State of the Industry

State of the Industry

Contact Author Carrie Lennard, Euromonitor International
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  • Baby care and deodorants were the star performers 2008–2009, and both proved to be very resistant to the downturn.
  • Bath and shower had unexpectedly high growth of 6% 2008–2009.
  • Oral care proved to be surprisingly resilient; the category maintained its value growth of just above 4%.
  • Skin care growth slowed to 3%, but antiaging posted comparatively strong growth of 7%.
  • Value growth in hair colorants jumped from 1% 2007–2008 to 5% 2008–2009.
  • Japan saw negative growth in percentage terms 2008–2009, and is set to decline by $2 billion.
  • The U.S. experienced negative growth 2008–2009, and is set for stagnant absolute growth 2009–2014.
  • Asia is set to outpace Western Europe and become the largest region globally by 2014.
  • Due to high taxes on premium-priced products, the Brazilian beauty market is driven almost entirely by sales of mass products.
  • Eastern Europe is only expected to produce modest levels of growth in the next five years.

Growth in the global beauty market slowed to 4% in 2009, down from 5% in 2008, a result of increased price sensitivity and spending cutbacks among consumers, fueling demand for less expensive brands and private label, according to Euromonitor International. Despite some regional bright spots—namely emerging markets, which put in strong performances—sharp declines in major beauty markets, such as Japan, dragged down overall growth globally. Discretionary categories suffered most, with growth in premium cosmetics and fragrances taking a hit in key markets, notably the U.S.

Baby Care; Deodorants Maintain High Growth

There were some notable category performances in 2009. Baby care and deodorants were the star performers 2008–2009, and both proved to be very resistant to the downturn, with global value growth of 7% each. The baby care category actually posted better growth in most regions in 2008–2009 compared to 2007–2008. Natural and organic baby care products continue to be a significant trend. Consumer demand for organic and natural products in packaged and adult personal care translated into increased demand for natural baby care products as well. Many consumers are unwilling to trade down from products that are perceived as being of a high quality for their children.

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Deodorant sales were boosted by increased uptake in Asia and Africa/Middle East, coupled with Latin American’s love for using deodorants and body sprays as a fragrance substitute. (See “BRIC Key for Future Growth” on Page 18 for more information.)

Basic Segments Hold Their Own

Bath and shower had unexpectedly high growth of 6% 2008–2009, fueled by liquid soap and hand sanitizers booming in markets impacted by the H1N1 flu (Latin America saw 20% growth, for example), and trade up from bar soap to shower gel and liquid soap in emerging regions such as Asia and Africa/Middle East. Oral care also proved to be surprisingly resilient; the category maintained its value growth of just over 4% 2008–2009, and sales in all regions, excluding Eastern Europe, remained virtually unchanged from 2007–2008—a result of consumers buying into value-added products, such as those with teeth-whitening and enamel protection benefits.

Skin Care Hit, but Antiagers Remain a Priority

Global skin care growth slowed to 3% in 2009, down from 5% in 2008. The segment was hit hard by stagnant value growth of 0% in the key region of North America, down from 3% during the previous year. Antiaging products showed comparatively strong growth (7%) despite the threat of trade down, as the global population ages and remains equally preoccupied with resisting the outward signs of growing older.

Sun Care Impact by Reduction of Travel

Sun care saw much lower growth than the previous year, dropping from 10% growth in 2007–2008 to -3% 2008–2009. The category was largely affected by reduced international holiday travel and further penetration of private label and mass market offerings in the category’s key North American market, which saw growth in the region plummet to just 1%. Sun care is comprised mostly of sun protection products, which accounted for approximately 85% of global sun care sales in 2009. All segments took a big hit as consumers in key markets cut back on summer holidays. Australasia was an exception, posting increased growth in sun care due to health fears related to sun exposure.

Discretionary Categories Suffered

Premium cosmetics were hit hard by consumer trade down to less expensive brands in most regions, with the exception of the Middle East/Africa (which saw 12% value growth 2008–2009), leading to an overall decline of -0.5%. Fragrance’s position as a discretionary product meant that global sales growth was poor in mature regions such as North America (-5%) and Western Europe (0%), but boosted by strong growth in Latin America as disposable incomes rose in the region, producing overall growth globally of 4% 2008–2009.

Hair Care; Color Cosmetics Saw Reduced Growth

Value growth in hair colorants jumped from 1% 2007–2008 to 5% 2008–2009 as consumers opted to color their own hair instead of salon treatments. This failed to have a major impact on overall hair care growth, which remained unchanged 2007–2008 at 3%. While Latin America saw growth of 18%, the comparatively small size of its color cosmetics market meant its growth has limited impact on global growth. Western Europe was the only mature region where the lipstick theory actually seemed to hold true, posting growth of 3%. Negative growth in the key region of North America pulled down global growth to 3% in 2008–2009.

Losses in Key Markets Slow Global Growth

While some markets showed resistance to the downturn posting 2008–2009 growth rates similar to those seen 2007–2008, the bad news was that it was primarily the countries with the biggest beauty value markets that suffered most. Japan has become the problem child for the beauty industry, becoming the slowest of the major markets to recover from recession. The country saw negative growth in percentage terms 2008–2009, and is set to decline by $2 billion 2009–2014. The U.S. also experienced negative growth 2008–2009, and is set for stagnant absolute growth 2009–2014 (just $7 million for the period).

Emerging Regions Compensate—To an Extent

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.

Carrie Lennard is a research analyst at Euromonitor International.

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