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State of the Industry

By: Carrie Lennard, Euromonitor International
Posted: June 7, 2011, from the June 2011 issue of GCI Magazine.

page 2 of 4

Premium Cosmetics Rebound Globally but Fail to Impact in Latin America Nearly all key players in premium cosmetics saw much improved results following significant losses in 2009. Overall, many companies focused their strategies on the mass market, but there was still a great deal of new product development in premium beauty (particularly in skin care) and a number of high-profile acquisitions involving premium and professional brands.

Premium cosmetics, too, grew faster than mass cosmetics in some markets. In the U.S., the UK and Germany, premium cosmetics outperformed mass cosmetics, unlike in many other developed markets. In China, this was even more notable, with growth of premium cosmetics reaching 16% in 2010 compared to 9% for mass cosmetics. However, the share of premium cosmetics is very low in Latin America, which is one of the key future growth regions for the beauty industry. Of total beauty value sales of $65 billion in the region in 2010, the share of premium cosmetics stood at just 4%. The main reasons behind this are high import and excise taxes in Brazil—the major market for beauty in the region—which have kept premium cosmetics largely out of the market and enabled the mass market to thrive.

Discretionary Categories Return to Form

On the whole, many of the categories that performed poorly in 2009 returned to growth in 2010. Discretionary categories saw a return to growth following weaker sales than necessity categories such as oral care and bath and shower during the recession. Fragrances jumped to 6% value growth in 2010, up from a more modest 3% in 2009. This was driven by continued innovation and a return to higher spending in Western Europe and North America, along with a very strong performance in Latin America, which accounted for 26% of sales globally in 2010.

Color cosmetics also saw its value growth performance improve from 3% in 2009 to 6%, the sort of growth rate that was last seen prior to the recession in 2007.

There was a further revival for skin care, which recovered to 5% growth in 2010, up from 3% in 2009. Likewise, sun care recovered to post 7% value growth in 2010, up from 4% the previous year. Both skin care and sun care were boosted primarily by a return to form for sales in the U.S., which has a major impact on global performance.