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State of the Industry: Eco-values Escalate

By: Briony Davies
Posted: June 14, 2007
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The latest research from Euromonitor International shows that, in 2006, the cosmetics and toiletries industry posted a growth rate of more than 5% over 2005, its overall highest since 2001. The industry continues to benefit from a combination of strong macroeconomic trends (including a worldwide rise in consumer spending power); key demographic factors such as aging populations and higher life expectancies; an increased interest in appearance and personal care as a means of preventive healthcare; and lifestyle and climatic changes that are creating opportunities for new product niches. Legislative restrictions, too, are having a positive impact by improving consumer confidence and facilitating international trade, and technological advances are improving product efficacy and providing manufacturers with new marketing tools and advertising opportunities.

Emerging Markets Show Strongest Growth

With growth rates of 13%, Eastern Europe and Latin America were the fastest movers from a regional perspective, alongside key markets in Asia-Pacific, with expansion linked to large populations, rising disposable incomes, modernizing retail and distribution networks, and increased consumer awareness. With regard to the mature markets of Western Europe and North America, fortunes appear to be on the up after a lackluster 2005, due, in part, to the continuation of economic recovery in the large markets of the U.S., Germany and France. Western Europe takes the lion’s share of global C&T sales, although its importance has contracted over the years. The region now accounts for just less than 30% of the world market, with sales up 3% on the previous year. North America’s performance is closely linked to that of the U.S., where 2006 sales were in excess of $50 billion—a first.

Eastern Europe to Become a Two-tier Market

Russia was the largest cosmetics and toiletries market in Eastern Europe in 2006, with sales of $8.5 billion, representing approximately 42% of regional value. The trend toward more premium products is a particular feature of the Russian market. As growth threatened to slow across most cosmetics and toiletries products, the premium segment offered the greatest opportunities. Growth of 13% in Romania is also notable, and came about largely as a consequence of the country’s improved economic fortunes, resulting from regulatory reforms necessary for its accession to the European Union (EU). Heavy brand advertising by multinationals also drove up sales, although discounting in the core hygiene sectors, such as bath and shower products and oral hygiene, proved a drag on growth.

Eastern Europe is expected, in the long term, to become a two-tier market, a division forming between the EU accession nations and Commonwealth of Independent States (CIS) countries. EU members will experience rapid development, with the trends evident in Western Europe spreading eastward. Demand for premium products and value-added brands may even exceed economic growth in these markets as consumers look to leave the hardships of the recent past behind and embrace Western lifestyles. It is largely the younger demographics that are driving value growth, as these consumers are more willing to sacrifice thriftiness for fashion.