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State of the Industry

By: Carrie Lennard, Euromonitor International
Posted: June 3, 2010, from the June 2010 issue of GCI Magazine.

page 3 of 4

Recovery hopes are boosted by the still-dynamic regions of Latin America and Asia, the latter set to outpace Western Europe and become the largest region globally by 2014. In terms of individual markets, Brazil and China were highlights, with the former increasing its value growth to 15% 2008–2009, up by one percentage point from the previous year, while China added $1.7 billion to the size of its beauty industry that same period.

Brazil has one of the fastest-growing beauty industries in the world, reaching approximately $29 billion in 2009, making it the third largest beauty market globally.

Due to high taxes on premium-priced products, the beauty market is driven almost entirely by sales of mass products. A rise in disposable income has also created a new breed of middle-class consumers, which is driving sales. Fragrances registered an excellent performance in 2009 with current value growth of 16%, a trend which is set to continue and will make fragrances one of the fastest-growing main categories in the Brazilian beauty market, along with sun care. As a consequence, by 2014, the size of the country’s beauty care market is expected to be worth more than $35 billion.

Eastern European Growth Slides

One of the major disappointments in 2009 for the beauty industry was Eastern Europe. The region had buoyant value growth of 11% 2007–2008, but experienced a steep drop in growth to just 4% 2008–2009. The dip was caused mostly by the recession-hit Russian and Ukrainian markets, which saw discretionary spending on beauty decline in 2009. Eastern Europe is only expected to produce modest levels of growth in the next five years.

Outlook: Shift in Consumer Attitudes to Persist

As the world slowly emerges from the grip of recession, it is clear attitudes have changed among many consumers. Some are opting for lower-priced brands, but more of them look for high-quality products at reduced prices. Premium cosmetics growth is set to remain modest, at best, globally, and decline in North America. From 2009–2014, North America is set to see its premium cosmetics market contract by more than $170 million. A number of prestige players are adapting to this decline by bringing out more affordable lines, and others are seeking ways of reaching out to the mass market in distributing their products. It is clear that the brands that will sustain the highest long-term growth are those that stand out from the crowd and offer consumers real value for money.