The reviving Italian market and the largest tradeshow in the world celebrates its 40th birthday.
The Italian C&T industry is showing signs of a significant revival after a period of prolonged staganation, achieving a total volume of more than €8.7bn in 2006, an increase of 2.2%. In the same period the industry’s turnover has also increased by 2.7%, to a value of €8.1bn.
The resurgence in the domestic market was matched by positive growth in the exports market too, with a rise of 4.5% in 2006, up to a total of €2.24bn. Unipro, the Italian Association of Cosmetic Industries, says that this has helped with: “solidifying the industry’s balance of trade, which has now been in Italy’s favour for ten years. Although the increase in cosmetics consumption is certainly facilitated by a general increased tendency to spend on consumer goods, it has been found to move at a faster rate than other sectors with which it has traditionally been compared, such as fashion or footwear.”
Channelled growth
Looking at the various channles of distrbution growth was reasonably even across the range. The most dynamic channel was chemists, which saw a growth rate of 6% and a total market value of €1.233bn. This channel now accounts for 14% of the total market and Unipro attributes this continued success to consumers’ attitudes, saying the: “pharmacy channel can be seen as an increasing confirmation of the preference for service and quality that is becoming a fairly typical feature of much larger groups of users these days. In addition, the investments that firms have made in the channel’s communications and its marketing policies have made a significant contribution to supporting a particularly evolved form of consumption in the course of the last ten years.”
Typical of the wider market, perfumeries are showing significant signs of revival after a period in the doldrums with a growth rate of 2.5%. A volume in excess of €2.3bn equates to a 26% share of the 2006 dometic marketplace. The perfumery channel is primarily benefitting from a general increase in confidence among consumers, driven by economic upturn. More specifically consumption through this channel is though to be additionally supported by the focus on brand and niche products in the marketplace. Highly publicised new launches specific to this channel help, with new perfumes and the more glamourous and high end cosmetic products often enjoying large marketing and advertising campaigns that serve to attract consumers to this channel.
The mass market accounts for 44% of total consumption with a growth rate of 1% bringing a volume of nearly €3.9bn in 2006, having suffered in recent years because of losing market share to more specialised channels. Significantly, super- and hypermarkets’ market values have grown by 2.4%, making up €2.16bn of the total mass market channel. Further economies of scale mean that future growth in these channels is likely as the large retailers consolidate, increasing economies of scale and exercising greater control on supply chains.
Unipro hails these these as: “important signals that confirm, on the one hand, the revival of a climate of confidence among families and the related increase in their willingness to buy and, on the other hand, the choices made by businesses recently, which have tended to focus on generating an increasingly specific, differentiated supply side, investing significantly in communications, but above all confirming their capacity to innovate and offer a service that the market really appreciates.”
The niche channel of the herbalist’s shop has again enjoyed significant growth - 6% in 2006 - indicating a rise in the number of sophisticated consumers looking for increased quality of product and retail environment.
In 2006, the market for door-to-door sales experienced a lively revival, demonstrating that it is a well entrenched sector of the cosmetics industry, with a value of more than €330m that grew by 5.5% last year. Over the same period there was an 11% drop in the mail order market, resulting in a value of approximately €74m, possibly showing that the personal nature of cosmetics means it is still very dependant on the more traditional buying channels.
In the professional channels beauty salons saw recorded 3.5% growth, up to a market value of €204m. An outlet obviously well suited for specialised and extended product lines, hopes are high that this channel will make further gains in the future as the market develops. Meanwhile sales of professional products for hairdressing rose 1.5% to a market value exceeding €770m. Unipro attributes this to a plethora of new product launches showcasing product innovation and also to an increasing emphasis on service standards within the industry.
Market values
In terms of sectors the largest for 2006 was body care products, thanks to an increase of 3.9% over the year, taking the total to €1.173bn. This was partially driven by double digit growth in anti-celluite products (14%) and body oils (17.2%) taking their respective values to €103m and €23m, showing a strong interest in specialist or relatively new products from Italian consumers.
Hair products overall fell by 1.2% to €1.168bn, with hair gels losing 10.6% of the previous year’s value and hairspray falling by 6.8%. Given the rise in trade in the professional hair care channel it can be speculated that the fall in this sector is coming from traditional retail channels.
Strong growth was found in the face care sector, which increased by 3.9% in 2006 to a total value of €1.153bn. A large chunk of this growth is from the €433m value from a 7% increase in sales of anti-ageing related products. Other sub-sectors registering high growth included masks and skin peelers, which registered a growth rate of 9.7%, rising to €41m in value.
The personal hygiene sector grew by 1.1% to a value of €1.019bn. The increasingly sophisticated state of this sector, with new innovations and products, means the tradtional soaps sub-sector drop by 2.6% (still holding to value over €124m). This was counterbalanced by growth in products for intimate hygiene, up by 4.7% to a total value of €230m. Also foot hygiene further established its fledgling products category with 20.6% growth.
Alcohol-based perfume products enjoyed 3.3% overall growth thanks to a 4.5% rise in the women’s sub-sector. Driven by strong product launches there, the total value for the category comes to €861m.
One particularly dynamic performer in 2006 was mouthwashes, which grew by 14.5% to a market value of more than €113m. Facial make-up products gained by 8.5% to a value of just under €100m due to where there has been renewed consumer interest in cheek blushes and powders.
The men’s sector saw lotion creams sales rise steeply by 7.2% to a value of more than €44m, whilst the added value of gift packages proved attractive to consumers, precipitating an increase of 11.1% to a market value of €85m.
Unique challenges
Unipro notes that suppliers are offering increasingly specific, personalised product ranges, supported by significant investments both in product innovation and in communications. On the demand side, in addition to the natural revival of consumer propensity to buy, there is a noticeable increase in the differentiation between individuals’ profiles and a personalisation of their approach to cosmetics, as consumers become more alert to quality, to service and to the new understanding of wellness products that have been making their mark on the cosmetics industry for some time now.
However the Italian market clearly has specific challenges defined by the strong national characteristics exhibited by consumers.
“I believe that the Italian colour cosmetics industry suffers because Italian women tend to be fashion victims,” said Giorgia Bonetti, corporate communications manager at Deborah Italia. “This is exceptional in comparision to other nations in Europe and it means there is a massive proliferation of brands, with the latest thing always the most desirable. This means brands do not necessarily have to produce the best products to suceed in the marketplace; placements in fashion magazines or a high profile endorsement can be just as effective. Similarly a designer label brand of cosmetics often proves popular as it looks good and goes with the right handbag. Perhaps some women spend so much on fashion it can mean that cosmetics are overlooked!”
Generally though Bonnetti feels that in order to be successful in the Italian market it is most important to keep up with the fashion industry in terms of colours and style and to back this market knowledge with quality products.”
“However it cannot be doubted that Italian men and women’s desire to look their best can be translated into further and sustained growth for the personal care market. Certainly Italian men are changing their attitudes towards their grooming habits,” she says.
Shiseido this year launched Adenogen, a product that counteracts progressive hair loss and promotes hair growth phase.
“A full head of hair is synonymous with health and youth and is fundamental for the image one has of oneself and transmits to the others,” said Emanuela Mazza, publicist Shiseido Cosmetici Italia. “Baldness mostly concerns men, but hair thinning affects many women too. We think this product is very well suited to Italian men as the image of virility is very important to them. A few years ago the macho element in their makeup would have prevented a product like this from succeeding here.”
Growing revival
Unipro’s figures divide the domestic market turnover into two areas, professional and traditional. In 2006, these both contributed to an equal extent to sustaining the general growth rate, with the professional channels increasing by 2% and the traditional channels by 1.8%.
In terms of value, the mass market still accounts for the largest single share of the distribution turnover, with sales totalling €2.68bn and a growth rate of 0.9%. In terms of development, the pharmacy is the sector that has put in the most sustained growth rates, up 6% to a total 2006 turnover of €685m. In terms of dynamics, exports play a significant role. Having increased consistently for more than ten years, they grew by another 4.5% in 2006, reaching a total value of €2.24bn.
Despite a relatively successful 2006, the Italian cosmetics market is still subject to uncertainty about the revival of domestic consumption and general economic factors including exchange rate tensions that could decrease international trade.
However, according to Unipro, the 2006 performance is not just the result of the industry’s well known tendency to invest heavily in research and innovation. “It is also the result of its ability to seize the main chance offered by consumers’ changing needs, both at home and abroad, as they grow more aware of the existence of increasingly high quality and highly targeted products and services.” Certainly the majority of the sectors in the Italian C&T industry have considerable potential for further growth in the future, provided that they stay in fashion.