Key Trends in Beauty and Personal Care in North and Latin America

KEY TRENDS IN BEAUTY AND PERSONAL CARE

NORTH AND LATIN AMERICA

OCTOBER 2015

INTRODUCTION

DIVERSIFICATION IN DISTRIBUTION

KEY MARKETING STRATEGIES

POTENTIAL IN NATURAL PRODUCTS

OPPORTUNITIES IN NEW CONSUMER GROUPS

SUMMARY

© Euromonitor International

3

Scope

INTRODUCTION

Beauty and Personal Care

Baby and Child-Specific Products

Bath and Shower

Colour Cosmetics

Deodorants

Depilatories

Fragrances

Hair Care

Men's Grooming

Oral Care

Skin Care

Sun Care

Sets/Kits

Premium Beauty and Personal Care

Mass Beauty and Personal Care

http://www.euromonitor.com/

INTRODUCTION





SUMMARY


5

Beauty and Personal Care is one of the most dynamic fmcg industries in the Americas. Sales in North and

Latin America combined increased by 7% at fixed exchange rates in 2014.

Beauty and personal care, a dynamic industry


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Sales of beauty and personal care in the Americas 2009-2014

Latin America North America



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Traditional retailers within beauty and personal care, such as direct sellers, modern grocery retailers and

mixed retailers, have been increasing their sales at lower rates compared to health and beauty specialist

retailers and internet retailing. This diversification in distribution is an opportunity for manufacturers and

retailers to cater to growing demand for value-added products and convenience.

Distribution diversifies within beauty and personal care


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Modern Grocery Retailers Health and BeautySpecialist Retailers

Mixed Retailers Direct Selling Internet Retailing

% v

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Beauty and personal care distribution in Americas 2004-2014

2004 2014



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Euromonitor International’s survey on shopping for beauty and personal care showed the preference of

consumers to purchase in stores, which contributes to support the growing sales in channels such as health

and beauty specialist retailers compared to direct selling.

Impulse purchasing plays an important role in consumers preference to purchase in a store.

Preference for purchasing at stores


Brazil

46.4%

Colombia

49.3%

US

55.2%

Mexico

50.0%

% of Respondents who

purchase in person at a store – 2014

Source: Euromonitor International Survey 2014



8

Movement towards multichannel in Latin America


Gu

atem

ala •Beauty specialist stores and

drugstores have expanded their assortment of beauty and personal care products, and they have been gaining importance, especially in sales of masstige products. In order to capture this movement, Boots acquired the second placed Chilean pharmacy, aiming to introduce its private label. Salco, the leading drugstore in Chile recently acquired DBS, an independent beauty specialist retailer.

Ecu

ado

r •Modern grocery retailers face a very competitive environment, which has led them to develop very aggressive strategies, including price wars in a number of categories. This has been impacting direct sellers, particularly those targeting lower income levels. Modern grocery retailers have been offering products at similar prices to direct sellers with the advantage of the products being available immediately.

Co

sta

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a •Stiff competion among retailers such as drugstores, beauty specialist retailers, direct selling and hypermarkets is driven by special occasion sales and convenient payment deals, such as Black Friday, payment apps and partnerships between providers of financial tools and stores, such as ZIMP, an app for smartphones, which works as a virtual pocketbook used to pay in certain stores through the use of a code.

In some countries within Latin America, there have been movements towards expanding sales to new

channels and initial investment in multichannel retailing.



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Movement towards multichannel in Latin America


Ch

ile

•Due to the stiff competition in medicines, drugstores have taken the opportunity to expand their assortment of products to beauty and personal care, which offers better margins. Meykos Parapharmacies, for instance, offers consultants provided with equipment to examine customers’ skin and recommend the most suitable products.

Mex

ico

•Internet retailing is one of the channels that retailers have been investing in to cater growing interest among consumers in the convenience offered. Fybeca, one of the biggest chained drugstores, recently initiated operations through the internet.

Peru

•Direct selling continues to lose share to store-based retailing due to constant investment in discounting and marketing activities. In addition, consumers are proving less willing to wait to receive direct selling orders.

Co

lom

bia

•Both manufacturers and retailers are expanding channels to become omnipresent in the current retail environment. Beyond the expanding internet retailing marketplace, retailers like Almacenes Éxito are making inroads in sales based on catalogues, while large companies like Nutresa are rapidly expanding in direct selling. During the review period, major direct sellers like Amway and Belcorp launched bricks-and-mortar stores to expand their presence.



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Canada, the US and Brazil are the top three markets in terms of per capita consumption within the

Americas. More developed markets are at a different stage of multichannel retailing, with a focus on the

premium segment through direct selling and investment in private label.

Distribution in mature markets


In a very competitive retail landscape that has seen strong growth for beauty specialist retailers and internet retailing, direct sellers have struggled. However, direct selling is currently being re-imagined by newer companies that are breaking the mould of traditional direct sellers and compete at the premium end of the market. Rodan & Fields – a premium direct seller of skin care and sets/kits – has enjoyed phenomenal growth since its launch in 2008, and serves as a good example of this trend. However, as channel lines have blurred, and even mass operators have begun to offer products that emulate boutique quality items, consumers have either committed to full-scale premium products or have settled for the value tier. Thus, as direct sellers look to remain competitive, they have increasingly begun to offer more premium products in an effort to entice the more affluent.

The large number of new entrants in the market is increasing competition in the industry, while traditional players are investing in marketing campaigns and innovation in order to retain their market share and increase their penetration among consumers. As a result, the use of multichannel strategies has increased greatly in the past few years, as players are entering all the channels available in the country in order to catch consumers’ attention and increase sales. For example, O Boticário, a traditional beauty specialist retailer, entered the direct selling channel a few years ago, and is also present online. The strategy is paying off, as O Boticário continues to grow strongly year-on-year.

Retailers are seeking to capitalise on demand for beauty and personal care, and more private label products are entering the market. Loblaws Cos –Canada’s leading grocery retailer – has recently acquired Shoppers Drug Mart – the leading Canadian drugstore retailer and one of the largest beauty care retailers. Loblaws is expanding its beauty care range under the Joe Fresh brand to include skin care formulated with botanic ingredients. Joe Fresh was launched initially as a private label apparel brand of Loblaws, but has gained the status of a fashion brand. The retailer continues to build its expertise in beauty and personal care, leveraging the Joe Fresh name, while putting emphasis on marketing Joe Fresh beauty lines and seeking to fit better into the prevailing trends in the Canadian beauty care market.



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Some countries have been facing limited investment in retailing, due to economic slowdown. Bolivia

continues to benefit from the good relationships established by direct sellers.

Challenges for Venezuela, Uruguay and Bolivia


Venezuela

Due to regulatory obstacles to operating a business in Venezuela, the development of newer retailing options has faltered, with many retailers dropping plans to expand their platforms. For instance, retailers such as the supermarket Excelsior Gama and the home improvement and garden centre Epa previously offered online sales and homeshopping as a multi-channel strategy, but both have been forced to halt these efforts.

Uruguay

Distribution continues to be dominated by supermarkets and health and beauty specialist retailers.

Bolivia

Direct selling continues to remain the most important channel [Q: and it is outperforming store-based retailing. Passport – its share declined over the review period.] This is due to the good relationships built by consultants, which are still perceived as an important factor by Bolivians.


INTRODUCTION





SUMMARY


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Competition is stiff in beauty and personal care, with the top 10 leading companies holding a 56% value

share in North and Latin America in 2014. The tough competition requires manufactures to innovate and

invest constantly in communication.

Beauty and personal care – tough competition


North and Latin America – Beauty and personal care market shares by value - 2014

Procter & Gamble Co, The

L'Oréal Groupe

Unilever Group

Colgate-Palmolive Co

Johnson & Johnson Inc

Estée Lauder Cos Inc

Avon Products Inc

Natura Cosméticos SA

44%

56%

Source: Euromonitor



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Investment in mass advertising campaigns continues to be important to leading multinational players to

increase brand awareness in competitive categories within beauty and personal care. Some companies have

been focusing on specific marketing actions at points-of-sale, product positioning and associating products

with professionals.

Different marketing strategies to remain competitive

Professional brands

• US: MAC and Bobby Brown are associated with professional artists in make-up. Guthy-Renker has used a professional hair stylist named Chaz Dean to serve as its iconic figure.

• Brazil: Unilever has presented TREsemmé as a professional product, and this high quality image has contributed to the good performance of the brand.

Ethnic products

• Canada: In spring 2014, L’Oréal announced a new marketing and product development strategy that will seek to draw the attention of consumers in China and other Asian markets.

Marketing in point-of-sale

• Uruguay: Leading players in hair care have been advertising products with point-of-sale materials, while drugstores have been promoting products through the distribution of flyers.

• Chile: Specialist stores for Estée Lauder brands have a specialist to teach and assess consumers, and offer free colour and facial make-up sessions.




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More investment in social media


Growing sales of computers and smartphones, and a rise in the number of people using the Internet in the

Americas have opened opportunities to companies to explore other channels to promote their brands,

such as social media (eg Facebook, Twitter and Instagram) and blogs.

Source: Euromonitor

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Internet access and ownership of technology in the Americas 2009-2014

Sales of Computers Latin America Sales of Smartphones Latin America

Sales of Computers North America Sales of Smartphones North America

% Population Using The Internet Latin America % Population Using The Internet North America



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Based on a survey conducted by Euromonitor International, the most common brand interactions via social

media are:

How consumers interact through social media


In Latin America, companies have been investing in social media to

have closer contact with consumers to promote new

products, promote discounting and understand consumers’ needs.

Ecuador faces restrictions due to communication regulations, while

Venezuela has experienced product shortages. Companies like

L’Oréal and Beiersdorf have responded by using social media to

advertise products. Source: Euromonitor International Survey 2014, 8,051

respondents


INTRODUCTION





SUMMARY


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Differentiation through product innovation has been one of the strategies adopted by manufacturers to

remain competitive in beauty and personal care. Although products positioned as natural or containing

natural ingredients are still a niche in the Americas, they are increasing their presence.

In 2014, a survey showed that consumers are willing to pay more for natural products within beauty and

personal care.

Differentiation through natural products


Source: Euromonitor International Survey 2014, 2,129 respondents

Willingness to pay for beauty products

Sought-after green features - 2014



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An image of high quality, combined with the introduction of more effective and eco-friendly products across

all countries in the Americas, has driven sales of natural products.

Manufacturers with a focus on both mass and premium products have been investing in natural products. In

Canada and Argentina, for instance, there are local manufacturers specifically investing in this niche.

In the US, studies have been published linking triclosan to liver cancer, and suggesting that mothers could

easily passed parabens and phenols through their breast milk. The entire state of Illinois banned micro-

beads in 2014, as they are know to damage marine ecosystems. Negative publicity surrounding traditional

ingredients tends to draw the attention of consumers to natural and organic products.

Natural products perceived as offering high quality


Live Clean Baby

Calming Bedtime

contains a blend of

lavender, camomile,

jasmine and vanilla

extracts, and essential

oils

Boti-K in Argentina is

present mainly in bath

and shower with 100%

natural products



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Presence of natural positioning in mass products


Natura is acknowledged as using natural ingredients and

being socially responsible.

Avon is using the natural approach with Avon Naturals in

Ecuador

Speed Stick Naturals & Protect in Bolivia and Guatemala



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Local companies investing in natural products


Aromas para El Alma, local company from Costa Rica,

invests in natural and organic products

Yanbal Eco-organics with extracts from açaí, noni and

acerola

Roots Cosmética Natural, from Ecuador, includes synthetic

chemical-free soap in its portfolio


INTRODUCTION





SUMMARY


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New consumer groups drive growth in beauty and personal care


Men

High Income

Young Adults

Men, young adults and high income women are increasingly becoming targets for beauty and personal care

manufacturers, as they have proven to be willing to spend on everything from basic products to higher

priced, multi-functional and targeted items to improve their appearance.



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Young female consumers an important consideration


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Ye

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Mean age of female population - 2015 While the age of consumers continues

to rise across the Americas, especially

in North America, the current average

age of women in many countries is

between 25 and 35. In some cases, it is

a full 10 years younger than the

average in Uruguay, US and Canada.

These young women are an important

target for new product innovation.

Even in countries where consumers are

ageing, there is a benefit to focusing on

young people, as establishing a

relationship early on will help to create

brand loyalty. Additionally, while

younger consumers may not have the

level of income of their older

counterparts, they typically have more

discretionary income and are willing to

invest in their appearance.



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Uruguayans have historically

been very traditional in their choice

of colour cosmetics; however, in

recent years, new trends have

brought new colours, such as

shining blue, green, orange and

pink to make-up and hand products

that have not only been adopted by

teenagers but by older women in

their everyday look. The wearing of

such vibrant colours among 50

year-old women would have been

unthinkable in the past, but is now

much more common. Brands such

as OPI in nail polishes and

Maybelline in make-up have been

developing colour trends and have

been very successful in Uruguay

While baby boomers remain a key

demographic in the US, much of

the industry’s recent growth can be

attributed to millennial shoppers.

Growth within skin care has shifted

away from anti-agers to acne

treatments, facial cleansers and lip

care. As millennials continue to

emerge as a prominent

demographic, their brand

preferences are creating shifts

within the competitive landscape.

Formerly strong brands, like Olay

and Avon, are ceding share to new

upstarts that appeal directly to

millennial consumers.

Teenagers in Ecuador are an

important group for beauty

manufacturers. Parents have

become more accepting of the early

adoption of make-up, allowing their

daughters to experiment with

products, especially colour

cosmetics. The population using

colourants is evolving, from 35 year-

olds and over towards teenagers

looking to change and update their

look regularly, resulting in

penetration jumping from 10% to

40% of the female population,

according to trade sources. For

women in Ecuador, hair is also a

very important part of grooming and

is considered as their “presentation

card”. Having the right colour (and

the colour on-trend) is a key part of

this.

Targeting youth despite older average population




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019 %

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Forecast beauty and personal care growth vs men’s grooming 2014-2019

Men's Grooming

Total BPC

Men’s grooming expected to see strong growth


Projected growth for men’s

grooming is strong in Latin

America. While this can be

attributed in part to the

smaller base of men’s

grooming, the opportunity is

still notable, especially in

Brazil, Mexico and Peru, where

growth over 2014-2019 is

predicted to outpace that of

total beauty and personal care.



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Men, particularly those in the upper or

middle income brackets, are

increasingly interested in investing in

personal care products. However, price

controls and import restrictions are

expected to continue restricting the

development and growth of men’s

grooming over the forecast period.

Venezuela’s leading beauty and

personal care companies are expected

to continue focusing on larger, less

regulated categories, making it likely

that men’s grooming will record low

levels of company activity during the

forecast period.

Venezuela

While men’s toiletries will see a positive value CAGR of 1% at

constant 2014 prices between 2014 and 2019, a sharp

decline in men’s shaving will drive growth down for men’s

grooming overall. The relaxation of men’s business dress

codes and fashion trends in facial hair, coupled with the cost

and inconvenience of shaving, will hamper sales.

There remains hope in men’s skin care. As male consumers

become more educated about their skin, a growing number

of consumers are expected to look for their own skin care

products rather than using the family products. Meanwhile,

manufacturers are expected to be active in product

development to help boost sales, continuing to link skin care

products with the shaving process.

Canada

Men’s’ grooming fairs poorly, for very different reasons




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Guatemala Mexico

Men’s grooming is perceived as having

considerable potential in Guatemala. Men are

feeling more confident in buying specific products

for their personal needs, and companies are taking

the opportunity to launch new products designed

specifically for them.

The variety of products is growing in the market,

such as shampoos, for example Head & Shoulders

for Men (Procter & Gamble Interamericas Ltda),

bath and shower products like Protex Men (Colgate

Palmolive), and facial creams and moisturisers like

L’Oréal Men (L’Oréal).

In Mexico, most men’s grooming segments are

posting positive growth with increasing interest

from men in their personal care regimes. Men’s

skin care is expected to register the strongest retail

value CAGR of 8% at constant 2014 prices over the

forecast period, supported by a growing number of

men concerned about reducing signs of ageing,

which will favour men’s facial care.

A number of hypermarkets and parapharmacies

already have a men’s section, where all personal

care products for them are together, no matter if

they are hair care, skin care or deodorants.

Also, some direct sellers have recently started to

incentivise the entrance of men to their sales force

to help them to reach male consumers more easily.

Opportunities ahead for men’s products




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Annual disposable incomes to see continued growth


-3

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Projected annual disposable income growth 2014-2019

Growth is expected for beauty and personal care products in most of the Americas . Those categories

considered non-necessities are expected to benefit from rising disposable income growth over the

forecast period.



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Rising incomes in Bolivia have expanded the

consumer base for beauty and personal care.

Manufacturers are specifically targeting these new

consumers through advertising, looking to build brand

loyalty.

Bolivia

As disposable incomes rise, the base of consumers

wanting to enjoy premium-like brands or those offering

affordable luxury increases. On many occasions, low-

income consumers purchase a premium product to

meet their aspirational desires.

Mass brands, like the direct sellers Yanbal and

Oriflame, are offering portfolios with higher perceived

value for consumers wanting to upgrade to more

premium products. The penetration of fashion brands in

colour cosmetics is still not as developed as it is in

fragrances. This could be a good expansion opportunity

for fashion brands in the retailing environment.

Colombia

The growing high income consumer group in Chile is

driving demand for premium beauty products. Top end

skin care from Perricone, La Prairie, Swiss Code,

Guerlain, and many others is much more visible and

available.

The middle and upper income segments of women are

discovering the benefits of more varied options in terms of

colour, as well as multi-benefit products like DD creams in

skin care. At the same time, they are moving towards

more premium product ranges.

Women have become more ambitious and optimistic

about their personal and career development.

Beauty specialist stores, including DBS, Bobbi Brown,

MAC and L’Occitane, have opened to target these

consumers. Drugstores and pharmacies have added

dedicated spaces for beauty and personal care (eg

Espacio Salco Brand, Ahumada and Cruz Verde).

Chile

From skin care to fragrances, premium growth opportunities abound




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Brazil Peru

The trend for nail products in Brazil has led to

the creation of a new retail channel,

esmalterias. These are specialised beauty

parlours that offer manicures and pedicures,

and also sell a wide variety of premium nail

care products.

These salons attract those Brazilians interested

in premium nail care. While the market is still

considered niche, it is growing rapidly, as more

and more consumers are drawn to the trend.

In 2014, consumers continued to be attracted

by multi-benefit products, which help them to

save time. The hectic lifestyles of consumers

have led them to look for alternatives offering to

solve many problems with just one product.

Consumers are willing to pay extra for multi-

benefit products because they offer to replace

many products providing the same or similar

results.

New products and trends appeal to consumers willing to spend



INTRODUCTION





SUMMARY


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• Made to order

• Exclusivity

• Multi-purpose

• Multi-benefit

• Time saving

• Affordable luxury

• Value added products

• Natural Ingredients

• Natural Products

• Organics

Focus on health and

natural Premiumisation

Individualisation Convenience

SUMMARY

Innovations on new consumer’s profile and preferences



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SUMMARY

Multi-

channel

• The retailing environment is changing worldwide. Consumers want to be in control.

• Multi-channel is here to stay, mainly internet retailing, which is changing the way consumers shop.

Natural Products

• Consumers are more concerned about the benefits of natural products, for themselves and for the natural environment.

• Consumers are willing to pay more for natural products.

New Consumers

• New target consumer groups, such as men and teenagers, are expected to offer the highest growth in beauty and personal care, as there is plenty of room to develop these segments.

Top 3 future prospects for Americas

THANK YOU!

Key Trends in Beauty and Personal Care in North and Latin America

Business

Transcript of Key Trends in Beauty and Personal Care in North and Latin America