the multifaceted evolution of global beauty

8/10/2019 The Multifaceted Evolution of Global Beauty

1/56

THE MULTIFACETED EVOLUTION OF GLOBALBEAUTY

October 2014


2/56

INTRODUCTION

GLOBAL INDUSTRY HIGHLIGHTS

EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS


3/56

Euromonitor International PASSPORT 3BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

Disclaimer

Much of the information in thisbriefing is of a statistical nature and,while every attempt has been madeto ensure accuracy and reliability,Euromonitor International cannot beheld responsible for omissions orerrors.

Figures in tables and analyses arecalculated from unrounded data andmay not sum. Analyses found in thebriefings may not totally reflect thecompanies opinions, reader

discretion is advised.

With major markets, inc ludin g

the US, Brazi l and Chin a,

witnessing growth pressures

and innovat ion becoming

saturated, the beauty indus try

needs to f ind new fron t iers for

expanding revenue po tent ial .

Cross-category produ ct

developments have been

explored and brands continue tobe inspired by synergies among

beauty segments and cross-

industry sh if ts . Despite the

slowdo wn, Brazi l and China wil l

remain crucial to expansion

strategies, while hair and skin

care should see dynamic

innovat ion act iv i t ies.

ScopeINTRODUCTION

All values expressed in this report are in US dollar terms, using a fixed

exchange rate (2013).2013 figures are based on part-year estimates.

All forecast data are expressed in constant terms; inflationary effects arediscounted. Conversely, historical data are expressed in current terms;inflationary effects are taken into account.

Beauty and Personal Care

Baby and Child-Specific Products

Bath and Shower

Colour Cosmetics

Deodorants

Depilatories

Fragrances

Hair Care

Men's Grooming

Oral Care

Skin Care

Sun Care

Sets/Kits

Premium Beauty and Personal Care

Mass Beauty and Personal Care
http://www.euromonitor.com/http://www.euromonitor.com/http://www.euromonitor.com/http://www.euromonitor.com/


4/56


Key findingsINTRODUCTION

Beauty industry growth

decelerates in 2013

Despite a moderate slowdown, beauty industry growth remained robust at over 5% in 2013,

down from close to 6% in 2012. This was the result of dampened consumer demand inemerging markets, combined with the still subdued environment in the West.

Asia reinforces

domination, Western

Europe picks up

2013 year-on-year growth in Asia and Latin America was moderately down, but the sheer

size of China and Brazil meant the global impact was clearly evident. While Western

Europes growth in 2013 strengthened marginally, ledby positive signs in the UK.

New frontier markets

with good growth

potential

With smaller market sizes, ranking outside even the top 20 largest BPC markets in 2013,

there is a group of markets forecast to register compound annual growth rates (CAGRs) well

above the global average, eg Indonesia and Saudi Arabia.

Emerging marketsreach parity in beautysales by 2018

China and Brazil combined will contribute some 53% of the global BPC market value growth

over the 2013-2018 period. Staples, such as soap and shower gel, are receiving a strong

boost from India. Deodorants, fragrances and hair care reflect the magnitude of Brazil.

Mass domination, with

strong premium

potential

Although mass beauty products still dominate national markets with largest expected

absolute value growth up to 2018, the forecast percentage growth for premium is more

dynamic for the period 2013-2018 in most emerging and largest developed markets.

Future revenues in the

hands of skin and haircare

Growth in China, the US and Indonesia will largely be generated by skin care, while in

Brazil, Turkey and Central Asian markets hair care will add most significantly to the beautymarkets growth in retail value sales terms up to 2018.

Key themes to define

growth in beauty

Many brands have already experimented with multi-benefit combinations but this is

becoming more ubiquitous. 2014 will also be the year of what might be defined as selfie

beauty. Consumers are now more than ever preoccupied with their own image. Interest in

fashion brands and luxury at home remain key trends.


5/56

INTRODUCTION


EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS


6/56


Mass beauty boosted by emerging markets and

weak economic recovery in developed regions Beauty industry growth in 2013 remained robustdespite a moderate slowdown - at over 5%, downfrom close to 6% in 2012. This was the result ofmodestly dampened consumer demand in emergingmarkets, combined with the still subduedenvironment in the West.

Mass-market growth was slightly stronger than

overall BPC growth, largely driven by emergingmarkets. Brazil, China and India combined generatedalmost 50% of absolute market value growth over the2008-2013 review period.

The dip in premium beauty was more pronounceddue to sharper decreases in Eastern Europe andNorth America.

Growth remained strongest in Latin America,reaching near 16% year on year, with premiumfragrances contributing strongly to this rapid growth.

Despite the global BPC slowdown, the industry stillmanaged to gain a further US$22.6 billion in 2013,

just over half a billion less than in 2012.

Beauty industry growth decelerates in 2013GLOBAL INDUSTRY HIGHLIGHTS

0

1

2

3

4

5

6

7

2007 2008 2009 2010 2011 2012 2013

%y

-o-ygrowth

Beauty and Personal Care: Growth

Performance by Segment 2007-2013

Total BPC Premium BPC Mass BPC


7/56


Mass BPC was again at the heart of the growth story, fuelling US$15.3 billion of growth in absolute terms

compared with US$3.9 billion for premium BPC in 2013, which was slightly less than the previous year. In2013, Asia Pacific, North America and Western Europe combined accounted for near 85% of globalpremium BPC sales with other regions being largely insignificant.

In 2013, all regional premium BPC markets registered positive growth; over one third of new sales in theyear was generated by Asia Pacific but Latin America and Middle East and Africa combined accounted foranother 37% of global market value expansion presenting a new premium investment terrain.

Growth in Western Europe also picked up slightly in 2013 compared to flat performance in 2012. The best-performing categories were premium deodorants and colour cosmetics.

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2008 2009 2010 2011 2012 2013

US$millionrsp

Mass vs Premium Beauty Market Size 2008-2013

Mass Beauty Premium Beauty

Mass contribution sustained, premium drops slightly in 2013GLOBAL INDUSTRY HIGHLIGHTS


8/56


Slowdown in 2013

While Western Europes growth in2013 strengthened marginally and theMiddle East and Africa remainedsteady, all other regions fared lesswell in 2013 compared to 2012. Thiswas the result of still unsettledeconomic conditions and deepexpenditure decline, notably in the US

and Eastern Europe. Positive signs are showing in the UK,the second largest beauty market inWestern Europe. Year-on-year growthnearly doubled in 2013 with theeconomy improving and the consumerconfidence index hitting its highestlevel for nine years in February 2014.

2013 year-on-year growth in Asia and Latin America was moderately down, but the sheer size of China andBrazil meant the global impact was clearly evident. China had already replaced Japan as the largestregional market, reinforcing the power shift to emerging markets.

South Africa, Nigeria and Saudi Arabia all posted double-digit growth in 2013 with very strong potential infragrances, which is the largest BPC category in both Saudi Arabia and South Africa.

BPC 2013: Asia reinforces domination, Western Europe picks upGLOBAL INDUSTRY HIGHLIGHTS


9/56


15,000

25,000

35,000

45,000

55,000

65,000

75,000

85,000

US$millionrsp

Top 14 BPC Markets Value Growth

2013/2018US

China

Brazil

Japan

Germany

UK

France

8,000

9,000

10,000

11,000

12,000

13,000

14,000

2013 2018

India

Russia

Mexico

South Korea

Italy

Canada

Spain

Both China and Brazil witnessed a slowdown in

expenditure in 2013. At 8.7%, it was the most sluggishreal GDP growth for China in over two decades.Despite the relatively weaker performance in China,and also in Brazil, emerging economies are still set topresent a huge growth potential with new growthfrontiers coming to the fore. Brazil on its own isforecast to account for nearly a quarter of globalabsolute value growth over 2013-2018 thanks to its

deeply-rooted beauty culture.Large developed beauty markets, such as Japan,Germany, the UK and France, are expected to remainflat up to 2018 due to market maturity and weakconsumer confidence.

India is expected to match the pace of growth in Brazilup to 2018 despite a cooling economy, risingcommodity prices and a downgrading trend for staples

in rural areas, in addition to reduced export demandfrom China.

The expected market size contraction in Russia, Italyand Spain reflects the depth of the economic crisesthese countries have been unable to overcome sincethe recession took hold in 2009.

Mixed growth prospects in largest BPC marketsGLOBAL INDUSTRY HIGHLIGHTS


10/56


Despite a smaller market size base, ranking outside even the top 20 largest BPC markets in 2013, there is

a group of markets forecast to register compound annual growth rates (CAGRs) well above the globalaverage of 3% over 2013-2018. Trends driving growth are diverse and strategies to exploit opportunitiesalso need to vary considerably.

Most notably, Indonesias dynamic expansion is the result of resilient middle-class consumption, which isseeing a boost from secondary cities. Vietnam and Pakistan also benefit from the same trends as bothmultinational and local companies build stronger distribution infrastructures to reach a new consumer base.

In Saudi Arabia, the consumer base is relative affluent; per capita expenditure on BPC items exceededUS$140 in 2013, while Chinas, for example, still stands at less than US$33. In addition, a further 31%

growth in per capita expenditure is expected in Saudi Arabia over 2013-2018, which creates a positivemarket environment for premium BPC segments.

0.0

2.0

4.0

6.0

8.0

10.0

0

500

1,000

1,500

2,000

2,500

Indonesia Saudi Arabia Peru Vietnam United ArabEmirates

Pakistan Morocco Tunisia

%C

AG

R2013-2018

US$millionrsp

BPC: New Frontier Growth Markets Growth Prospects 2013-2018

Absolute Market Value Growth 2013/2018 (US$ million rsp) % CAGR 2013-2018

Growth potential with new frontiers coming to the foreGLOBAL INDUSTRY HIGHLIGHTS

Global BPC market value % CAGR


11/56


In terms of categories in 2013, deodorants was the strongest performer followed by oral care, while all

other categories growth rates were fairly subdued compared to the previous year. Deodorants are seeing strong exposure to value-added innovation which is resonating well with consumersin Latin America, by far the largest region for this segment globally.

Oral care, the only other category to exceed its 2012 growth in 2013, is witnessing deeper penetration inemerging markets, particularly in Latin America, where there is growing demand for more upscale andtargeted product offerings such as whitening toothpaste and dental floss.

Skin care is experiencing growing maturity in key Asian markets. Despite such dampening forces, skin carerecorded US$4.7 billion in value growth globally in 2013, led by anti-agers and moisturisers. While Chinaand the US continued to lead growth, anti-agers received a strong boost from the new growth frontiersincluding Indonesia, Thailand and Argentina.

0

2

4

6

8

10

0

20,000

40,000

60,000

80,000

100,000

120,000

Skin Care Hair Care Colour Cosmetics

Fra-grances

Oral Care Bath andShower

Men'sGrooming

Deo-dorants

Sets/Kits

Baby andChild-

specificProducts

Sun Care Depila-tories

%y

-o-ygrowth

U

S$millionrsp

BPC: Growth Performance by Category 2012 vs 2013

Value Sales 2013 (US$ million rsp) 2011-12% growth 2012-13%

Most categories see weaker performance in 2013GLOBAL INDUSTRY HIGHLIGHTS


12/56


Historically anti-agers occupied the top spot among

the fastest growing BPC categories but with moreand more make-up products incorporating anti-ageing features and hybrid products such as BB/CCcreams proving popular with the younger segment -the growing force by anti-agers has now beenovertaken by other facial make-up.

BB creams, also known as beauty balms andblemish balms, have been popular in Japan and

South Korea for a number of years but practicallyunknown to Americans before 2011. By 2013, theUS generated 58% of the categorys market valuegrowth in 2013. Dr. Jart+, a South Korean brand,was one of the first BB creams to become wellknown in the US. LOralwas the first to introduce amass-market BB cream, Garnier BB Cream SkinRenew Miracle Skin Perfector.

Interestingly in 2013, perms and relaxants expandedstrongly although it remains a niche category withnearly all sales concentrated in the Middle East and

Africa and Latin America due to the large ethnicdiversity and hair types in those markets and strongconsumer desire for straight hair.

Niche categories post most dynamic growth in 2013GLOBAL INDUSTRY HIGHLIGHTS

0 10 20 30

Face Masks

Premium Unisex Fragrances

Baby and Child-specificToiletries

Nail Treatments

Nail Polish

Men's Skin Care

Polish Remover

Deodorant Sprays

Perms and Relaxants

Other Facial Make-Up

% y-o-y growth

Fastest Growing BPC Categories 2013


13/56


Product developments major impact on category performanceGLOBAL INDUSTRY HIGHLIGHTS

The strong decline in perms and relaxants in 2011-

2012 was a result of the ban in Brazil by ANVISA onformaldehyde, which is a common component used toget straight hair, due to the negative impact on healthand accidents reported. Therefore, many companieshad to withdraw their products and this had a directimpact on sales in both retail volume and value terms.Robust growth of perms and relaxants in 2013 wasthe result of companies introducing new substitute

products for those that were discontinued followingANVISAs decision. This resulted in a majorturnaround in global category growth from less than0% to over 17% in one year.

Frequent product launches with continuous productdevelopments in other facial make-up has been thegrowth engine for the category since 2011.

While lack of innovation sees growth move

downwards. Although nail polish continues to grow atover 10% year on year, it is no longer a buzz topic inthe US having faded in popularity. However, it stillrepresents an opportunity in Latin America with Braziloffsetting declines in the US and set to replace the USas the largest market in 2018.

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2010-11 2011-12 2012-13

%y

-o-ygrowt

h

Select BPC Category Performance

2011-2013

Other Facial Make-Up Nail Polish

Perms and Relaxants Mass Men's Skin Care


14/56

INTRODUCTION


EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS


15/56


BPC: Absolute Global Market Value

Growth by Category 2013/2018

Skin Care

Hair Care

Oral Care

Colour Cosmetics

Men's Grooming

Fragrances

Bath and Shower

Deodorants

Others

Top Eight BPC Market Growth Prospects 2013/2018

US$ million rspChina 20,787.7

Brazil 16,066.1

US 6,239.8

India 3,688.5

Indonesia 2,066.9

South Korea 2,054.6

Saudi Arabia 1,853.5Mexico 1,314.5

Others 15,278.8

China and Brazil combined will contribute some 53% of global BPC market value growth over the2013-2018 period. In China, the majority of sales will come from the mass segment, fuelled by Olay,

Aupres, LOraland Mary Kay.

Hair care will receive a strong growth boost from Brazil. It will account for 32% of global hair care

growth over 2013-2018. Keeping up with past trends, conditioners and treatments will be thegreatest beneficiary of the developments in hair care with more targeted offerings, increasinglymaking them an essential part of any routine to maintain healthy hair.

In the US, growth in premium BPC will outpace mass significantly and will be the strongercontributor to absolute market value growth with US$2.8 billion over 2013-2018. This provides goodopportunities for premium-positioned product launches targeting a relative affluent consumer base.

Brazil and China key revenue generatorsEMERGING MARKETS


16/56


India and Indonesia are among the top five fast-expanding BPC target markets for manufacturers.

However, Indias historic rapid growth is no longer a future certainty. A cooling economy and lower ruralurban middle-class consumption could mean challenging times for Unilever and Procter & Gamble, whichhave made huge investments there already. However, the market is seeing growing demand for moresophisticated, higher-margin, BPC products, for example mens grooming, with skin whitening brands suchas Fair and Handsome doing particularly well, as well as Garnier. Although still more commoditised, bathand shower and oral care will generate one third of Indian market value expansion over 2013-2018.

In Indonesia, skin care has become a focal point for manufacturers, with LOralsetting up a productionhub, while Unilever closely targets the market with its Ponds range, which dominated the market with a

near 40% value share in 2013. Mens grooming is also forecast to be a rapidly growing segment over 2013 -2018 with a 10% CAGR. However, the category is highly consolidated between Japans top mensgrooming brand, Gatsby and Procter & Gambles Gillette.

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500

India

Indonesia

Absolute value growth (US$ million rsp) 2013/2018

India vs Indonesia: Growth Prospects by Category 2013-2018Oral Care

Bath and Shower

Hair Care

Skin Care

Men's Grooming

Colour Cosmetics

Deodorants

Fragrances

Growing market sophistication in Indian and Indonesian beautyEMERGING MARKETS


17/56


Key opportunities for further penetration in emerging marketsEMERGING MARKETS

Brazil and Chinas proportional weight in hair care andskin care, respectively, is indicative of category growthprospects. In the context of overall emerging markets,category opportunities differ in terms of potential forfurther penetration.

While some products, eg deodorants and fragrancesare already generating over 50% of global sales inemerging markets, others have room to expand muchfurther, such as colour cosmetics and sun care.

Deodorants deep penetration in emerging markets isalso largely the result of the widespread availabilityand popularity of such products in Brazil (accountingfor 23% of global category sales in 2013). Over 2013-2018, the top five most attractive growth markets fordeodorants also include Venezuela, Argentina andIndia.

As a strictly beauty product as opposed to personal

care or hygiene, colour cosmetics has remained apredominantly developed market category. However,as a result of rising spending power on non-essentialbeauty products and rapid urbanisation, key growthmarkets for the category up to 2018 are expected tobe Brazil, China, South Korea and India.

0% 20% 40% 60% 80% 100%

Baby/child products

Bath and shower

Colour cosmetics

Deodorants

Fragrances

Hair care

Men's grooming

Skin care

Oral care

Sun care

Emerging vs Developed Market BPC:

Value Sales by Category 2013

Emerging Developed


18/56


By 2018, emerging markets will achieve parity with developed markets interms of BPC retail value sales.

Staples such as soap and shower gel are receiving a strong boost fromIndia, which is the second largest bath and shower products market in

Asia Pacific.

Deodorants, fragrances and hair care reflect the magnitude of Brazilagain and the strong position (number one in the former two, and numbertwo for hair care) the country holds in these segments. Fragrances is alsostrongly boosted by South Africa and Saudi Arabia.

It is interesting to note that skin care is not highly penetrated in emergingmarkets, mainly due to Latin Americas weakness in this segment withconsumers showing greater preference for scented products andbeautiful hair, rather than interest in anti-ageing features.

Asia Pacific has low penetration in colour cosmetics. The US is thelargest market and China and India are projected to lead future growth,but they all fall in the lowest band of proportional income spent on make-

up. On the other hand, lower-income countries in the Middle East andAfrica and Latin America fall in the highest band, spending on a widevariety of colour cosmetics.

Oral care in emerging markets is also yet to reach high penetration levelswith more scope for non-essential products such as mouthwashes andfloss, and beyond traditional toothpastes.

Global BPC Sales

2013/2018

Emerging Developed

2013

Emerging markets reach parity in BPC sales by 2018EMERGING MARKETS

2018


19/56


Although mass BPC products still dominate national markets with the largest expected absolute valuegrowth up to 2018, the forecast percentage growth for premium is more dynamic over 2013-2018 in mostemerging and largest developed markets; one notable exception being Argentina.

In Argentina, the recession continues, the economy remains flat and there are a number of production-supply chain issues. Regulations for import lock-out over 2013-2014 are unlikely to be changed, which isaffecting all companies. The shift to local production results in cheaper products, hence devaluing themarket, although it has benefited local producers.

Mass domination, with strong premium potentialEMERGING MARKETS

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Brazil

Indonesia

India

Mexico

Argentina

Russia

China

US

Mass vs Premium Beauty Value Sales by Core Markets 2013

Mass Premium

Growth in premium > mass in 2013Growth in mass > premium in 2013


20/56


Some 64% of premium skin care market value growth over2013-2018 will be generated by China, despite categorygrowth slowing in China in 2013 due to purchasing abroad,slowing penetration in second- and third-tier cities and acooling economy. In addition, the Chinese middle class isbecoming more discerning and value conscious and notonly aspirational and status driven but more sophisticatedin terms of needs. However, growth is expected toaccelerate again from 2014 and China will replace Japan

by 2018 as the largest premium skin care market in theworld with retail value sales of US$10.1 billion in 2018.China premium skin care is fuelled by Lancme, EsteLauder, Christian Dior and Artistry.

Only four countries, China, India, Indonesia and Vietnam,are expected to enjoy annual double-digit growth forpremium skin care over the 2013-2018 period. Strongaspirational demand for Western brands, young

populations and early adoption of skin care routines andanti-ageing products, are the key drivers of the stronggrowth.

Indonesia, India and Vietnam have an average female ageof 30 years, but are expected to see anti-agers retail salesgrow in double-digit terms annually by 2018.

Premium skin care dominated by ChinaEMERGING MARKETS

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2011-122012-132013-142014-152015-162016-172017-18

%y

-o-ygrowth

Premium Skin Care: Growth

Prospects by Select Markets2011-2018

World China India

Indonesia Vietnam


21/56


Brazilians generally consider local quality as superior, but when it comes to fragrances importedinternational scents are more highly regarded. A growing number of more aspirational consumers looktowards international brands; upper class consumers buy abroad, while the middle class requiresaccessible products.

It is common in Brazil to purchase beauty products via instalment plans due to the high prices and this wasthe strategy adopted by retailers to stimulate consumption and facilitate access for consumers, especially inlower-income brackets, to certain products.

Due to high taxes on premium BPC products, prices can be 2-3 times higher than those when purchasingan international brand abroad.

However, the gap between local best-selling fragrances and international brands is generally narrowing asa result of wider availability.

Many multinational players are employing strategies to access the Brazilian market with strong demand forpremium fragrances, including Coty and L'Occitane.

0.0

2.0

4.06.0

8.0

10.0

0

50

100150

200

250

Premium Fragrances Premium Sun Care Premium Skin Care Premium Colour Cosmetics

Premium Hair Care

%C

AGR2013-2018

US$millio

nrsp

Brazil: Premium Beauty Growth Prospects by Category 2013-2018

Absolute Market Value Growth 2013-2018 (US$ million rsp) % CAGR 2013-2018

Premium prospects in Brazil largely concentrated in fragrancesEMERGING MARKETS


22/56


International brands are pursuing diversestrategies to tailor their offerings to the Brazilianmarket environment for full growth potential.

One possibility is for local tailoring by loweringfragrance concentration for limited editions, suchas Paco Rabanne body spray or Flower by KenzoLgre. In addition, local celebrities and events canbe used to promote flagship brands.

In Brazil, prestige outlets are limited and currently

there are many changes in terms of new retailformats, eg Grupo Boticriosnew Beauty Boxconcept, which sells prestige third party brandsincluding Dior, Lancme, Shiseido and Burberry.

Internet retailings penetration is growing but alsopotential collaboration with local direct sellingoperators is key, given their importance.

Companies are moving to local production to avoidheavy import duties, such as Coty in collaborationwith Jequiti Cosmticos to produce J-Lo Rio Glow.Coty also had an agreement to launch Truth orDare by Madonna and launched Beyoncfragrance in 2013.

Price

Local tailoring

Local production

Channel

International brands adapt to Brazils premium market environmentEMERGING MARKETS

Growth Driving Factors in Brazilian Premium

Beauty


23/56


0.0 5.0 10.0 15.0

Beiersdorf

Hypermarcas

Johnson & Johnson

L'Oral

Colgate-Palmolive

Avon

Procter & Gamble

Grupo Boticrio

Unilever

Natura

% market value share

Brazil: Top 10 Beauty Players MarketValue Share 2013

Local Player

0.0 5.0 10.0 15.0

Este Lauder

Johnson & Johnson

Beiersdorf

Amway

Colgate-Palmolive

Mary Kay

Shiseido

Unilever

L'Oral

Procter & Gamble

% market value share

China: Top 10 Beauty Players MarketValue Share 2013

Local players hold stronger positions in Brazil than in ChinaEMERGING MARKETS


24/56


The competitive landscape in Brazil is very different from that in China. Both countries have relative poorbusiness infrastructures beyond first-tier cities, leaving large proportions of the population still un-captured.

An over-regulated business environment is also a common feature of the two markets.

However, Brazil has the highest import taxes in the world, which make market entry by international playersmore challenging. Aside from taxes, the strong presence and good reputations of Natura and Boticario(combined these command close to one quarter of the BPC market in Brazil) is another obstacle tointernational brands.

Brazils BPC environment is also strongly focused on the direct selling model, with Natura and Avonaccounting for some 20% of all beauty sales. In China, however, early movers Unilever and Procter &

Gambles strength is due to successful penetration in hair care, TRESemm in particular, offering salon-style hair care at an accessible price point. Procter & Gamble owns three out of the top five BPC brands inChina, namely Olay, Head & Shoulders and Rejoice.

Brazil

Underdeveloped infrastructure, over-regulatedbusiness environment

High import taxes

Established direct selling networks

FAVOURING LOCAL BRANDS

China

Underdeveloped infrastructure, over-regulatedbusiness environment

Strong growth of health and heauty specialistretailers

Multinationals early-mover advantage

FAVOURING INTERNATIONAL BRANDS

Diverse competitive landscapes in Brazil and ChinaEMERGING MARKETS


25/56


-2 -1 0 1 2

Direct Selling

Supermarkets

Department Stores

Internet Retailing

Beauty Specialist Retailers

% growth 2008-2013

Brazil: Direct Selling Losing Ground2008-2013

-4 -2 0 2 4

Avon

Natura

Unilever

Procter & Gamble

Boticrio

% growth 2008-2013

Brazil: Store-Based Portfolios Gain2008-2013

Brazil, where direct selling is a key distribution channel, saw local beauty specialist Grupo Boticriooutperform Natura and Avon over 2008-2013. Both direct sellers having suffered from operational,distribution and sales force productivity issues. Although direct selling is still a major distribution channel inBrazil, with 26% of beauty products sold through this channel in 2013, it is gradually losing share to brick-and-mortar stores as consumers tend to buy on impulse and as an indulgence.

Natura has been shifting strategies with the aim to fill white spaces. It has launched economy brand Sou forlower-income and more value-conscious consumers. It has also introduced new upscale fragrance Una,priced at US$75. In 2013, through the acquisition of Aesop Natura has gained further foothold abroad as itfeels pressure in its home market and tougher competition by modern retail formats in the face of Sephora

(12 stores already) and more recently Boticrio (90 stores) as well as the rise of independent perfumeries. Internet retailing is also growing healthily in the area of premium brands, with Sephora at the forefront.

Brazilian competitive landscape changingEMERGING MARKETS


26/56


In China, many international players are comingunder pressure. LOralsposition has been lessaffected than that of Procter & Gamble, but Garnierand Revlon pulling out of the market was a warningsign for all international players as to theirstrategies in the face of stronger local competitionand a cooling economy. Revlon and Garnier hadnot penetrated sufficiently in secondary cities, asslow innovation pipelines and inadequate pricing

policies left them highly exposed when marketconditions changed for the worse.

Local brands are becoming more sophisticated,targeted and Korean ones have an extra edge dueto the popularity of Korean pop culture. Otherinternational brands are also in danger, particularlyin the mass segment where local players operate

Nu Skin launched ageLOC anti-ageing products in

2012 and as a result of heavy promotion and wideavailability the company increased its market valueshare in Chinese BPC from 0.5% in 2012 to 1.4%in 2013.

Local players in China intensify competitionEMERGING MARKETS

-3 -2 -1 0 1 2 3

Procter & Gamble

Avon

Amway

Kao

Johnson & Johnson

AmorePacific

Yunnan Baiyao

Shanghai Inoherb

Jala

Este Lauder

Mary Kay

Proya Cosmetics

Nu Skin

L'Oral

Market value share growth (percentage points)

China: Share Growth in Selected BPCCompanies 2008-2013


27/56


Another trend in China favouring local players isthe growing interest in traditional Chinese medicine(TCM). Thanks to the nations long-standingpractice of using TCM, BPC products using naturalherbs are increasingly appealing to consumers ofall age. In this context, local players hold a strongerhand than international players, as they promotetheir better knowledge of herbal benefits andemphasise local ingredients.

Two local players with portfolios focusing onproducts with TCM credentials, Shanghai Inoherband Shanghai Jahwa (flagship brand Herborist),have been gaining market value share steadilyover the 2008-2013 period.

Inoherb largely targets the mass market and in2013 it also launched new products in mens skincare. Shanghai Jahwa introduced more high-end

anti-ageing products in 2013, priced at CNY980(US$160). However, the majority of the portfolio isstill priced at CNY100-400 per unit, with theLanege brand from AmorePacific as Herboristsmajor competitor and benchmark brand.

0.0

0.5

1.0

1.5

2.0

2.5

2008 2009 2010 2011 2012 2013

%m

arketvalueshare

Local Companies Market Value SharePerformance 2008-2013

Shanghai Inoherb Shanghai Jahwa (Herborist)

Dynamic sales ofageLOC, included inboth consumer healthand BPC products

Advantage inmarketing productswith TCM credentials

Trends favouring local Chinese beauty playersEMERGING MARKETS

Trends Driving Local Players Growth in China Beauty


28/56


0.0

2.0

4.0

6.0

8.0

10.0

0

200

400

600

800

1,000

Skin Care Colour Cosmetics Men's Grooming

%C

AGR

2013-2018

US$

millionrsp

South Korea: Top BPC GrowthProspects by Category 2013-2018

Absolute Market Value Growth 2013-2018 (US$ million rsp)

% CAGR 2013-2018

0.0

0.1

0.2

0.3

0.4

0.5

0.6

2008 2009 2010 2011 2012 2013

%m

arketvalueshare

AmorePacific Corp: Korean BrandsPerformance in China BPC 2008-2013

Mamonde Lanege Innisfree*

Note: *Innisfree share indicates share of colour cosmetics

Although Korean brands are unlikely to gainsignificant share from Procter & Gamble andLOral, they are rapidly gaining share in China.

Korean products are positioned as more affordableand are capturing the younger consumer segment.

Demand for Korean products is strongly boostedby the popularity of Korean pop culture, with manyof its stars promoting their own fragrance and skincare lines, underpinning strong demand for Koreancosmetics.

South Korea is becoming the new focal market forbeauty innovations and it is one of the mostinnovative markets in the Asia Pacific region. Itposted a near 8% CAGR over 2008-2013.

Korean innovation is especially pioneering skincare and mens grooming products and offersopportunities to leverage growth into the wider AsiaPacific region or global markets.

Korean brands gain popularity in China Growth also comes on the back of innovation

Korean exports reach new high thanks to huge China salesEMERGING MARKETS


29/56


Expansion strategies also vary according to diversemarket environments.

Coty and Frajo (owned by Grupo Boticrio)established a joint venture in Brazil, which provides abetter platform to distribute their brands. This deal willexpand Coty's go-to-market capabilities in the region

Coty Inc has intensified its efforts to expand itsconsumer base through distribution agreements,announcing two deals in as many months in 2014. In

June, it entered into an agreement with Li & Fung,which will distribute some of Coty's power brands inChina, including adidas, Rimmel and Playboy. Thisfollows an agreement with Avon in May whereby selectCoty fragrances will be marketed and sold through

Avon Brazil's network of 1.5 million independent salesrepresentatives. This deal empowers Avon withdifferent price points and brands.

Avon also started to manufacture and market Greeknatural skin care brand Korres through a new strategicalliance. Once again this will empower Avon but it isyet to be seen how successful it will be given thecountrys weak predisposition to skin care products.

Expansion Strategies Targeting EmergingMarkets

Coty Frajo Joint venture Brazil

Coty AvonDistributionpartnership

Brazil

Coty Li &Fung

Distributionpartnership

China

Avon KorresManufacture andmarket

LatinAmerica

EsteLauder

OsiaoNew productlaunch

China

Local collaborations

Joint ventures

Acquisitions

Local customisation

Expansion strategies intensifyEMERGING MARKETS


30/56


Este Lauder Companies, which already sells 12 of its 28 cosmetics brands in China, is taking a newapproach by adding an entirely new brand, Osiao, to its portfolio.

The new skin care brand caters to the tastes of consumers in Asia. Osiao was developed in China butmanufactured in Japan. The brands specialised formulations, for example, contain Chinese medicinalplants such as ginseng and ganoderma, a type of mushroom, tapping into the strong belief by localconsumers in the power of traditional Chinese medicine (TCM), as well as their desire for luminosity andclarity.

Este Lauders current portfolio is positioned at premium price points and many of its brands easilyoutperformed the already dynamic premium BPC market in China. The strong development of the health

and beauty specialists channel in the market favours its eponymous Este Lauder and luxury La Merbrands.

Similar to other international players, Este Lauder has strengthened its Chinese expansion strategy interms of local tailoring and strengthening existing brands beyond first-tier cities.

0

10

20

30

40

50

0

100

200

300

400

500

600

Este Lauder Clinique La Mer Bobbi Brown Mac

%C

AGR2008-2013

US$millionrsp

Este Lauder Brands Performance in China 2008-2013

Retail Value Sales 2013 (US$ million rsp) % CAGR 2008-2013

Este Lauder develops Osiao for ChinaEMERGING MARKETS


31/56


Product customisation to local trends and demand isalso present in Brazil and one of the pioneeringmultinationals is LOccitane.

In 2013, it has launched a new range of cosmetics,LOccitaneau Brsil. It is manufactured locally andinspired by Brazilian biomes, such as the Amazon,using indigenous plants that are not traditionally usedfor cosmetics.

It is a move not without risk, especially for a group

that has spent the previous four decades building itsbrand around its Frenchness and its Provence-based manufacturing facility.

However, with some of the highest import taxes inthe world, Brazil can turn even the most nationalist ofcompanies into a local producer. Indeed, LOccitaneclaimed that its LOccitaneau Brsil products wouldbe about 30% cheaper than its imported range. While

part of this saving is due to the fact that production inBrazil is less expensive than in Provence, the bulk ofthe discount is a result of tax savings.

LOccitanehas already tripled its sales in Brazil since2008 and the new range will create a significantgrowth platform for the group.

0

50

100

150

200

250

300

350

US Japan Brazil China Russia

US$millionrsp

LOccitane: BPC Value Sales in SelectMarkets 2008/2013

2008 2013

LOccitanebenefits from local production in BrazilEMERGING MARKETS


32/56


L'Occitane has also started to target mens grooming categories in Brazil to benefit from the dynamicgrowth rates and early-mover advantage in the relative new categories.

L'Occitane en Provence entered the barber shop channel in Brazil with the unveiling of a barber shop inL'Occitane Spa in Vila Nova Conceio, an upscale neighbourhood of So Paulo. Following the concept ofa traditional barber shop, and vintage style, the service is carried out by so-called BarberStylists, experts indifferent techniques of shaving and facial treatments. The space dedicated to a male audience offers thetraditional services of a barber shop and massage allied to treatments with branded products. Among theexperiences offered to male customers, there are facial massages lasting 30-45 minutes using the male-orientated lines Cade, offering smoothing and stimulating properties, and Vernon, offering invigorating and

moisturising properties. In Brazil, however, mens grooming categories beyond deodorants and razors and blades are not yet asignificant size but the expected dynamic double-digit growth rates over 2013-2018 are attractive formultinationals in search of new growth segments uncontested by local players.

0.0

5.0

10.0

15.0

20.0

0

500

1,000

1,500

Men's Deodorants Men's Razors andBlades

Men's Post-Shave Men's Pre-Shave Men's Hair Care Men's Bath andShower

Men's Skin Care

%C

AGR2

013-2018

US$m

illionrsp

Brazil: Mens Grooming Growth Prospects by Category 2013-2018

Absolute Market Value Growth 2013/2018 (US$ million rsp) % CAGR 2013-2018

L'Occitane targets mens grooming in BrazilEMERGING MARKETS


33/56

INTRODUCTION


EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS


34/56


Skin and hair carecategories areexpected to be thelargest growthsegments in keybeauty markets.

Growth in China, theUS and Indonesia willbe generated largely

by skin care, while inBrazil, Turkey andCentral Asian marketshair care will add mostsignificantly to the BPCmarkets growth inretail value sales termsup to 2018.

Fragrances is also a key growth engine especially in the Middle East and Africa and in a number of largeLatin American markets. In these markets, the combination of traditional preference for fragrances and thedynamic growth of disposable incomes will boost category sales significantly.

In Russia, sets/kits will add the largest absolute value growth to the BPC market over 2013-2018. Thegrowing presence of sets/kits in hypermarkets/supermarkets and in beauty specialist stores will lead tohigher sales. Moreover, producers are offering a wider variety of sets/kits than in previous years.

Future revenues in the hands of skin care and hair careKEY INDUSTRY THEMES


35/56


Brand loyalty plays a key role in how the BPC industry evolves, as does the vast stream of innovation, andwith the continuous rise of niche skin care brands it is becoming increasingly difficult to retain consumers.Looking at the reasons consumers choose to be brand loyal or not, provides a deeper understanding ofhow to develop more tailored product offerings.

When it comes to maintaining healthy hair and skin, consumer preference is greater for trusted brands. Themajority say they almost or usually buy the same hair care and skin care brands; far fewer frequently switchbetween products.

There is much more experimentation when it comes to products that augment rather than preserveappearance, such as in colour cosmetics with nail polish. As for fragrances, the desire for a personal

scent is becoming increasingly outdatedas more and more consumers are likely to play with new brandsthan to stick with what they know.

Brand loyalty in skin care and hair care prevailsKEY INDUSTRY THEMES

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Nail Polish

Lip Care

Fragrance

Facial Care

Hair Cleaning

Brand Loyalty Survey Results by Select Beauty Category 2014

Prefer new brands Neutral Prefer same trusted brands

Euromonitor Internationals Personal Appearances Survey results are drawn from ~6,600 online consumers ranging in age from 15 to 65+ and living in 16

major markets in 2014: Australia,Brazil, China, Colombia, France, Germany, India, Indonesia, Japan, Mexico, Russia, Spain, Turkey, Middle East (KSA and

UAE), United Kingdom, and the US.


36/56


Multi-benefitbecomesubiquitous

Fashionbeauty

Selfiebeauty

New

productexperience

Luxury forall

at-homebeauty

Many brands have already experimented with multi-benefit combinations, with BB/CC creams growingstrongly, but this is becoming more ubiquitous andexpected as standard in many products. However,there are still opportunities for further cross-category convergence and more hybrid products onthe market.

Consumers are now more than ever preoccupiedwith their own image, selfie beauty remains a key

trend. This will necessitate focus on more tailoredand personalised product offerings.

Brands are experimenting with novel packaging,application formats, brand image associations,scents, textures, as well as novel retail experiencesto create further excitement and engagement withconsumers.

Fashion brands are entering the beauty space in a

wide range of categories. Beyond fragrances andcolour cosmetics, skin care is also seeing a numberof new entrants from fashion brands at both thepremium end, such as Burberry, and more mass-orientated brand ranges, such as H&M in the UK.

Key themes to define the industry in 2014 and beyondKEY INDUSTRY THEMES


37/56


Hair

Hair - anti-agers Hair - health Hair - fragrances Hair - make-up

Colour

Nail - anti-agers Nail - skin care Nail - fragrances Lipstick - lip care

Skin Skin - body washes Skin - fragrances Skin - textiles Skin - devices

Globally in 2014, consumers have become moreaccustomed to paying for convenience as well as tryingnovel products and services, a trend that is expected tocontinue in 2015 and beyond.

The vast amount of information available especially inthe form of online reviews has helped minimise the riskof trying new offerings for consumers. BB/CC creamsrobust progression is a testament to how theconvenience that these hybrid products provide coupled

with the novelty factor has been a successful recipe forBPC companies.

Added fragrance is becoming a stronger feature acrossall categories from hair or skin care to colour cosmetics.

Products with anti-aging properties are also becomingmore prominent outside skin care.

The BPC industry is also crossing over to otherindustries, such as consumer appliances and textiles.For example, Unilevers Iluminage subsidiary offerscutting-edge, clinically proven and interactive skin caresolutions for skin rejuvenation. Beauty devices offertreatments and textiles have been designed for at-homeuse to optimise beauty products efficacy.

More opportunities for benefit crossoverKEY INDUSTRY THEMES

Multi-benefitop

portunities


38/56


Lip Lover Balm

Multifunctional balm, lipstickand gloss hybrid designed toprovide colour, shine and lipcare in one - infused withemollients and silicones.

Clinique Nail Polish

Marketed for sensitive skindue to formulation withoutformaldehyde, formaldehyderesin, DBP or parabens.

Bobbi Brown Art

Sticks

Classic 2-in-1 product is usedfor lips and cheeks. A blend ofemollients and shea buttercreates a rich creamy texturethat allows smooth application.

Multi-benefit product launches in hair care and colour cosmeticsKEY INDUSTRY THEMES

Phyto PhytodensiumAge-Defying Serum

Marketed as a powerfulcombination of plant extractsthat helps hair regain densityand vitality and helps inhibit

the growth of grey hair.

Caviar Anti-AgingOvernight Hair Rescue

Claims to repair hair duringsleep and prevent futurebreakage.

Nexxus Youth RenewalRejuvenatingConditioner

Promises to combat eightvisible signs of ageing in hair:volume loss, breakage, lessshine, roughness, dryness,

brittleness, unruliness andloss of colour vibrancy.

Hair Care

Colour Cosmetics


39/56


J Crew 2014

Fashion brands up their investment in beautyKEY INDUSTRY THEMES

The increasing desire for more affordable luxury as well as the need for expansion without compromisingthe brand image has pushed luxury fashion brands to expand or enter the beauty market.

Most recent examples include Tory Burch and Michael Kors, which both entered the BPC market withfragrances and colour cosmetics through Este Lauder. Marc Jacobs and Tom Ford, meanwhile, expandedin colour cosmetics and mens skin care, respectively. Furthermore, prestige fashion brands such asChristian Dior and Chanel have upped their investment in skin care, which although traditionally avoided byfashion brands, appears to have become the key focus area of expansion.

Most recently, in August 2014, J Crew has entered its flagship brand into fragrances by investing significantresources into its new fragrance collections marketing campaign. No. 31 and No. 57 will be featured

prominently in the companys September 2014 catalogue and will have their own page on the website.Michael Kors 2013 Tory Burch 2013


40/56


Christian Dior and Chanel have focused investment on skin care in recent years. Chanel operates its ownresearch laboratories which distinguishes it from some of the other fashion houses. The Le Lift line

introduced in 2013 offered in three different formats, cream, lotion and gel, competes directly with thepopular Crme de la Mer. Chanel launched its own multi-step skin care routine, the Le Jour, La Nuit and LeWeekend, which breaks away from the 3-step system that Clinique has been promoting for years, to offer anew concept

Christian Diors new Dreamskin line claims to treat skins texture and tone regardless of age and group.Dior generates more than half of its global skin care revenue in Asia, with most of its total absolute growthover 2008-2013 coming from China, which makes further investment in skin care even more compelling.

Chanel, in particular, has used the regions consumers predisposition for skin care and many of its skincare launches were first introduced in Asia before being launched in the West, including the Chanel LeBlanc series, which has experienced huge success, achieving double-digit growth globally in 2013.

Opportunities in skin care still untappedKEY INDUSTRY THEMES

0

1

2

3

4

5

6

0

100

200

300

400

500

Fragrances Colour Cosmetics Skin Care Fragrances Colour Cosmetics Skin Care

Christian Dior Chanel

%C

AGR2

008-2013

Absolutevaluegrowth

(US$millionrsp)2008/2013

Fashion Brands' Growth Performance in Selected BPC Categories2008-2013


41/56


2013 was the year of the selfie as personalimages via social media, whether on Facebook,

Twitter, Instagram or Snapchat, were the preferredform of communication. With image so importantnail polish/nail art, skin care and skin protectionallow consumers to showcase individuality andpersonality through unique textures and colours.

Young consumers continuous preoccupation withtheir image brings about more tailored offerings

with a rise in specific solution-based products thatconsumers can relate to. Examples includehyperpigmentation, evening skin tone, scalp healthand anti-ageing for hair among others.

As product portfolios become more diverse, thesewill cater to a higher number of different consumersfrom teens to over 50s and also offer a wider rangeof offerings for men. Access to rapidly developing

telecommunication devices by an ever wideningconsumer base across developed and emergingmarkets feeds this trend.

Selfie beautyKEY INDUSTRY THEMES

Nail polish

Individuality Novel textures Nail art

Tailoredinnovation

Solution-based Hyperpigmentation Scalp health

Skinperfection

Even tone Spot correction Smooth texture

Selfie

beauty


42/56


The rise of personal image as the keycommunication tool has increased the importance

of picture-perfect skin.

Innovation in 2014 will continue to be driven by arange of products that promise to smooth outimperfections, tighten pores and even out skintone.

Some of the most notable launches in 2013catering to this trend included LOral Pariss Skin

Perfection series, the Idealia Life Serum by Vichy,Lancmes DreamTone and most recentlyChristian Diors Dreamskin.

In celebration of its serum DreamTone, LancmeUSA launched a social media campaign#bareselfie, which encouraged users to use theproduct and take bare look/no make-up pictures toshare on Instagram.

There campaign also aims to promote Lancmesnew serum, DreamTone, which is a barely-theretinted serum that visibly corrects pigmentation,uneven skin tone and colour imperfections

Christian Diors Dreamskin

Idealia Life Serum by Vichy

Lancmes DreamTone

LOral Pariss Skin Perfection

LOral Revitalift Magic Blur

Garnier Skin Renew 5 SecBlur Instant Smoother

The power of social media on skin care product developmentsKEY INDUSTRY THEMES


43/56


Retail Virtual

Texture Format

ApplicationNovel

Formulation

Scent Packaging

Image

Companies new product launches target consumers by offering a fullproduct experience starting with the retail environment through new

textures, formats, applications to novel formulations and scents, etc.

Prestige brands positioning is enhanced through the expansion ofstand-alone retail outlets, eg Chanel or Burberry. Most recently, evenpredominantly mass market-positioned LOralParis has set up travelretail counters at airports.

Riding on the good success of skin care devices, new productsintegrating application or cleansing tools are becoming common. For

example, Lancme has integrated a tool in the form of a massage discinto its Rnergie French Lift Crme.

There is growing demand for scented products in a wide range of BPCcategories, including skin and hair care or colour cosmetics. One of theglobal launches includes Revlon Parfumerie Scented Nail Enamel. Inhair care, Clairol Herbal Essences launched a range of fragrance oils,including Herbal Essences Fruit Fusions Citrus Scent.

Packaging solutions form a large part of both product image andefficacy. For example, in deodorants, new compact versions had asignificant impact on category performance.

In order to ensure a high-quality product experience for consumers,new product launches need to take a more holistic approach todevelopment.

New product experience comes in different formsKEY INDUSTRY THEMES

Product experience


44/56


Demand for new textures is intensifying innovationactivities in the global BPC market.

Oils are set to become more popular, in both skin andhair care thanks to their hydrating and moisturisingproperties.

Facial oils are especially emerging as part of theformulations in nourishing, illuminating moisturisers ormake-up removers. For example, BiothermsBlueTherapy Serum Oil, launched in September 2013, is a

2-phase oil that claims to have the reparative propertiesof an oil and also act as a serum. In addition, L'OralParis Eclat Sublime Huile Dmaquillante make-upremover also features an oil-based formula.

Hair care has received a strong stimulus to growth inWestern markets, evolving into a multifaceted categoryincreasingly inspired by skin care and salon alternatives.Hair oil has been one of the most successful launches in

retail channels. Hair oil has been introduced as a leave-in conditioner, but its nutritional benefits for hair alsomake it an essential part of hair treatment. At the end of2013, Unilever expanded its Dove hair care portfolio toinclude a new range of premium oil treatments.

Retailers are also following the oil trend.LVMH- owned beauty products retailer Sephorais focusing on the category of oil-basedproducts by creating an in-store area calledZoom in some of its largest stores in Europe.The area groups together its offer of oil-based

skin and hair care products and has created akit of 12 must-have oil-based products fromacross a range of brands. In addition, it is alsolaunching its own private label oil-based skincare range in the US.

Product experience: Texture and formatKEY INDUSTRY THEMES


45/56


With the aim of offering a convenient way of properly applying anti-ageing skin care products, brands arelaunching pad formats. US brand Radical Skincares Age-Defying Exfoliating Pads contain AHA and BHAmulti-fruit acids, which promise to exfoliate, promote cell renewal and accelerate the performance of otherskin care ingredients. The 40% triple acid peel features capsules, which are to be shaken, opened and

applied to the pads before application, a process meant to mimic a professional skin care service at home.Although it was first launched in 2008, Air Cushion has recently become a key trend in facial make up in

South Korea after the huge success of BB creams. Air Cushion is similar to a liquid foundation but theproduct is soaked in a sponge together with sun protection, make-up base and moisturiser. The idea behind

Air Cushion derives from a stamp that can be pressed on the users face, so its packaging resembles morea compact powder case than a tube or bottle.

Unilevers game-changing move in deodorantswith its new compressed and portable format, alsoextended to mens lines, has not only been seen asa stronger commitment to sustainability but also asa new way to excite and engage with consumerson a different level.

Similarly its on-the-go spay moisturiser format forVaseline has now been extended to the St Ivesbrand, promoting faster absorption for women withbusy lifestyles.

Taking design to a new level, Redkensnewoverhauled black jar packaging for styling agents isdesigned to be used in combination with other stylingagents and achieving different hairstyles by adopting alayered approach. Currently a strong trend in hair careis customisation. Redken is offering consumers thechance to easily combine two or three different stylingproducts, in interlocking jars. The range includes eight

different styling agents.

Unilevers compact spray formats LOralRedken redesign focuses on customisation

Application design to control dosage

Product experience: Packaging and applicationKEY INDUSTRY THEMES


46/56


Fragranced skin care is particularlyprominent in South Korean brands,key examples including productsfrom the mono-brand companiesNature Republic, The Face Shop,Etude House etc. These are allfragranced, but not necessarilyfloral scents and can also be fruity

essences.

For mens lines, they tend to usephytoncides, active substancesderived from plants, often with apine-like aroma.

This trend does not only apply toskin care products but can also be

found in hair care, body care orcolour cosmetics.

Beyond beauty, Bvlgari announcedthe launch of Le Gemme, a newcollection of luxury perfumesinspired by semi-precious stones.

Fragranced skin care discerning

trend in South Korea and Japan Scented products are alsoappearing in more unusualcolour cosmetics categories.

For example, in nail polish,Revlon Parfumerie Nail EnamelCollection has 20 shades splitinto three fragrance groups;Fruit & Floral; Fresh; and Sweet& Spice. It is an interestingconcept, allowing consumers tochoose nail polish not only forits colour but also for its scent.

Faint floral aromas are alsoinfused in Kao Corps SofinaJenne and Sofina Beaute

products. Sofina is the thirdlargest premium BPC brand inJapan and has been expandingits market value shareparticularly strongly in colourcosmetics.

Scented products in colour

cosmetics Hair care is especially

accommodating of the scenttrend.

For example, KeraSys andElastine in South Koreacollaborated with a famedperfumer to launch fragrancedshampoo lines marketed withthe word perfume.

In the more mass market-orientated hair care productlines, Procter & Gambleslaunched Naked HerbalEssences, which is very herbaland green, and not fruity like

Herbal Essencessothershampoos. It contains rosemaryand peppermint extracts, withthe fragrance lasting for 10hours on the hair.

Hair care and fragrances make

natural fit

Product experience: ScentKEY INDUSTRY THEMES


47/56


Distribution of BPC products has seen a shift to more self-serviceenvironments. Even growth in beauty specialist retailers, which

generally have a strong service element, has been driven by self-service environments in large chains such as Sephora.

Curation is a word typically associated with museums and artgalleries, but is also a concept found in BPC retailing that adopts amore selective and guided approach in terms of product promotionand display, and at the same time suggests that the products are bestin class. Curation helps online and offline retailers to diversify andcompete more effectively in a marketplace dominated by self-serviceretail culture.

Mass beauty brand LOralParis inaugurated its first stand-alonestore in Spain in Madrid in January 2014. Conceived as a laboratory,according to the company, the boutique gives consumers the chanceto test and purchase an edited range of the brands products, whileproviding access to added-value services.

Similarly, a virtual retail kiosk from L'Oral Paris can detect the

colours in a users clothing and then recommend beauty products thatwould complement them. The kiosk, launched inside a New York Citysubway station in November 2013, features a large touch screen anda full-length smart mirror to create digital animations of the user.Customers can directly purchase the recommended products or havethe eye, lip and nail shade recommendations emailed to them.

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012 2013

%t

otalBPCva

luesales

Global BPC: Value Salesby Key Distribution

Channel 2008-2013

Internet Retailing

Department Stores

Direct Selling

Modern Grocery Retailers

Product experience: Changing retail environmentKEY INDUSTRY THEMES


48/56


In-store retail enhancements Digital focuses on personalisation

Responseto the rise of

internetretailing

Consumerswant to feel

morespecial

Strongcustomerservice

Improvedshopping

experience

Global beauty retailer Sephora, part of the France-based LVMH group, has launched a socialshopping platform aimed at encouraging morecustomer engagement by using beauty images.

Called Beauty Board, the platform encouragesusers to share Sephora images of cosmeticproducts and effects by giving them the ability topost, share, browse and shop from Sephorasphoto gallery on Sephora.com, which is accessiblethrough all mobile devices.

This enables consumers to upload photos, tagproducts and share with other social media usershow they tailor the use of these products to theirindividual beauty routines, and is designed aroundsocial media platforms such as Pinterest and

Instagram, which are evolving on increasinglyimage-focused lines.

Websites such as Pinterest and Fancy.comoperate on a crowd curation model, allowing webusers (as well as celebrities and businesses) tocurate their own collections of products.

Product experience: In-store and digital retail developmentsKEY INDUSTRY THEMES


49/56


At-home beauty: Face masks an untapped opportunityKEY INDUSTRY THEMES

At-home treatments, which have been elevated due toreduced salon visits and the desire for a pampering

experience, have remained strong, with face masksexpected to be the strongest performing category over2013-2018. As players in this field, largely concentratedin Asia, continue to diversify their offerings beyondlightening to radiance, anti-ageing, eye-masks etc, theirpopularity is expected to spread across to developedmarkets including the US.

For example, SK-II is promoting face masks in the US,using its Magic Ring Skin Analysis Test Machine, which isavailable at SK-II counters.

It was China, however, that singularly led the stronggrowth in face masks over 2008-2013.

Interestingly, until recently, this market has beendominated by local players. Identifying strongopportunities in face masks, LOralacquired the leading

face mask player Magic Holdings in China in 2013. Asmoisturisers and anti-agers reach greater maturity, facemasks present the much-needed white space for growthin Chinas lucrative skin care market, but this could alsopotentially open up avenues for future growth potential inother Asian markets and beyond.

0 2 4 6

Firming/Anti-Cellulite BodyCare

Facial Cleansers

Lip Care

Toners

Hand Care

General Purpose Body Care

Facial Moisturisers

Anti-Agers

Face Masks

% value CAGR 2013-2018

Skin Care: Growth Prospects byCategory 2013-2018


50/56


Skin care devices continue to migrate from dermatologistsand spas to beauty store shelves. Tools have been more

visible in recent years, as skin care brands are keen toposition themselves as dermatological experts and provethe effectiveness of their ranges.

In 2013, there were several device innovations. Swedishbrand Foreo introduced Luna, a silicone facial cleansingdevice that makes anti-ageing claims. Mass brand Conairintroduced the True Glow Sonic cleansing brush. Non-

device brands are also taking steps, such as LancmesRnergie French Lift, which features a small massage discmeant to prepare skin for the skin care formulation.

In May 2013, Lancme also launched a limited editioncomplementary service in partnership with Sephora storesin France, to promote the launch of Advanced Gnfique,the second generation of its Gnfique anti-ageing skincare line. The service involves the beauty advisor applying

the product using a hand-held ultrasound device. Thepulsating action is claimed to provide the skin with theequivalent of one week of product in just one application.Lancme claims the ultrasound technology reaches thedeepest layer of the epidermis.

US: Brand Shares in Other PersonalCare Appliances 2008/2013

Homedics Conair Clarisonic Dr Scholl's

Inner circle 2008

Outer circle 2013

Skin care devices: More unexplored potentialKEY INDUSTRY THEMES


51/56


Among other multinational beauty products players, Unilever especiallyappears to be focusing on the opportunities devices and hi-tech

solutions offer to the industry.

In the first quarter of 2014, the company purchased Ioma Paris, apersonalised measurable skin care solution business, aiming to expandthe concept in Asia, and New York-based Iluminage Beauty Inc, with itsFDA-approved, in-home laser treatment range for wrinkle reduction.

Launch of the Iluminage Skin Smoothing Laser

The Iluminage Skin Smoothing Laser is priced at US$595 and approved

by the FDA for use in smoothing and reducing the appearance of finelines and wrinkles around the eyes and mouth. The laser was launchedin the second quarter of 2014 in department stores Neiman Marcus andNordstrom. The device is designed to spur the creation of collagen,bolstering the skins underlying support structure.

The laser is accompanied by a 4-product anti-ageing skin care linecalled Iluminage Youth Cell Skincare, containing a concentrate, eyecream, cleanser and day cream. Added to the range is the IluminageSkin Rejuvenating Pillowcase. The fabric of the US$60 pillowcasecontains copper oxide fibres to help reduce wrinkles by stimulating theself-renewal mechanisms within skin cells.

The beauty device market is rapidly growing and Unilevers Iluminage isstill well positioned to benefit from early-mover advantage.

Iluminage: First in-home laser deviceKEY INDUSTRY THEMES

Iluminage Skin Smoothing Laser


52/56

INTRODUCTION


EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS

CONCLUSIONS


53/56


0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

US$millionrsp

Beauty and Personal Care: AbsoluteValue Growth by Category 2013/2018

Others

Baby and Child-

specific ProductsDeodorants

Bath and Shower

Fragrances

Men's Grooming

Colour Cosmetics

Oral Care

Hair Care

Skin Care

China

Brazil

US

India

Indonesia

South Korea

Saudi Arabia

Mexico

Thailand

Colombia

0

1

2

3

4

5

6

7

8

9

10

0 5,000 10,000 15,000 20,000 25,000

%C

AGR2013-2018

Absolute value growth (US$ million rsp) 2013/2018

Top 10 BPC Markets Growth Prospects2013-2018

The outlook over 2013-2018 is generally cautious, with unfavourable forecasts in developed markets andemerging market instability. Despite the slowdowns in China and Brazil, there is still huge potential to grow

beyond first-tier cities and to expand penetration of existing flagship brands. As a result, half of total BPCindustry absolute value growth over 2013-2018 will come from these two markets.

New growth frontiers enter spotlightCONCLUSIONS

CONCLUSIONS


54/56


Key themes to define growth in beautyCONCLUSIONS

There will be greater emphasis onthe personalisation of beauty,

particularly in the higher-valuedeveloped markets of WesternEurope. There will, for example, bea strategic focus on artisanal andnatural products.

Long-term growth opportunities,driven by ongoing urbanisation andmiddle class creation in emergingeconomies, beyond China andBrazil, India and Mexico, willprovide a significant boost to staplecategories such as oral care andbath and shower, while localproduct tailoring will remain key tosuccess.

New product launches will targetconsumers by offering a full productexperience starting with the retailenvironment through new textures,formats, applications to novelformulations and scents.

Novel products

Local tailoringPersonal

experience


55/56

FOR FURTHER INSIGHT PLEASE CONTACT

RELATED ANALYSIS

Ildiko Szalai

Senior AnalystBeauty and Personal Care

[email protected]

Beauty Innovation Round-Up Summer 2014Sept 2014

The Impact of Russias Sanctions on Global Beauty PlayersSept 2014

Beauty Players Fit Response to World Cup-Stirred OpportunitiesJuly 2014


56/56

E i I i l PASSPORT 6BEAUTY AND PERSONAL CARE THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

This research from Euromonitor International is part of a global

strategic intelligence system that offers a complete picture of the

commercial environment. Also available from EuromonitorInternational:

Global Briefings

Timely, relevant insight published every month on the state of themarket, emerging trends and pressing industry issues.

Interactive Statistical Database

Complete market analysis at a level of detail beyond any other source.Market sizes, market shares, distribution channels and forecasts.

Strategy Briefings

Executive debate on the global trends changing the consumer marketsof the future.

Global Company Profiles

The competitive positioning and strategic direction of leading

companies including uniquely sector-specific sales and share data.Country Market Insight Reports

The key drivers influencing the industry in each country;comprehensive coverage of supply-side and demand trends and howthey shape future outlook.

Learn MoreTo find out more about

Euromonitor International'scomplete range of businessintelligence on industries,countries and consumers pleasevisit www.euromonitor.com orcontact your local EuromonitorInternational office:

Bangalore+91 80 4904 0500Cape Town+27 21 524 3000

Chicago+1 (312) 922 1115

Dubai+971 4 372 4363

London+44 (0) 207 251 8024

Santiago+56 2 2 9157200

So Paulo +55 11 2970 2150

Shanghai+86 21 603 21088Singapore+65 6429 0590

Sydney+61 2 9581 9200

Tokyo+81 3 3436 2100

Vilnius+370 5 243 1577

Experience more...

the multifaceted evolution of global beauty

Documents