Don't forget Brazil!
the economy in Brazil also booming, South America's largest market
for cosmetics and toiletries has grown at 15 per cent annually over
the past three years.
Compared to China the market for cosmetics is far more developed, which is why, despite having a fraction of the population, the Brazil market was valued at $5.3 billion in 2004, compared to $7.1 billion in China.
But that is not to say that there is still plenty of potential for further growth, as the latest report from Kline & Company, Global Cosmetics & Toiletries 2004, shows that the country's 20 cosmetic and toiletry product categories continue to outshine nearly all other world markets.
"Every product category that we've covered has seen increases in both unit volume and value sales over the past year, and for most categories, these increases have been impressive," said Lenka Contreras, vice president and head of the Consumer Products practice for Kline's research division. "Across the board, Brazil's cosmetics and toiletries market shows solid growth that is expected to continue."
Brazil's strong economic performance in 2004 has bolstered rising demand for beauty and personal care products, the report's authors point out. This means that GDP grew by 5.2 per cent between 2003 and 2004, the highest increase for Brazil in a decade. As has been the case in China, improvements in real income, which have led to a higher level of spending power, are expected to continue to drive demand for makeup, skin care products and oral care products.
According to Contreras, although Brazil is the leading economic power in South America, usage rates in many product categories remain relatively low among its population of 186 million, indicating that there is still plenty of room for further scope in the market. She points to facial and skin care products as offering the best opportunities for marketers to expand penetration rates. Both of these categories posted impressive double-digit gains in 2004.
"On one end of the spectrum, market growth is being driven by increasing awareness of the need for sun protection, more technologically advanced products, and higher price points. But there are also the more rural regions where people don't use many product categories regularly, and these are untapped sources of growth for cosmetic and toiletry marketers," she said.
Alongside the economic upturn, Brazil's distribution channels have also seen great change to keep up with the added demand. The report authors point out that mass market merchandisers already represent the largest slice of the retail cake for cosmetic and toiletry products in the country, but that direct sales players such as Avon, and Brazil-based Natura also hold a significant share of the market.
But with the future expansion of mass market outlets, the position of direct sales businesses could be threatened.
"As economic development continues, we'll see further expansion of mass merchandisers and specialty stores. And although there is still plenty of room for overall market growth, direct sales will likely lose some of its market share to newly opened outlets, even if value sales in all channels continue to increase," said David Vladyka, head of Kline's Consumer Products consulting practice.
In a recent report by the United Nations Conference on Trade and Development both China and Brazil were named as being amongst the five most attractive places for foreign investment in 2005 and 2006. But with cultural differences often making business difficult to conduct in China, Brazil's more westernized approach might seem more appealing.
"The mature markets for cosmetics and toiletries - the US, Western Europe, and Japan - have offered only minimal growth over the last five years, and marketers should be looking to countries like Brazil as a new source of growth," said Contreras.
