends to strengthen guidelines on the self-regulation of marketing material in an attempt to eradicate misleading advertisements, as well as work toward updating the regulatory framework for beauty and personal care products to bring them in line with international standards—benefiting consumer well-being as well as strengthening commerce opportunities.

Mexico has attracted big investments from international beauty companies recently, with L’Oréal opening its largest hair color production plant (in terms of production capacity) in Villa de Reyes, which is in the Mexican state of San Luis Potosí. The new facility represents an investment of $100 million from L’Oréal, and it doubles the company’s production capacity in Mexico, which is used to supply both Latin America and North America. It also created approximately 1,200 jobs for the area.

In line with the company’s ambition to reach one billion new consumers in the next 10 years, the new factory is part of L’Oréal’s global strategy toward greater specialization of its production by business segment. The Villa de Reyes plant began operations in April 2012 with a targeted production of more than 100 million units in 2013 and more than 210 million in 2014, for a total production of 400 million units in Mexico (including the company’s Mexico City plant). It currently manufactures hair color products for L’Oréal Paris, Garnier, SoftSheen Carson and, added in 2013, for L’Oréal Professionnel. Mexico is clearly a key element for L’Oréal’s global plan moving forward.

And the opportunities for beauty companies in Brazil and Mexico should be on the rise, as the countries signed a free trade agreement at the start of the 2013. The Mexican chamber explained the accord seeks to broaden the existing Economic Complementation Agreement between the two countries, with the aim of increasing revenue and employment.

Chile, Argentina On the Upswing

Chile’s numbers also show an upward trend. The first half of 2013 saw beauty retail value sales of $1.4 billion, according to the Cosmetics Industry Chamber of Chile (CIC), which represents 82.1% of the market. Growth was 8.5% over the same period in 2012, representing 46% of total annual sales. And bearing in mind that the sector’s highest sales figures are typically reported in the fourth quarter, it is estimated that 2013 will close with growth of almost 9% for Chile’s beauty industry.