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Emerging Markets Soft-Soap the Growth Picture of Global Bath and Body Care

By: Rob Walker, Euromonitor International
Posted: November 26, 2012, from the December 2012 issue of GCI Magazine.

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Strategically, the bigger picture in Brazil relates to the opportunities in the northeast and center-west regions. Large numbers of low-income consumers in these parts of the country have been dragged from the margins of formal retailing into the mainstream over recent years, fueled by the expansion of modern retail channels and hikes in minimum wage. This relatively new consumer base will continue to expand during the next five years—the northeast is now home to around 30% of Brazil’s population—and will help offset softer middle income spending in the southeast.

As a result, Brazil will continue to be a major growth engine for bath and body care, albeit with a probable shift down market in terms of the segmentation mix.

India, Mexico, China Sharpen Growth Curve

There also are myriad opportunities for new product development in China, and not least because of the vast untapped growth potential in the interior regions—specifically mid-China, southwest China and northwest China—which, in 2011, collectively accounted for around a quarter of the country’s total bath and body care sales.

Stronger demand for commodity toiletries in these less-developed regions has the capacity to act as revenue ballast to weaker spending in the big coastal consumption bases of east China and south China. As with Brazil, the most vulnerable brands will be those priced in the middle segments, because they will be under growing pressure to position aggressively.

Elsewhere in the emerging markets, the bath and body care category has potential to build substantial new business—notably in India, which was the second strongest growth market in 2011 (in absolute terms) after Brazil. Most strikingly, India was the largest growth market in the world for bar soap, with spending increasing by $313 million. Sales of deodorants also rose precipitously, up 43% on the preceding year, with men’s brands—spearheaded by Axe—fueling more than three-quarters of the growth.

Mexico is another market where international brands will look to build stronger positions to 2016. Crucially, its economy is now growing faster—and looking more resilient—than Brazil’s. Bar soap was the dominant growth segment here last year, with sales rising 13% (at fixed U.S. dollar prices). Overall, Mexico’s bath and body care sales climbed 10% in 2011 to $1.3 billion.

Body Wash: Glimmer of Opportunity in Developed Markets

The strength of bar soap in Mexico and India highlights another key strategic differentiation between developed and emerging markets. Specifically, bar soap is losing ground in Western Europe and North America, with retail value sales dropping 1% and 2%, respectively, in 2011. This is because consumers are drifting increasingly into body washes in the U.S. (up 6% in 2011) and liquid soap in Western Europe (up 4% in 2011).

Stronger development of body wash, in particular, has been one of the few silver linings of growth for leading bath and body care players in developed markets. And the segment was energized in 2011 by burgeoning demand for men’s brands, notably in the U.S., Germany and the U.K. This created welcome new revenue streams for brands such as Irish Spring, Dove, Axe and Old Spice.

Emerging Markets Continue to Drive Strategic Agenda

During the next five years, emerging markets—propelled by Brazil, China, India, Russia and Mexico—will continue to dominate the global growth picture of bath and body care, though sales will almost certainly be softer than during the preceding five years, reflecting a squeeze on the middle ground.

Premium and luxury brands (of commodity toiletries) are well-insulated in the BRICs, as their core consumer base is less affected by lulls in economic confidence. And at the other end of the price pyramid, economy brands will pick up down trades from middle brands, some of which will need to reposition in order to maintain market share.