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Women the world over view color cosmetics as a staple of their beauty regimen—products can radically enhance external appearance in a matter of minutes without requiring any long-term procedures that cause pain and undo expense. Subsequently, the sector is usually one of the first to take off in emerging markets, meaning that a company’s strategy has to focus on encouraging consumers to trade up to value-added products that can command premium prices to achieve year-on-year growth. Economic conditions can determine the success or failure of such an approach, as was apparent in 2004. In spite of a flurry of product innovations, contractions in the economies of both the United States and Japan (the two largest markets in the world for color cosmetics) curtailed global growth. In contrast, 2005 marked a reverse in fortunes with an increase in sales in fixed exchange terms for both markets of 1.8% and 3.6% respectively. This resulted in color cosmetics growing at almost double the 2003–2004 rate in 2004–2005.
Although Western Europe managed to overtake North America in terms of market size for the first time in 2005, it alone presents insufficient opportunity for manufacturers with intentions of global domination. Forecast average annual growth of 2.5% through 2010 is diminutive in comparison to those of Latin America, Eastern Europe and even Asia Pacific, which is due to be buoyed by China and India.
Development since 2000 in both Latin America and Eastern Europe is underpinned by the increasing spending power of working women (which has a knock-on effect on sales of premium and upper-mass products), economic recovery in the large markets of Brazil and Russia, and the influx of women’s magazines that disseminate Western fashion trends—which heavily influence purchases of color cosmetics.
Sales also were influenced positively by the success of direct selling companies such as Avon, Mary Kay and home-grown Natura and Faberlic, which offer consumers good quality products at highly competitive prices. Avon’s creation of a stand-alone division in 2005 to focus on Central and Eastern Europe, to accompany the existing Latin American unit, further indicated the strategic importance and long-term potential that these regions offer to the leading manufacturers of color cosmetics. The trend for women to apply makeup “under the veil” indicates that Africa and the Middle East should also be a territory for future consideration.
Given that disposable income, although rising, remains low in the Ukraine, it is notable that color cosmetics, with double-digit growth in 2005, is the most important segment in that country, almost twice the size as the next largest sector—hair care. Use of color cosmetics quickly has become engrained in Ukrainian psyche, with girls as young as 13 using color products on a daily basis. Chinese consumers have not been as quick to come to terms with the sector, with many women opting to use makeup on special occasions only; however, its large population and rising salaries mean that huge growth (of almost 70%) is forecast through 2010. Manufacturers will have to concentrate on educating women to ensure that color cosmetics become engrained in the daily beauty regimen; the launch of women’s magazines such as Vogue in China in early 2006 will ensure that they have a vehicle to spread the world.