BW Confidential - Issue #1 - April 2010 - (Page 49)

Western Europe: Italy Challenged Italy’s prestige market was hit hard and the country’s perfumery channel continues to struggle T The Italian beauty market continued its sluggish course in 2009—mass and prestige sales combined came to €9.1bn, according to industry association Unipro, showing only slight growth over 2008 sales of €9.07bn. The recession, coupled with rising inflation, has made Italian consumers more price-conscious. While shoppers aren’t necessarily trading down to mass products, they are looking for more value for money. In light of this, prestige products took the worst beating last year—according to NPD, the channel registered a 4% decrease (December 2008 to November 2009) with sales of $2.6bn (€1.89bn). Perfumery sales were down by 3.8% in the second half of last year, and so far this year the channel has seen little improvement, with a 1.5% decrease forecast for the first half of 2010. Suppliers have also had a rough time with their retail partners: “The recession has been disastrous for many brands. Payment terms have been stretched to as long as 260 days at some independent perfumery operators,” notes one Italian brand manager. just heat up this year. There is also new activity in the department-store sector. The chain La Rinascente opened a five-story 5,000m2 (53,819ft2) store in Palermo this spring modelled on “ The recession has been disastrous for many brands. Payment terms have been stretched to as long as 260 days at some independent perfumery operators Italian brand manager New retail initiatives The perfumery channel, which accounts for 26% of sales, is still dominated by independent outlets, though the sector continues to see consolidation—some 45% of the market is now owned by retail chains, compared to 10% only 10 years ago. French retailer Sephora opened a 1,200m2 (12,916ft2) flagship store in Milan, which it says is Italy’s largest perfumery, in February, and announced it would continue to open flagships in major Italian cities. German retailer Douglas is also focusing on Italy this year. It plans to open 40 stores in 2010, with a focus on Italy and Portugal. Given these ambitions, the competition between the German retail giant and the LVMH chain may its Milan flagship, and announced plans to begin work on a store in Rome this year. The department-store group sold its mass-market Upim chain to rival Coin earlier this year. Despite the efforts among prestige retailers, the weak economy has seen Italian shoppers ” migrate to channels offering more personalized service (perfumeries, it seem, do not meet this criteria). Sales through pharmacies grew by 2.7% in the second half of last year (Unipro), with growth of 3.1% forecast for the first half of 2010. Industry sources estimate that 30% of skincare products are sold through pharmacies in the country. Herbalist shops are also faring better than the market with their combination of strong service and expertise in natural products; the channel grew by 2.5% in the second half of 2009 and Unipro is predicting an increase of 4% for the first half of this year. However, sales through beauty and hair salons suffered in Italy as elsewhere, due to fewer visits and customers who restricted their spend to services only. Sales in the professional channel were down by nearly 4% in the second half of last year, with a continued negative forecast for this year. For 2010, Unipro notes that export sales will pick up, while the future of the domestic market remains uncertain, given the challenged professional and perfumery channels. n Italy beauty market sales 2009-2010 by channel Channel 2009 Sales 2nd half 2009 1st half 2010* €bn % change % change Mass retailers 3.60 +2.4 +2.5 Perfumery 2.32 -3.8 -1.5 Pharmacy 1.40 +2.7 +3.1 Herbalist shops 0.33 +2.5 +4.0 Hair salons 0.70 -3.9 -3.5 Beauty salons 0.20 -3.8 -2.5 Source: Unipro *Forecast April 2010 - N°1 - BW Confidential credit: stock.xchng 49

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