BW Confidential - Issue #1 - April 2010 - (Page 42)

Market watch Western Europe: Germany Weathering the storm credit: stock.xchng The market looks more resilient than others in the region T he German beauty market is proving a lot more resilient than its European neighbors. Personal-care sales increased by 1.7% in 2009 to reach €12.83bn, according to cosmetics industry association IKW. None of beauty’s categories saw declines last year, although both haircare and men’s products were flat. Make-up saw an excellent performance with sales up 7.8% to €1.44bn. Business through selective perfumeries were also better-than-expected. Sales were down by 1.6% to €2.63bn, although Christmas proved disappointing and the sector saw a decline of 1.1%, according to Germany’s National Association of Perfumery Retailers. The perfumery sector has suffered. The consumer is increasingly price sensitive and is less likely to buy beauty on what were once important gifting occasions, such as Valentine’s Day and Mother’s and Father’s Day. Retailers also say the oversupply of product is fueling the gray market, and that the sales and distribution areas needed to accommodate the constant flow of product is eating into margins. The perfumery association says that this led to consolidation in the sector last year. Their figures show that number of perfumery outlets shrank from 2,800 in 2008 to 2,700 in 2009. “Selective perfumeries are losing out on image. They were not attracting enough young people and offering service and they are now trying to focus more on this with their advertising, Facebook and the internet. They have to change their approach and go for more quality and experience.” Price increases, service, youth Perfumeries add that steep price increases from suppliers are adding to their woes. German distributor Albrecht & Dill managing director Philipp Sahling comments: “One of the main reasons that consumers are not buying in perfumeries is because the prices are too high. I cannot understand why brands are proposing skincare at €400; consumers can’t afford this and are not going to go to a store where the beauty assistants are trying to sell these products.” For German cosmetics brand Art Deco vice president marketing Anna Blasco Salvat, perfumeries could be doing more to improve the quality of their stores and service. “ One of the main reasons consumers are not buying in perfumeries is because the prices are too high Albrecht & Dill managing director Philipp Sahling Germany beauty market €bn Category Sales % change €bn 09-08 Haircare 3.05 +0.0 Skincare 2.97 +1.6 Color cosmetics 1.44 +7.8 Oral hygiene 1.33 +0.8 Women’s fragrances 0.99 +1.1 Men’s cosmetics 0.89 +0.5 Bath & shower 0.85 +1.1 Deodorants 0.69 +1.2 Soap 0.22 +2.9 Other 0.41 +4.9 Total 12.83 +1.7 Source: IKW Retail sales price Germany prestige beauty sales 2009 Category % change 09/08 Women’s fragrances -1.0 Skincare -1.4 Color cosmetics -0.3 Men’s cosmetics -4.3 Other -0.7 Total market -1.6 Source: German National Association of Perfumery Retailers Retail sales price Douglas, Germany’s leading perfumery chain with 452 stores, claims to be working on this. “We are increasing the number of private labels and brands that can exclusively be found in Douglas perfumeries. This combined with complimentary services like free makeovers, hand massages, or skincare consultations is greatly appreciated by our customers,” says a Douglas spokesperson. In addition, the company plans to add sales space and modernize its stores this year, and focus on providing lower prices. The retailer’s German sales increased 1.2% last year and it opened 10 new stores in the country. ” The drugstore drive Exclusives and services may be the only way to fight competition from Germany’s strong drugstore channel. Brands say that the drugstores have been developing n n n 42 April 2010 - N°1 - BW Confidential

Table of Contents for the Digital Edition of BW Confidential - Issue #1 - April 2010

Update - Brand and retail recap
Take note - Market facts, figures and trends
Launches - The latest fragrance, skincare and make-up launches
Best of BW - Market highlights
Interview - Sephora international & development md Olivier Schaeffer
Insight: make-up - Category overview
 - Industry viewpoint
 - Trends
Wellness report - Overview
 - Industry roundtable
 - Spa case studies
Travel retail - Europe: little chance of a rebound
Market watch: Western Europe - Regional analysis
 - Germany
 - France
 - UK
 - Spain
 - Italy
Radar - Six up-and-coming beauty brands
Packaging special -  Industry analysis
 - Innovation
Last word - UBS analyst Nik Modi's outlook for 2010

BW Confidential - Issue #1 - April 2010