Considering Asia’s Beauty Markets

According to international research agency Datamonitor, that beauty industry has been able to maintain growth in spite of general economic downturns due, in part, to the fact that grooming and well-being are important to consumers globally, regardless of other financial pressures. A majority of global consumers place great importance on looking their best in day-to-day life, believing that personal care is a basic necessity that cannot be ignored. These perceptions, global market research firm Euromonitor says, go on to drive behavior. In Asia, this is reflected in a general increase of sales across beauty product types. The heightened demand for personal care products in the region subsequently attracted many ingredient manufacturers to Asia.

In a preview of the topics of focus at PCHi 2013 (held in Guangzhou March 13–15, 2013), Cosmetic Valley, Gattefossé and Northstar Lipids discuss business opportunities and challenges in Asia, and share their outlook on the market.

Building Opportunities

Not surprisingly, Asia’s importance to businesses lies in its size and potential for growth. Since entering the region’s personal care market in the mid-90s, Gattefossé has seen growth in demand for high quality skin care products, for which the company produces active ingredients and excipients, such as dispersers, emollients, emulsifiers and solubilizers.

“Asia is a huge market that is growing,” said Ségolène Moyrand-Gros, group communication manager, Gattefossé. “Our business has increased steadily over the years. Right now, approximately 15% of our revenue is from sales to Asia’s pharmaceutical and personal care industries.”

Northstar Lipids, a UK-based specialist supplier of plant-derived nutritional oils, also recognized the need and opportunity to establish a physical presence in Asia.

“Setting up an office in Asia is important, as it’s vital to keep a close eye on the business here,” said Chris Houghton, managing director, Northstar Lipids. “Asia is a major part of our entire business. We saw a 100% increase in revenue from the cosmetics and toiletries market here from 2010 to 2011, which is why we chose to set up a Guangzhou office in 2011.”

As one of the fastest growing markets for beauty, Asia is now a choice location for brand owners looking to expand their operations. In fact, Procter & Gamble recently announced its decision to move its headquarters for skin care, cosmetics and personal care to Singapore.

Commenting on the shift, Moyrand-Gros said, “Being in Asia allows companies to be closer to their customers’ needs. To have locals working for the company also gives management a better view of the market.” With application laboratories in Shanghai and Mumbai, as well as a production facility in Singapore, Gattefossé put the rationale behind this business decision into practice.

Apart from the sheer size of the market, changes in consumer perceptions, desires and behavior have also created new business opportunities. “The Asian market has become more mature over the years," said Franckie Venet, communication and export manager, Cosmetic Valley, a resource center for  France’s beauty industry. "Consumers seek out products of high quality and efficacy, which have accounted for the French personal care sector’s higher export figures to Asia in the recent years. This may be due to consumers having higher levels of education, greater access to information and better purchasing power than ever before.”

Not a Bed of Roses

Choosing to enter the Asian market may not be as straightforward as it seems. Each market has its specific needs, and custom changes must be applied to address each challenge. “Consumer demands vary across different regions, so manufacturers must create products according to these preferences,” said Venet.

At times, such modifications to products or ingredients may involve more extensive R&D work. “The preference for traditional Chinese medicine and certain skin care needs such as whitening are specific to Asia,” said Moyrand-Gros. “In these instances, our R&D department is looking into ways to answer these special needs for active ingredients.”

And at other times, meeting Asian needs is about understanding trends in consumer demands. “We’ve noticed an increased interest in ‘Western style’ formulations and products in the China market,” said Houghton. “These trends took some time to pick up in Asia, so we track them and cater to needs within the region accordingly. For instance, while organic is still popular in Asia, it appears to be on the decline in Europe.”

Another challenge that companies face is difficulties with regulatory bodies. Certain Asian countries require foreign manufacturers to register their products before they are sold in the market, and this sometimes ends up being a long-drawn and costly procedure.

“The registration process in some countries can take up a lot of time and money, even before the products are distributed,” said Venet. “Eventually, some companies change their minds about entering a new market in Asia because they find that it takes up too much of their resources.”

Looking Ahead

But very often in business expansion, it is not just what you know that counts. Who you know also matters. For this reason, networking platforms are essential for companies looking to break into a new region. Cosmetic Valley considers China a region of interest for market penetration, particularly due to its size. When asked about strategies to overcome this challenge, Venet said, “Based on our experience, participating in exhibitions such as PCHi has helped companies under Cosmetic Valley meet the right partners.”

While there are several other concerns global companies need to battle with (such as language barriers and possibility of counterfeits), Asia remains an attractive region for business expansions.

“The region is a young, dynamic market with an open approach,” said Houghton. “Customers are interested in new ideas and are willing to listen. We intend to maintain a high level of customer support and visibility, as well as understand the commercial and technical demands of the market. This will allow us to respond accordingly with novel products for Asia.”

Gattefossé holds a similar stance about the Asian market. Moyrand-Gros said, “Asia is made up of many emerging economies, so the region’s cosmetics and toiletries market will keep growing. Gattefossé has a strong presence here, and it has proven to be vital to answering requests to market-specific requests in Asia. We expect to see continued growth in China, South Korea, India and also South East Asia.”

Asia’s C&T market is expected to continue growing in the years to come. For premium cosmetics alone, Euromonitor International foresees that sales from the region will likely add up to US$5 billion by 2016. In addition, the research firms reports that less developed nations such as India, Indonesia and the Philippines present great potential for growth. If these facts are anything to go by, there is plenty of pie to go around for a growing number of global companies looking to enter Asia.

Over the next few years, Euromonitor expects hair care and skin care to be the two main drivers in the region, as has been the case for a while. Brands can also take advantage of other upcoming trends including anti-aging, whitening, naturals and men’s personal care.

Gattefossé, Northstar Lipids and Cosmetic Valley are among the companies participating in PCHi 2013, organized and managed by Reed Sinopharm Exhibitions, in association with the in-cosmetics series of events. As part of the annual conference program, delegates will hear from other industry experts about current demands of consumers in the region in order to better equip their businesses for success in Asia. The three-day event is expected to attract more than 6,200 industry professionals, and will feature nearly 300 ingredient suppliers.

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