- Premium cosmetics was the most remarkable performer in 2010, posting 3% value growth following a 0.5% decline in 2009.
- In China, the growth of premium cosmetics reached 16% in 2010 compared to 9% for mass cosmetics.
- The share of premium cosmetics is very low in Latin America, which is one of the key future growth regions.
- The U.S. and France were two of the industry’s key markets that pulled out of negative territory in 2010.
- Fragrances jumped to 6% value growth in 2010; Latin America accounted for 26% of sales globally.
- Non-store retail was the only channel to gain share in 2010, and Internet retailing grew by 16% in 2010— adding a further $2 billion to its share of sales.
Bolstering Asia, China will add more than $10 billion to the size of its beauty industry by 2015; Japan, which still accounts for nearly half of Asia’s sales, is not expected to recover by 2015.
The year 2010 marked a further recovery for the beauty industry as a whole with 5% value growth, up from 4% in 2009. While the mass market accounted for most of this recovery, it was the revival of premium cosmetics that was the most remarkable, with the category posting 3% value growth following a 0.5% decline in 2009.
Key Markets Return to Positive Growth
The U.S. and France were two of the industry’s key markets that pulled out of negative territory in 2010 to each register positive growth of just under 1%. However, high unemployment and debt-ridden economies continued to hamper growth of beauty in certain markets. As a result, several major markets for the beauty industry—including Spain, Greece, Ireland and Japan—continued to post negative growth rates in 2010.
Among the fastest growing were the BRICs, all of which achieved double-digit growth in 2010.
Premium Cosmetics Rebound Globally but Fail to Impact in Latin America Nearly all key players in premium cosmetics saw much improved results following significant losses in 2009. Overall, many companies focused their strategies on the mass market, but there was still a great deal of new product development in premium beauty (particularly in skin care) and a number of high-profile acquisitions involving premium and professional brands.
Premium cosmetics, too, grew faster than mass cosmetics in some markets. In the U.S., the UK and Germany, premium cosmetics outperformed mass cosmetics, unlike in many other developed markets. In China, this was even more notable, with growth of premium cosmetics reaching 16% in 2010 compared to 9% for mass cosmetics. However, the share of premium cosmetics is very low in Latin America, which is one of the key future growth regions for the beauty industry. Of total beauty value sales of $65 billion in the region in 2010, the share of premium cosmetics stood at just 4%. The main reasons behind this are high import and excise taxes in Brazil—the major market for beauty in the region—which have kept premium cosmetics largely out of the market and enabled the mass market to thrive.
Discretionary Categories Return to Form
On the whole, many of the categories that performed poorly in 2009 returned to growth in 2010. Discretionary categories saw a return to growth following weaker sales than necessity categories such as oral care and bath and shower during the recession. Fragrances jumped to 6% value growth in 2010, up from a more modest 3% in 2009. This was driven by continued innovation and a return to higher spending in Western Europe and North America, along with a very strong performance in Latin America, which accounted for 26% of sales globally in 2010.
Color cosmetics also saw its value growth performance improve from 3% in 2009 to 6%, the sort of growth rate that was last seen prior to the recession in 2007.
There was a further revival for skin care, which recovered to 5% growth in 2010, up from 3% in 2009. Likewise, sun care recovered to post 7% value growth in 2010, up from 4% the previous year. Both skin care and sun care were boosted primarily by a return to form for sales in the U.S., which has a major impact on global performance.
Hair care sales rose by 5% in value terms in 2010, boosted by another strong year for shampoos as consumers in Brazil continue to drive the global hair care industry. Salon hair care continued to struggle as consumers stretched out time between visits to the hairdresser.
Of the smaller categories, consistently strong growth was seen in deodorants and baby care, which achieved value growth of 8% each in 2010, and men’s grooming, which registered a 7% increase for the year as sales of these products are increasing in the developing world. Deodorant sales are booming in emerging regions where their use is becoming incorporated into the daily hygiene regimens of consumers. Latin America, particularly Brazil, is driving global deodorant sales, with consumers in the region using scented body sprays as less expensive substitutes for more expensive fragrances.
Internet Retailing Makes Advances in Beauty
Non-store retail was the only channel to gain share in 2010. A strong performance from direct selling, particularly in Latin America and Asia, also had a role to play in this, but Internet retailing alone grew by 16% in 2010, adding a further $2 billion to its share of beauty and personal care sales.
Regional Outlook: Africa and Middle East to See Strong Growth
By 2015, most regions will see a return to pre-crisis growth rates, except Eastern Europe, which will put in a slightly weaker performance compared to the double-digit growth rates of the past.
Asia will be boosted by excellent growth in China, with more than $10 billion added to the size of its beauty industry by 2015. However, slower growth is expected in Japan, which still accounts for nearly half of Asia’s sales, with the market not expected to recover by 2015. Latin America will be the main growth driver of the global beauty industry, with the region set to add more than $18 billion to its value size by 2015. Africa and the Middle East are also set to witness strong growth, although this will still be from a very low base. Growth in the region will be fairly concentrated on just a few markets—primarily South Africa and Saudi Arabia.
Skin Care to Continue Dominance
The star category to 2015 will continue to be skin care, which will increase its lead to become, by far, the biggest value category in the global beauty industry. This will be driven primarily by strong demand in Asia, and China in particular.
Carrie Lennard is a research analyst at Euromonitor International.