Top of Form

Beauty and Personal Care in China

Industry Overview | 07 Jun 2011

EXECUTIVE SUMMARY

Strong growth fuelled by rising disposable income levels

Beauty and personal care saw strong growth in China throughout the review period, with this largely due to an increasingly affluent consumer base. Strong economic growth during the review period led to rising disposable income levels encouraging higher spending on non-essentials. Rising urbanisation was meanwhile coupled by a growing association between a well-groomed and youthful appearance and social and career success. Consequently, consumers became increasingly willing to invest in their appearance, particularly in urban areas.

Competition widens beyond first tier cities

The leading players and retailers in beauty and personal care focused on expanding their distribution networks into smaller cities towards the end of the review period. Competition in first tier cities such as Beijing and Shanghai is intense, while second and third tier cities offer a relatively untapped consumer base. As a result of this widening distribution, consumers in rural areas and lower tier cities gained access to a growing range of beauty and personal care. These consumers tend to be more traditional in their attitudes and are often highly price-sensitive, with players consequently encouraging purchases by offering price promotions and focusing on affordable brands such as Shiseido’s skin care and sun care brand Pure & Mild.

Strong multinationals push for growth

Beauty and personal care is led by a number of strong multinationals, with Procter & Gamble, L'Oréal, Shiseido, Unilever and Amway being the top five players in 2010. These players competed aggressively for share, with L'Oréal and Shiseido proving particularly successful in 2010. Both companies focused on expanding distribution towards the end of the review period, while benefiting from strong marketing and new product development. They also benefit from a strong portfolio of well-differentiated brands such as Shiseido’s Aupres and L'Oréal’s Maybelline New York, alongside their eponymous flagship brands. These companies’ brands cover a wide range of prices and have a strong reputation for quality, thus attracting many consumers trading up in search of more effective and indulgent products.

Beauty specialist retailers and internet retailing continue to emerge

Sales of beauty and personal care continued to be dominated by two well-established distribution channels in 2010. Supermarkets/hypermarkets continued to have the leading share, offering a wide range of mass products and attractive prices. Meanwhile, department stores ranked second, often being the only outlet for premium beauty and personal care in many smaller cities and towns and also

benefiting from offering expert advice and a wide choice of premium products. However, both channels continued to rapidly lose value share in 2010 over the previous year as beauty specialist retailers and internet retailing continued to emerge. Beauty specialist retailers continued to expand into lower tier cities and towns towards the end of the review period, with this expansion led by chains such as Sephora. Internet retailing meanwhile benefited from ongoing rapid growth in internet users and from the popularity of sites such as Taobao. Internet retailing also attracted consumers due to the wide range of beauty and personal care bargains that can be found online.

Further economic growth to fuel stronger sales

Beauty and personal care is expected to continue to see dramatic sales growth during the forecast period. Constant value growth rates are expected to slow down in comparison to those seen during the review period due to a higher sales base but absolute growth rates will be stronger. Growth will be fuelled by China’s ongoing economic growth and consumers’ rising disposable income levels. Mid- and high-income consumers in first tier cities are expected to become increasingly affluent, consequently seeking out premium brands and value-added products. Low-income consumers and those outside of the largest cities will meanwhile remain price-sensitive but will begin to buy a widening range of beauty and personal care as their income levels rise. Men are expected to be a major driver of growth, with a growing number of men buying their own products as they seek to look well-groomed and youthful.

KEY TRENDS AND DEVELOPMENTS

Economic growth encourages growing interest in value-added products

By the end of the review period, China had benefited from three decades of solid growth, with this resulting in a marked rise in disposable income levels. In addition, while many countries experienced recession towards the end of the review period as a result of the global economic downturn, China maintained impressive growth rates. The country achieved real GDP growth of 9% in 2009 and 10% in 2010. The country benefited from effective government economic stimulus packages in 2009 and also from a lax monetary policy.

As a result of economic growth, Chinese consumers found they had more money to spend on non-essential items. According to government data, average personal disposable incomes in urban areas increased from RMB10,500 to RMB17,200 by 2009. In addition, many employers in the coastal areas of South China increased workers’ salaries dramatically in early-2010, due to growing competition for skilled workers in this area. Urbanisation was also a major factor in boosting disposable income levels, with a growing number migrating to large cities in search of higher paid work. Urbanisation consequently rose from 36% in 2000 to 47% by 2009.

Current Impact

China’s economic performance was clearly reflected in the performance of beauty and personal care during the review period. Rising disposable income levels during the review period were the major

factor behind the strong 12% current value CAGR seen for overall beauty and personal care and the ongoing 11% growth seen in 2010 over the previous year.

Higher disposable income levels also encouraged many consumers to trade up within beauty and personal care. Consumers became increasingly willing to pay more for value-added products, with these often offering multifunctional benefits. Within sun care, there was for example a dynamic 17% current value growth for aftersun, with this driven by growing interest in products offering whitening, moisturising and sun protection benefits. Within bath and shower, there was meanwhile strong growth for products offering moisturising benefits and indulgent fragrance.

Players responded to this trend with strong new product development towards the end of the review period. Shiseido for example launched Aquair Rich Moist in June 2010, with this indulgent and moisturising body wash/shower gel using sunflower essence to lock moisture into skin. L'Oréal’s Maybelline New York meanwhile fuelled the BB cream craze with its launch of Clear Smooth Minerals BB Cream in “other” facial make-up in 2010. This tapped into a number of trends, being based on minerals and multifunctional, claiming to boost radiance, smoothness, moisture, clarity and tone while reducing redness and lines.

Outlook

China is expected to see strong economic growth during the forecast period, with Euromonitor International data estimating real GDP growth of 10% in 2011 and over 9% annually to 2015. Much of this growth is expected to be driven by rising domestic demand, with China keen to reduce its reliance on export sales. The government is notably planning to encourage domestic consumption by offering subsidies on purchases of goods such as domestic electrical appliances and also by improving the accessibility of consumer lending. The government also plans to improve China’s social security system during the forecast period and is likely to reduce personal income tax rates. Consequently, consumers are expected to see a marked rise in disposable income levels during the forecast period and are likely to greatly increase spending as a result.

Future Impact

Strong economic growth is expected to continue to drive impressive sales growth for beauty and personal care during the forecast period. Consumers are expected to become increasingly demanding and sophisticated in their purchasing decisions, which will result in many consumers trading up. Value-added and multifunctional products are expected to perform particularly well, with BB cream in colour cosmetics and anti-ageing and whitening skin care and sun care likely to be outstanding growth areas.

The leading players in beauty and personal care will meanwhile have to work hard in order to keep up with rapidly changing consumer demands during this period of economic growth. There is strong competition within beauty and personal care due to its dynamic growth in recent years and players will thus invest heavily in research and development as they seek to gain a first-mover advantage in new trends. L'Oréal and Shiseido proved particularly successful in swiftly responding to consumer demands and indeed shaping these demands through their marketing during the review period. However,

domestic players such as Yunnan Baiyao and Shanghai Jahwa United also invest heavily in research and development and may well benefit from their closer links to Chinese consumers and use of herbal TCM ingredients.

Looking good shifts from luxury to essential positioning for many consumers

There was a marked shift in attitudes to personal appearance in China during the review period. At the start of the review period, high quality and fashionable clothing and many product areas in beauty and personal care were viewed as luxuries. However, by the end of the review period there was a growing attitude that spending on one’s personal appearance is an investment in a social and professional advantage. This attitude is concentrated in affluent cities such as Beijing and Shanghai, although it also began to spread across China’s other large cities. Many young professionals are for example willing to cut back their spending in other areas, even including food, in order to afford upmarket clothing and premium cosmetics. These consumers typically have a strong focus on brands, being attracted by a blend of Japanese and western aesthetics and brands,

This trend was notably seen among both men and women towards the end of the review period. Chinese men are increasingly willing to invest in their appearance in the belief that it will contribute to a healthy, professional and affluent image and thus help their career. In addition, men are increasingly encouraged to spend money on looking good by contemporary films, TV programmes, celebrities and men’s magazines.

Current Impact

A growing focus on maintaining a healthy, fashionable and youthful appearance benefited growth across beauty and personal care at the end of the review period, particularly in first tier cities. There were two main trends seen across beauty and personal care as a result of consumers increasingly equating an attractive appearance with success. Firstly, there was an increasingly aspirational attitude to beauty and personal care, with many consumers trading up to perceived high-status brands such as L'Oréal’s Lancôme in colour cosmetics and skin care or Chanel N°5 in fragrances.

Secondly, consumers began to focus on presenting a well-groomed face to the world on a daily basis as they sought to cultivate a professional image. This trend for example supported 15% current value growth for deodorant sprays in 2010 and 17% growth for mouthwashes/dental rinses, as consumers sought to avoid unpleasant body odour and bad breath. There was a good 10% current value growth for hair removers/bleaches, with many young women seeking flawless hair-free limbs, while women also began to spend more on colour cosmetics. Foundation/concealer, eye shadow and mascara current value sales climbed by 12%, 12% and 16% in current value terms as women began to use these products daily for work and socialising.

The most significant impact of this trend was however that it attracted men to a wider range of beauty and personal care. Men are considerably more likely to invest in beauty and personal care if they can be convinced that these products improve their career or romantic prospects. Consequently, players focused on nurturing this idea during the review period. L'Oréal was particularly successful in its

advertising campaigns for L'Oréal Men Expert, with these positioning the brand as helping men to avoid looking worn out or stressed at work. Procter & Gamble meanwhile promoted Gillette with TV advertising linking a shaved face to finding romance around Valentine’s Day in 2010.

Outlook

Consumers’ focus on their appearance is expected to increase further during the forecast period. Ongoing economic growth for China will be accompanied by further growth in consumers’ disposable income levels, with this leading to a growing preoccupation with status and looking affluent. A growing number of consumers are meanwhile likely to equate an attractive appearance with success and will indeed believe that a well-groomed appearance assists career prospects and social success.

This trend was mainly limited to young mid- and high-income adults in first tier cities during the review period. During the forecast period, however, an obsession with appearance is likely to be increasingly seen among other consumer groups, including middle-aged consumers, low-income consumers and those in lower tier cities. Consumers are expected to become more interested in western and Japanese fashion and lifestyle trends and to become increasingly aspirational in their own lifestyle choices and purchasing decisions.

Future Impact

A growing willingness to invest in looking and smelling good is expected to drive strong growth for many product areas during the forecast period, particularly in products targeting men. Men’s grooming overall is for example set to see 13% constant value CAGR during the forecast period, with particularly strong growth being seen for men’s deodorants, men’s hair care and men’s skin care. These products will benefit from men seeking to avoid body odour, dandruff, tired skin and premature ageing, with these personal issues being increasingly regarded as socially unacceptable. Men’s skin care is notably expected to see 19% constant value CAGR during the forecast period as men seek to look younger, fresher and free from stress.

Beyond male-specific products, mouthwashes/dental rinses is also expected to see a strong constant value CAGR of 11% during the forecast period as consumers seek to avoid bad breath. Women will also seek to present a flawless image on a daily basis, meanwhile. This will result in strong growth in product areas including whitening and anti-ageing skin care, foundation/concealer and eye make-up, hair removers/bleaches and salon hair care, with the latter notably set to see a constant value CAGR of 10% during the forecast period.

Internet retailing sales see dynamic growth

There was a surge in interest in internet retailing in China during the review period, with the country having the highest number of internet users globally by the end of the review period. By mid-2010, the country had an estimated 420 million internet users or a third of the population, including over 100 million rural internet users. This represents a striking growth in household penetration since 2005, when just 8% of the population had regular internet connectivity. The internet is thus no longer limited to

high-income groups. Young consumers are the main users of the internet, with the China Internet Network Information Centre estimating that 41% of internet users are 30-years-old or younger.

Increasing internet connectivity greatly fuelled consumers’ interest in internet retailing, with this facilitated by the high share of broadband internet. Wired broadband accounted for 86% of households connected to the internet at the end of the review period.

A major factor driving strong growth in internet retailing is cost. Many consumers shop online in search of bargains, with the channel’s low prices enabling many to trade up to more luxurious or aspirational brands. In addition, consumers use the internet to research purchases and also to find the best prices in store-based retailing outlets. Online retailers meanwhile benefit from a lack of overheads but also from the government’s inability to control or tax internet retailing. Clothes and shoes was the main product area purchased online at the end of the review period but beauty and personal care came a close second. A large share of internet retailing sales are consumer-to-consumer via sites such as eBay and leading internet retailing player Taobao. Both these players also offer business-to-consumer portals on their sites, however, enabling branded players to reach their users.

In addition, growing internet usage also benefited beauty and personal care in other ways. Internet users are keen to explore foreign media, with many downloading films, music and TV from other countries. This trend encouraged young Chinese consumers to explore and emulate western, South Korean and Japanese lifestyle trends, resulting in many placing a greater emphasis on clothes and general appearance.

Current Impact

Internet retailing saw dynamic growth in beauty and personal care in 2010 over the previous year. This channel saw strong growth throughout the review period, with annual current value growth rates of 17-24% over 2006-2009. However, 2010 saw growth soar to 293% in current value terms, with the value share of internet retailing thus jumping from below 1% in overall beauty and personal care sales in 2009 to 3% in 2010. Young consumers were mainly responsible for driving growth in many product areas across beauty and personal care towards the end of the review period, with this also being the core internet user group. Growth in internet retailing sales of beauty and personal care was also largely thanks to the Taobao effect.

Taobao expanded from customer-to-customer sales when it introduced a dedicated business-to-consumer sales platform in April 2008 called Taobao Mall. This portal attracted subsequently attracted a widening range of beauty and personal care players and customers towards the end of the review period, thus revolutionising internet retailing. By the end of 2010, leading multinationals and domestic players alike had a presence on Taobao Mall, including leading players Procter & Gamble and L'Oréal. Taobao released data on its top 10 beauty and personal care brands in 2010, revealing that the leading brands included Elca’s Estée Lauder and Clinique, L'Oréal’s Lancôme and L'Oréal, Shiseido and Mary Kay. The website continued to see new entrants towards the end of the review period, however, with domestic player Bawang for example launching its shop in the Taobao Mall in October 2010.

Consumers are meanwhile attracted to Taobao by its parent company Alibaba’s payment platform Alipay, which is viewed as easy, safe and secure. Consequently, consumers who would be unwilling to shop online using financial cards are often willing to buy via Taobao. Other secure third party payment engines such as PayPal also encouraged consumers to shop more online, particularly for lower-priced products such as beauty and personal care.

Outlook

The internet is expected to see further strong growth in household penetration during the forecast period, particularly as the government plans to invest in broadband infrastructure in rural and interior China. The government is keen to invest in enabling internet connectivity, viewing this as a means of connecting the entire Chinese economy. During the forecast period, the number of internet users is thus set to grow by a striking 42%.

There is thus also set to be strong growth for internet retailing in China during the forecast period, with an estimated constant value growth of 23% during the forecast period to reach RMB75 billion by 2015. Growth is expected to be largely driven by business-to-consumer sales. Many small and large businesses alike are notably set to gain a presence in large malls that blend business-to-consumer with consumer-to-consumer sales such as eBay and Taobao. Growth will also be driven by improved security for payments via financial cards and by stricter government regulations, with consumers becoming less concerned about issues such as identity theft and counterfeiting as a result.

Future Impact

Internet retailing is expected to continue to see a dynamic growth in sales of beauty and personal care during the forecast period. This channel appeals to many consumers, offering a seemingly infinite range of products and facilitating comparison between brand and product prices and benefits. The internet is notably regarded as a good source of bargains, with a lack of the overheads associated with store-based retailing enabling sellers to offer lower prices. In addition, internet retailing will offer an increasing number of rural consumers an unprecedented access to the full range of beauty and personal care on offer as rural internet penetration expands. Internet retailing could thus rise to account for around 12% of overall sales value during the forecast period.

Internet retailing is expected to perform particularly strongly in premium skin care and fragrances and men’s grooming during the forecast period. Consumers will use the internet to research different premium skin care brands’ benefits and will also use it to track down the best price in both skin care and fragrances. Within fragrances, internet retailing will mainly be used for repeat purchases but consumers may also opt to visit department stores or beauty specialist retailers in order to try out a range of fragrances before buying their favourites online.

Internet retailing sales are meanwhile set to see the strongest growth in men’s grooming during the forecast period, with many men attracted by the no-fuss and good-value nature of this distribution channel. While many men are keen to improve their beauty and personal care regimes, they may be alienated by the often feminine environment of beauty specialist retailers and department stores. These

men are thus likely to be attracted by the convenience and ease of shopping online, particularly as the channel enables them to seek out lower prices for leading brands.

Growth in internet retailing will also be underpinned by a growing number of producers launching branded internet retailing sites, with Shiseido announcing plans to launch an online beauty and personal care mall in Japan in April 2012 called Beauty Platform. The company subsequently plans to expand this site globally, focusing first on China and the US.

Domestic players develop strategies to compete

Multinationals continued to dominate sales of beauty and personal care at the end of the review period. The top nine players in GBO terms in 2010 were Procter & Gamble, L'Oréal, Shiseido, Unilever, Amway, Colgate-Palmolive, Beiersdorf, Mary Kay and Johnson & Johnson, with these players together accounting for 52% value share. These players benefit from strong marketing and new product development budgets and also benefit from offering well-established and well-trusted brands, such as Procter & Gamble’s Olay and Amway’s Artistry. They consequently continued to gain share in 2010 over the previous year, with L'Oréal and Shiseido proving particularly dynamic thanks to expanded distribution.

However, many domestic players are also keen to capitalise on dynamism in beauty and personal care. In addition, aspirational Chinese consumers are heavily influenced by foreign trends. Most young Chinese in first tier cities are influenced by Japanese and western lifestyle trends, with this also having an impact on the brands chosen by these consumers. While domestic players lack the budgets and high profile of the leading multinationals, they however began to explore different strategies for growth.

Current Impact

Domestic players in beauty and personal care notably focused on expanding their distribution reach during the review period, as they sought to reach a widening range of consumers. Retailing in many of China’s largest cities such as Beijing, Shanghai and Guangzhou is largely mature, with strong competition for outlets. In addition, rapidly rising costs related to rent and labour resulted in many leading retailers shifting their attention to less developed areas. Retailers mainly focused their expansion on lower tier cities towards the end of the review period, particularly in inland areas such as Mid China, Northwest China and Southwest China.

Multinationals typically expanded distribution more rapidly, with Procter & Gamble, Shiseido and L'Oréal. However, chained retailing expansion also offered an avenue growth for domestic players, particularly those offering affordable pricing. Jala for example benefited from expanding distribution for Chcedo skin care, sun care and colour cosmetics in second and third tier cities. The company employed a growing number of local distribution agents and thus expanding its distribution network by 20% in 2010 over the previous year. The company also targeted these smaller cities with marketing and overall succeeded in growing current value sales by 26% in 2010 over the previous year. Carlsan meanwhile benefited from expanded distribution via branded counters in department stores and beauty specialist retailers towards the end of the review period, with 30% of the company’s sales value stemming from these counters in county-level cities and rural towns in 2010.

Other domestic players sought to expand beyond store-based retailing. In response to dynamic growth for internet retailing, Shanghai Jahwa for example declared 2010 to be the company’s E-Commerce Year and launched e-commerce subsidiary Shanghai Jahwa Information and Technology. The company also gained a presence on the Taobao Mall website and on other business-to-consumers sales sites.

The most successful strategy for domestic players was possibly a focus on herbal TCM, with China’s strong traditions in this area resulting in many consumers having a strong trust in Chinese herb-based beauty and personal care. Shanghai Jahwa United’s Herborist skin care and sun care for example saw 32% current value growth in 2010 over the previous year, benefiting not only from its reputation for quality and herbal ingredients but also from being produced in Shanghai. Shanghai Inoherb Cosmetics meanwhile saw 45% current value growth thanks to the strong reputation of its herbal skin care and sun care. Yunnan Baiyao meanwhile saw a striking current value growth of 41% in 2010 over the previous year in toothpaste, with consumers placing a strong trust in the multifunctional benefits offered by the brand.

It is however imperative that domestic players maintain an impeccable reputation for quality. Bawang for example saw strong growth in value share for much of the review period, benefiting from offering natural herb-based hair care and skin care. However, the company’s current value sales plummeted by 20% in 2010 over the previous year, following media reports in July 2010 that samples of the company’s Bawang Anti-Falling anti-hair-loss shampoo and its Royal Wind brand contained the carcinogen dioxane. Bawang responded that it uses stringent quality tests and that its products meet all standards required by the mainland Chinese and Hong Kong authorities. However, the scandal besmirched the company’s natural and healthy image and alienated many consumers in 2010, with the company issuing a profit warning as a result in November 2010.

Outlook

Domestic players will continue to focus on a number of strategies in order to gain share during the forecast period. Many domestic players will continue to compete mainly on price, offering affordable products in lower tier cities and rural areas. However, other players such as Yunnan Baiyao and Shanghai Jahwa United are likely to differentiate their products and add value by taking inspiration from herbal TCM.

Players offering herb-based beauty and personal care and other domestic companies are likely to place a greater emphasis on their Chinese origins during the forecast period. The country’s projected economic growth during the forecast period is likely to result in an upsurge in national pride, with this resulting in consumers showing a growing interest in home-grown brands. This trend will be encouraged by the Chinese government, which already invested around RMB100 million annually in Yunnan Baiyao’s research and development during the review period.

Future Impact

Multinationals are expected to retain a leading position in beauty and personal care during the forecast period, with players such as L'Oréal and Shiseido benefiting from well-established brands, huge

marketing and new product development budgets and widening distribution. However, there are strong opportunities for domestic players to gain share.

The differing strategies used by domestic players are expected to result in different degrees of success. Domestic players who primarily focus on price competition are expected to struggle during the forecast period. These players will suffer as rising disposable income levels enable consumers to trade up to products with a higher-quality positioning. They will also suffer due to multinationals such as Procter & Gamble and L'Oréal offering good quality economy brands and expanding their distribution reach into smaller cities and towns.

However, those domestic players that focus on offering well-differentiated products inspired by China’s heritage are expected to prove highly successful. There is a growing interest in herbal TCM in general in China and beauty and personal care based on traditional herbs are likely to be perceived as natural and effective. Consequently, players such as Yunnan Baiyao, Shanghai Inoherb Cosmetics and Shanghai Jahwa United are expected to see a strong growth in value share during the forecast period.

Rising income disparity results in divergent urban and rural trends

China’s economic growth did not benefit all consumers equally during the review period, with a marked rise in income disparity. This was chiefly due to economic growth being concentrated in specific geographic areas such as Shanghai and Beijing. However, rising income disparity was also due to more affluent Chinese being better placed to take advantage of the financial and industrial opportunities on offer.

It is difficult to gauge the full extent of income disparity in China due to a long-standing culture of not fully revealing incomes. Many Chinese have more than one job and many are keen to avoid paying taxes if they can avoid it, enjoying untaxed income from side jobs or overtime. This income is commonly referred to as grey income.

During the review period, the strongest growth in grey income levels is believed to have occurred in the top 20% of households in terms of income levels, while the top 10% of households were estimated to account for almost two-thirds of the RMB10 trillion wealth in China in 2009. These households are thus the best able to afford tax but also the most skilled at evading it, with their wealth consequently doing little to benefit less affluent consumers or the country’s infrastructure.

Current Impact

There were two distinct trends in beauty and personal care towards the end of the review period. In first tier cities, mid- and high-income consumers became increasingly sophisticated and aspirational in their product choices. These consumers increasingly equated an attractive appearance with status, career success and even health and increased their spending accordingly. These consumers are typically strongly influenced by Western and Japanese media via the internet, film, satellite TV and magazines and are thus generally attracted to premium Western and Japanese brands.

Simultaneously, however, there is a large and largely untapped consumer base in lower tier cities and rural areas. Consumers outside of cities continue to have little access to a wide range of beauty and personal care, with players mainly focusing distribution expansion on second and third tier cities during the review period. They also typically have low-income levels and are highly price-sensitive and traditional in their preferences.

However, as income levels rose across China, these consumers also benefited from a growing budget for beauty and personal care. Consequently, there were a number of shifts in their purchasing patterns towards the end of the review period. This was further encouraged by strong urbanisation, as family and friends visited from cities with talk of new trends. There was for example a marked shift from informal to formal retailing channels, due to consumers becoming increasingly concerned about counterfeits and quality. This was a major factor behind the 5% volume growth seen for men’s razors and blades in 2010 over the previous year. These consumers also began to shift to more modern formats, for example shifting from bar soap to body wash/shower gel and liquid soap. Consequently, bar soap saw just 1% volume growth in 2010 over the previous year, while body wash/shower gel and liquid soap grew by 7% and 10% respectively.

There was also a shift from traditional but questionable personal care practices in rural areas during the review period, with government oral care campaigns for example encouraging these consumers to switch from twigs and green tea to toothbrushes and toothpaste. This trend supported 5% volume growth for both toothbrushes and toothpaste in 2010 over the previous year.

Outlook

Income disparity is expected to persist during the forecast period. Most Chinese consumers are pragmatic about the existence of grey income, with untaxed income being common in all income groups. There are likely to be a number of high profile corruption cases involving high-income individuals, with these highlighting the existence of undeclared wealth. These in turn are likely to result in a degree of anger among low-income groups.

However, the government is unlikely to successfully challenge this problem due to its endemic nature. Instead, the government is expected to focus on improving the lot of low-income consumers as it seeks to reduce income disparity. This is expected to result in minimum wage increases and greater spending on infrastructure in poor rural areas. In addition, the housing bubble is expected to burst in 2011 or 2012 in cities such as Shanghai and Beijing, with this likely to wipe out much of high-income consumers’ grey income.

Future Impact

The divergent trends seen during the review period are expected to persist into the forecast period but on a larger level. Sophisticated and aspirational purchasing decisions and a focus on looking good will continue to mainly characterise more affluent consumers in urban areas. However, these trends are expected to spread to a wider range of income, age and geographic groups. Mid-income consumers are expected to become increasingly aspirational during the forecast period, while this trend will

increasingly be seen in second and third tier cities in addition to first tier cities. In addition, while a focus on grooming was strongest among young adults at the end of the review period it is expected to become increasingly pronounced among middle-aged consumers during the forecast period.

Within towns and rural areas, players focus will meanwhile be on attracting consumers rather than encouraging them to trade up. A large number of Chinese consumers continued to pay little heed to beauty and personal care at the end of the review period, relying on a handful of core products such as bar soap and shampoo. These consumers are expected to buy an increasingly wide range of beauty and personal care during the forecast period, however, supporting strong growth in areas such as body wash/shower gel, general purpose body care, mass facial moisturisers, toothbrushes and toothpaste and conditioners.

TERRITORY KEY TRENDS AND DEVELOPMENTS

East China

Trends

Eastern coastal areas saw stronger economic development in China in comparison to inland regions during the review period. Consequently, consumers in East China typically have more sophisticated demands when it comes to beauty and personal care and a greater awareness of the range of products and benefits on offer. Consumers in this region are typically more responsive to fashion and beauty trends. However, many consumers in Shanghai and other leading Eastern cities opt to purchase premium beauty and personal care overseas, whether online or in person. This especially impacts skin care and colour cosmetics, with premium variants in these areas offering a cheaper selling price overseas in comparison to prices in China.

Due to the strong economy in East China, premium products are particularly popular in this region, especially in skin care. Premium products accounted for 15% of total value sales in beauty and personal care in 2010 and saw stronger current value growth of 17%, in comparison to 11% overall growth. Within skin care, premium products meanwhile accounted for 23% of overall value sales in 2010 and saw 19% current value growth in comparison to 14% overall growth. Consumers began to shift from economy or mid-priced products to premium products in this region during the review period, as income levels rose. This trend was seen both in major cities such as Shanghai, in second tier and low tier cities and even in rural regions.

The popularity of premium products in East China notably impacted mass brands’ new product development towards the end of the review period. Procter & Gamble’s Head & Shoulders for example launched premium hair care range Hair & Scalp in 2010, with this seeing fast sales growth in the region. Following Hair & Shoulders, other brands such as C-Bons’ Slek and Unilever’s Hazeline also launched high-end hair care products focused on spa-style scalp care.

Men’s grooming was highly dynamic in East China in 2010, with current value growth of 19%. This product area saw growing interest from beauty and personal care companies. This was in response to

men in the region paying more attention to their appearance, with this particularly benefiting men’s skin care. Men’s skin care consequently saw dynamic current value growth of 31% in 2010 over the previous year, with a review period current value CAGR of 35%.

A higher proportion of male consumers in East China are well-educated, fashion-sensitive and high income. These consumers are increasingly buyers and users of men’s grooming products, while at the start of the review period most were merely users and relied on their wives or partners to buy products. In response, leading manufacturers launched brands specifically targeting male shoppers in 2010, such as Procter & Gamble’s Olay Men launched in March 2010. Young and fashionable men in Shanghai even began to use colour cosmetics towards the end of the review period. These consumers mainly use foundation/concealer, however, and seldom use other colour cosmetics such as mascara.

Consumers in East China are becoming increasingly focused on natural and healthy ingredients. In colour cosmetics, nail products for example lost share towards the end of the review period due to many consumers being concerned about its potential health impact. Herbal and natural products meanwhile saw a strong performance due to rising disposable income levels and growing consumer awareness. For example, in skin care, Shanghai Jahwa United’s Herborist saw rapid growth in the region thanks to its herbal formulation.

Supermarkets/hypermarkets remained the main distribution channel for beauty and personal care throughout the review period. Smaller grocery retailers saw less attention from the leading chains, although there was widening distribution via Watson’s parapharmacies/drugstores in major cities such as Shanghai and Qingdao. Internet retailing also saw strong growth in East China in 2010 over the previous year. Consumers in this region tend to be less traditional and thus more willing to accept new concepts. This resulted in a rapid uptake for internet retailing in the region in comparison to other regions, particularly in inland China. Internet retailing sales are particularly strong in Shanghai, where many highly educated people opt to shop online.

In East China, the unit price of most product areas in beauty and personal care declined in constant value terms in 2010 over the previous year. This is partly due to competition being very fierce, with many manufacturers and retailers maintaining or reducing prices in order to gain a competitive advantage. In addition, a growing share for internet retailing drove down price in 2010, with many consumers using the channel to seek out bargains. However consumers were prepared to pay more in some product areas, notably firming/anti-cellulite body care and facial moisturisers, which saw constant value unit price growth of 1% and 2% respectively. Premium facial moisturisers saw even stronger constant value unit price growth of 3%, as increasingly affluent consumers became willing to pay more in the hope of buying more effective products.

Competitive landscape

Procter & Gamble (Guangzhou) continued to lead sales of beauty and personal care in East China in 2010. The company benefited from its numerous innovations in product design, product concept and packaging in many product areas throughout the review period, with the company constantly striving to meet the differing and changing demands of consumers in this region. In hair care, the company notably

launched the SPA and Hair & Scalp ranges for Head & Shoulders in 2010 and established the Pantene Hair Care Research Institute in September 2010. In skin care, the company launched Olay Men at the beginning of 2010. In men’s grooming, Gillette Fusion was meanwhile launched. Most of the company’s new products are initially launched in Shanghai.

Based in Shanghai, domestic player Shanghai Jahwa United grew share rapidly in this region in 2010. The company benefits from offering a wide product portfolio, including bath and shower, colour cosmetics, skin care, fragrance and home care. The company’s famous skin care brand Herborist particularly performed well in East China towards the end of the review period. This brand benefited from being produced in Shanghai, which appeals to many consumers in the region. In addition, consumers in East China are attracted by its herbal and natural formula, believing natural ingredients to be better for skin health. Shanghai Jahwa also benefits from investing heavily in innovation both via its own research and development centre and in cooperation with universities and research institutes.

The most significant new product development in 2010 was the launch of Unilever’s international brand Dove in hair care. In most relevant distribution outlets in Shanghai, Dove mid-priced shampoos and conditioners were offered with promotions following the launch. The complete Dove hair care range was launched, with the brand claiming to deeply moisturise and repair hair. In bath and shower, Shiseido meanwhile launched Aquair Moist shower gel in June 2010, which also attracted many consumers’ attention due to its high quality and moisturising image.

Domestic manufacturers faced increasingly severe competition in beauty and personal care in East China towards the end of the review period. Multinationals such as Procter & Gamble, Unilever and L'Oréal benefit from stronger financial support for research and development, manufacturing and marketing, with domestic players thus being at a disadvantage. According to trade sources, domestic manufacturers are consequently focusing mainly on gaining a distribution presence in second and third tier cities with these having a lower level of competition. Domestic players performed best in low- and mid-priced products at the end of the review period.

Marketing continues to be highly significant in East China and is important for leading manufacturers in maintaining or gaining share. The leading players became increasingly innovative in their marketing towards the end of the review period. For example, Amway cooperated with theatres in Shanghai and sponsored performances and concerts in order to enhance the high-end brand image of Artistry in skin care. The company also focused on offering good-value product sets and attracted potential consumers with free gifts with purchases.

Many domestic players meanwhile focused on building a natural herbal image for their products, with this strategy enabling domestic players to better compete with international brands. In toothpaste, Yunnan Baiyao for example performed well in 2010, thanks to its clearly differentiated herbal and healthy products, especially those catering to sensitive teeth. Similarly, Shanghai Jahwa United’s Herborist skin care also performed strongly due to its traditional herbal ingredients.

Prospects

Consumers in East China are becoming increasingly aware of the range of products on offer in beauty and personal care and are increasingly sophisticated in their understanding of these products’ benefits. These trends are expected to continue during the forecast period, with players responding with increasingly closely-targeted new product development. Consumers’ demands will also become more complex during the forecast period. Female consumers are thus likely to spend more on skin care, hair care or colour cosmetics during the forecast period as they seek to maintain a youthful appearance. Therefore, these products are expected to see strong growth during the forecast period, with colour cosmetics seeing 9% constant value CAGR, hair care seeing 6% CAGR and skin care seeing 10% CAGR.

Competition will become increasingly severe during the forecast period, with players seeking to offer the most attractive combinations of price, quality and marketing. Closely-targeted marketing and products will thus continue to be very important in gaining or maintaining share. As consumers become more sophisticated, manufacturers will focus on product innovations. In order to attract a wide range of consumers, players are unlikely to dramatically increase unit prices for products in bath and shower, hair care and colour cosmetics. However, overall constant value unit prices are expected to increase in many product areas as consumers trade up. Nourishers/anti-agers, firming/anti-cellulite body care and men’s toiletries are consequently all expected to see 2% constant value CAGR in unit price during the forecast period.

During the forecast period, hair removers/bleaches is expected to see strong sales growth in East China with a constant value CAGR of 8%. As women’s purchasing power increases due to greater participation in the workforce and a growing focus on careers, women will place more of an emphasis on their appearance. Sales of hair removers/bleaches remained fairly low at the end of the review period but will benefit from women increasingly investing in a well-groomed appearance during the forecast period.

Other product areas set to benefit from a growing focus on grooming include mouthwashes/dental rinses, conditioners and men’s toiletries, with the latter set to see a dynamic 15% constant value CAGR. These product areas will benefit from the fast economic development of East China and also from growing consumer acceptance. Manufacturers will fuel more widespread consumer acceptance by investing heavily in marketing, with multinationals set to lead the way. Johnson & Johnson for example invested heavily in widening the uptake for its Listerine mouthwashes/dental rinses towards the end of the review period and will continue to invest in this area during the forecast period.

Multinationals will focus on localising their product range during the forecast period as they seek to appeal to consumers in East China. Sophisticated consumers in East China are increasingly responsive to global fashion trends but also have strong local preferences. Amway’s colour cosmetics for example suffered during the review period from product design being carried out in the US, with the company failing to tailor its new product development to suit the demands of local consumers. Successful multinationals are expected to base research and development departments in China and thus to develop products in line with consumer demands. Amway is for example set to build a large plant-focused research and development centre in China at the start of the forecast period, with this being fully operational by 2013.

Safety and healthy will continue to be important factors that influence consumers’ choice of beauty and personal care during the forecast period. This trend will benefit products with a natural herbal image such as herbal skin care, toothpaste and shampoo. Players are expected to respond accordingly in terms of new product development. Yunnan Baiyao for example plans to launch herbal hair care in East China in 2011, following the successful completion of test-marketing in Beijing in 2010. However, a quality guarantee will remain all-important for both herbal and standard products. Traditional Chinese herbal shampoo Bawang for example saw a marked drop in sales in 2010 following a carcinogen-related scandal.

Internet retailing will become an increasingly influential channel in East China during the forecast period. At the end of the review period, many consumers remained wary of internet retailing due to a lack of regulation but it has a great potential for future growth, particularly as online security and improved payment instruments are developed. Many players launched branded internet retailing sites by the end of the review period, such as L'Oréal and Maybelline New York. More players are expected to enter the channel during the forecast period. In addition, special beauty retailers’ websites such as Sasa are also expected to see growing sales during the forecast period. This channel will particularly attract consumers in large cities such as Shanghai due to these cities’ developed logistics infrastructure, with players thus able to offer express delivery.

Mid China

Trends

Beauty and personal care continued to see a good current value growth in Mid China in 2010, with sales rising by 9% over the previous year. This was thanks to increasing disposable income per capita during the review period as a whole. Growth slowed in 2009 due to economic uncertainty but as the region’s economic growth recovered consumers began to spend more freely.

Consumers in Mid China are increasingly focused on achieving a higher quality of life, with many product areas beauty and personal care thus moving from a luxury to a daily positioning. This trend was strongly encouraged by advertising and media articles encouraging a growing focus on personal hygiene. Consumers in the region were thus increasingly encouraged to wash their hair everyday and to shower in both the morning and evening.

Men's grooming saw the fastest current value growth within beauty and personal care in Mid China in 2010, with sales growing by 19% over the previous year. This was due to a growing number of men focusing on personal hygiene and on maintaining a well-groomed and youthful appearance. Growth was particularly strong for men’s skin care, with a striking current value growth of 33% in 2010 over the previous year. This was driven by the growing popularity of mass brands, with strong new product development in this area. Nanjing Jianong Chemical’s Tjoy for men, Guangzhou Sisder Health & Beauty’s Doctor Li and Shanghai Baiqueling Daily Use Chemical Products’s Baiqueling for example all launched men’s skin care products, with these targeting low-income men. These ranged from facial cleansers to full skin care ranges in sets and individual products. In addition, the majority of health and beauty specialist retailers in Mid China began to dedicate shelf special to men's grooming towards the end of

the review period. This consequently raised men’s awareness of these products and encouraged them to buy a wider range.

Consumers in Mid China tend to have strong brand awareness and began to pay more attention to the quality and function of beauty and personal care towards the end of the review period. These consumers are often attracted by famous brands and also often develop a strong sense of brand loyalty. However, there is a strong concern about counterfeiting, with counterfeit sales and informal retailing remaining strong in the region.

The strength of informal retailing hindered the expansion of beauty specialist retailers in Mid China compared to the channel’s development in other regions such as South China. However, Watson’s saw a rapid expansion in Hubei province during the review period, with 20 stores in Wuhan. In the forecast period, Watson’s is expected to open 19 stores in Hubei and will also extend its network to include second tier cities. The company also plans to establish a logistics centre in Wuhan, with this centre distributing products to Mid and West China.

Competitive landscape

There are few clear leaders in beauty and personal care in Mid China. In hair care, bath and shower and oral care, Procter & Gamble is the leading player due to its wide product portfolio. L'Oréal meanwhile showed an outstanding performance in colour cosmetics towards the end of the review period, benefiting from offering a portfolio of famous colour cosmetic brands that appeal to both mass and premium consumers. Johnson & Johnson meanwhile leads in baby care thanks to its professional image. There is however no clear leader in men's grooming, which is still emerging.

Carlsan rapidly gained share in colour cosmetics towards the end of the review period, maintaining about 30% annual current value growth from 2007 to 2010. The company’s colour cosmetics products offer a wide range of colours and keep up with changing fashion trends, while including eye and facial make-up and lip products. The company clearly targets young mid-income consumers, particularly college students. The company saw a highly successful sales performance in Hubei towards the end of the review period, alongside the strong development of rural sales. 30% of the company’s sales value came from in-store branded counters in county-level cities and rural towns in 2010. The company also benefited from strong investment in promotion and brand image building, including TV advertising and public relations events.

There was a strong trend towards the horizontal expansion of brands towards the end of the review period, with players extending brands into product areas. This created increasingly fierce competition. For example, L'Oréal expanded its hair care range into shampoos and conditioners from colorants, while Procter & Gamble extended Safeguard from bar soap into liquid soap and launched Olay Men in skin care. Unilever meanwhile extended Dove bath and shower into hair care

In Mid China, multinationals dominate sales. Domestic companies only have a leading position in liquid soap, with players such as Guangzhou Blue Moon and Lohmann Haas Health with Walch being strong. These players benefit from entering this product area earlier in comparison to multinationals, thus

building strong brand recognition. There are also some local brands present in this area, such as Hesao from Wuhan Star Daily Chemicals.

Prospects

There is strong competition among retailers in Mid China, including local and regional retailers and multinational retailers in centre cities. During the forecast period, retailers are expected to increasingly focus on gaining a presence in prefecture-level cities. For example Carrefour will open in Xiaogan at the beginning of 2011, with this being the company’s first store in Hubei Province outside Wuhan. Wal-Mart will meanwhile focus on mid-sized cities in Mid China, with the company set to open outlets in Jinmen and Huangshi in 2011 and 2012 respectively. Wal-Mart also plans to develop a new retail model specifically for rural China, focusing on compact and low cost outlets in contrast to the company’s current hypermarket format. The Intime department store from Hangzhou also intends to open 20 new stores in the forecast period in Mid China. Strong chained retail development in the region is expected to boost beauty and personal care sales during the forecast period.

Beauty and personal care producers are expected to focus on developing rural sales during the forecast period. Procter & Gamble notably launched its China Three strategy in 2009, with this focusing on rural expansion and covering the early part of the forecast period. The company struggled to meet targets for rural expansion during the review period but has budgeted 30% of its research and development department for the development of products for rural consumers. The company will also continue to develop rural distribution, regarding this as a long-term strategy.

There are however numerous constraints to the development of rural sales in China, including a poor transportation infrastructure and the fact that consumer habits and demands are so different from those in urban areas. This will continue to challenge the leading companies, with both domestic players and multinationals being keen to capitalise on the large rural customer base.

Players are expected to indirectly increase constant value unit price in beauty and personal care in Mid China during the forecast period. Players will for example offer higher prices for products in new packaging, with new formulations or for entirely new products in the form of brand extension. Players will adopt such strategies in order to avoid alienating consumers through more traditional price increases. In 2010, Procter & Gamble launched Olay ProX with a more premium positioning, while Unilever similarly offered Pond's Gold Radiance. Other skin care brands are also expected to launch premium brand extensions during the forecast period. Oral care is also expected to see a shift towards high-end product, with this led by Yunnan Baiyao’s new product development. Depilatories is also expected to see constant value unit price growth, as women trade up to higher-priced products as their purchasing power increases.

Men's grooming is expected to continue to see the highest growth rates during the forecast period, with a constant value CAGR of 16%. This is an immature product area with considerable scope to grow as consumers become more aware of these products and income levels rise. The forecast period is expected to see advertising for these products focus on the links between a well-groomed and youthful

appearance and social and career success, with this concept likely to prove increasingly popular to urban consumers in Mid China.

North and Northeast China

Trends

Sales benefited from recovering consumer economic confidence in 2010, with the region’s economy seeing a stronger growth in comparison to 2009. Rising disposable income levels and improved living standards encouraged consumers to trade up within beauty and personal care and to buy more products. This trend especially benefited mid-priced and premium products, as mid-income consumers increased their purchases of beauty and personal care and also often traded up to higher-priced products.

Many niche product areas saw an outstanding performance in 2010, as consumers began to buy a wider range of products. For example, men's grooming saw significant current value growth of 18%, as men increasingly focused on their appearance as they sought to move up in modern society. Baby care also exhibited robust growth of 14% in current value terms in 2010 over the previous year. This was due to an increased birth rate in the region, with many starting families in response to economic growth.

Consumers in North and Northeast China typically display high levels of brand loyalty and generally prefer to buy well-known brands, believing these products to be more reliable in terms of quality. For example, Procter & Gamble’s Crest, Colgate (Guangzhou)’s Colgate and Unilever’s Zhong Hua together accounted for more than 60% value share in toothpaste in this region in 2010. Brand awareness and brand loyalty are particularly pronounced in first tier cities in the region. However, consumers in the second and third tier cities and rural areas have different attitudes. In addition to branding, price and effectiveness are also important for these consumers’ purchasing decisions.

In order to capitalise on growing demand for beauty and personal care in the region, a growing number of companies expanded distribution into North and Northeast China towards the end of the review period. Notably, a number of cosmeceutical brands such as Pierre Fabre’s Avene and L'Oréal’s Vichy and La Roche-Posay increased their distribution in emerging cities such as Shenyang, Dalian and Harbin. Beauty and personal care specialist retailers meanwhile continued to expand their distribution into lower tier cities in this region towards the end of the review period. Leading retailers in this channel such as Sephora, Gialen and Watson’s opened branches in Shijiazhuang and Changchun towards the end of the review period.

There is extremely dry weather and intense ultraviolet radiation in North and Northeast China. Facial moisturisers consequently accounted for a large 22% value share of overall sales in 2010 as consumers are generally willing to buy these products in an attempt to maintain their skin health. Sales are particularly strong in autumn and winter, due to harsh weather. In response to these climatic conditions, companies also focused on products that would address consumer needs in the region. Whitening products are particularly significant, including both mass products such as Tjoy Whitening Facial Foam and premium products such as L'Oréal Paris Re-Lighting Whitening Eye Cream or the Nu Skin Tri-Phasic

White System kit. Whitening skin care, sun care, bath and shower and even foundation/concealer see their strongest sales during May to October as a result of strong ultraviolet radiation in these months.

The region saw a strong ageing for its population and rapid economic growth during the review period. As a result of these trends, sales of anti-wrinkle and anti-aging products expanded rapidly towards the end of the review period. Products targeting women aged 30-40-years-old proved most successful, with these women often having strong incomes and a growing interest in anti-aging products. Consumers also showed a growing interest in beauty and personal care offering multiple effects towards the end of the review period, such Olay Multi-Effect Cream, which not only whitens but also reduces wrinkles.

In North and Northeast China, international premium brands are mainly sold via department stores, while many lower-end products are sold via supermarkets/hypermarkets. Non-store retailing however saw the strongest growth towards the end of the review period, with direct selling and homeshopping notably becoming increasingly competitive. Internet retailing however saw the most dynamic growth in this region towards the end of the review period. This was partly due to the widening product range on offer via internet retailing. L'Oreal, Shanghai Jahwa United’s Herborist and many other brands launched branded internet retailing sites during the review period.

Competitive landscape

Multinational companies and joint ventures took the leading position in beauty and personal care in North and Northeast China in 2010, while domestic brands mainly focused on low-end products. Multinationals benefit from offering brands with a high degree of consumer awareness and a strong reputation for quality, with consumers in the region tending to be highly brand-conscious and brand-loyal. For example, Procter & Gamble’s Crest, Colgate and Unilever’s Zhong Hua accounted for over half of value sales in oral care in 2010. Meanwhile domestic brands such as Liuzhou Liangmianzhen’s Liangmianzhen and Dencare (Chongqing)’s Lesening focused sales on second tier cities and rural areas and sought to appeal to consumers by offering low prices.

As competition in beauty and personal care became increasingly fierce towards the end of the review period, players focused on functional products, broadening product portfolio or new packaging designs in order to gain share. For example, in 2010 Procter & Gamble’s Head & Shoulders launched premium range Hair & Scalp in anti-dandruff shampoo in North and Northeast China. Unilever’s Dove meanwhile extended from bath and shower with the launch of a series of hair repair products in 2010.

Procter & Gamble, Unilever and Johnson & Johnson are the most competitive players in North and Northeast China. These three multinationals continued to lead sales in 2010. Compared with domestic companies, leading multinationals are more experienced in marketing activities, investing heavily in TV and magazine advertisements and in-store promotions. These players were consequently more successful in building brands and thus in attracting local consumers.

L'Oréal saw the strongest growth within beauty and personal care in the region in 2010 over the previous year. The company benefited from offering a wide range of products and also from its wide distribution coverage, strong marketing skills and wide price range, enabling it to appeal to consumers

from a wide range of income groups. L’Oreal’s products include colour cosmetics, mass skin care, cosmeceutical skin care, hair care and fragrances. Among the company’s brands, Maybelline New York was its strongest performer in 2010 in the region. This was chiefly due to strong advertising, with the brand having an advertising presence in most fashion magazines and TV channels. In addition, Maybelline New York benefited from strong ongoing new product development, for example launching Clear Smooth Minerals BB Cream in 2010, with this claiming to boost radiance, smoothness, moisture, clarity and tone while reducing redness and lines.

Prospects

With economic growth and consumers’ growing focus on grooming, sales are expected to continue to see strong growth in North and Northeast China during the forecast period with a constant value CAGR of 10%. Constant value unit prices are also expected to continue to rise during the forecast period, with this linked to the rising price of raw materials and human resources. Products with a closely targeted consumer base and those offering multi-effects or unique functions are expected to perform particularly strong, such as multifunctional BB cream in “other” facial make-up. There will be growing interest in these value-added products as disposable income levels rises. In addition, more multifunctional products are expected to be launched as the emphasis of competition between players and retailers shifts from price to quality and functionality.

Men in North and Northeast China are expected to become increasingly concerned about their appearance during the forecast period, with men's grooming sales consequently increasing rapidly with a constant value CAGR of 15%. Men will increasingly associate a well-groomed and youthful appearance with wealth and a successful career, with this connection supporting particularly strong constant value growth of 19% CAGR for men’s toiletries. In addition, a growing number of players are expected to enter men’s grooming during the forecast period, with growing competition and stronger investment in marketing and new product development as a result.

Consumers are expected to trade up within skin care during the forecast period, with this product area consequently seeing an impressive 12% constant value CAGR and a rise in constant value unit price. Cosmeceutical skin care is expected to maintain rapid growth in the forecast period in the region, as a growing number of cosmetic manufacturers and pharmaceutical companies enter. Shiseido launched its new cosmeceutical brand DQ (Dermal Quotient) in 2010 and had a presence in over 600 parapharmacies/drugstores in major cities in the region by the end of the review period such as Beijing, Tianjin and Shenyang. Other players are expected to launch similar brands as they follow Shiseido’s lead. Anti-aging products will also develop rapidly, as women’s disposable income levels rise and they place a growing premium on a youthful appearance. Products that claim to emulate salon treatments are expected to prove particularly popular such as Olay’s Regenerist Thermal Skin Polisher and Lancôme’s Resurface Peel Kit.

Mouthwashes/dental rinses is expected to see a strong constant value CAGR of 13% during the forecast period. This will be due to the grooming trend, with consumers becoming increasingly focused on avoiding bad breath and also on dental health. Consequently, mouthwashes/dental rinses will continue

to shift from a luxury to an essential positioning. Business men and women will be the main consumers of mouthwashes/dental rinses, due to their growing focus on maintaining a well-groomed image and also due to their busy urban lifestyles. Many may opt to use mouthwashes/dental rinses instead of toothpaste and toothbrush, believing the former to kill harmful bacteria effectively and regarding it as more convenient.

There will be increasingly sophisticated computer technology during the forecast period, with this encouraging growing interest in internet retailing among consumers in the region. In response, many brands and companies will open branded online shops. Internet retailing is thus set to grow share dramatically in beauty and personal care during the forecast period, especially in low-end beauty and personal care, due to offering more attractive prices. However, sales of high-end beauty and personal care may be constrained by concerns over counterfeiting, with consumers generally only buying these products from branded internet retailing sites as a result. In addition, many will prefer to shop in-store in order to take advantage of sales assistants’ advice and to find out about new products in the range.

Northwest China

Trends

In 2010, thanks to steady economic growth and rising disposable income levels, Northwest China witnessed 9% current value growth for overall beauty and personal care, with this being higher than the growth seen in 2009. Xi’an continued to be the regional growth engine city for beauty and personal care. As a popular tourist destination, the city of Xi’an attracts tourists from all over the world. Growth was not only driven by sales to tourists but the presence of tourists and many global brands also cultivated local consumer awareness of international brands.

The majority of consumers in Northwest China prefer mid-end beauty and personal care brands such as Nivea, Mentholatum, Unilever’s Pond’s and Shiseido’s Za. Consumers tend to be price-sensitive and are thus attracted by products that they perceive to offer good value. However, consumers became more sophisticated in their product selection during the review period as incomes rose, with this resulting in a growing focus on product functionality. Due to dry weather in Northwest China, hydration and moisturising are important to consumers. Whitening products are also widely popular among young women, while anti-ageing and anti-wrinkle products are increasingly popular among middle-aged women. These trends were seen among both mid-income and high-income groups, thus benefiting both mass and premium skin care. There was thus for example 14% current value growth for premium facial moisturisers in 2010 and 10% growth for mass facial moisturisers.

Men are increasingly buying their own beauty and personal care in the region rather than relying on female household members to buy such products, with this shaping growth rates in men’s grooming. Many male consumers are beginning to choose skin care themselves, for example, with this trend supporting a dynamic 30% current value growth in men’s skin care. Men are increasingly focusing on their appearance and thus on the functionality and quality of such products. This trend was also driven by players’ strong investment in men’s skin care, with numerous new launches and strong promotional campaigns. Many key brands launched new products in men’s skin care in 2010 such as L’Oréal Paris,

Nivea, Mentholatum and Procter & Gamble’s Olay. A key consumer group of these products is urban office workers and business men, who often equate a well-groomed appearance with business success.

Another increasingly significant consumer group for beauty and personal care is college students. There were over 62 universities in Shaanxi province by the end of the review period, Trade sources state that these students, particularly female students, are strongly focused on fashion and lifestyle trends and are paying an increasing amount of attention to their image. This group particularly boosted sales of skin care, men’s grooming, colour cosmetics and hair care, although most product areas other than baby care benefited for this trend towards the end of the review period.

Northwest China saw an increasing number of parapharmacies/drugstores open towards the end of the review period, with the Watson’s chain driving growth for this channel. Meanwhile, there were also a growing number of beauty specialist retailers, with the Sephora chain spearheading this expansion. The expansion of these retail channels offered an easier and more relaxed shopping experience for consumers and offered them a wider range of beauty and personal care. Internet retailing also saw strong growth, benefiting from offering convenience and bargains. This channel also benefited from the large number of young white-collar workers and university students in the region, with these consumer groups being prominent among online shoppers.

Competitive Landscape

In 2010, the top three players in beauty and personal care in Northwest China continued to be L’Oréal, Procter & Gamble and Shiseido. To gain share, L’Oréal worked hard to expand its consumer base towards the end of the review period, investing heavily in ongoing product innovation and strong marketing. Procter & Gamble meanwhile benefits from the longstanding presence of its wide skin care range Olay, with this attracting a wide number of women. In 2010, the company capitalised on the strength of Olay and sought to take advantage of growing interest in men’s skin care, thus launching the Olay Men range with products such as Men Solutions Refreshing Energy. Shiseido meanwhile invested heavily in gaining a distribution presence in second and third tier cities, focusing on branded counters in department stores. Shiseido focused on its affordable brands Za and Pure & Mild in second and third tier cities while focusing on high-end brands such as Shiseido in first tier cities in the region.

In 2010, Mentholatum (Zhongshan) Pharmaceuticals performed very well in Northwest China and saw the fastest growth in value share. The company benefited from offering a sales promotion with at least 30% off its prices in the city of Lanzhou. Mentholatum notably focused on the development of men’s toiletries, seeking to offer a wide range of products with distinctive concepts and using value-added ingredients such as marine and herbal extracts. The company benefited from using teen idol Stephen Fung in its advertising, with this attracting many consumers aged 18-29-years-old.

Other players also focused on men’s grooming towards the end of the review period. Nivea (Shanghai) continued to expand distribution for its wide men's skin care range, while L'Oréal’s Garnier launched a number of men's skin care products including the Men's Natural, Kinetic Energy and Oil Control ranges. Many of these products offer similar functionality and prices, with this resulting in intense competition

among companies in men’s grooming towards the end of the review period and strong investment in marketing as a result

In 2010, the performance of regional companies was poor in comparison to that of multinational players and nationwide companies. Larger domestic companies and multinationals benefit from offering strong brands, frequent new product development, effective marketing support and extensive distribution networks. Smaller local players consequently struggle to attract consumers’ attention. In addition, the availability of local brands is poor, making it difficult for consumers to track down such products in health and beauty specialist retailers, supermarkets/hypermarkets or independent small grocers.

Prospects

Both tourists and regional consumers are likely to drive sales growth for beauty and personal care during the forecast period. In 2011, the International Horticultural Exposition will be held in Xi’an, which will result in a large number of tourists visiting the city. This is expected to boost the consumer base for beauty and personal care. However, rising disposable income levels are also expected to result in local consumers spending more on beauty and personal care during the forecast period.

Due to the dry climate in Northwest China, moisturising facial care will continue to attract both men and women. A greater sense of affluence is also expected to result in consumers trading up within this product area during the forecast period or seeking out more functional products, with this resulting in premium facial moisturisers seeing strong constant value growth of 9% CAGR. Women are likely to increasingly opt for whitening, anti-ageing and anti-wrinkle products such as Elca’s Estée Lauder’s ANR range. There will however also be a parallel trend towards more natural herb-based products.

There is expected to be a slight growth in constant value unit price for most product areas in beauty and personal care during the forecast period. This will partly be due to the increasing price of raw materials and packaging. However, players will keep price increases to a minimum as they seek to attract price-sensitive consumers in the region. Much of the constant value unit price growth expected for the forecast period will thus be linked to consumers trading up as disposable income levels increase.

Beauty and personal care targeted at male consumers is expected to see rapid growth in Northwest China during the forecast period, with men’s grooming notably set to see a dynamic 10% constant value CAGR. Within men’s grooming, there is expected to be a marked shift from basic generic products to more functional and specialised products. These products will increasingly target different age groups and also focus on different functions and needs. The forecast period may therefore see launches of products such as men’s UV-protection facial moisturisers, eye care, night creams and anti-ageing and whitening facial moisturisers.

In Northwest China, retailers will continue to compete fiercely during the forecast period, with a focus on outlet volume expansion. Hypermarkets such as Wal-Mart and Vanguard are expected to expand rapidly during the forecast period, with these outlets attracting consumers by offering a wide range of products. Internet retailing is also expected to gain share during the forecast period, thanks to offering convenience and discounted prices, with this channel likely to particularly appeal to students and other

young consumers. In more affluent villages and small towns, small independent supermarkets are also gaining a growing presence are gaining an increasing presence, with this trend set to continue during the forecast period.

South China

Trends

Beauty and personal care continued to see good growth in South China in 2010, with current value sales rising by 11% overall from the previous year. Growth was underpinned by rising disposable income levels, along with a growing consumer focus on appearance, with these trends encouraging men and women to spend more on beauty and personal care.

Skin care and hair care dominate beauty and personal care sales in the region, together accounting for 54% value share in 2010. These products also accounted for the bulk of new product development in the region in 2010, with players launching increasingly specialised products. Unilever for example launched Pantene Clinicare Colour/Perm Damage Repair Intensive Treatment and the Lux Treatment range. In skin care, players meanwhile focused on self-tanning body care and anti-ageing facial moisturisers with sun protection, such as Nanjing Jianong Chemical’s Tjoy Whitening Sunblock Lotion, L’Occitane Immortelle Divine Cream and Amway’s Artistry Pure White.

There was a growing focus on premiumisation among producers and retailers towards the end of the review period. For example, Mentholatum (Zhongshan) Pharmaceuticals’ Organic, L'Oréal’s Biotherm Skin Vivo and Colgate Sensitive Pro-relief Toothpaste were all launched in 2010 with a premium positioning. The latter product was for example sold at RMB29 for 110g and was thus around 150% more expensive than most toothpaste brands. In addition, private label players such as Watson’s and Mannings also improved their quality and consequently attracted a growing number of consumers in South China.

Well-established channels such as supermarkets/hypermarkets and beauty specialist retailers continued to dominate distribution for beauty and personal care in South China at the end of the review period. Beauty specialist retailers such as Mannings and Watson’s notably benefited from their use of price promotions and membership cards to attract more consumers and to maintain loyalty. Internet retailing meanwhile also saw a strong growth in share. This was largely due to major new entrants, with L'Oréal’s Biotherm Homme and Lancôme for example both launching branded internet retailing sites in 2010.

Male consumers became increasingly significant in sales of beauty and personal care in South China towards the end of the review period. This trend was encouraged by strong new product development. For example, leading brands such as Procter & Gamble’s Olay, L'Oréal Paris and Nivea all launched men’s grooming collections in 2010. Men’s deodorants saw strong growth thanks to a growing focus on grooming, with 17% current value growth in 2010 over the previous year. Men’s hair care and men’s skin care however saw the strongest investment from players and also saw dynamic growth, expanding by 14% and 36% respectively in current value terms. Men’s skin care was thus the most dynamic product area in men’s grooming in the year. Nivea for Men, Procter & Gamble’s Head & Shoulders for Men and

L'Oréal Men Expert were among the three most eye-catching brands in South China in 2010, thanks to strong advertising via TV, the internet and magazines. Procter & Gamble (Guangzhou) meanwhile launched Olay Men in 2010.

Competitive landscape

L'Oréal and Procter & Gamble consolidated their leading positions in South China in 2010 thanks to new product development and heavy investment in a number of advertising campaigns. Both companies had a strong lead in many product areas throughout the review period, with these well-established brands continuing to lead in 2010. For example, L'Oréal’s Maybelline New York ranked first in colour cosmetics in the region in 2010, while Procter & Gamble’s Crest led oral care thanks to its effective TV advertising and in-store promotions. Procter & Gamble also continued to invest heavily in TV advertising for its lower-priced lines, such as Safeguard, Rejoice and Clairol. Other multinationals are also strong in the region. Unilever for example holds a strong position in the region thanks to the strength of its Clear, Pond’s, Rexona, Lux and Dove brands.

Johnson & Johnson is also a strong player in South China, although it faced image problems towards the end of the review period. This followed the Campaign for Safe Cosmetics’ 2009 claims that some of the company’s Johnson’s Baby range contained traces of formaldehyde and dioxane. The company refuted these claims and refused to recall products but many consumers switched from its products as a result. Consequently, the shifted its focus from baby care to skin care towards the end of the review period as it sought to compensate for declining share in the former product area. The company thus focused on its Clean & Clear range in skin care, while its subsidiary Dabao also benefited from strong marketing support from Johnson & Johnson, with Dabao being one of the most trusted brands in the region.

Brand image is by far the most important factor for success in beauty and personal care in South China. Consequently, companies focus on advertising as their main promotional strategy. Mentholatum (Zhongshan) Pharmaceuticals is a leading manufacturer in South China and strongly promoted its new products in 2010 both in South China and at a national level. The company stepped up its advertising investment for ranges such as Think Pink Water Colour and Organic, including posters in office buildings and on public transport such as the Guangzhou subway.

Local players struggle to compete with multinationals in South China. These small players lack strong financial support and mostly target low- and mid-income consumers with lower-priced products. These players consequently lack the ability to invest heavily in product innovation and marketing support. As disposable income levels rose during the review period, an increasing number of consumers in South China meanwhile traded up to leading global or national brands. These brands benefit from offering consistently high quality and from stronger brand awareness due to high-profile marketing support.

Prospects

South China is expected to see strong economic growth during the forecast period, with rising disposable income levels likely to create an increasingly affluent and aspirational consumer base. Economic and sales growth is expected to be strongest in Guangdong Province, with this region seeing

the strongest real GDP growth in 2010 and looking set to maintain strong growth. Increasing urbanisation is likely to be focused on the larger cities of the region such as Guangzhou and Shenzhen, with this trend also driving strong sales growth for the region as a whole. Urbanisation typically results in higher income levels and also in greater access to beauty and personal care and greater exposure both to marketing and to beauty and grooming trends.

Hair care, skin care and oral care will continue to be the main categories in beauty and personal care in the region during the forecast period. Consequently, major players will focus on these areas. There is expected to be a growing focus on premium and value-added mid-priced brands as consumers’ incomes increase, with this trend boosting brands such as L'Oréal’s Lancôme and Yue-Sai and LVMH’s Guerlain.

Thanks to ongoing economic growth in the region, there is expected to be a strong focus on premiumisation during the forecast period. Players are predicted to focus on cutting-edge technology, taking their lead from 2010 launches such as Colgate Sensitive Pro-relief toothpaste. This was the first toothpaste to contain Pro-Argin, which is clinically proven to deliver instant and lasting relief from tooth sensitivity. Premium fragrances is also expected to see strong growth during the forecast period, with a constant value CAGR of 11%. According to industry sources, multinationals plan to invest heavily in growing sales of premium fragrances in the region during the forecast period.

Local players will however struggle to join the premiumisation trend, lacking the strong funding required to develop highly-functional and innovative products or to use high-value ingredients or technology. Faced with severe competition, local players are instead likely to focus on product areas where simple products are likely to prove popular. Local players may for example achieve a successful performance in baby care during the forecast period, where they may benefit from a lingering consumer mistrust of Johnson’s Baby. For example, Guangzhou Lixin is expected to benefit from offering an extensive range of baby care under the brand Croco Baby. This brand offers simple and gentle products and is expected to prove very popular with consumers during the forecast period.

There is a strong interest in herbal/traditional products in general in South China, with this extending into beauty and personal care. This is expected to support strong growth for newly-launched herb-based brands such as Bawang’s Herborn. This was launched in December 2009 and is expected to continue to see strong advertising support at the start of the forecast period. Shanghai Jahwa United’s Herborist Lifting & Firming Essence was meanwhile launched in skin care in 2010. This brand claims to contain a range of effective herbal ingredients and is also expected to see a strong performance at the start of the forecast period.

There is expected to be a slight rise in constant value unit price for most products during the forecast period. The region’s CPI is expected to see inflation of 4% in 2011, with inflationary pressures peaking in the first months of 2011. However, players will keep their price increases to a minimum as they seek to attract a wider range of consumers. Consequently, price competition is expected to be fierce during the forecast period, with this likely to drive out small companies. Larger players meanwhile benefit from stronger economies of scale and can thus better bear increased raw material costs without increasing prices. In addition, larger players benefit from strong research and development budgets. This enables

these players to launch value-added products in order to boost their profits, while continuing to keep the price of their more affordable and basic products steady.

Southwest China

Trends

Southwest China greatly benefited from the government’s National Western Development strategy during the review period. Consequently, consumers’ purchasing power improved significantly in the review period, with this in turn boosting the growth of beauty and personal care, especially skin care and men’s grooming, as well as premium products. Players in beauty and personal care were attracted by rising income levels in the region, with these players’ increased investment in turn supporting stronger growth for beauty and personal care.

In Chengdu, premium beauty and personal care notably saw strong growth in 2010 over the previous year, especially colour cosmetics, skin care and men’s grooming. Rising inflation in the region did not result in high-income consumers cutting back their expenditure on premium beauty and personal care in 2010, as economic growth counterbalanced higher inflation with higher disposable income levels. In addition, these consumers became increasingly aspirational and interested in Western and Japanese lifestyle trends and brands, with many thus trading up. According to the Chengdu Statistics Bureau, Chengdu Xidan Shopping Mall’s monthly sales for example increased by 60% from January to September in 2010, with premium beauty and personal care contributing heavily to overall sales and growth.

However, in small cities and rural areas in Southwest China the situation is quite different. Consumers faced rising living costs as a result of inflation and saw less benefit from the region’s economic growth. Consequently, most consumers opted to tighten their budgets and to reduce their spending on non-essential products or to opt for lower-priced products. Consequently, beauty and personal care saw little sales growth in such areas, with the bulk of sales and growth stemming from large cities. Procter & Gamble’s Head & Shoulders hair care for example posted a poor performance in these areas in 2010. However, some lower-priced domestic brands saw a strong performance as consumers traded down, with C-Bons’ Slek for example seeing rapid growth in small cities such as Mianyang in Sichuan Province.

Baby care saw a dynamic current value growth of 15% in Southwest China in 2010 over the previous year. These products were barely affected by inflation, with baby skin care and baby hair care seeing the most dynamic growth rates of 18% and 16%. China’s One-Child Policy results in most families being small, with households thus generally being willing to spend money on their children. Moreover, baby care benefited from 2010 being the Tiger Year according to Chinese traditions, which is regarded as an auspicious year for births. Consequently, more infants were born in the year, with many parents wishing their babies to grow to be as strong as a tiger.

BB cream proved a strong trend in Southwest China in 2010, with this trend supporting 9% current value growth for facial make-up in the year. Growth was spearheaded by Maybelline New York, which launched Clear Smooth Minerals BB Cream in the year, with the brand’s strong marketing attracting many consumers to BB cream. BB cream benefits from offering affordable prices and multifunctional

benefits including whitening, concealing and sunscreen. Consequently, this product type proved particularly popular among young women who lack make-up skills and have lower income levels. Eye make-up also posted a good performance in 2010 with a current value growth of 12%. Sales growth was mainly driven by Carlsan’s strong advertising, wide range and affordable pricing.

In bath and shower, there was an ongoing shift from bar soap to body wash/shower gel and liquid soap. This shift was encouraged by the widening availability of mid-priced and low-end products in body wash/shower gel and liquid soap, which boosted sales of these products in smaller towns and rural areas. With improved living standards and ongoing rural-urban migration, city lifestyles and trends also began to have an increasing impact in smaller towns and rural areas, with liquid soap and body wash/shower gel increasingly regarded as a more convenient and hygienic alternative to bar soap.

A widening range of products with a cosmeceutical or medical positioning appeared in skin care and oral care in the region’s larger cities such as Chengdu and Chongqing, towards the end of the review period. These included Shanghai Jahwa’s Dr.richia and Shiseido’s DQ in skin care and Saky Toothpaste from South Korea in oral care. These products proved popular among upper-mid- and high-income urban consumers due to growing health-consciousness and a growing interest in dermatology. Consumers are increasingly willing to pay a premium for more effective problem-solving products, such as skin care that reduces allergies, itching, dryness or acne and oral care that eases bleeding gums or prevents bad breath.

Men’s grooming saw rapid growth in the region’s larger cities such as Chengdu towards the end of the review period with current value growth of 17% in 2010. Within this product area, men’s toiletries saw the strongest sales growth with men’s skin care and hair care both performing strongly. Growth was boosted by the launch of a wider range of products in Chengdu in 2010, such as Procter & Gamble’s Olay Men and Bawang Shampoo for Men.

In Chengdu, the current value unit price of imported beauty and personal care increased by 10% in 2010 over the previous year according to industry sources, with this mostly due to fluctuations in exchange rates. Similar trends were seen across the region. However, domestic brands’ unit prices remained stable. This constrained growth in overall unit price, particularly as many low- and mid-income rural consumers traded down to these brands in order to save money.

Competitive landscape

Procter & Gamble is the leading company in Southwest China, with its Rejoice, Head & Shoulders, Safeguard, Crest and Gillette brands being leading brands in their respective product areas. The company benefited from its strong focus on innovation and effective advertising for its leading brands. In addition to advertising via TV and magazines, Procter & Gamble also invested in improving its brand awareness by using celebrity representatives such as Jolin Tsai for Head & Shoulders. The company also notably launched a version of UK TV talent show Britain’s Got Talent called Head & Shoulders: China’s Got Talent in 2010.

In Southwest China, Carlsan continued to gain share in colour cosmetics and overall beauty and personal care in 2010. The company’s wide range of eye make-up and facial make-up at affordable prices proved attractive to local consumers. The company also benefited from strong advertising and expanded distribution. According to trade sources, the company invested nearly RMB100 million in TV advertising in TV in 2010. Like Procter & Gamble, the company also has a presence in TV talent, sponsoring the national singing show Love Big Eye, Love Carlsan, with this show greatly enhancing customer awareness.

Leading pharmaceutical company Yunnan Baiyao also saw dynamic growth towards the end of the review period. The company continued to benefit from strong growth for premium-positioned Yunnan Baiyao Toothpaste, which was launched in 2005 but continued to see rapid growth thanks to its effective reputation and multifunctional benefits. In the last two years of the review period, the company launched a series of beauty and personal care, including Qiancaotang Body Wash Gel and Baiyao Freckle Cream. The company also benefited from government investment according to trade sources, which state that the government invests RMB100 million in the company’s research and development annually in order to support this national brand.

Many beauty and personal care players focused marketing and distribution expansion on Southwest China towards the end of the review period. Players believe there is a strong potential for sales growth in this region due to its large population and rapid economic growth. Consequently, the region attracted a growing number of premium brands towards the end of the review period. For example, in February 2010 the first Dior Counter was opened in Chongqing, while October 2010 saw Armani’s full range officially launched in Chengdu, including colour cosmetics, skin care and fragrances.

In September 2010, Guangzhou Liby Enterprise Group relaunched Aoni Shampoo in Chongqing after a four years absence. This brand was strong in the region prior to its disappearance in 2006. Guangzhou Liby Enterprise acquired Chongqing Aoni Shampoo Co in 2006 but faced a dispute over trademark rights for the brand, finally gaining these in April of 2010 after four years of litigation. The brand benefited from Guangzhou Liby Enterprise’s established distribution network, with Aoni Shampoo being launched via various supermarkets/hypermarkets in Chongqing. In order to support the launch, the company used in-store promotions such as price promotions, volume free promotions and promotional gifts.

In October 2010, Shiseido China meanwhile introduced the Aupres upper-mid-priced beauty and personal care range with a branded counter in Chongqing. This was the fourth dedicated Aupres counter to be launched across the whole country. In contrast to the other Aupres counters, this displays products according to a detailed classification of skin problems and use. Shiseido thus hopes to demystify skin care and to better enable consumers to select the best product for their needs.

Prospects

Premium and upper-mid-priced beauty and personal care are expected to see rapid growth in Southwest China over the forecast period. At the end of 2010, the Chinese government approved the planning of the Chengdu-Chongqing Economic Zone. The region’s economic development is thus expected to increase rapidly during the forecast period, with the zone attracting increasing investment.

This will be accompanied by growing purchasing power and lead to an increasingly aspirational consumer base that is willing to pay more for value-added products and aspirational brands.

Beauty and personal care with a professional, medical or cosmeceutical positioning are expected to perform particularly well during the forecast period, with many consumers regarding these as more effective. This trend is expected to particularly benefit cosmeceutical skin care and medical-positioned oral care. Southwest China offers rich resources in terms of medicinal herbs, especially in Tibet, Yunnan and Guizhou. These resources offer a good opportunity for local companies to cosmeceutical skin care and oral care based on traditional Chinese herbs. Yunnan Baiyao was a pioneer in this area during the review period but other players are also increasingly focusing on herbal beauty and personal care, such as China Shenghuo Pharmaceutical Holding.

Natural/herbal products are expected to prove particularly successful in baby care during the forecast period, benefiting from a gentle and safe image. As consumer health awareness increases, young parents will pay more attention to product formulations and seek out more natural products in baby care. Elaker proved successful in natural baby care towards the end of the review period, seeing rapid sales growth in Chengdu in the two years of the review period. Elaker is expected to continue to gain share, benefiting from a first-mover advantage in this area. However, more companies are also expected to launch natural baby care during the forecast period.

Men’s grooming is expected to attract a growing number of customers during the forecast period but also to attract a growing number of players, with this product area consequently becoming increasingly crowded. Manufacturers will thus need to find points of differentiation for their products and are expected to focus on closer consumer targeting during the forecast period, backed by well-developed marketing strategies. Domestic skin care companies are for example likely to invest in mid-priced and low-priced products for mass consumption and to target smaller cities and rural areas. Premium brands may meanwhile focus on offering value-added men’s skin care and targeting affluent urban men.

Competition in beauty and personal care will be fierce in rural areas during the forecast period, especially in product categories such as skin care, oral care, hair care and bath and shower. There will be gradual saturation in the cities as sales mature, with many brands thus focusing on expanding distribution in rural areas. Leading multinationals such as Procter & Gamble and Unilever will compete with national brands such as C-Bons’ Slek and small local economy brands for consumer attention. This is expected to result in growing consolidation in rural sales of beauty and personal care during the forecast period, as many small local brands struggle to survive.

MARKET DATA

Table 1 Sales of Beauty and Personal Care by Category: Value 2005-2010

RMB million 2005 2006 2007 2008 2009 2010

Baby Care 1,885.7 2,080.7 2,362.8 2,734.1 3,101.2 3,571.0

Bath and Shower 11,307.5 12,005.8 12,894.8 13,727.3 14,337.4 15,188.7

Colour Cosmetics 8,585.2 9,513.3 10,975.3 12,338.4 13,085.0 14,303.9

Deodorants 246.5 291.9 342.4 386.2 438.9 484.0

Depilatories 261.6 279.8 300.2 323.0 336.9 361.1

Fragrances 1,905.9 2,288.6 2,794.2 3,202.0 3,495.9 3,768.9

Hair Care 18,417.5 20,100.1 22,268.2 24,368.8 25,907.2 28,157.3

Men's Grooming 1,666.1 1,853.9 2,260.9 3,125.3 3,855.2 4,587.9

Oral Care 13,592.9 14,411.9 15,142.8 16,232.9 17,281.1 18,588.2

Oral Care excl Power Toothbrushes 13,247.9 14,048.8 14,759.6 15,824.6 16,856.1 18,139.3

Skin Care 30,698.6 35,678.4 42,770.1 49,836.2 56,757.0 64,187.0

Sun Care 1,572.5 1,795.8 2,075.4 2,404.3 2,735.8 3,110.6

Sets/Kits 3,931.4 4,528.6 5,381.5 6,189.3 6,851.6 7,836.6

Premium Cosmetics 11,153.9 11,921.2 14,533.1 17,690.7 20,754.2 24,146.6

Mass Cosmetics 67,396.8 76,361.9 87,331.5 97,495.8 105,955.9 116,460.4

Beauty and Personal Care 93,410.4 104,032.2 118,418.0 132,907.3 145,533.6 160,831.7

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Note 1: Premium cosmetic sales are additionally included within baby care, bath and shower, colour cosmetics, deodorants, fragrances, hair care, sets/kits, skin care and sun care. Note 2: Sum of categories is greater than market size because the four men’s toiletries categories are included in men’s grooming as well as in bath and shower, deodorants, hair care and skin care.

Table 2 Sales of Beauty and Personal Care by Category: % Value Growth 2005-2010

% current value growth2009/10

2005-10 CAGR

2005/10 TOTAL

Baby Care 15.1 13.6 89.4

Bath and Shower 5.9 6.1 34.3

Colour Cosmetics 9.3 10.7 66.6

Deodorants 10.3 14.5 96.4

Depilatories 7.2 6.7 38.0

Fragrances 7.8 14.6 97.7

Hair Care 8.7 8.9 52.9

Men's Grooming 19.0 22.5 175.4

Oral Care 7.6 6.5 36.7

Oral Care excl Power Toothbrushes 7.6 6.5 36.9

Skin Care 13.1 15.9 109.1

Sun Care 13.7 14.6 97.8

Sets/Kits 14.4 14.8 99.3

Premium Cosmetics 16.3 16.7 116.5

Mass Cosmetics 9.9 11.6 72.8

Beauty and Personal Care 10.5 11.5 72.2

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Note 1: Premium cosmetic sales are additionally included within baby care, bath and shower, colour cosmetics, deodorants, fragrances, hair care, sets/kits, skin care and sun care. Note 2: Sum of categories is greater than market size because the four men’s toiletries categories are included in men’s grooming as well as in bath and shower, deodorants, hair care and skin care.

Table 3 Sales of Premium Cosmetics by Category: Value 2005-2010

RMB million 2005 2006 2007 2008 2009 2010

Premium Baby Care 96.2 116.5 153.6 259.7 310.1 375.0

Premium Bath and Shower 796.6 676.1 686.2 701.9 745.0 801.8

Premium Colour Cosmetics 1,354.7 1,427.0 1,664.9 1,912.4 2,138.2 2,453.8

Premium Deodorants 0.9 0.6 0.5 0.5 0.5 0.5

Premium Fragrances 1,097.0 1,416.5 1,802.6 2,087.5 2,308.5 2,522.9

Premium Hair Care 740.9 768.8 829.7 883.8 989.6 1,102.9

Premium Skin Care 5,865.7 6,270.0 7,893.3 10,136.1 12,297.4 14,590.9

Premium Sun Care 267.3 256.8 311.3 324.6 388.5 435.5

Premium Sets/Kits 934.6 989.0 1,191.0 1,384.1 1,576.5 1,863.2

Premium Cosmetics 11,153.9 11,921.2 14,533.1 17,690.7 20,754.2 24,146.6

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Note: Premium cosmetic sales are additionally included within baby care, bath and shower, colour cosmetics, deodorants, fragrances, hair care, sets/kits, skin care and sun care.

Table 4 Sales of Premium Cosmetics by Category: % Value Growth 2005-2010

% current value growth 2009/102005-10 CAGR

2005/10 TOTAL

Premium Baby Care 20.9 31.3 289.9

Premium Bath and Shower 7.6 0.1 0.7

Table 4 Sales of Premium Cosmetics by Category: % Value Growth 2005-2010

% current value growth 2009/102005-10 CAGR

2005/10 TOTAL

Premium Colour Cosmetics 14.8 12.6 81.1

Premium Deodorants 0.3 -12.4 -48.3

Premium Fragrances 9.3 18.1 130.0

Premium Hair Care 11.5 8.3 48.9

Premium Skin Care 18.6 20.0 148.7

Premium Sun Care 12.1 10.3 62.9

Premium Sets/Kits 18.2 14.8 99.4

Premium Cosmetics 16.3 16.7 116.5

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Note: Premium cosmetic sales are additionally included within baby care, bath and shower, colour cosmetics, deodorants, fragrances, hair care, sets/kits, skin care and sun care.

Table 5 Sales of Beauty and Personal Care by Region: Value 2005-2010

RMB million 2005 2006 2007 2008 2009 2010

East China 25,501.1 28,586.5 32,961.3 37,385.0 41,166.8 45,740.9

Mid China 12,337.6 13,533.1 15,030.6 16,634.4 17,969.6 19,649.5

North and Northeast China 21,762.0 24,453.6 28,010.9 31,578.8 34,826.2 38,690.6

Northwest China 5,627.4 6,131.1 6,809.2 7,477.1 8,061.7 8,792.5

Table 5 Sales of Beauty and Personal Care by Region: Value 2005-2010

RMB million 2005 2006 2007 2008 2009 2010

South China 18,043.5 20,150.4 23,082.8 26,053.0 28,650.0 31,769.5

Southwest China 10,138.7 11,177.6 12,523.3 13,779.0 14,859.3 16,188.7

China 93,410.4 104,032.2 118,418.0 132,907.3 145,533.6 160,831.7

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 6 Sales of Beauty and Personal Care by Region: % Value Growth 2005-2010

% current value growth 2009/102005-10 CAGR

2005/10 TOTAL

East China 11.1 12.4 79.4

Mid China 9.3 9.8 59.3

North and Northeast China 11.1 12.2 77.8

Northwest China 9.1 9.3 56.2

South China 10.9 12.0 76.1

Southwest China 8.9 9.8 59.7

China 10.5 11.5 72.2

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 7 Beauty and Personal Care Company Shares by NBO 2006-2010

% retail value rsp 2006 2007 2008 2009 2010

Procter & Gamble (Guangzhou) Ltd 17.8 18.5 17.3 16.8 16.4

L'Oréal China 6.8 7.8 8.8 9.5 10.4

Shiseido China Co Ltd 3.6 4.2 4.5 4.7 5.0

Unilever China Ltd 4.7 4.3 4.5 4.4 4.3

Amway (China) Co Ltd 3.7 3.6 4.1 4.0 3.8

Hangzhou Mary Kay Cosmetics Co 2.1 2.2 2.4 2.9 2.9

Colgate (Guangzhou) Co Ltd 3.1 2.8 2.6 2.4 2.2

Johnson & Johnson China Ltd 1.9 1.9 2.0 1.9 1.8

C-Bons Group 1.6 1.7 1.6 1.6 1.6

Shanghai Jahwa United Co Ltd 1.3 1.3 1.4 1.5 1.6

Avon (China) Co Ltd 2.8 3.1 3.0 2.7 1.5

Jala (Group) Co Ltd 0.3 0.5 0.8 1.3 1.4

Nivea (Shanghai) Co Ltd 0.9 1.1 1.3 1.4 1.4

Jiangsu Longliqi Group Co Ltd 1.3 1.4 1.4 1.4 1.3

Estée Lauder (Shanghai) Commercial Co Ltd 0.8 0.9 1.0 1.2 1.2

Hawley & Hazel Chemical (Zhongshou) Co Ltd 0.8 0.8 0.9 1.0 1.1

Bawang (Guangzhou) Co Ltd 0.5 1.0 1.3 1.5 1.1

Amore Pacific Cosmetics (Shanghai) Co Ltd 0.5 0.6 0.6 0.7 0.8

Kao (China) Holding Co Ltd 1.1 1.0 1.0 0.8 0.8

Kosé Cosmetics Co Ltd (China) 0.8 0.7 0.7 0.7 0.7

Arche Group Co Ltd 0.9 0.8 0.7 0.7 0.6

Table 7 Beauty and Personal Care Company Shares by NBO 2006-2010

% retail value rsp 2006 2007 2008 2009 2010

Yunnan Baiyao Group Co Ltd 0.1 0.1 0.3 0.5 0.6

La Fang International Group 0.9 0.9 0.8 0.7 0.6

Guangzhou Uniasia Cosmetics Science Technology Co Ltd - - 0.1 0.2 0.6

Shanghai DHC Business Co Ltd 0.1 0.2 0.4 0.5 0.6

Nanjing Jianong Chemical Co Ltd 0.8 0.6 0.6 0.6 0.6

Fancl Corp 0.1 0.3 0.4 0.5 0.5

Dabao Cosmetics Co 1.1 1.0 0.7 0.6 0.5

Guangzhou Meiji Cosmetics Co Ltd 0.1 0.2 0.2 0.3 0.5

Shanghai Inoherb Cosmetics Co Ltd 0.1 0.1 0.2 0.3 0.4

Christian Dior (China) Fragrance & Cosmetics Co Ltd 0.2 0.3 0.3 0.4 0.4

Infinitus (China) Co Ltd 0.0 0.0 0.0 0.4 0.4

Beijing LG Household Chemical Co Ltd 0.4 0.4 0.4 0.4 0.4

Henkel (China) Co Ltd 0.7 0.5 0.4 0.4 0.4

Chanel SA 0.2 0.3 0.3 0.3 0.4

Nice Group 0.2 0.2 0.3 0.3 0.4

Guangzhou Bayan Cosmetics Co Ltd - 0.2 0.3 0.3 0.3

Shanghai Kanebo Cosmetics Co Ltd 0.2 0.3 0.3 0.3 0.3

Dencare (Chongqing) Oral Care Co Ltd 0.4 0.4 0.3 0.3 0.3

Nu Skin (China) Daily-Use & Health Products Co Ltd 0.5 0.3 0.3 0.3 0.3

Nanfang Lee Kum Kee Co Ltd 0.3 0.4 0.4 - -

Gillette China Ltd 1.4 - - - -

Table 7 Beauty and Personal Care Company Shares by NBO 2006-2010

% retail value rsp 2006 2007 2008 2009 2010

Others 34.9 32.9 30.8 29.6 29.6

Total 100.0 100.0 100.0100.0

100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 8 Beauty and Personal Care Company Shares by GBO 2006-2010

% retail value rsp 2006 2007 2008 2009 2010

Procter & Gamble Co, The 19.4 18.6 17.5 17.0 16.6

L'Oréal Groupe 6.8 7.8 8.8 9.5 10.4

Shiseido Co Ltd 3.6 4.2 4.5 4.7 5.0

Unilever Group 4.7 4.3 4.5 4.4 4.3

Amway Corp 3.7 3.6 4.1 4.0 3.8

Colgate-Palmolive Co 3.8 3.7 3.5 3.4 3.3

Beiersdorf AG 0.9 2.9 3.0 3.1 3.1

Mary Kay Inc 2.1 2.2 2.4 2.9 2.9

Johnson & Johnson Inc 2.0 2.0 2.8 2.5 2.4

Shanghai Jahwa United Co Ltd 1.3 1.4 1.6 1.7 1.7

Avon Products Inc 2.8 3.1 3.0 2.7 1.5

Jala (Group) Co Ltd 0.3 0.5 0.8 1.3 1.4

Jiangsu Longliqi Group Co Ltd 1.3 1.4 1.4 1.4 1.3

Table 8 Beauty and Personal Care Company Shares by GBO 2006-2010

% retail value rsp 2006 2007 2008 2009 2010

Estée Lauder Cos Inc 0.8 0.9 1.0 1.2 1.2

Kao Corp 1.3 1.4 1.3 1.1 1.1

Bawang (Guangzhou) Co Ltd 0.5 1.0 1.3 1.5 1.1

LVMH Moët Hennessy Louis Vuitton 0.6 0.7 0.7 0.8 0.9

AmorePacific Corp 0.5 0.6 0.6 0.7 0.8

Kosé Corp 0.8 0.7 0.7 0.7 0.7

Arche Group Co Ltd 0.9 0.8 0.7 0.7 0.6

Yunnan Baiyao Group Co Ltd 0.1 0.1 0.3 0.5 0.6

La Fang International Group 0.9 0.9 0.8 0.7 0.6

Huanya Group Co Ltd - - 0.1 0.2 0.6

DHC Corp 0.1 0.2 0.4 0.5 0.6

Nanjing Jianong Chemical Co Ltd 0.8 0.6 0.6 0.6 0.6

Fancl Corp 0.1 0.3 0.4 0.5 0.5

Guangzhou Meiji Cosmetics Co Ltd 0.1 0.2 0.2 0.3 0.5

Shanghai Inoherb Cosmetics Co Ltd 0.1 0.1 0.2 0.3 0.4

Lee Kum Kee Co Ltd 0.3 0.4 0.4 0.4 0.4

LG Corp 0.4 0.4 0.4 0.4 0.4

Henkel AG & Co KGaA 0.7 0.5 0.4 0.4 0.4

Chanel SA 0.2 0.3 0.3 0.3 0.4

Nice Group 0.2 0.2 0.3 0.3 0.4

Guangzhou Bayan Cosmetics Co Ltd - 0.2 0.3 0.3 0.3

Table 8 Beauty and Personal Care Company Shares by GBO 2006-2010

% retail value rsp 2006 2007 2008 2009 2010

Dencare (Chongqing) Oral Care Co Ltd 0.4 0.4 0.3 0.3 0.3

Nu Skin Enterprises Inc 0.5 0.3 0.3 0.3 0.3

Rohto Pharmaceutical Co Ltd 0.2 0.2 0.3 0.3 0.3

Zhongshan Magic Co Ltd 0.4 0.3 0.3 0.3 0.3

Perfect (China) Co Ltd 0.4 0.3 0.3 0.3 0.3

Youngrace Cosmetic Group International Ltd 0.3 0.2 0.2 0.3 0.3

Others 35.7 31.9 28.7 27.4 27.4

Total 100.0100.0

100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 9 Beauty and Personal Care Brand Shares by GBN 2007-2010

% retail value rsp Company 2007 2008 2009 2010

Olay Procter & Gamble (Guangzhou) Ltd

5.7 5.1 4.8 4.6

Mary Kay Hangzhou Mary Kay Cosmetics Co

2.2 2.4 2.9 2.9

Crest Procter & Gamble (Guangzhou) Ltd

2.4 2.4 2.4 2.3

Aupres Shiseido China Co Ltd 2.5 2.5 2.4 2.3

Artistry Amway (China) Co Ltd 2.0 2.5 2.4 2.3

Table 9 Beauty and Personal Care Brand Shares by GBN 2007-2010

% retail value rsp Company 2007 2008 2009 2010

Head & Shoulders Procter & Gamble (Guangzhou) Ltd

2.3 2.3 2.2 2.2

L'Oréal Dermo-Expertise L'Oréal China 1.5 1.8 1.8 1.9

Rejoice Procter & Gamble (Guangzhou) Ltd

2.3 2.0 1.9 1.9

Safeguard Procter & Gamble (Guangzhou) Ltd

2.1 2.0 2.0 1.9

Maybelline New York L'Oréal China 1.8 1.8 1.8 1.8

Colgate Colgate (Guangzhou) Co Ltd 2.1 1.9 1.8 1.7

Pantene Procter & Gamble (Guangzhou) Ltd

1.4 1.5 1.5 1.6

Avon Avon (China) Co Ltd 2.9 2.9 2.5 1.4

Johnson's Baby Johnson & Johnson China Ltd 1.3 1.4 1.3 1.3

Longliqi Jiangsu Longliqi Group Co Ltd 1.4 1.4 1.4 1.3

L'Oréal Paris L'Oréal China 0.5 0.7 0.9 1.2

Lux Unilever China Ltd 1.3 1.2 1.2 1.2

Darlie Hawley & Hazel Chemical (Zhongshou) Co Ltd

0.8 0.9 1.0 1.1

Lancôme L'Oréal China 0.7 0.8 0.9 1.1

Chcedo Jala (Group) Co Ltd 0.5 0.7 0.9 1.0

Zhong Hua Unilever China Ltd 1.1 1.0 1.0 1.0

Shiseido Shiseido China Co Ltd 0.6 0.7 0.8 0.9

Vichy L'Oréal China 0.8 0.8 0.8 0.8

Table 9 Beauty and Personal Care Brand Shares by GBN 2007-2010

% retail value rsp Company 2007 2008 2009 2010

Bawang Bawang (Guangzhou) Co Ltd 1.0 1.3 1.2 0.8

Estée Lauder Estée Lauder (Shanghai) Commercial Co Ltd

0.6 0.6 0.7 0.8

Pond's Unilever China Ltd 0.8 0.8 0.8 0.7

Slek C-Bons Group 0.7 0.7 0.7 0.7

Yue-sai L'Oréal China 0.7 0.7 0.7 0.7

Yunnan Baiyao Yunnan Baiyao Group Co Ltd 0.1 0.3 0.5 0.6

G&H Amway (China) Co Ltd 0.7 0.7 0.7 0.6

Liushen Shanghai Jahwa United Co Ltd 0.6 0.6 0.6 0.6

Garnier Mininurse L'Oréal China 0.7 0.7 0.6 0.6

DHC Shanghai DHC Business Co Ltd 0.2 0.4 0.5 0.6

L'Oréal Derma Genesis L'Oréal China 0.3 0.4 0.5 0.6

Glister Amway (China) Co Ltd 0.5 0.6 0.6 0.6

Cathy Arche Group Co Ltd 0.7 0.6 0.6 0.5

Fancl Fancl Corp 0.3 0.4 0.5 0.5

Meifubao Guangzhou Uniasia Cosmetics Science Technology Co Ltd

- 0.0 0.2 0.5

Dabao Dabao Cosmetics Co 1.0 0.7 0.6 0.5

Nivea Visage Nivea (Shanghai) Co Ltd 0.4 0.5 0.5 0.5

Others Others 50.5 49.1 49.0 50.0

Total Total 100.0 100.0 100.0 100.0

Table 9 Beauty and Personal Care Brand Shares by GBN 2007-2010

% retail value rsp Company 2007 2008 2009 2010

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 10 Sales of Beauty and Personal Care by Distribution Format: % Analysis 2005-2010

% retail value rsp 2005 2006 2007 2008 2009 2010

Store-Based Retailing 82.4 84.8 85.3 85.5 85.6 82.9

Grocery Retailers 41.9 42.7 42.6 42.5 42.3 41.0

Discounters 0.0 0.0 0.0 0.0 0.0 0.0

Small Grocery Retailers 7.6 7.2 6.7 6.3 6.0 5.8

Convenience Stores 3.9 3.9 3.8 3.8 3.7 3.6

Forecourt Retailers 0.0 0.0 0.0 0.0 0.0 0.0

Independent Small Grocers 3.7 3.3 2.8 2.5 2.3 2.1

Supermarkets/Hypermarkets 34.3 35.5 36.0 36.1 36.2 35.3

Other Grocery Retailers 0.0 0.0 0.0 0.0 0.0 0.0

Non-Grocery Retailers 40.5 42.1 42.7 43.0 43.3 41.9

Health and Beauty Retailers 10.8 11.6 12.1 12.4 13.0 13.6

Beauty Specialist Retailers 4.5 4.9 5.1 5.2 5.8 6.2

Chemists/Pharmacies 1.2 1.3 1.3 1.3 1.3 1.4

Parapharmacies/Drugstores 4.9 5.3 5.5 5.7 5.7 5.8

Table 10 Sales of Beauty and Personal Care by Distribution Format: % Analysis 2005-2010

% retail value rsp 2005 2006 2007 2008 2009 2010

Other Health and Beauty Retailers 0.2 0.2 0.2 0.2 0.1 0.2

Mixed Retailers 29.5 30.3 30.5 30.6 30.1 28.1

Department Stores 29.5 30.3 30.5 30.6 30.1 28.1

Mass Merchandisers 0.0 0.0 0.0 0.0 0.0 0.0

Variety Stores 0.0 0.0 0.0 0.0 0.0 0.0

Warehouse Clubs 0.0 0.0 0.0 0.0 0.0 0.0

Outdoor Markets 0.0 0.0 0.0 0.0 0.0 0.0

Other Non-Grocery Retailers 0.1 0.1 0.1 0.1 0.1 0.1

Non-Store Retailing 17.6 15.2 14.7 14.5 14.4 17.1

Direct Selling 15.8 13.5 13.0 12.9 12.8 13.2

Homeshopping 1.2 1.0 0.9 0.8 0.8 0.8

Internet Retailing 0.7 0.7 0.8 0.8 0.9 3.1

Vending 0.0 0.0 0.0 0.0 0.0 0.0

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Table 11 Sales of Beauty and Personal Care by Category and by Distribution Format: % Analysis 2010

% retail value rsp BC BS CC D DP F HC MG OC SC SU SK

Store-Based Retailing 86.8 87.8 85.5 66.9 96.9 90.0 91.3 85.0 89.8 73.7 77.7 93.4

Grocery Retailers 52.4 63.7 15.1 39.7 48.1 6.2 65.6 52.2 75.7 22.8 28.6 32.2

Discounters 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Small Grocery Retailers 4.4 9.0 0.0 0.9 0.0 0.0 10.6 10.7 17.5 1.8 0.9 0.0

Convenience Stores 3.3 4.8 0.0 0.9 0.0 0.0 4.2 9.1 12.5 1.8 0.9 0.0

Forecourt Retailers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Independent Small Grocers 1.1 4.2 0.0 0.0 0.0 0.0 6.4 1.6 5.0 0.0 0.0 0.0

Supermarkets/Hypermarkets 48.0 54.7 15.1 38.7 48.1 6.2 55.0 41.5 58.2 21.0 27.8 32.2

Other Grocery Retailers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Non-Grocery Retailers 34.4 24.0 70.4 27.2 48.8 83.8 25.7 32.8 14.0 50.9 49.0 61.2

Health and Beauty Retailers 9.9 16.7 12.9 13.6 16.2 8.1 17.3 12.2 9.4 13.4 14.1 14.0

Beauty Specialist Retailers 6.1 7.7 5.7 5.6 0.0 8.1 6.0 4.9 3.1 7.1 5.8 6.1

Chemists/Pharmacies 0.0 0.5 0.0 0.0 0.0 0.0 0.6 1.4 0.0 2.8 3.7 1.6

Parapharmacies/Drugstores 3.8 8.5 7.2 8.0 16.2 0.0 9.8 5.7 6.3 3.4 4.6 6.2

Other Health and Beauty Retailers

0.0 0.0 0.0 0.0 0.0 0.0 0.9 0.2 0.0 0.0 0.0 0.0

Mixed Retailers 18.7 7.3 57.5 13.6 32.6 75.7 8.4 20.6 4.5 37.6 34.9 47.3

Department Stores 18.7 7.3 57.5 13.6 32.6 75.7 8.4 20.6 4.5 37.6 34.9 47.3

Mass Merchandisers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Variety Stores 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Table 11 Sales of Beauty and Personal Care by Category and by Distribution Format: % Analysis 2010

% retail value rsp BC BS CC D DP F HC MG OC SC SU SK

Warehouse Clubs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Outdoor Markets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Other Non-Grocery Retailers 5.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.0

Non-Store Retailing 13.2 12.2 14.5 33.1 3.1 10.0 8.8 15.0 10.2 26.3 22.3 6.6

Direct Selling 2.8 8.5 10.6 29.4 0.0 6.8 5.5 11.9 7.0 21.8 18.3 6.6

Homeshopping 0.9 0.8 0.8 0.0 0.9 0.0 0.8 0.6 0.8 0.9 0.8 0.0

Internet Retailing 9.6 2.9 3.1 3.8 2.2 3.3 2.5 2.6 2.5 3.6 3.1 0.0

Vending 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total 100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources

Key: BC = baby care; BS = bath and shower; CC = colour cosmetics; D = deodorants; DP = depilatories; F = fragrances; HC = hair care; MG = men’s grooming; OC = oral care; SC = skin care; SU = sun care; SK = sets/kits

Table 12 Forecast Sales of Beauty and Personal Care by Category: Value 2010-2015

RMB million 2010 2011 2012 2013 2014 2015

Baby Care 3,571.0 4,002.5 4,506.7 5,098.2 5,796.0 6,622.0

Bath and Shower 15,188.7 15,875.2 16,624.3 17,370.9 18,114.4 18,859.1

Table 12 Forecast Sales of Beauty and Personal Care by Category: Value 2010-2015

RMB million 2010 2011 2012 2013 2014 2015

Colour Cosmetics 14,303.9 15,256.0 16,404.7 17,753.4 19,248.9 20,794.8

Deodorants 484.0 523.6 563.8 604.2 644.6 685.9

Depilatories 361.1 376.6 392.2 407.9 423.5 439.2

Fragrances 3,768.9 4,010.0 4,301.1 4,644.2 5,026.5 5,431.0

Hair Care 28,157.3 29,828.5 31,565.2 33,320.6 35,089.5 36,883.1

Men's Grooming 4,587.9 5,295.4 6,060.2 6,863.2 7,689.2 8,498.2

Oral Care 18,588.2 19,641.2 20,608.7 21,579.7 22,563.5 23,509.7

Oral Care excl Power Toothbrushes 18,139.3 19,177.3 20,128.1 21,079.9 22,042.1 22,963.8

Skin Care 64,187.0 70,710.1 77,317.0 84,052.0 91,080.0 98,219.2

Sun Care 3,110.6 3,414.8 3,744.4 4,093.7 4,437.0 4,787.8

Sets/Kits 7,836.6 8,638.0 9,453.3 10,299.6 11,192.0 12,134.9

Premium Cosmetics 24,146.6 27,164.7 30,414.1 33,914.1 37,701.9 41,733.3

Mass Cosmetics 116,460.4 125,093.8 134,066.5 143,322.2 152,927.1 162,684.6

Beauty and Personal Care 160,831.7 173,596.2 186,844.2 200,625.9 215,051.9 229,832.2

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Note 1: Premium cosmetic sales are additionally included within baby care, bath and shower, deodorants, colour cosmetics, hair care, fragrances, skin care and sun care Note 2: Sum of categories is greater than market size because the four men’s toiletries categories are included in men’s grooming as well as in bath and shower, deodorants, hair care and skin care.

Table 13 Forecast Sales of Beauty and Personal Care by Category: % Value Growth 2010-2015

% constant value growth2010-15 CAGR

2010/15 TOTAL

Baby Care 13.1 85.4

Bath and Shower 4.4 24.2

Colour Cosmetics 7.8 45.4

Deodorants 7.2 41.7

Depilatories 4.0 21.6

Fragrances 7.6 44.1

Hair Care 5.5 31.0

Men's Grooming 13.1 85.2

Oral Care 4.8 26.5

Oral Care excl Power Toothbrushes 4.8 26.6

Skin Care 8.9 53.0

Sun Care 9.0 53.9

Sets/Kits 9.1 54.8

Premium Cosmetics 11.6 72.8

Mass Cosmetics 6.9 39.7

Beauty and Personal Care 7.4 42.9

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Note 1: Premium cosmetic sales are additionally included within baby care, bath and shower, deodorants, colour cosmetics, hair care, fragrances, skin care and sun care Note 2: Sum of categories is greater than market size because the four men’s toiletries categories are included in men’s grooming as well as in bath and shower, deodorants, hair care and skin care.

Table 14 Forecast Sales of Premium Cosmetics by Category: Value 2010-2015

RMB million 2010 2011 2012 2013 2014 2015

Premium Baby Care 375.0 440.3 513.8 601.6 707.1 827.7

Premium Bath and Shower 801.8 851.2 905.2 952.2 999.5 1,047.4

Premium Colour Cosmetics 2,453.8 2,750.2 3,110.4 3,538.0 4,024.9 4,782.8

Premium Deodorants 0.5 0.5 0.5 0.4 0.4 0.3

Premium Fragrances 2,522.9 2,699.9 2,916.7 3,176.8 3,472.6 3,788.7

Premium Hair Care 1,102.9 1,197.0 1,297.0 1,401.2 1,509.4 1,622.1

Premium Skin Care 14,590.9 16,625.2 18,747.1 20,977.6 23,360.6 25,701.0

Premium Sun Care 435.5 481.5 531.7 585.4 643.4 699.0

Premium Sets/Kits 1,863.2 2,119.1 2,391.7 2,680.9 2,984.0 3,264.3

Premium Cosmetics 24,146.6 27,164.7 30,414.1 33,914.1 37,701.9 41,733.3

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Note: Premium cosmetic sales are additionally included within baby care, bath and shower, colour cosmetics, deodorants, fragrances, hair care, sets/kits, skin care and sun care.

Table 15 Forecast Sales of Premium Cosmetics by Category: % Value Growth 2010-2015

% constant value growth2010-15 CAGR

2010/15 TOTAL

Premium Baby Care 17.2 120.8

Premium Bath and Shower 5.5 30.6

Table 15 Forecast Sales of Premium Cosmetics by Category: % Value Growth 2010-2015

% constant value growth2010-15 CAGR

2010/15 TOTAL

Premium Colour Cosmetics 14.3 94.9

Premium Deodorants -6.7 -29.2

Premium Fragrances 8.5 50.2

Premium Hair Care 8.0 47.1

Premium Skin Care 12.0 76.1

Premium Sun Care 9.9 60.5

Premium Sets/Kits 11.9 75.2

Premium Cosmetics 11.6 72.8

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Note: Premium cosmetic sales are additionally included within baby care, bath and shower, colour cosmetics, deodorants, fragrances, hair care, sets/kits, skin care and sun care.

Table 16 Forecast Sales of Beauty and Personal Care by Region: Value 2010-2015

RMB million 2010 2011 2012 2013 2014 2015

East China 45,740.9 49,605.1 53,630.5 57,834.7 62,258.4 66,803.0

Mid China 19,649.5 21,024.0 22,433.6 23,899.0 25,442.3 27,001.4

North and Northeast China 38,690.6 42,004.5 45,443.7 49,035.3 52,781.7 56,630.1

Northwest China 8,792.5 9,374.0 9,976.8 10,593.7 11,226.8 11,858.9

Table 16 Forecast Sales of Beauty and Personal Care by Region: Value 2010-2015

RMB million 2010 2011 2012 2013 2014 2015

South China 31,769.5 34,371.1 37,097.7 39,924.4 42,894.2 45,972.4

Southwest China 16,188.7 17,217.4 18,261.8 19,338.9 20,448.5 21,566.4

China 160,831.7 173,596.2 186,844.2 200,625.9 215,051.9 229,832.2

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

Table 17 Forecast Sales of Beauty and Personal Care by Region: % Value Growth 2010-2015

% constant value growth2010-15 CAGR

2010/15 TOTAL

East China 7.9 46.0

Mid China 6.6 37.4

North and Northeast China 7.9 46.4

Northwest China 6.2 34.9

South China 7.7 44.7

Southwest China 5.9 33.2

China 7.4 42.9

Source: Euromonitor International from trade associations, trade press, company research, trade interviews, trade sources

DEFINITIONS

This report analyses the market for Beauty and Personal Care in China. For the purposes of the study, the market was defined as follows:

Baby care

Bath and shower

Colour cosmetics

Deodorants

Depilatories

Fragrances

Hair care

Men's grooming

Oral hygiene

Skin care

Sun care

Sets/Kits

Explanations of words and/or terminology used in this report are as follows:

SFDA: State Food and Drug Administration of China;

TCM: Traditional Chinese Medicine: includes a wide range of traditional Asian medicine practices, notably herbal medicine but also acupuncture, massage therapy and dietary therapy.

Sources used during the research included the following:

Summary 1 Research Sources

Trade Associations Guangdong Daily Used Association

Source: Euromonitor International

Related Information

Statistics

View Related Statistics

Industry Reports

Baby Care in China

Bath and Shower in China

Beauty Beyond the Crisis – The Year in Review and Growth Concepts for the Future

Brazil: Key Player in Global Beauty and Personal Care Growth

Changing Habits in Hair Care

China: How to Get a Piece of the Action in Beauty and Personal Care

Colour Cosmetics in China

Deodorants in China

Depilatories in China

Fragrances in China

Global Beauty and Personal Care: State of the Industry 2010

Global Cosmetics and Toiletries: Corporate Strategies in an Economic Slowdown

Global Cosmetics and Toiletries: Exploring growth through novel beauty and luxury concepts

Global Cosmetics and Toiletries: Industry Prospects for 2009 and Beyond

Global Cosmetics and Toiletries: The Next Beauty Hotspots

Hair Care in China

Men's Grooming in China

New Value Perceptions in Skin Care

Oral Care in China

Overcoming Barriers to Growth in Nutricosmetics

Reigniting Growth in the Fragrance Industry

Sets/Kits in China

Skin Care in China

Sophistication and Evolution in Men's Grooming Products

Staying Ahead of the Game: How Companies are Adapting to the Changing Face of Beauty

Strategies for Global Beauty Players to Extend Presence in Emerging Markets

Sun Care in China

Sustaining Growth in Oral Care

The Changing Face of Private Label Beauty and Personal Care

The Shapes and Sizes of Recovery in 2010

Unlocking China's Beauty Market Potential

Value Redefined? Finding a Winning Formula in the Midst of Economic Downturn

Company Profiles

Amway (China) Co Ltd in Beauty and Personal Care (China)

Amway (China) Co Ltd: Company Factfile

Arche Group Co Ltd: Company Factfile

Avon (China) Co Ltd: Company Factfile

Bawang (Guangzhou) Co Ltd in Beauty and Personal Care (China)

C-Bons Group in Beauty and Personal Care (China)

C-Bons Group: Company Factfile

Colgate (Guangzhou) Co Ltd: Company Factfile

Gillette China Ltd: Company Factfile

Guangzhou Blue Moon Co Ltd: Company Factfile

Guangzhou Liby Enterprise Group Co Ltd: Company Factfile

Hangzhou Mary Kay Cosmetics Co: Company Factfile

Jala (Group) Co Ltd in Beauty and Personal Care (China)

Jiangsu Longliqi Group Co Ltd: Company Factfile

Johnson & Johnson China Ltd: Company Factfile

Kao Corp Shanghai: Company Factfile

L'Oréal China in Beauty and Personal Care (China)

L'Oréal China: Company Factfile

Nanfang Lee Kum Kee Co Ltd: Company Factfile

Perfect (China) Co Ltd: Company Factfile

Procter & Gamble (Guangzhou) Ltd in Beauty and Personal Care (China)

Procter & Gamble (Guangzhou) Ltd: Company Factfile

Sephora (Shanghai) Cosmetic Co Ltd in Beauty and Personal Care (China)

Shanghai Jahwa United Co Ltd in Beauty and Personal Care (China)

Shiseido China Co Ltd in Beauty and Personal Care (China)

Tianjin Tianshi Biological Development Co Ltd: Company Factfile

Unilever China Ltd in Beauty and Personal Care (China)

Unilever China Ltd: Company Factfile

Xian Janssen Pharmaceutical Ltd: Company Factfile

Articles

Shiseido Expands into Mass Cosmetics with Diverse Product Strategy

All Eyes on the BRICs: Continued Domination of the Global Beauty Industry

Taiwan beauty growth lags behind most of Asia

Avon Japan – an independent entity in 2011

Direct sellers bank on the BRICs

Beauty players focus on mass market and further global expansion

Procter & Gamble yet to benefit from opportunities in mass men's toiletries

Euromonitor International reveals the latest beauty trends at In-Cosmetics Asia 2010

The BRICs and beyond: The lure of emerging economies for the beauty industry

Acquisition in the cards for Colgate-Palmolive

More related items

Business Environment: China

China in 2030: The Future Demographic

China: Country profile

Consumer Lifestyles in China

Income and Expenditure: China

Risks and Vulnerabilities: China

Technology, Communications and Media: China

© 2011 Euromonitor International

Bottom of Form

Combe launches men's hair colourant in India

Combe Inc, the US personal care company behind Just for Men, has recently launched the brand in the Indian market. The product is distributed in mass channels and endorsed by Indian male model Milind Soman. This tactic is similar to that employed by the Fair & Handsome brand, which used Bollywood actors to help overcome male reluctance about using a product with strong female connotations. There is currently a shortage of serious competition for Just for Men, but with the correct strategy, male hair colourants offer good scope for future growth

While male hair dye also publically remains largely a subject of ridicule in even the most progressive markets, there is no shortage of men who are privately would-be consumers. Getting the marketing right is difficult. Despite Just for Men winning the dubious accolade of being voted the 10th worst advert on www.tvs-worst-adverts.co.uk, the brand has consistently accounted for 9% of global men's hair care sales. Its brand share has been in decline in some key markets, however, dropping from 25% of men's hair care in the US in 2001 to 21% by 2008.