The Multifaceted Evolution of Global Beauty

THE MULTIFACETED EVOLUTION OF GLOBAL
BEAUTY
October 2014
INTRODUCTION
GLOBAL INDUSTRY HIGHLIGHTS
EMERGING MARKETS
KEY INDUSTRY THEMES
CONCLUSIONS
INTRODUCTION
Scope
All values expressed in this report are in US dollar terms, using a fixed
exchange rate (2013).
2013 figures are based on part-year estimates.
All forecast data are expressed in constant terms; inflationary effects are
discounted. Conversely, historical data are expressed in current terms;
inflationary effects are taken into account.
Beauty and Personal Care
Baby and Child-Specific Products
Men's Grooming
Bath and Shower
Oral Care
Colour Cosmetics
Skin Care
Deodorants
Sun Care
Depilatories
Sets/Kits
Fragrances
Premium Beauty and Personal Care
Hair Care
Mass Beauty and Personal Care
Euromonitor International
Disclaimer
Much of the information in this
briefing is of a statistical nature and,
while every attempt has been made
to ensure accuracy and reliability,
Euromonitor International cannot be
held responsible for omissions or
errors.
Figures in tables and analyses are
calculated from unrounded data and
may not sum. Analyses found in the
briefings may not totally reflect the
companies opinions, reader
discretion is advised.
With major markets, including

the US, Brazil and China,
witnessing growth pressures
and innovation becoming
saturated, the beauty industry
needs to find new frontiers for
expanding revenue potential.
Cross-category product
developments have been
explored and brands continue to
be inspired by synergies among
beauty segments and crossindustry shifts. Despite the
slowdown, Brazil and China will
remain crucial to expansion
strategies, while hair and skin
care should see dynamic
innovation activities.
BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY
PASSPORT 3
INTRODUCTION
Key findings
Beauty industry growth
decelerates in 2013
Despite a moderate slowdown, beauty industry growth remained robust at over 5% in 2013,
down from close to 6% in 2012. This was the result of dampened consumer demand in
emerging markets, combined with the still subdued environment in the West.
Asia reinforces
domination, Western
Europe picks up
2013 year-on-year growth in Asia and Latin America was moderately down, but the sheer
size of China and Brazil meant the global impact was clearly evident. While Western
Europes growth in 2013 strengthened marginally, led by positive signs in the UK.
New frontier markets

with good growth
potential
With smaller market sizes, ranking outside even the top 20 largest BPC markets in 2013,
there is a group of markets forecast to register compound annual growth rates (CAGRs) well
above the global average, eg Indonesia and Saudi Arabia.
Emerging markets
reach parity in beauty
sales by 2018
China and Brazil combined will contribute some 53% of the global BPC market value growth
over the 2013-2018 period. Staples, such as soap and shower gel, are receiving a strong
boost from India. Deodorants, fragrances and hair care reflect the magnitude of Brazil.
Mass domination, with

strong premium
potential
Although mass beauty products still dominate national markets with largest expected
absolute value growth up to 2018, the forecast percentage growth for premium is more
dynamic for the period 2013-2018 in most emerging and largest developed markets.
Future revenues in the

hands of skin and hair
care
Growth in China, the US and Indonesia will largely be generated by skin care, while in
Brazil, Turkey and Central Asian markets hair care will add most significantly to the beauty
markets growth in retail value sales terms up to 2018.
Key themes to define

growth in beauty
Many brands have already experimented with multi-benefit combinations but this is
becoming more ubiquitous. 2014 will also be the year of what might be defined as selfie
beauty. Consumers are now more than ever preoccupied with their own image. Interest in
fashion brands and luxury at home remain key trends.
PASSPORT 4
INTRODUCTION
EMERGING MARKETS
KEY INDUSTRY THEMES
CONCLUSIONS
Beauty industry growth decelerates in 2013

Mass beauty boosted by emerging markets and
weak economic recovery in developed regions
Beauty and Personal Care: Growth

Performance by Segment 2007-2013
7
Beauty industry growth in 2013 remained robust

despite a moderate slowdown - at over 5%, down
from close to 6% in 2012. This was the result of
modestly dampened consumer demand in emerging
markets, combined with the still subdued
environment in the West.
The dip in premium beauty was more pronounced

due to sharper decreases in Eastern Europe and
North America.
Growth remained strongest in Latin America,
reaching near 16% year on year, with premium
fragrances contributing strongly to this rapid growth.
Despite the global BPC slowdown, the industry still
managed to gain a further US$22.6 billion in 2013,
just over half a billion less than in 2012.
% y-o-y growth
Mass-market growth was slightly stronger than

overall BPC growth, largely driven by emerging
markets. Brazil, China and India combined generated
almost 50% of absolute market value growth over the
2008-2013 review period.
0
2007
2008
Total BPC
2009
2010
2011
Premium BPC
2012
2013
Mass BPC
PASSPORT 6
Mass contribution sustained, premium drops slightly in 2013

Mass BPC was again at the heart of the growth story, fuelling US$15.3 billion of growth in absolute terms
compared with US$3.9 billion for premium BPC in 2013, which was slightly less than the previous year. In
2013, Asia Pacific, North America and Western Europe combined accounted for near 85% of global
premium BPC sales with other regions being largely insignificant.
In 2013, all regional premium BPC markets registered positive growth; over one third of new sales in the
year was generated by Asia Pacific but Latin America and Middle East and Africa combined accounted for
another 37% of global market value expansion presenting a new premium investment terrain.
Growth in Western Europe also picked up slightly in 2013 compared to flat performance in 2012. The bestperforming categories were premium deodorants and colour cosmetics.
Mass vs Premium Beauty Market Size 2008-2013
350,000
US$ million rsp
300,000
250,000
200,000
150,000
100,000
50,000
0
2008
2009
2010
Mass Beauty
2011
2012
2013
Premium Beauty
PASSPORT 7
BPC 2013: Asia reinforces domination, Western Europe picks up

Slowdown in 2013
While Western Europes growth in
2013 strengthened marginally and the
Middle East and Africa remained
steady, all other regions fared less
well in 2013 compared to 2012. This
was the result of still unsettled
economic conditions and deep
expenditure decline, notably in the US
and Eastern Europe.
Positive signs are showing in the UK,
the second largest beauty market in
Western Europe. Year-on-year growth
nearly doubled in 2013 with the
economy improving and the consumer
confidence index hitting its highest
level for nine years in February 2014.
2013 year-on-year growth in Asia and Latin America was moderately down, but the sheer size of China and
Brazil meant the global impact was clearly evident. China had already replaced Japan as the largest
regional market, reinforcing the power shift to emerging markets.
South Africa, Nigeria and Saudi Arabia all posted double-digit growth in 2013 with very strong potential in
fragrances, which is the largest BPC category in both Saudi Arabia and South Africa.
PASSPORT 8
Mixed growth prospects in largest BPC markets
Top 14 BPC Markets Value Growth

2013/2018
85,000
US
75,000
China
65,000
Brazil
55,000
Japan
45,000
Germany
35,000
US$ million rsp
Both China and Brazil witnessed a slowdown in

expenditure in 2013. At 8.7%, it was the most sluggish
real GDP growth for China in over two decades.
Despite the relatively weaker performance in China,
and also in Brazil, emerging economies are still set to
present a huge growth potential with new growth
frontiers coming to the fore. Brazil on its own is
forecast to account for nearly a quarter of global
absolute value growth over 2013-2018 thanks to its
deeply-rooted beauty culture.
Large developed beauty markets, such as Japan,
Germany, the UK and France, are expected to remain
flat up to 2018 due to market maturity and weak
consumer confidence.
India is expected to match the pace of growth in Brazil
up to 2018 despite a cooling economy, rising
commodity prices and a downgrading trend for staples
in rural areas, in addition to reduced export demand
from China.
The expected market size contraction in Russia, Italy
and Spain reflects the depth of the economic crises
these countries have been unable to overcome since
the recession took hold in 2009.
25,000
UK
15,000
France
14,000
India
13,000
Russia
12,000
Mexico
11,000
South Korea
Italy
10,000
Canada
9,000
Spain
8,000
2013
2018
PASSPORT 9
Growth potential with new frontiers coming to the fore

Despite a smaller market size base, ranking outside even the top 20 largest BPC markets in 2013, there is
a group of markets forecast to register compound annual growth rates (CAGRs) well above the global
average of 3% over 2013-2018. Trends driving growth are diverse and strategies to exploit opportunities
also need to vary considerably.
Most notably, Indonesias dynamic expansion is the result of resilient middle-class consumption, which is
seeing a boost from secondary cities. Vietnam and Pakistan also benefit from the same trends as both
multinational and local companies build stronger distribution infrastructures to reach a new consumer base.
2,500
10.0
2,000
8.0
1,500
6.0
1,000
4.0
Global BPC market value % CAGR
500
2.0
% CAGR 2013-2018
US$ million rsp
In Saudi Arabia, the consumer base is relative affluent; per capita expenditure on BPC items exceeded
US$140 in 2013, while Chinas, for example, still stands at less than US$33. In addition, a further 31%
growth in per capita expenditure is expected in Saudi Arabia over 2013-2018, which creates a positive
market environment for premium BPC segments.
BPC: New Frontier Growth Markets Growth Prospects 2013-2018
0.0
Indonesia
Saudi Arabia
Peru
Vietnam
United Arab
Emirates
Absolute Market Value Growth 2013/2018 (US$ million rsp)
Pakistan
Morocco
Tunisia
% CAGR 2013-2018
PASSPORT 10
Most categories see weaker performance in 2013

In terms of categories in 2013, deodorants was the strongest performer followed by oral care, while all
other categories growth rates were fairly subdued compared to the previous year.
Deodorants are seeing strong exposure to value-added innovation which is resonating well with consumers
in Latin America, by far the largest region for this segment globally.
Oral care, the only other category to exceed its 2012 growth in 2013, is witnessing deeper penetration in
emerging markets, particularly in Latin America, where there is growing demand for more upscale and
targeted product offerings such as whitening toothpaste and dental floss.
120,000
10
100,000
80,000
60,000
4
40,000
20,000
0
% y-o-y growth
US$ million rsp
Skin care is experiencing growing maturity in key Asian markets. Despite such dampening forces, skin care
recorded US$4.7 billion in value growth globally in 2013, led by anti-agers and moisturisers. While China
and the US continued to lead growth, anti-agers received a strong boost from the new growth frontiers
including Indonesia, Thailand and Argentina.
BPC: Growth Performance by Category 2012 vs 2013
0
Skin Care Hair Care
Colour
FraCosmetics grances
Oral Care Bath and

Men's
Shower Grooming
Value Sales 2013 (US$ million rsp)
Deodorants
2011-12% growth
Sets/
Kits
Baby and Sun Care

Childspecific
Products
2012-13%
Depilatories
PASSPORT 11
Niche categories post most dynamic growth in 2013

Historically anti-agers occupied the top spot among
the fastest growing BPC categories but with more
and more make-up products incorporating antiageing features and hybrid products such as BB/CC
creams proving popular with the younger segment the growing force by anti-agers has now been
overtaken by other facial make-up.
BB creams, also known as beauty balms and
blemish balms, have been popular in Japan and
South Korea for a number of years but practically
unknown to Americans before 2011. By 2013, the
US generated 58% of the categorys market value
growth in 2013. Dr. Jart+, a South Korean brand,
was one of the first BB creams to become well
known in the US. LOral was the first to introduce a
mass-market BB cream, Garnier BB Cream Skin
Renew Miracle Skin Perfector.
Interestingly in 2013, perms and relaxants expanded
strongly although it remains a niche category with
nearly all sales concentrated in the Middle East and
Africa and Latin America due to the large ethnic
diversity and hair types in those markets and strong
consumer desire for straight hair.
Fastest Growing BPC Categories 2013

Other Facial Make-Up
Perms and Relaxants
Deodorant Sprays
Polish Remover
Men's Skin Care
Nail Polish
Nail Treatments
Baby and Child-specific
Toiletries
Premium Unisex Fragrances
Face Masks
0
10
20
% y-o-y growth
30
PASSPORT 12
Product developments major impact on category performance
Frequent product launches with continuous product

developments in other facial make-up has been the
growth engine for the category since 2011.
While lack of innovation sees growth move
downwards. Although nail polish continues to grow at
over 10% year on year, it is no longer a buzz topic in
the US having faded in popularity. However, it still
represents an opportunity in Latin America with Brazil
offsetting declines in the US and set to replace the US
as the largest market in 2018.
30.0
Select BPC Category Performance

2011-2013
25.0
20.0
% y-o-y growth
The strong decline in perms and relaxants in 20112012 was a result of the ban in Brazil by ANVISA on
formaldehyde, which is a common component used to
get straight hair, due to the negative impact on health
and accidents reported. Therefore, many companies
had to withdraw their products and this had a direct
impact on sales in both retail volume and value terms.
Robust growth of perms and relaxants in 2013 was
the result of companies introducing new substitute
products for those that were discontinued following
ANVISAs decision. This resulted in a major
turnaround in global category growth from less than
0% to over 17% in one year.
15.0
10.0
5.0
0.0
-5.0
2010-11
2011-12
2012-13
Other Facial Make-Up
Nail Polish
Perms and Relaxants
Mass Men's Skin Care
PASSPORT 13
INTRODUCTION
EMERGING MARKETS
KEY INDUSTRY THEMES
CONCLUSIONS
EMERGING MARKETS
Brazil and China key revenue generators

BPC: Absolute Global Market Value
Growth by Category 2013/2018
Skin Care
Hair Care
Oral Care
Colour Cosmetics
Men's Grooming
Fragrances
Bath and Shower
Deodorants
Others
Top Eight BPC Market Growth Prospects 2013/2018

US$ million rsp
China
20,787.7
Brazil
16,066.1
US
6,239.8
India
3,688.5
Indonesia
2,066.9
South Korea
2,054.6
Saudi Arabia
1,853.5
Mexico
1,314.5
Others
15,278.8
China and Brazil combined will contribute some 53% of global BPC market value growth over the
2013-2018 period. In China, the majority of sales will come from the mass segment, fuelled by Olay,
Aupres, LOral and Mary Kay.
Hair care will receive a strong growth boost from Brazil. It will account for 32% of global hair care
growth over 2013-2018. Keeping up with past trends, conditioners and treatments will be the
greatest beneficiary of the developments in hair care with more targeted offerings, increasingly
making them an essential part of any routine to maintain healthy hair.
In the US, growth in premium BPC will outpace mass significantly and will be the stronger
contributor to absolute market value growth with US$2.8 billion over 2013-2018. This provides good
opportunities for premium-positioned product launches targeting a relative affluent consumer base.
PASSPORT 15
EMERGING MARKETS
Growing market sophistication in Indian and Indonesian beauty

India and Indonesia are among the top five fast-expanding BPC target markets for manufacturers.
However, Indias historic rapid growth is no longer a future certainty. A cooling economy and lower rural
urban middle-class consumption could mean challenging times for Unilever and Procter & Gamble, which
have made huge investments there already. However, the market is seeing growing demand for more
sophisticated, higher-margin, BPC products, for example mens grooming, with skin whitening brands such
as Fair and Handsome doing particularly well, as well as Garnier. Although still more commoditised, bath
and shower and oral care will generate one third of Indian market value expansion over 2013-2018.
In Indonesia, skin care has become a focal point for manufacturers, with LOral setting up a production
hub, while Unilever closely targets the market with its Ponds range, which dominated the market with a
near 40% value share in 2013. Mens grooming is also forecast to be a rapidly growing segment over 20132018 with a 10% CAGR. However, the category is highly consolidated between Japans top mens
grooming brand, Gatsby and Procter & Gambles Gillette.
India vs Indonesia: Growth Prospects by Category 2013-2018
Oral Care
Bath and Shower
Indonesia
Hair Care
Skin Care
Men's Grooming
Colour Cosmetics
India
Deodorants
Fragrances
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Absolute value growth (US$ million rsp) 2013/2018
PASSPORT 16
EMERGING MARKETS
Key opportunities for further penetration in emerging markets

Brazil and Chinas proportional weight in hair care and
skin care, respectively, is indicative of category growth
prospects. In the context of overall emerging markets,
category opportunities differ in terms of potential for
further penetration.
While some products, eg deodorants and fragrances
are already generating over 50% of global sales in
emerging markets, others have room to expand much
further, such as colour cosmetics and sun care.
Deodorants deep penetration in emerging markets is
also largely the result of the widespread availability
and popularity of such products in Brazil (accounting
for 23% of global category sales in 2013). Over 20132018, the top five most attractive growth markets for
deodorants also include Venezuela, Argentina and
India.
As a strictly beauty product as opposed to personal
care or hygiene, colour cosmetics has remained a
predominantly developed market category. However,
as a result of rising spending power on non-essential
beauty products and rapid urbanisation, key growth
markets for the category up to 2018 are expected to
be Brazil, China, South Korea and India.
Emerging vs Developed Market BPC:

Value Sales by Category 2013
Sun care
Oral care
Skin care
Men's grooming
Hair care
Fragrances
Deodorants
Colour cosmetics
Bath and shower
Baby/child products
0%
20%
Emerging
40%
60%
Developed
80%
100%
PASSPORT 17
EMERGING MARKETS
Emerging markets reach parity in BPC sales by 2018

By 2018, emerging markets will achieve parity with developed markets in
terms of BPC retail value sales.
Global BPC Sales

2013/2018
Staples such as soap and shower gel are receiving a strong boost from
India, which is the second largest bath and shower products market in
Asia Pacific.
Deodorants, fragrances and hair care reflect the magnitude of Brazil
again and the strong position (number one in the former two, and number
two for hair care) the country holds in these segments. Fragrances is also
strongly boosted by South Africa and Saudi Arabia.
It is interesting to note that skin care is not highly penetrated in emerging
markets, mainly due to Latin Americas weakness in this segment with
consumers showing greater preference for scented products and
beautiful hair, rather than interest in anti-ageing features.
2013
Emerging
Developed
Asia Pacific has low penetration in colour cosmetics. The US is the

largest market and China and India are projected to lead future growth,
but they all fall in the lowest band of proportional income spent on makeup. On the other hand, lower-income countries in the Middle East and
Africa and Latin America fall in the highest band, spending on a wide
variety of colour cosmetics.
Oral care in emerging markets is also yet to reach high penetration levels
with more scope for non-essential products such as mouthwashes and
floss, and beyond traditional toothpastes.
2018
PASSPORT 18
EMERGING MARKETS
Mass domination, with strong premium potential

Although mass BPC products still dominate national markets with the largest expected absolute value
growth up to 2018, the forecast percentage growth for premium is more dynamic over 2013-2018 in most
emerging and largest developed markets; one notable exception being Argentina.
In Argentina, the recession continues, the economy remains flat and there are a number of productionsupply chain issues. Regulations for import lock-out over 2013-2014 are unlikely to be changed, which is
affecting all companies. The shift to local production results in cheaper products, hence devaluing the
market, although it has benefited local producers.
Mass vs Premium Beauty Value Sales by Core Markets 2013
US
China
Russia
Argentina
Mexico
India
Indonesia
Brazil
0%
10%
20%
30%
40%
50%
Mass
60%
70%
80%
90%
100%
Premium
Growth in premium > mass in 2013

Growth in mass > premium in 2013
PASSPORT 19
EMERGING MARKETS
Premium skin care dominated by China
Only four countries, China, India, Indonesia and Vietnam,

are expected to enjoy annual double-digit growth for
premium skin care over the 2013-2018 period. Strong
aspirational demand for Western brands, young
populations and early adoption of skin care routines and
anti-ageing products, are the key drivers of the strong
growth.
Indonesia, India and Vietnam have an average female age
of 30 years, but are expected to see anti-agers retail sales
grow in double-digit terms annually by 2018.
30.0
Premium Skin Care: Growth

Prospects by Select Markets
2011-2018
25.0
20.0
% y-o-y growth
Some 64% of premium skin care market value growth over

2013-2018 will be generated by China, despite category
growth slowing in China in 2013 due to purchasing abroad,
slowing penetration in second- and third-tier cities and a
cooling economy. In addition, the Chinese middle class is
becoming more discerning and value conscious and not
only aspirational and status driven but more sophisticated
in terms of needs. However, growth is expected to
accelerate again from 2014 and China will replace Japan
by 2018 as the largest premium skin care market in the
world with retail value sales of US$10.1 billion in 2018.
China premium skin care is fuelled by Lancme, Este
Lauder, Christian Dior and Artistry.
15.0
10.0
5.0
0.0
2011-122012-132013-142014-152015-162016-172017-18
World
China
Indonesia
Vietnam
India
PASSPORT 20
EMERGING MARKETS
Premium prospects in Brazil largely concentrated in fragrances

Brazilians generally consider local quality as superior, but when it comes to fragrances imported
international scents are more highly regarded. A growing number of more aspirational consumers look
towards international brands; upper class consumers buy abroad, while the middle class requires
accessible products.
It is common in Brazil to purchase beauty products via instalment plans due to the high prices and this was
the strategy adopted by retailers to stimulate consumption and facilitate access for consumers, especially in
lower-income brackets, to certain products.
Due to high taxes on premium BPC products, prices can be 2-3 times higher than those when purchasing
an international brand abroad.
However, the gap between local best-selling fragrances and international brands is generally narrowing as
a result of wider availability.
Many multinational players are employing strategies to access the Brazilian market with strong demand for
premium fragrances, including Coty and L'Occitane.
10.0
200
8.0
150
6.0
100
4.0
50
2.0
0.0
Premium Fragrances
Premium Sun Care
Premium Skin Care
Absolute Market Value Growth 2013-2018 (US$ million rsp)
Premium Colour
Cosmetics
% CAGR 2013-2018
US$ million rsp
Brazil: Premium Beauty Growth Prospects by Category 2013-2018

250
Premium Hair Care
% CAGR 2013-2018
PASSPORT 21
EMERGING MARKETS
International brands adapt to Brazils premium market environment

International brands are pursuing diverse
strategies to tailor their offerings to the Brazilian
market environment for full growth potential.
One possibility is for local tailoring by lowering
fragrance concentration for limited editions, such
as Paco Rabanne body spray or Flower by Kenzo
Lgre. In addition, local celebrities and events can
be used to promote flagship brands.
In Brazil, prestige outlets are limited and currently

there are many changes in terms of new retail
formats, eg Grupo Boticrios new Beauty Box
concept, which sells prestige third party brands
including Dior, Lancme, Shiseido and Burberry.
Internet retailings penetration is growing but also
potential collaboration with local direct selling
operators is key, given their importance.
Companies are moving to local production to avoid
heavy import duties, such as Coty in collaboration
with Jequiti Cosmticos to produce J-Lo Rio Glow.
Coty also had an agreement to launch Truth or
Dare by Madonna and launched Beyonc
fragrance in 2013.
Growth Driving Factors in Brazilian Premium

Beauty
Price
Local tailoring
Local production
Channel
PASSPORT 22
EMERGING MARKETS
Local players hold stronger positions in Brazil than in China

Brazil: Top 10 Beauty Players Market
Value Share 2013
China: Top 10 Beauty Players Market

Value Share 2013
Natura
Procter & Gamble
Unilever
L'Oral
Grupo Boticrio
Unilever
Procter & Gamble
Shiseido
Avon
Mary Kay
Colgate-Palmolive
Colgate-Palmolive
L'Oral
Amway
Johnson & Johnson
Beiersdorf
Hypermarcas
Johnson & Johnson
Beiersdorf
Este Lauder
0.0
Local Player
5.0
10.0
% market value share
15.0
0.0
5.0
10.0
15.0
PASSPORT 23
EMERGING MARKETS
Diverse competitive landscapes in Brazil and China

The competitive landscape in Brazil is very different from that in China. Both countries have relative poor
business infrastructures beyond first-tier cities, leaving large proportions of the population still un-captured.
An over-regulated business environment is also a common feature of the two markets.
However, Brazil has the highest import taxes in the world, which make market entry by international players
more challenging. Aside from taxes, the strong presence and good reputations of Natura and Boticario
(combined these command close to one quarter of the BPC market in Brazil) is another obstacle to
international brands.
Brazils BPC environment is also strongly focused on the direct selling model, with Natura and Avon
accounting for some 20% of all beauty sales. In China, however, early movers Unilever and Procter &
Gambles strength is due to successful penetration in hair care, TRESemm in particular, offering salonstyle hair care at an accessible price point. Procter & Gamble owns three out of the top five BPC brands in
China, namely Olay, Head & Shoulders and Rejoice.
Brazil
China
Underdeveloped infrastructure, over-regulated

business environment
Underdeveloped infrastructure, over-regulated

business environment
Strong growth of health and heauty specialist
retailers
High import taxes

Established direct selling networks
Multinationals early-mover advantage
FAVOURING LOCAL BRANDS
FAVOURING INTERNATIONAL BRANDS
PASSPORT 24
EMERGING MARKETS
Brazilian competitive landscape changing

Brazil, where direct selling is a key distribution channel, saw local beauty specialist Grupo Boticrio
outperform Natura and Avon over 2008-2013. Both direct sellers having suffered from operational,
distribution and sales force productivity issues. Although direct selling is still a major distribution channel in
Brazil, with 26% of beauty products sold through this channel in 2013, it is gradually losing share to brickand-mortar stores as consumers tend to buy on impulse and as an indulgence.
Natura has been shifting strategies with the aim to fill white spaces. It has launched economy brand Sou for
lower-income and more value-conscious consumers. It has also introduced new upscale fragrance Una,
priced at US$75. In 2013, through the acquisition of Aesop Natura has gained further foothold abroad as it
feels pressure in its home market and tougher competition by modern retail formats in the face of Sephora
(12 stores already) and more recently Boticrio (90 stores) as well as the rise of independent perfumeries.
Internet retailing is also growing healthily in the area of premium brands, with Sephora at the forefront.
Brazil: Direct Selling Losing Ground
2008-2013
Brazil: Store-Based Portfolios Gain

2008-2013
Beauty Specialist Retailers
Boticrio
Internet Retailing
Procter & Gamble
Department Stores
Unilever
Supermarkets
Natura
Direct Selling
Avon
-2
-1
0
1
% growth 2008-2013
-4
-2
0
% growth 2008-2013
PASSPORT 25
EMERGING MARKETS
Local players in China intensify competition

In China, many international players are coming
under pressure. LOrals position has been less
affected than that of Procter & Gamble, but Garnier
and Revlon pulling out of the market was a warning
sign for all international players as to their
strategies in the face of stronger local competition
and a cooling economy. Revlon and Garnier had
not penetrated sufficiently in secondary cities, as
slow innovation pipelines and inadequate pricing
policies left them highly exposed when market
conditions changed for the worse.
Local brands are becoming more sophisticated,
targeted and Korean ones have an extra edge due
to the popularity of Korean pop culture. Other
international brands are also in danger, particularly
in the mass segment where local players operate
Nu Skin launched ageLOC anti-ageing products in
2012 and as a result of heavy promotion and wide
availability the company increased its market value
share in Chinese BPC from 0.5% in 2012 to 1.4%
in 2013.
China: Share Growth in Selected BPC

Companies 2008-2013
L'Oral
Nu Skin
Proya Cosmetics
Mary Kay
Este Lauder
Jala
Shanghai Inoherb
Yunnan Baiyao
AmorePacific
Johnson & Johnson

Kao
Amway
Avon
Procter & Gamble
-3
-2
-1
0
1
2
3
Market value share growth (percentage points)
PASSPORT 26
EMERGING MARKETS
Trends favouring local Chinese beauty players

Trends Driving Local Players Growth in China Beauty Another trend in China favouring local players is
the growing interest in traditional Chinese medicine
(TCM). Thanks to the nations long-standing
practice of using TCM, BPC products using natural
herbs are increasingly appealing to consumers of
Dynamic sales of
all age. In this context, local players hold a stronger
Advantage in
ageLOC, included in
marketing products
hand than international players, as they promote
both consumer health
with TCM credentials
their better knowledge of herbal benefits and
and BPC products
emphasise local ingredients.
Two local players with portfolios focusing on
products with TCM credentials, Shanghai Inoherb
and Shanghai Jahwa (flagship brand Herborist),
have been gaining market value share steadily
over the 2008-2013 period.
Local Companies Market Value Share

Performance 2008-2013
2.5
2.0
1.5
1.0
0.5
0.0
2008
2009
2010
Shanghai Inoherb
2011
2012
2013
Inoherb largely targets the mass market and in

2013 it also launched new products in mens skin
care. Shanghai Jahwa introduced more high-end
anti-ageing products in 2013, priced at CNY980
(US$160). However, the majority of the portfolio is
still priced at CNY100-400 per unit, with the
Lanege brand from AmorePacific as Herborists
major competitor and benchmark brand.
Shanghai Jahwa (Herborist)
PASSPORT 27
EMERGING MARKETS
Korean exports reach new high thanks to huge China sales

Korean brands gain popularity in China
Growth also comes on the back of innovation
Although Korean brands are unlikely to gain

significant share from Procter & Gamble and
LOral, they are rapidly gaining share in China.
South Korea is becoming the new focal market for

beauty innovations and it is one of the most
innovative markets in the Asia Pacific region. It
posted a near 8% CAGR over 2008-2013.
Demand for Korean products is strongly boosted

by the popularity of Korean pop culture, with many
of its stars promoting their own fragrance and skin
care lines, underpinning strong demand for Korean
cosmetics.
AmorePacific Corp: Korean Brands
Performance in China BPC 2008-2013
Korean innovation is especially pioneering skin

care and mens grooming products and offers
opportunities to leverage growth into the wider Asia
Pacific region or global markets.
South Korea: Top BPC Growth

Prospects by Category 2013-2018
1,000
0.5
US$ million rsp
0.6
0.4
0.3
0.2
0.1
10.0
800
8.0
600
6.0
400
4.0
200
2.0
0.0
2008
2009
Mamonde
2010
2011
Lanege
2012
Innisfree*
Note: *Innisfree share indicates share of colour cosmetics
2013
% CAGR 2013-2018
Korean products are positioned as more affordable

and are capturing the younger consumer segment.
0.0
Skin Care
Colour Cosmetics Men's Grooming
Absolute Market Value Growth 2013-2018 (US$ million rsp)

% CAGR 2013-2018
PASSPORT 28
EMERGING MARKETS
Expansion strategies intensify

Local collaborations
Expansion strategies also vary according to diverse

market environments.
Joint ventures
Coty and Frajo (owned by Grupo Boticrio)

established a joint venture in Brazil, which provides a
better platform to distribute their brands. This deal will
expand Coty's go-to-market capabilities in the region
Acquisitions
Local customisation
Expansion Strategies Targeting Emerging

Markets
Coty
Frajo
Coty
Avon
Coty
Li &
Fung
Avon
Korres
Este
Lauder
Osiao
Joint venture
Distribution
partnership
Distribution
partnership
Manufacture and
market
New product
launch
Brazil
Brazil
China
Latin
America
China
Coty Inc has intensified its efforts to expand its

consumer base through distribution agreements,
announcing two deals in as many months in 2014. In
June, it entered into an agreement with Li & Fung,
which will distribute some of Coty's power brands in
China, including adidas, Rimmel and Playboy. This
follows an agreement with Avon in May whereby select
Coty fragrances will be marketed and sold through
Avon Brazil's network of 1.5 million independent sales
representatives. This deal empowers Avon with
different price points and brands.
Avon also started to manufacture and market Greek
natural skin care brand Korres through a new strategic
alliance. Once again this will empower Avon but it is
yet to be seen how successful it will be given the
countrys weak predisposition to skin care products.
PASSPORT 29
EMERGING MARKETS
Este Lauder develops Osiao for China

Este Lauder Companies, which already sells 12 of its 28 cosmetics brands in China, is taking a new
approach by adding an entirely new brand, Osiao, to its portfolio.
The new skin care brand caters to the tastes of consumers in Asia. Osiao was developed in China but
manufactured in Japan. The brands specialised formulations, for example, contain Chinese medicinal
plants such as ginseng and ganoderma, a type of mushroom, tapping into the strong belief by local
consumers in the power of traditional Chinese medicine (TCM), as well as their desire for luminosity and
clarity.
Este Lauders current portfolio is positioned at premium price points and many of its brands easily
outperformed the already dynamic premium BPC market in China. The strong development of the health
and beauty specialists channel in the market favours its eponymous Este Lauder and luxury La Mer
brands.
Similar to other international players, Este Lauder has strengthened its Chinese expansion strategy in
terms of local tailoring and strengthening existing brands beyond first-tier cities.
50
500
40
400
30
300
20
200
10
100
0
% CAGR 2008-2013
US$ million rsp
Este Lauder Brands Performance in China 2008-2013

600
0
Este Lauder
Clinique
La Mer
Retail Value Sales 2013 (US$ million rsp)
Bobbi Brown
Mac
% CAGR 2008-2013
PASSPORT 30
EMERGING MARKETS
LOccitane benefits from local production in Brazil
350
LOccitane: BPC Value Sales in Select

Markets 2008/2013
300
250
US$ million rsp
Product customisation to local trends and demand is

also present in Brazil and one of the pioneering
multinationals is LOccitane.
In 2013, it has launched a new range of cosmetics,
LOccitane au Brsil. It is manufactured locally and
inspired by Brazilian biomes, such as the Amazon,
using indigenous plants that are not traditionally used
for cosmetics.
It is a move not without risk, especially for a group
that has spent the previous four decades building its
brand around its Frenchness and its Provencebased manufacturing facility.
However, with some of the highest import taxes in
the world, Brazil can turn even the most nationalist of
companies into a local producer. Indeed, LOccitane
claimed that its LOccitane au Brsil products would
be about 30% cheaper than its imported range. While
part of this saving is due to the fact that production in
Brazil is less expensive than in Provence, the bulk of
the discount is a result of tax savings.
LOccitane has already tripled its sales in Brazil since
2008 and the new range will create a significant
growth platform for the group.
200
150
100
50
0
US
Japan
Brazil
2008
China
Russia
2013
PASSPORT 31
EMERGING MARKETS
L'Occitane targets mens grooming in Brazil

L'Occitane has also started to target mens grooming categories in Brazil to benefit from the dynamic
growth rates and early-mover advantage in the relative new categories.
L'Occitane en Provence entered the barber shop channel in Brazil with the unveiling of a barber shop in
L'Occitane Spa in Vila Nova Conceio, an upscale neighbourhood of So Paulo. Following the concept of
a traditional barber shop, and vintage style, the service is carried out by so-called BarberStylists, experts in
different techniques of shaving and facial treatments. The space dedicated to a male audience offers the
traditional services of a barber shop and massage allied to treatments with branded products. Among the
experiences offered to male customers, there are facial massages lasting 30-45 minutes using the maleorientated lines Cade, offering smoothing and stimulating properties, and Vernon, offering invigorating and
moisturising properties.
US$ million rsp
1,500
20.0
15.0
1,000
10.0
500
5.0
0.0
Men's Deodorants Men's Razors and Men's Post-Shave Men's Pre-Shave
Blades
Men's Hair Care
Absolute Market Value Growth 2013/2018 (US$ million rsp)
Men's Bath and

Shower
% CAGR 2013-2018
In Brazil, however, mens grooming categories beyond deodorants and razors and blades are not yet a
significant size but the expected dynamic double-digit growth rates over 2013-2018 are attractive for
multinationals in search of new growth segments uncontested by local players.
Brazil: Mens Grooming Growth Prospects by Category 2013-2018
Men's Skin Care
% CAGR 2013-2018
PASSPORT 32
INTRODUCTION
EMERGING MARKETS
KEY INDUSTRY THEMES
CONCLUSIONS
KEY INDUSTRY THEMES
Future revenues in the hands of skin care and hair care

Skin and hair care
categories are
expected to be the
largest growth
segments in key
beauty markets.
Growth in China, the
US and Indonesia will
be generated largely
by skin care, while in
Brazil, Turkey and
Central Asian markets
hair care will add most
significantly to the BPC
markets growth in
retail value sales terms
up to 2018.
Fragrances is also a key growth engine especially in the Middle East and Africa and in a number of large
Latin American markets. In these markets, the combination of traditional preference for fragrances and the
dynamic growth of disposable incomes will boost category sales significantly.
In Russia, sets/kits will add the largest absolute value growth to the BPC market over 2013-2018. The
growing presence of sets/kits in hypermarkets/supermarkets and in beauty specialist stores will lead to
higher sales. Moreover, producers are offering a wider variety of sets/kits than in previous years.
PASSPORT 34
KEY INDUSTRY THEMES
Brand loyalty in skin care and hair care prevails

Brand loyalty plays a key role in how the BPC industry evolves, as does the vast stream of innovation, and
with the continuous rise of niche skin care brands it is becoming increasingly difficult to retain consumers.
Looking at the reasons consumers choose to be brand loyal or not, provides a deeper understanding of
how to develop more tailored product offerings.
When it comes to maintaining healthy hair and skin, consumer preference is greater for trusted brands. The
majority say they almost or usually buy the same hair care and skin care brands; far fewer frequently switch
between products.
There is much more experimentation when it comes to products that augment rather than preserve
appearance, such as in colour cosmetics with nail polish. As for fragrances, the desire for a personal
scent is becoming increasingly outdated as more and more consumers are likely to play with new brands
than to stick with what they know.
Brand Loyalty Survey Results by Select Beauty Category 2014
Hair Cleaning
Facial Care
Fragrance
Lip Care
Nail Polish
0%
10%
20%
30%
Prefer new brands
40%
Neutral
50%
60%
70%
80%
90%
100%
Prefer same trusted brands
Euromonitor Internationals Personal Appearances Survey results are drawn from ~6,600 online consumers ranging in age from 15 to 65+ and living in 16
major markets in 2014: Australia,Brazil, China, Colombia, France, Germany, India, Indonesia, Japan, Mexico, Russia, Spain, Turkey, Middle East (KSA and
UAE), United Kingdom, and the US.
PASSPORT 35
KEY INDUSTRY THEMES
Key themes to define the industry in 2014 and beyond

Many brands have already experimented with multibenefit combinations, with BB/CC creams growing
strongly, but this is becoming more ubiquitous and
expected as standard in many products. However,
there are still opportunities for further crosscategory convergence and more hybrid products on
the market.
Multi-benefit
becomes
ubiquitous
Luxury for
all
at-home
beauty
New
product
experience
Fashion
beauty
Consumers are now more than ever preoccupied

with their own image, selfie beauty remains a key
trend. This will necessitate focus on more tailored
and personalised product offerings.
Brands are experimenting with novel packaging,
application formats, brand image associations,
scents, textures, as well as novel retail experiences
to create further excitement and engagement with
consumers.
Selfie
beauty
Fashion brands are entering the beauty space in a

wide range of categories. Beyond fragrances and
colour cosmetics, skin care is also seeing a number
of new entrants from fashion brands at both the
premium end, such as Burberry, and more massorientated brand ranges, such as H&M in the UK.
PASSPORT 36
KEY INDUSTRY THEMES
Multi-benefit opportunities
More opportunities for benefit crossover
Hair
Hair - anti-agers
Hair - health
Hair - fragrances
Hair - make-up
Colour
Nail - anti-agers
Nail - skin care
Nail - fragrances
Lipstick - lip care
Globally in 2014, consumers have become more

accustomed to paying for convenience as well as trying
novel products and services, a trend that is expected to
continue in 2015 and beyond.
The vast amount of information available especially in
the form of online reviews has helped minimise the risk
of trying new offerings for consumers. BB/CC creams
robust progression is a testament to how the
convenience that these hybrid products provide coupled
with the novelty factor has been a successful recipe for
BPC companies.
Added fragrance is becoming a stronger feature across
all categories from hair or skin care to colour cosmetics.
Products with anti-aging properties are also becoming
more prominent outside skin care.
Skin
Skin - body washes

Skin - fragrances
Skin - textiles
Skin - devices
The BPC industry is also crossing over to other

industries, such as consumer appliances and textiles.
For example, Unilevers Iluminage subsidiary offers
cutting-edge, clinically proven and interactive skin care
solutions for skin rejuvenation. Beauty devices offer
treatments and textiles have been designed for at-home
use to optimise beauty products efficacy.
PASSPORT 37
KEY INDUSTRY THEMES
Multi-benefit product launches in hair care and colour cosmetics

Hair Care
Phyto Phytodensium
Age-Defying Serum
Marketed as a powerful
combination of plant extracts
that helps hair regain density
and vitality and helps inhibit
the growth of grey hair.
Caviar Anti-Aging
Overnight Hair Rescue
Claims to repair hair during

sleep and prevent future
breakage.
Nexxus Youth Renewal

Rejuvenating
Conditioner
Promises to combat eight

visible signs of ageing in hair:
volume loss, breakage, less
shine, roughness, dryness,
brittleness, unruliness and
loss of colour vibrancy.
Colour Cosmetics
Lip Lover Balm
Clinique Nail Polish
Multifunctional balm, lipstick

and gloss hybrid designed to
provide colour, shine and lip
care in one - infused with
emollients and silicones.
Marketed for sensitive skin

due to formulation without
formaldehyde, formaldehyde
resin, DBP or parabens.
Bobbi Brown Art

Sticks
Classic 2-in-1 product is used

for lips and cheeks. A blend of
emollients and shea butter
creates a rich creamy texture
that allows smooth application.
PASSPORT 38
KEY INDUSTRY THEMES
Fashion brands up their investment in beauty

The increasing desire for more affordable luxury as well as the need for expansion without compromising
the brand image has pushed luxury fashion brands to expand or enter the beauty market.
Most recent examples include Tory Burch and Michael Kors, which both entered the BPC market with
fragrances and colour cosmetics through Este Lauder. Marc Jacobs and Tom Ford, meanwhile, expanded
in colour cosmetics and mens skin care, respectively. Furthermore, prestige fashion brands such as
Christian Dior and Chanel have upped their investment in skin care, which although traditionally avoided by
fashion brands, appears to have become the key focus area of expansion.
Most recently, in August 2014, J Crew has entered its flagship brand into fragrances by investing significant
resources into its new fragrance collections marketing campaign. No. 31 and No. 57 will be featured
prominently in the companys September 2014 catalogue and will have their own page on the website.
Michael Kors 2013
Tory Burch 2013
J Crew 2014
PASSPORT 39
KEY INDUSTRY THEMES
Opportunities in skin care still untapped

Christian Dior and Chanel have focused investment on skin care in recent years. Chanel operates its own
research laboratories which distinguishes it from some of the other fashion houses. The Le Lift line
introduced in 2013 offered in three different formats, cream, lotion and gel, competes directly with the
popular Crme de la Mer. Chanel launched its own multi-step skin care routine, the Le Jour, La Nuit and Le
Weekend, which breaks away from the 3-step system that Clinique has been promoting for years, to offer a
new concept
Christian Diors new Dreamskin line claims to treat skins texture and tone regardless of age and group.
Dior generates more than half of its global skin care revenue in Asia, with most of its total absolute growth
over 2008-2013 coming from China, which makes further investment in skin care even more compelling.
Fashion Brands' Growth Performance in Selected BPC Categories

2008-2013
500
400
5
4
300
3
200
100
% CAGR 2008-2013
Absolute value growth

(US$ million rsp) 2008/2013
Chanel, in particular, has used the regions consumers predisposition for skin care and many of its skin
care launches were first introduced in Asia before being launched in the West, including the Chanel Le
Blanc series, which has experienced huge success, achieving double-digit growth globally in 2013.
0
Fragrances
Colour Cosmetics
Christian Dior
Skin Care
Fragrances
Colour Cosmetics
Skin Care
Chanel
PASSPORT 40
KEY INDUSTRY THEMES
Selfie beauty
Selfie beauty
Nail polish
Tailored
innovation
Skin
perfection
Individuality
Novel textures
Nail art
2013 was the year of the selfie as personal

images via social media, whether on Facebook,
Twitter, Instagram or Snapchat, were the preferred
form of communication. With image so important
nail polish/nail art, skin care and skin protection
allow consumers to showcase individuality and
personality through unique textures and colours.
Solution-based
Hyperpigmentation
Scalp health
Young consumers continuous preoccupation with

their image brings about more tailored offerings
with a rise in specific solution-based products that
consumers can relate to. Examples include
hyperpigmentation, evening skin tone, scalp health
and anti-ageing for hair among others.
Even tone
Spot correction
Smooth texture
As product portfolios become more diverse, these

will cater to a higher number of different consumers
from teens to over 50s and also offer a wider range
of offerings for men. Access to rapidly developing
telecommunication devices by an ever widening
consumer base across developed and emerging
markets feeds this trend.
PASSPORT 41
KEY INDUSTRY THEMES
The power of social media on skin care product developments

The rise of personal image as the key
communication tool has increased the importance
of picture-perfect skin.
Christian Diors Dreamskin
Innovation in 2014 will continue to be driven by a

range of products that promise to smooth out
imperfections, tighten pores and even out skin
tone.
Idealia Life Serum by Vichy
Some of the most notable launches in 2013

catering to this trend included LOral Pariss Skin
Perfection series, the Idealia Life Serum by Vichy,
Lancmes DreamTone and most recently
Christian Diors Dreamskin.
In celebration of its serum DreamTone, Lancme
USA launched a social media campaign
#bareselfie, which encouraged users to use the
product and take bare look/no make-up pictures to
share on Instagram.
There campaign also aims to promote Lancmes
new serum, DreamTone, which is a barely-there
tinted serum that visibly corrects pigmentation,
uneven skin tone and colour imperfections
Lancmes DreamTone
LOral Pariss Skin Perfection
LOral Revitalift Magic Blur
Garnier Skin Renew 5 Sec

Blur Instant Smoother
PASSPORT 42
KEY INDUSTRY THEMES
New product experience comes in different forms

Product experience
Companies new product launches target consumers by offering a full

product experience starting with the retail environment through new
textures, formats, applications to novel formulations and scents, etc.
Retail
Virtual
Prestige brands positioning is enhanced through the expansion of

stand-alone retail outlets, eg Chanel or Burberry. Most recently, even
predominantly mass market-positioned LOral Paris has set up travel
retail counters at airports.
Texture
Format
Application
Novel
Formulation
Riding on the good success of skin care devices, new products

integrating application or cleansing tools are becoming common. For
example, Lancme has integrated a tool in the form of a massage disc
into its Rnergie French Lift Crme.
Scent
Packaging
Image
There is growing demand for scented products in a wide range of BPC

categories, including skin and hair care or colour cosmetics. One of the
global launches includes Revlon Parfumerie Scented Nail Enamel. In
hair care, Clairol Herbal Essences launched a range of fragrance oils,
including Herbal Essences Fruit Fusions Citrus Scent.
Packaging solutions form a large part of both product image and
efficacy. For example, in deodorants, new compact versions had a
significant impact on category performance.
In order to ensure a high-quality product experience for consumers,
new product launches need to take a more holistic approach to
development.
PASSPORT 43
KEY INDUSTRY THEMES
Product experience: Texture and format

Demand for new textures is intensifying innovation
activities in the global BPC market.
Oils are set to become more popular, in both skin and

hair care thanks to their hydrating and moisturising
properties.
Facial oils are especially emerging as part of the
formulations in nourishing, illuminating moisturisers or
make-up removers. For example, Biotherms Blue
Therapy Serum Oil, launched in September 2013, is a
2-phase oil that claims to have the reparative properties
of an oil and also act as a serum. In addition, L'Oral
Paris Eclat Sublime Huile Dmaquillante make-up
remover also features an oil-based formula.
Retailers are also following the oil trend.

LVMH- owned beauty products retailer Sephora
Hair care has received a strong stimulus to growth in
is focusing on the category of oil-based
Western markets, evolving into a multifaceted category
products by creating an in-store area called
increasingly inspired by skin care and salon alternatives.
Zoom in some of its largest stores in Europe.
Hair oil has been one of the most successful launches in
The area groups together its offer of oil-based
retail channels. Hair oil has been introduced as a leaveskin and hair care products and has created a
in conditioner, but its nutritional benefits for hair also
kit of 12 must-have oil-based products from
make it an essential part of hair treatment. At the end of
across a range of brands. In addition, it is also
2013, Unilever expanded its Dove hair care portfolio to
launching its own private label oil-based skin
include a new range of premium oil treatments.
care range in the US.
PASSPORT 44
KEY INDUSTRY THEMES
Product experience: Packaging and application

Unilevers compact spray formats
LOral Redken redesign focuses on customisation
Unilevers game-changing move in deodorants

Taking design to a new level, Redkens new
with its new compressed and portable format, also overhauled black jar packaging for styling agents is
extended to mens lines, has not only been seen as designed to be used in combination with other styling
a stronger commitment to sustainability but also as agents and achieving different hairstyles by adopting a
a new way to excite and engage with consumers
layered approach. Currently a strong trend in hair care
on a different level.
is customisation. Redken is offering consumers the
Similarly its on-the-go spay moisturiser format for chance to easily combine two or three different styling
products, in interlocking jars. The range includes eight
Vaseline has now been extended to the St Ives
brand, promoting faster absorption for women with different styling agents.
busy lifestyles.
Application design to control dosage
With the aim of offering a convenient way of properly applying anti-ageing skin care products, brands are
launching pad formats. US brand Radical Skincares Age-Defying Exfoliating Pads contain AHA and BHA
multi-fruit acids, which promise to exfoliate, promote cell renewal and accelerate the performance of other
skin care ingredients. The 40% triple acid peel features capsules, which are to be shaken, opened and
applied to the pads before application, a process meant to mimic a professional skin care service at home.
Although it was first launched in 2008, Air Cushion has recently become a key trend in facial make up in
South Korea after the huge success of BB creams. Air Cushion is similar to a liquid foundation but the
product is soaked in a sponge together with sun protection, make-up base and moisturiser. The idea behind
Air Cushion derives from a stamp that can be pressed on the users face, so its packaging resembles more
a compact powder case than a tube or bottle.
PASSPORT 45
KEY INDUSTRY THEMES
Product experience: Scent

Fragranced skin care discerning
trend in South Korea and Japan
Fragranced skin care is particularly
prominent in South Korean brands,
key examples including products
from the mono-brand companies
Nature Republic, The Face Shop,
Etude House etc. These are all
fragranced, but not necessarily
floral scents and can also be fruity
essences.
For mens lines, they tend to use
phytoncides, active substances
derived from plants, often with a
pine-like aroma.
Hair care and fragrances make

natural fit
Hair care is especially
accommodating of the scent
trend.
Scented products in colour

cosmetics
Scented products are also
appearing in more unusual
colour cosmetics categories.
For example, KeraSys and

Elastine in South Korea
collaborated with a famed
perfumer to launch fragranced
shampoo lines marketed with
the word perfume.
For example, in nail polish,

Revlon Parfumerie Nail Enamel
Collection has 20 shades split
into three fragrance groups;
Fruit & Floral; Fresh; and Sweet
& Spice. It is an interesting
concept, allowing consumers to
choose nail polish not only for
its colour but also for its scent.
In the more mass marketorientated hair care product

lines, Procter & Gambles
launched Naked Herbal
This trend does not only apply to
Essences, which is very herbal
skin care products but can also be and green, and not fruity like
found in hair care, body care or
Herbal Essencess other
colour cosmetics.
shampoos. It contains rosemary
Beyond beauty, Bvlgari announced and peppermint extracts, with
the fragrance lasting for 10
the launch of Le Gemme, a new
hours on the hair.
collection of luxury perfumes
inspired by semi-precious stones.
Faint floral aromas are also

infused in Kao Corps Sofina
Jenne and Sofina Beaute
products. Sofina is the third
largest premium BPC brand in
Japan and has been expanding
its market value share
particularly strongly in colour
cosmetics.
PASSPORT 46
KEY INDUSTRY THEMES
Product experience: Changing retail environment
Global BPC: Value Sales

by Key Distribution
Channel 2008-2013
100
90
80
% total BPC value sales
Distribution of BPC products has seen a shift to more self-service

environments. Even growth in beauty specialist retailers, which
generally have a strong service element, has been driven by selfservice environments in large chains such as Sephora.
Curation is a word typically associated with museums and art
galleries, but is also a concept found in BPC retailing that adopts a
more selective and guided approach in terms of product promotion
and display, and at the same time suggests that the products are best
in class. Curation helps online and offline retailers to diversify and
compete more effectively in a marketplace dominated by self-service
retail culture.
Mass beauty brand LOral Paris inaugurated its first stand-alone
store in Spain in Madrid in January 2014. Conceived as a laboratory,
according to the company, the boutique gives consumers the chance
to test and purchase an edited range of the brands products, while
providing access to added-value services.
Similarly, a virtual retail kiosk from L'Oral Paris can detect the
colours in a users clothing and then recommend beauty products that
would complement them. The kiosk, launched inside a New York City
subway station in November 2013, features a large touch screen and
a full-length smart mirror to create digital animations of the user.
Customers can directly purchase the recommended products or have
the eye, lip and nail shade recommendations emailed to them.
70
60
50
40
30
20
10
0
2008 2009 2010 2011 2012 2013
Internet Retailing
Department Stores
Direct Selling
Modern Grocery Retailers
PASSPORT 47
KEY INDUSTRY THEMES
Product experience: In-store and digital retail developments

In-store retail enhancements
Digital focuses on personalisation

Global beauty retailer Sephora, part of the Francebased LVMH group, has launched a social
shopping platform aimed at encouraging more
customer engagement by using beauty images.
Response
to the rise of
internet
retailing
Consumers
want to feel
more
special
Improved
shopping
experience
Strong
customer
service
Called Beauty Board, the platform encourages

users to share Sephora images of cosmetic
products and effects by giving them the ability to
post, share, browse and shop from Sephoras
photo gallery on Sephora.com, which is accessible
through all mobile devices.
This enables consumers to upload photos, tag
products and share with other social media users
how they tailor the use of these products to their
individual beauty routines, and is designed around
social media platforms such as Pinterest and
Instagram, which are evolving on increasingly
image-focused lines.
Websites such as Pinterest and Fancy.com
operate on a crowd curation model, allowing web
users (as well as celebrities and businesses) to
curate their own collections of products.
PASSPORT 48
KEY INDUSTRY THEMES
At-home beauty: Face masks an untapped opportunity

At-home treatments, which have been elevated due to
reduced salon visits and the desire for a pampering
experience, have remained strong, with face masks
expected to be the strongest performing category over
2013-2018. As players in this field, largely concentrated
in Asia, continue to diversify their offerings beyond
lightening to radiance, anti-ageing, eye-masks etc, their
popularity is expected to spread across to developed
markets including the US.
For example, SK-II is promoting face masks in the US,
using its Magic Ring Skin Analysis Test Machine, which is
available at SK-II counters.
It was China, however, that singularly led the strong
growth in face masks over 2008-2013.
Interestingly, until recently, this market has been
dominated by local players. Identifying strong
opportunities in face masks, LOral acquired the leading
face mask player Magic Holdings in China in 2013. As
moisturisers and anti-agers reach greater maturity, face
masks present the much-needed white space for growth
in Chinas lucrative skin care market, but this could also
potentially open up avenues for future growth potential in
other Asian markets and beyond.
Skin Care: Growth Prospects by

Category 2013-2018
Face Masks
Anti-Agers
Facial Moisturisers
General Purpose Body Care
Hand Care
Toners
Lip Care
Facial Cleansers
Firming/Anti-Cellulite Body
Care
0
2
4
% value CAGR 2013-2018
PASSPORT 49
KEY INDUSTRY THEMES
Skin care devices: More unexplored potential

Skin care devices continue to migrate from dermatologists
and spas to beauty store shelves. Tools have been more
visible in recent years, as skin care brands are keen to
position themselves as dermatological experts and prove
the effectiveness of their ranges.
US: Brand Shares in Other Personal

Care Appliances 2008/2013
In 2013, there were several device innovations. Swedish

brand Foreo introduced Luna, a silicone facial cleansing
device that makes anti-ageing claims. Mass brand Conair
introduced the True Glow Sonic cleansing brush. Nondevice brands are also taking steps, such as Lancmes
Rnergie French Lift, which features a small massage disc
meant to prepare skin for the skin care formulation.
In May 2013, Lancme also launched a limited edition
complementary service in partnership with Sephora stores
in France, to promote the launch of Advanced Gnfique,
the second generation of its Gnfique anti-ageing skin
care line. The service involves the beauty advisor applying
the product using a hand-held ultrasound device. The
pulsating action is claimed to provide the skin with the
equivalent of one week of product in just one application.
Lancme claims the ultrasound technology reaches the
deepest layer of the epidermis.
Inner circle 2008

Outer circle 2013
Homedics
Conair
Clarisonic
Dr Scholl's
PASSPORT 50
KEY INDUSTRY THEMES
Iluminage: First in-home laser device

Among other multinational beauty products players, Unilever especially
appears to be focusing on the opportunities devices and hi-tech
solutions offer to the industry.
In the first quarter of 2014, the company purchased Ioma Paris, a
personalised measurable skin care solution business, aiming to expand
the concept in Asia, and New York-based Iluminage Beauty Inc, with its
FDA-approved, in-home laser treatment range for wrinkle reduction.
Launch of the Iluminage Skin Smoothing Laser
The Iluminage Skin Smoothing Laser is priced at US$595 and approved

by the FDA for use in smoothing and reducing the appearance of fine
lines and wrinkles around the eyes and mouth. The laser was launched
in the second quarter of 2014 in department stores Neiman Marcus and
Nordstrom. The device is designed to spur the creation of collagen,
bolstering the skins underlying support structure.
The laser is accompanied by a 4-product anti-ageing skin care line
called Iluminage Youth Cell Skincare, containing a concentrate, eye
cream, cleanser and day cream. Added to the range is the Iluminage
Skin Rejuvenating Pillowcase. The fabric of the US$60 pillowcase
contains copper oxide fibres to help reduce wrinkles by stimulating the
self-renewal mechanisms within skin cells.
Iluminage Skin Smoothing Laser
The beauty device market is rapidly growing and Unilevers Iluminage is

still well positioned to benefit from early-mover advantage.
PASSPORT 51
INTRODUCTION
EMERGING MARKETS
KEY INDUSTRY THEMES
CONCLUSIONS
CONCLUSIONS
New growth frontiers enter spotlight

The outlook over 2013-2018 is generally cautious, with unfavourable forecasts in developed markets and
emerging market instability. Despite the slowdowns in China and Brazil, there is still huge potential to grow
beyond first-tier cities and to expand penetration of existing flagship brands. As a result, half of total BPC
industry absolute value growth over 2013-2018 will come from these two markets.
Top 10 BPC Markets Growth Prospects
2013-2018
Beauty and Personal Care: Absolute

Value Growth by Category 2013/2018
10
70,000
Others
Baby and Childspecific Products

Deodorants
Indonesia
60,000
Bath and Shower

40,000
30,000
20,000
Fragrances
Men's Grooming
7
% CAGR 2013-2018
US$ million rsp
50,000
China
Saudi Arabia
India
Brazil
6
5
Colombia
Colour Cosmetics
Oral Care
Hair Care
Skin Care
South Korea
Thailand
Mexico
US
10,000
0
0
5,000
10,000
15,000
20,000
25,000
Absolute value growth (US$ million rsp) 2013/2018
PASSPORT 53
CONCLUSIONS
Key themes to define growth in beauty

There will be greater emphasis on
the personalisation of beauty,
particularly in the higher-value
developed markets of Western
Europe. There will, for example, be
a strategic focus on artisanal and
natural products.
Long-term growth opportunities,
driven by ongoing urbanisation and
middle class creation in emerging
economies, beyond China and
Brazil, India and Mexico, will
provide a significant boost to staple
categories such as oral care and
bath and shower, while local
product tailoring will remain key to
success.
New product launches will target
consumers by offering a full product
experience starting with the retail
environment through new textures,
formats, applications to novel
formulations and scents.
Novel products
Personal
experience
Local tailoring
PASSPORT 54
FOR FURTHER INSIGHT PLEASE CONTACT

Ildiko Szalai
Senior Analyst Beauty and Personal Care
Ildiko.szalai@euromonitor.com
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PASSPORT 56

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THE MULTIFACETED EVOLUTION OF GLOBAL

Bath and Shower

Premium Beauty and Personal Care

Mass Beauty and Personal Care

With major markets, including

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

New frontier markets

Mass domination, with

Future revenues in the

Key themes to define

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

Beauty industry growth decelerates in 2013

Beauty and Personal Care: Growth

Beauty industry growth in 2013 remained robust

The dip in premium beauty was more pronounced

Mass-market growth was slightly stronger than

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

Mass contribution sustained, premium drops slightly in 2013

US$ million rsp

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

BPC 2013: Asia reinforces domination, Western Europe picks up

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

Mixed growth prospects in largest BPC markets

Top 14 BPC Markets Value Growth

Both China and Brazil witnessed a slowdown in

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

Growth potential with new frontiers coming to the fore

Global BPC market value % CAGR

US$ million rsp

Absolute Market Value Growth 2013/2018 (US$ million rsp)

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

Most categories see weaker performance in 2013

US$ million rsp

Oral Care Bath and

Value Sales 2013 (US$ million rsp)

Baby and Sun Care

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

Niche categories post most dynamic growth in 2013

Fastest Growing BPC Categories 2013

Perms and Relaxants

Men's Skin Care

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

GLOBAL INDUSTRY HIGHLIGHTS

Product developments major impact on category performance

Frequent product launches with continuous product

Select BPC Category Performance

Other Facial Make-Up

Perms and Relaxants

Mass Men's Skin Care

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

Brazil and China key revenue generators

Top Eight BPC Market Growth Prospects 2013/2018

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

Growing market sophistication in Indian and Indonesian beauty

Absolute value growth (US$ million rsp) 2013/2018

BEAUTY AND PERSONAL CARE: THE MULTIFACETED EVOLUTION OF GLOBAL BEAUTY

Key opportunities for further penetration in emerging markets