BW Confidential - Issue #2 - May/June 2010 - (Page 39)

Market watch: Asia China The beauty rush Global beauty companies are spending even more in China as the West stagnates. But the market is still open to smaller players and maybe even local brands by Oonagh Phillips eauty companies have been talking up the BRIC countries more than usual since the recession hit. And more than ever China is seen as the perfect balance to declining growth in Old Europe and North America. The country may have witnessed a slight and temporary lull as a result of the financial crisis—hotel occupancy was down and bad news from elsewhere made the notoriously frugal Chinese consumer watch her pennies even more closely—but the breakneck growth rates were quick to come back. Last year beauty sales grew by 8.7% to €15.14bn, according to Euromonitor, slightly down from the 11-12% increases in 2007 and 2008, but impressive nonetheless. Needless to say, that the weight of the market and the highest growth still lies in the skincare segment. Skincare sales were up by 11% to €5.7bn in 2009. The good news is also that the premium segment is set to grow faster than the wider market, as the urban population grows, disposable incomes increase and consumers begin to trade up. The premium market reported a cumulative annual growth rate of 20% between 2003 and 2008 and the category’s sales were up by 13% in 2009. In light of these figures and compared to the lackluster sales elsewhere it’s not surprising that China will contribute 30% of the overall B growth in the global cosmetics and toiletries market between 2008 and 2013. China is where the action is and where the brands’ investments are going. L’Oréal, “ In the next five years there will probably be more local brands on the market—they will not necessarily be of high quality but there will be a natural selection here Ba Yan Ka La founder Jean Zimmermann which ranks number-two in the market with a 5% share, according to Kline & Co, saw sales increase by 18% last year. The group is bringing more of its brands to the market and launched Kiehl’s there in July. The Estée Lauder Companies too is introducing more of its lines to the market. It launched Origins in the Parkson department store in Shanghai ” in March and will roll the brand out to four more doors by June. China now accounts for 3% of ELC’s sales and this figure should reach 5% by in the next five years. P&G, which according to Kline is the leader with a 20% share of the cosmetics and toiletries market in China, is also focusing in filling in more ‘white spaces’ there primarily through its mass-market brands. More investments are also on their way from direct-sales company Avon, which will open a 40,000ft2 (3,716m2) R&D center in Shanghai at the end of 2010. The group’s direct-sales model is enabling it to get a stronger foothold in third-tier cities, whose retail infrastructure still needs to be developed. The market is dominated by global players that have invested millions in bombarding the consumer with advertising in all its forms —magazine ads, paid-for editorial, billboards and TV. But that does not mean that there isn’t a place for lesser-known names or smaller players. “Chinese consumers are hungry for news and new things. They spend a lot of time on the internet checking out brands, and if they see something that interests them they will go out of their way to get more information through the foreign website,” says Chinese brand Ba Yan Ka La founder Jean Zimmermann. Kanebo’s makeup brand Kate, for example, which is n n n May-June 2010 - N°2 - BW Confidential credit: stock.xchng 39

Table of Contents for the Digital Edition of BW Confidential - Issue #2 - May/June 2010

- Brand and retail news recap
Take note
- Market facts, figures and trends
The latest fragrance, skincare and make-up launches
Best of BW
- Market highlights
- Clarins Fragrance Group president Joël Palix
Insight : skincare
- Category overview
- Industry viewpoint
- Trends
- Training in spas
- Spa case studies
Market watch : Asia
- Regional analysis
- Japan
- China
- South Korea
Focus : Fragrance creation
- Fragrance regulations
- Perfumer roundtable
- Six up-and-coming beauty brands
Travel retail
- Asia regional roundup
- Interview with Korea duty-free
Last word
- Morning Star equity analyst Erin Swanson on beauty’s threats and opportunities

BW Confidential - Issue #2 - May/June 2010