Market Profile for Skincare and Cosmetic Products in the Hong Kong Market

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THE MARKET & COMPETITIVE ENVIRONMENT

Market structure and size

Hong Kong is a large import market for skincare and cosmetic products within the Asian region as it has a very small manufacturing sector of its own. Most of the companies in the industry are traders acting as agents of foreign brands to sell in the region, particularly the Chinese mainland. The market value for cosmetics and skincare in 2009 was US$408 million.1 Well-established international brands such as Lancome, Estee Lauder, Clinique, Shiseido, Christian Dior, Giorgio Armani, Bobbi Brown and Clarins, play a dominant role in the high-end market of Hong Kong. Mid range brands such as Revlon, Max Factor, LOreal and Olay are also popular. However, newer brands from Japan and Korea (eg. DHC, Fancl, HABA, Mioggi, Lanegie, Skin Food) and niche brands which contain natural ingredients (eg. Origins, Jurlique, Kiehls) are increasingly important. Euromonitor Internationals research also shows that consumers are increasingly turning to premium brands and products made from natural ingredients. Popular brands are Dr. Hauschka, Jurlique, Kiehls, Lavera, Origins and Aesop. Numerous new comers have also entered the market, namely Melvita, Amala, Primavera, Botani, Huiles & Maumes, Thalgo, 100% Pure, Olivers & Co, Hanskin, The Natural Source, and Do Organic. The largest product categories are facial moisturisers, anti-aging products, makeup foundation, lipsticks and eye makeup.

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Growth rate

The skincare market grew 9% from 2002 to 2007. In 2007 facial care was the largest category in the skincare market with an 85% share. The next two largest categories are body products and suncare with 6% each.2 Shopping tourism from mainland China continues to increase. In 2009 Hong Kong had 17.96 million visitors from mainland China of which 8. 29 million (46.2%) were same-day visitors. According to the Hong Kong Tourism Board, about 80% of the mainland Chinese tourists who visited Hong Kong went shopping and cosmetic and skincare products were among their top 3 shopping purchases.3 The increase in the average age is creating a demand for anti-aging cosmeceutical products that combine cosmetics with vitamins, herbs, and sometimes pharmaceuticals, such as vitamin C lotions, tea tree oil-infused cleansers and collagen masks.4 Multifunctional products such as foundation base with UV protection and lightening effect are also popular. The go natural trend is now established in skincare and cosmetic products. In skincare, a recent example is The Body Shop which launched its new Nutriganics range emphasizing the ECOCERT certification of its organic ingredients. New cosmetics brands promoting their use of natural and organic ingredients include Elysambre, Madara, Nveyeco, MIMC and 100% Pure.

1 2

Datamonitor. Consumer products database, make up and skincare categories. Datamonitor. Skincare databook, May 2009 3 Hong Kong Tourism Board Website. Statistics. http://www.tourism.gov.hk/english/welcome/welcome.html 4 NZTE Hong Kong Office

Men currently account for less than 10% of the total expenditure on skincare and many wellestablished brands with lines especially for men, such as LOreal and Shiseido are active in the Hong Kong market. Several men-only skincare centres have recently opened in Hong Kong to capture this emerging market.4

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Major players in the market

In 2009 the top 5 countries of origin for imports of cosmetics and skincare products into Hong Kong were France (25%), Japan (17%), China (15%), United States of America (15%) and the United Kingdom (3.7%). The total value of imports for cosmetics and skincare products dropped slightly in 2009 after a decade of steady increases. The expected market growth for 2007-2012 is estimated to be 6 percent.2 Hong Kong cosmetics and skincare products total value of imports in $USm 2007-20095 % change 2007 2008 2009 09/08 Perfume 236.62 266.69 238.68 -10.5 Beauty & Skin Care Preparation 726.82 900.01 937.50 4.2 Makeup 128.19 147.32 131.31 -10.8 Other 290.15 284.98 283.26 -0.6 1381.79 1599.02 1590.75 -0.52% Total
Source: World Trade Atlas

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Distribution channels

Cosmetics and skincare products are sold in Hong Kong through a variety of retail outlets. Speciality retailers dominate the market with a 42% share. The next largest are supermarkets (19%), department stores (17%), independent retailers (10%), pharmacies (5%), as well as beauty salons and concept stores.

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2.1

RECOMMENDED STRATEGIES
Possible points of differentiation for NZ companies

New Zealand does not have a strong image as a source of skincare or cosmetic products, but New Zealand is known for natural, agricultural-based products such as lanolin. This suggests value can be gained from association with New Zealands broader image as having a green and natural environment. Distinctive selling features such as natural or organic ingredients add value but consumers increasingly expect assurance through product certification, especially for new or unfamiliar products. Manufacturers are highly recommended to obtain certification from authorised certifiers such as GMP, AgriQuality or ECOCERT to enhance product credibility. Some products considered in high demand in Hong Kong include: anti-aging products high-degree UV protection/sun block lotion with skin lightening;
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World Trade Atlas. Products Group Skincare +Perfume HS3303

body firming lotions; bath toiletries with natural ingredients, such as rose or lily concentrates; aromatherapy products, with natural ingredients; and nail polish and lipsticks. skin lightening products Tactical recommendations on market entry

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Market positioning can call for a flexible approach if entering the market for the long term. Pricing commonly means New Zealand brands are in the medium to high levels where competition with established brands is strong. Flexibility on terms such as minimum order sizes and introductory offers can help new distinctive products get onto the shelves and become accepted on their merits so that stronger positioning can be built in time. Understanding Hong Kong consumers is critical to success. Product attributes such as unique features, colour, smell, design and package size must appeal to local tastes and the target consumers. Pricing and marketing strategies should be well planned in partnership with a distributor that sells through appropriate channels, can support marketing campaigns and report regularly on sales and market conditions.

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Marketing strategies

There is currently a trend towards concept stores, i.e. brand-specific beauty salons and spas, which are retail outlets designed to emphasize the experiential aspects of premium products. Developed to attract new customers and gain their loyalty in Hong Kongs increasingly competitive market, these new outlets combine new sales processes with make-up and skincare services. Since 2004, major players such as LOreal, Jurlique and H20+, have set up concept stores in Hong Kong. The more established outlets such as department stores and pharmaceutical chain stores remain strong in the market and New Zealand suppliers can consider promotional campaigns with them. Other common promotional tools are make-up demonstrations by overseas make-up artists and product launches featuring celebrities. Local newspapers and magazines such as Bazaar, Cosmopolitan, Elle, Jessica, Sunday and Next, frequently feature new cosmetic and skincare products. The editors expect product samples together with product literature and photographs when requesting for publicity through their magazines. These write-ups are influential in building brand and product awareness.

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Pricing

Because the price of skincare and cosmetics products in Hong Kong varies considerably depending on the product e.g. the ingredients, value proposition, positioning, branding and point of sale etc, this profile does not include prices. Price information is best obtained on a product specific basis. The right value proposition can bring a price premium in Hong Kong. For example, if a lanolin cream contains placenta or collagen, as opposed to just lanolin, it can be positioned out of the mainstream lanolin segment and command a higher price. Indicative mark-ups for skincare and cosmetics products in Hong Kong: importers or distributors - ranges from 30-50% on the import price 4

wholesalers - ranges from 30-50% on the wholesale price retailers -roughly 30% Recommendations on long term strategic issues Build a successful and profitable long-term relationship with a good working partner to ensure a better flow of market information and the development of appropriate marketing strategies. Invest in research and development for new products that address new market trends and demands. For medium to large companies, consider establishing an office in Hong Kong with the potential to cover Hong Kong and other markets in the region. See Hong Kong as part of the wider China market that includes the mainland, Taiwan and Macau. Scope the opportunities elsewhere in the region and assess options for wider market entry, including working with Hong Kong partners.

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3.1

MARKET RESOURCES AND CONTACTS

Tariffs

As Hong Kong is a free port, there are no customs tariffs on goods imported into or exported from Hong Kong. Excise duties are levied on only four types of goods, namely, liquors, tobacco, hydrocarbon oil and methyl alcohol. For more information on Hong Kongs general trade policy, import and export requirements and procedure, see http://www.tdc.trade.com/sme/iepract/index.htm.

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Regulations

Cosmetics and skincare products in Hong Kong are governed by Chapter 456 Consumer Goods Safety Ordinance. It is required that a person shall not supply, manufacture or import consumer goods unless the goods comply with the general safety requirement for consumer goods, or the goods must meet the approved standard if applicable. (http://www.legislation.gov.hk/eng/home.htm) There are no strict regulations imposed on the import of cosmetics and skincare products in Hong Kong. No import licence is required.

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Labelling

There is a prerequisite for all pharmaceuticals, cosmetics and skincare products to list the contents on the outer package of the product. The information should be in English and Chinese. Other information that must be included on the label is: brand name; product name; weight or volume; name and address of manufacturer or packer; statement of advice/cautions or instruction for use; and expiry date or best before" date.

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Trade fairs

Cosmoprof Asia Held every year in November at the Hong Kong Convention and Exhibition Centre http://www.cosmoprof-asia.com/ Natural Products Expo Asia Held every year in August at the Hong Kong Convention and Exhibition Centre http://www.naturalproductsasia.com/ea10/public/enter.aspx

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NZTE Contact Details

This document is one of a series of free information tools for exporters produced by New Zealand and Enterprise (NZTE). NZTE provides a wide range of standard services and sophisticated solutions that assist businesses through every stage of the export process. For information or advice, ring NZTE on 0800 555 888, visit www.nzte.govt.nz, or contact your Client Manager.

Prepared by: New Zealand Trade and Enterprise, March 2010