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State of the Industry

By: Rob Walker, Euromonitor International
Posted: June 1, 2012, from the June 2012 issue of GCI Magazine.

page 3 of 3

Both Avon and direct sales specialist Natura have been experiencing supply and logistical problems in Brazil, however. And both are coming under new competitive pressure from Eudora, a recently established direct sales arm of the local beauty retailer (and franchiser) O Boticário.

There is a culture of beauty in Brazil that is visible across all socioeconomic groups. Vast numbers of beauty salons, even in low-income neighborhoods, bear testimony to this. Brazil is also one of the biggest markets in the world for plastic surgery. In addition, beauty retailers are leveraging the country’s long-standing tradition for away-from-home beauty care, but it is a long way from maturity. This means Brazil will be one of the key battlegrounds for global beauty companies in the long term. Indeed, Brazil is forecast to generate higher incremental growth in beauty care than any other market to 2016.

A Polarized Industry

China, India, Mexico and Russia are also key projected growth markets for beauty spending, according to Euromonitor International. In particular, India is shaping up to be an investment hot spot with growth last year of 20% and a projected CAGR of 8% to 2016. Commodity toiletries are at the core of India’s surging sales, with mass brands fueling more than $1 billion of incremental value last year.

As austerity measures begin to bite in Western Europe, weakening discretionary spending power and hurting consumer confidence, the performance of India, China, Brazil, Russia and a host of second-tier emerging markets will become ever more critical to beefing up the industry’s bottom line. Equally, one of the key lessons of 2011 is that cash-strapped consumers in developed markets, especially the U.S., are responsive to affordable premiumization. That trend is showing signs of continuing, but at the same time, consumers are displaying more trading down activity. The result is a squeeze on the middle ground, and an industry characterized increasingly by its polarization.

Rob Walker, senior fast-moving consumer goods analyst, Euromonitor International, can be contacted at rob.walker@research7.euromonitor.com.