Perfume and cosmetics industry in Emerging Markets
A couple of years ago, China was undoubtedly the market with the
biggest potential. A study from Fung group conducted in 2012 stated
that Chinas cosmetics market had registered sustained growth for
the past few years, adding that China today is the largest emerging
cosmetics market in the world (Fung Group, 2012). Fast forward 2
years to 2014 and the trend has reversed At least in part.The
Chinese market was already showing signs of slowing down in 2013 as
the growth of Chinas beauty and personal care market slowed down
below 9%. This growth rate still remains above the average
exhibited in mature and developed market, but the Next Eleven can
boast higher numbers.From a foreign companys perspective, the
recent article (April 2014) by Rob Walker from Euromonitor
International points out that corporations such as LOreal Group and
Procter & Gamble are rapidly moving towards an exit strategy
from China. Walker emphasizes: For Revlon and LOreals Garnier,
things are already bad enough to warrant pulling the plug on China
[] the combined pressures of a cooling economy and more aggressive
competition [] have proved too much (Walker, 2014).The aggressive
competition Walker is referring to predominantly comes from Korea,
but also from Chinese local brands. Indeed, within the lower to
mid-range categories of products, foreign brands are affected by a
shrinking consumption as Chinese consumers are redirecting their
disposable income towards local brands such as The Herborist or
Innoherb. One could argue that, since products are locally made,
both cosmetics companies benefit from very low cost of production.
However this assumption would be very stereotypical and would
propagate the old myth of Made in China = Cheap and not durable!.On
the contrary, these companies have managed to gain larger market
shares through the improvement of their branding strategy and the
enhancement of the quality of their products thanks to
technological innovation, following a macro trend in China. In the
past 10 years China has increased the number of centers focusing on
R&D and has achieved the third place, behind the US and Japan,
in terms of patents with 21,000 of them registered last year only
(source from WIPO Patent Report 2013).However not all is lost!
There is still the appeal of luxury. In 2014 Shanghai has surpassed
New York City and has become the number 1 city in the world in
terms of spending for luxury goods. Chinese consumers still
associate luxury with Western brands. Henceforth LOreal Group is
redeploying its investments and strives to solidify the growth of
its LOreal Luxe arm. According to a post on GCI website in 2013,
the successful launch of Clarisonic as well as the opening of Yves
Saint Laurent Beaute boutique, are a few examples illustrating the
enhancement of the existing portfolio of LOreal Luxe.The
demographic evolution jumpstarted by the changes in family planning
should ensure a rising consumption of high-end make-up, cosmetics
and perfumes in the near future. Will we see an incursion of local
brands within this market segment which has typically been chasse
gardee of Western brands? Absolutely, but groups like LOreal seem
to have that eventuality covered. Yue Sai, now part of the LOreal
Luxe Portfolio, is a local brand based on high-tech extraction
methods of Chinese medicine. A brand and product invented in China,
for China
Source : IFA Paris
Recommended by : Steve Rogers ( [email protected]
)
