BW Confidential - Issue #14 - May/June 2013 - (Page 50)

Market watch: China Country overview credit: istock Snakes and ladders Reservations over China’s slowing growth are beginning to dissipate, while beauty companies continue to ramp up their investment in the country. BW Confidential investigates the ups and downs of the market by Oonagh Phillips T he industry is a lot more bullish on China for 2013. Last year, slowing growth and talk of a bursting bubble had analysts speculating over the fate of brands with increasing exposure to China. However, economic data has improved and industry watchers are encouraged by signs that income and spending is a lot higher than what has been officially reported, as well as by government promises to boost consumption through measures such as increasing the minimum wage. In terms of beauty, sales in 2012 were up by 11.9% to $31bn, slightly slower growth than in 2011, when the sector reported an increase of 12.4%, according to Euromonitor. It is estimated that the prestige market will see average annual growth of between 12-15% until 2016, when sales should reach $7bn. The market’s largest sub-segment, skincare, saw growth of 14.1%, while make-up sales increased by 12.3%. Fragrance, while still 50 small, is making progress. ”Currently 47% of fragrance consumers are aged between 17 and 23, thereby creating a bigger base for sales. “ Growth is clearly expected to come from new consumers in new cities across the country ” Estée Lauder Companies (ELC) president Asia Pacific Fabrice Weber More people are also buying fragrances for themselves instead of as a gift. Consumers will buy, on average, three to four bottles a year for their own use,” distribution company Eternal president Steven Lau told BW Confidential. Others add that consumers are now willing to pay more for fragrances and to buy bigger sizes. Lower-tier cities to lead growth The highest growth rates are still expected to come from less mature second-tier cities and third- and fourth-tier cities this year. In 2012, growth in first-tier cities slowed (growth was in the 8-9% range instead of the 12-15% seen in previous years) and this trend is set to continue. Estée Lauder Companies (ELC) president Asia Pacific Fabrice Weber, recently told investors that this situation is to be expected, as places like Shanghai and Beijing reach maturity. “Growth is clearly expected to come from new consumers in new cities across the country, a simple reflection of the fact that the mature tier-one cities in China are very close in terms of consumption per capita to what you see in neighboring countries, like Korea, which are May-June 2013 - N°14 - BW Confidential

Table of Contents for the Digital Edition of BW Confidential - Issue #14 - May/June 2013

Cover
Comment
Contents
Update
- Brand & retail news recap
- Companies on the move
Take note Market facts, figures & trends
Best of BW Highlights from our e-publication
Launches The latest in fragrance, skincare & make-up
Interview Clarins Group ceo Philip Shearer
Insight: Skincare
- Category overview
- Skincare devices
- Retail case studies
- The latest trends
Retail
- Amazon
- Store concepts
Digital Facebook
Market watch: China
- Country overview
- Industry viewpoint
- National domestic airports
- Department stores
- Third- & fourth-tier cities
Travel retail
- Emerging Asia analysis
- Passenger profiles
- Interview: King Power Group Duty Free & Travel Retail Hong Kong managing director Sunil Tuli
Radar Up-and-coming brands
Emerging markets Company profile: VLCC
Packaging
- Industry outlook
- Differentiation techniques
Last word Brand Keys founder and president Robert Passikoff

BW Confidential - Issue #14 - May/June 2013