The formation of the Benelux alliance helped the smaller nations of Belgium, Luxembourg and the Netherlands pack a weightier punch in the global C&T industry. But with the acquisition of more and more home-grown companies, the region is increasingly becoming a colony in the big players’ empires
Consider this: three small countries with close historical associations, constantly shifting border regions and the looming possibility of absorption into their larger neighbours. It is little wonder then that the Benelux three have nurtured such close economic relationships allying tiny Belgium and Luxembourg to their larger neighbour, the Netherlands. The Benelux Customs Union was established by the three exiled governments under the dark cloud of the Second World War in 1944 and came into effect in 1947, building on the older Belgium-Luxembourg Economic Union. These historical alliances remain strong to this day.
The C&T market in the Netherlands is the largest of the Benelux three and the most buoyant. After hitting a high in 2000-2001, the market gradually saw growth dwindle to reach a low of 3.3% for 2003-2004 for a total of €2.416bn. However, 2005 saw a return to form with a 4.2% increase to €2.489bn. According to Euromonitor, early indications suggest that the market stagnated in 2006, rising 4.6% to a value of €2.604bn.
The Dutch Cosmetics Association (NCV) notes that consumers have become more price conscious and supermarket price wars and fierce competition between supermarkets and drug stores have kept prices in free fall. This trend is also apparent in the growing popularity of own brand products, which had a negative effect on turnover in the first half of 2006.
Promotional pressure meant that volume sales stayed constant and even increased in some areas, despite this drop in turnover. Pressure was particularly high in sectors in which the grocery channel is strong, according to the NCV, such as hair care, body care and oral hygiene. NCV figures for 2005 show that men’s lines continued to experience greater growth than other categories, especially men’s facial skin care.
But the NCV particularly singled out the growth in selective brands, finding that the market for gift sets has sustained growth potential, as sales pushed t81.4bn. The mass market also showed clear growth in gift sales, which the NCV attributes to the versatility and year-round availability of gift sets.
Innovative products have a positive impact on the market and Dutch consumers are prepared to spend more on products that promise health benefits or pampering. The sun care market has benefited from this mindset, with the growing demand for sun protection.
According to the NCV, ageing is the most important demographic trend in Dutch personal care as the number of products aimed at the over 40s market grows. “This age category on average spends more on personal care products than young people and buys relatively more prestigious brands,” says the NCV.
Consumer confidence in the Netherlands is on the rise again according to the NCV, meaning that people will be less concerned with prices and more concerned with service and selection. There is also an emerging interest in products that are both enjoyable to use and deliver results.
Cutting the waffle
Conversely, the Belgian C&T market has seen steady growth in recent years, although this has been gradually slowing down to reach a 2.4% rise to a value of €1.517bn in 2005. Euromonitor forecasts a 2.7% rise for 2006, culminating in 17% growth by 2010 to reach €1.775bn. Luxembourg represents the smallest market of the Benelux three as well as the least successful in recent years. The market took a turn for the worse in 2004, after several years of sustained growth, falling 6.4% to reach a value of €71m. The following year saw a further fall of 1.9% to €69.7m. Euromonitor predicts that the market will rise 3.9% for fiscal year 2006 to reach €72.4m, with a 23.7% rise forecast over the next five years to achieve a value of approximately €86.2m. Clearly attention needs to paid to this tiny monarchy’s market if value is to be extracted from it and innovation is the key.
The hair care, fragrance, skin care and premium cosmetics sectors are the largest in all of the Benelux countries’ C&T markets according to Euromonitor figures. The premium cosmetics sector is the largest in the Netherlands, with a retail value of €613.2m in 2005. This figure represents steady growth over the last eight years and a 6% rise for 2004-05.
Hair care, including premium products, is the second largest sub sector with a value of €481.4m. Despite a slight fall in value of 0.4% in 2004, growth has remained steady in the Dutch hair care market with 0.7% growth in 2004-05. Andrélon (Unilever) takes the lion’s share of the market as the most popular hair care brand with 10.2% of the sector, closely followed by Elvive (L’Oréal) with 5.5% and Schwarzkopf (Henkel) with 5.1%.
Fragrance also performed well in the Dutch market, with the subsector gaining a value of €434.7m in 2005. Again, this has been achieved through steady, gradual growth, although this figure slowed in 2005 putting in a 5.2% rise, whereas 2004 saw growth reach a three year high of 7.7%. Lancôme’s Trésor was the most popular fragrance in the Netherlands in 2005 with 2.8% of the market, followed by Van Gils with 2.6% and Jean Paul Gaultier with 2.2%.
The Dutch skin care sector has a value of €402.9m signalling a 6.2% rise in 2005, a marked improvement on 2004 which saw a rise of just 3.1%, down from 7.6% the previous year. Dove (Unilever) proves to be the most popular skin care brand in the Netherlands, holding 9% of the market in 2005, with Nivea Visage (Beiersdorf) following close behind with 8% and L’Oréal Dermo-Expertise with a 7.6% share.
The skin care sector holds the biggest share of the Belgian market, up 3.9% to reach €332.3m. However, this growth represented a slowdown in respect of the 8.7% rise reported in 2003. The top skin care brand in Belgium is Nivea Visage with an 18.6% share, followed by L’Oréal Dermo-Expertise with 9.8% and Nivea Body with 8.3%.
The fragrance sector has seen steady growth in the Belgian C&T market culminating in a value of €303.8m in 2005, up 2.1% on the previous year. But this growth has yet to rival the growth of previous years – the market put on 8.1% in 1998. Pure Poison (Dior/LVMH) has the largest share of the Belgian fragrance market at 2.5%, followed by Adidas (Coty) and J’adore (Dior) both with 2.4% of the market.
Hair care in Belgium was valued at €237.2m in 2005, down 0.3% on 2004’s figures. Elsève (L’Oréal) is the frontrunner with 9.1%, followed by stablemates Garnier Fructis with 7.5% and Studio Line with 6.8%.
It would appear that the Luxembourgians enjoy smelling good as the fragrance sector holds the greatest retail value with €15.6m, according to Euromonitor, down 2.2% year on year. But 2005 was a dismal year for the entire market, with only the depilatories and sun care sectors reporting any growth, albeit in an attempt to redress the balance from the previous year. Skin care appears to have hit a peak – unless fresh innovation drives can lure the Luxembourgians in – dipping 0.1% to €14.4m. Hair care was also in the doldrums losing 4.6% for €10.2m.
Retail savvy
AS Watson has a significant presence in Belgium and the Netherlands after a number of key purchases. Kruidvat, one of the largest retailers in Belgium and the Netherlands, was bought by the company in 2002. Kruidvat stores are economy chemists that offer a range of traditional personal care items, with its own brand being very popular with customers. The company attributes this to the brand’s reputation for high quality goods, attractively priced. The retailer is also a big player in the Belgian market with more than 163 stores in the country.
Trekpleister has 198 shops across the Netherlands and places a heavy emphasis on its range of traditional personal care products, with health and beauty items as its major spearhead.
AS Watson also operates ICI Paris XL in Benelux and the perfumery is the market leader in the sector in Belgium and also enjoys a high profile in the Dutch market. The perfumery has more than 200 outlets, with perfumes and fragranced products accounting for more than half of total sales, with treatments, make-up and accessories forming the remainder. The company also runs an incentive programme.
Supermarkets and hypermarkets are one of the primary distributors of cosmetics and toiletries in Benelux, but the recent supermarket price wars in the region have been taking their toll on the C&T market. This is especially the case in the Netherlands, where a price war initiated by the large Albert Heijn chains (Royal Ahold) has forced smaller chains such as Laurus to sell products at below cost. Laurus sold its Konmar and Edah shops to deal with its €359m debt and €66m loss in 2005.
Cometiciary’s flagship store opened in Brussels’ Dansaert district in 2005, offering niche skin care and make-up brands including Stephane Marais, Dr Sebagh, and Les Bains du Marais. Expansion continued apace in 2006 with a boutique opening in Galerie du Roi in Brussels and plans to extend the store’s offerings to Antwerp, Gent, Mons and Luxembourg.
With the appealing central location and dynamic market, companies are increasingly aware that the Benelux countries cannot be ignored.
Belgium: Key facts
Capital: Brussels
Population: 10,379,067
Size: 30,528 sq km
Luxembourg: Key facts
Capital: Luxembourg
Population: 474,413
Size: 2,586 sq km
Netherlands: Key facts
Capital Amsterdam
Population 16,491,461
Size 41,526 sq km