In 2008 the Italian cosmetics industry coped well with the challenges of the economic crisis. Nadia Di Martino reports on the Italian C&T market
According to Italian cosmetics industry association Unipro, 2008 was a positive year for the C&T market with total turnover standing at €9.07bn, representing 0.8% growth on 2007’s figures when the total turnover stood at €8.99bn. Last year exports grew by 2.1% to a value of more than €2.31bn, which was the first sign of a market that had no plans of succumbing to the global economic turmoil. By overturning the negative results of 2007, last year actually saw the resumption of a trend that began in 1995 when exports had started to grow progressively.
In a dynamic market, Italian companies have been making significant investments in research and development. Consumers remain eager for new C&T items and thus fuel demand that in turn promotes innovation. In 2008 categories including hand products and colour cosmetics showed staggering results, growing by 6.8% and 5.3% respectively. Most sectors were stable, which represents a win in hard financial times. Lip products, however, was the only category to experience noticeable losses.
COPING WITH THE ECONOMY
The Italian C&T industry has been facing economic difficulties by reinventing itself. “We are going through difficult times but we have a proactive attitude. We strive to be resilient and react,” said Unipro president Fabio Franchina at the press conference for the opening of the 2009 edition of Cosmoprof. The trade show certainly represented this attitude, offering great variety and novelty. Franchina also stressed the importance of keeping up the efforts to increase the country’s “beautiful results”, highlighting the fact that Italy is in the world top ten for exports in the sector. The Italian C&T industry employs around 400,000 people and he pointed to the amount of money spent on education and research, a sector that employs around 5,000 professionals.
Gian Andrea Positano, director of Unipro’s economics and statistics research centre, explained how the reaction to the general crisis has been instrumental in giving rise interesting initiatives. He also underlined how the Italian C&T sector is evolving from a legislative point of view and what the implications of this are. “Cosmetics regulations are changing to increase safety,” he said. “There are new lists of ingredients that manufacturers can’t use or that they can only use at a certain level. Of course there are also the new directives on animal testing, which hasn’t been employed in Italy for ten years except for particular ingredients that required animal testing by law. While alternative solutions are being explored and extra costs pondered, at the same time all these changes are pushing producers towards innovation and creative initiatives guaranteeing long-term benefits for the Italian industry.”
Positano underlined how important it is to look beyond statistics and examine the quality of the Italian market and its products. “There has been an impact on raw materials due to the rise of crude oil prices with consequences for transportation. In this particular economic moment where most sectors in Italy are recording negative performances, we must be proud of the cosmetics industry and we are moderately optimistic in our forecast for 2009. We are also aware that the C&T industry in Italy must invest in its leadership. Just think of Italy’s footwear exports that represent 80% of the industry turnover. The cosmetics industry’s exports now stand at 27% but we can definitely bridge the gap. What we are still missing is an Italian version of L’Oréal, a big brand as well known as our fashion designers.”
THE PERCEPTION OF BEAUTY
“Cosmetics nowadays represent social growth, civil evolution and progress,” said Franchina. Throughout 2008 changes were evident in the approach of Italians to cosmetics. These are no longer viewed as luxury items and a holistic concept of well-being has replaced the traditional view of beauty. According to Unipro, every Italian comes into contact with a cosmetic product an average of six or seven times a day. In the case of women this grows to 25 contacts, including make-up applications and the use of hygiene products.
In distribution, it was again the pharmacy channel that stood out. It grew by 3.8%, reaching €1.387bn and representing over 15% of the entire cosmetics market. Italian consumers rely on pharmacies for custom tailored assistance, as with perfumeries. In 2008 perfumeries recorded a negative performance with a 1.1% loss over 2007 but still represented 26% of the total market.
Even though the very close relationship that used to exist between customer and shop assistant is more a reminiscence of the past than reality, perfumeries still retain the appeal of trust. Andrea Malinverno, president of the European Federation of Perfumers believes that selective perfumeries remain an area worth investing in: “We must revive the warmth and the atmosphere that in Italy used to be typical of perfumeries. For a product nowadays it is not enough to be good, consumers wants to be assisted in their choice. Recently, large perfumery chains such as Douglas and Limoni have contributed to the dynamism of the channel in Italy by promoting competition. In 2008 the channel also had to face credit issues – big brands need to cooperate by being bold enough to offer less pricey products while maintaining their credibility. Recession makes this essential. Traditional perfumeries in turn must make the effort to highlight the niche products they offer.”
Herbalists continued their positive growth climbing 3.7% and totalling over €164.5m. It remains a niche in Italy but is still managing to offer consumers a valid alternative to the mass market.
While pharmacies and herbalists are certainly the most dynamic channels, the best selling sector was the mass market. Accounting for about 44% of cosmetics consumption, this channel had an average growth standing at 1.5%. There were changes in 2008, with consumption shifting towards more specialised and niche products rather than generalised consumption.
Meanwhile there was a clear slowdown in professional channels. Profits of hair salons fell by 3.9% with a turnover around €730m. The cutting back on visits to professional centres has been one of the main consequences of the economic crisis. In fact if Italians didn’t stop spending on cosmetics and opted for some of the specific, innovative products on offer, they were certainly more careful with their wallets. The professional channel lost 2.9% over 2007 falling from €803.2m to €780m in 2008.
Italian consumers are also experimenting with newer ways of purchasing cosmetics, as the good performance of both direct sales and mail sales are showing a strong performance. Direct sales grew by 6% in 2008 totalling over €370m while mail orders totalled €56m after several years of losses. This trend confirms consumers’ need for both innovation and tailored services. The internet is another increasingly important channel but Unipro does not currently have figures for internet sales.
As in other countries, consumers are increasingly sophisticated about what they know and what they want and manufacturers need to take their expertise into account. And in Italy as elsewhere it’s no longer really possible to talk about brand fidelity as consumers often mix the channels in which they buy their cosmetics. In Italy they choose the perfumery for fragrances but the same clients will turn to the mass market for shampoo and for a good quality/price ratio. Sales are polarized and it’s possible to distinguish between two types of consumer: those who purchase low cost items wanting value for money and those who purchase luxury and niche items expecting the added value they promise.
In terms of consumption by product type, body care products accounted for 16.1% and body hygiene for 15.3%, followed by hair care and facial care products, both representing a 15.2% share of the market. Colour cosmetics hold 14%, oral hygiene 8.3%, female fragrance 7.2%, male fragrance 4.6%, male grooming 2.8% and gift items 1.3%.
In 2008 women’s products represented 71.6% of the market and men’s 28.4%. The male segment did not show positive signs, dropping 0.6%, but within the category only aftershaves fell (-4%) while creams actually inched up by 2.8% to €49.90m.
PRODUCT FOCUS
Unipro figures for 2008 show an unequal product performance in Italy.
Sales for single products were impressive in the colour cosmetics category increasing by 5.3% over 2007 and reaching a value of over €323m. Nail varnishes were up by 9.3% making up a market of over €76m and mouthwashes were up by almost 10% to over €148m. With regard to families of products there have also been changes. For example, hydrating, nourishing, anti-wrinkle and anti-ageing creams have been very successful over the last six years with average growth of around 6% a year, but this stopped in 2008. Sun products however saw average growth of around 7.5% progressing from €264m in 2002 to nearly €350m in 2008. Altogether body products secured nearly €1.3bn, inching up by 0.8% over 2007. In this segment, new formulations enjoyed the most dynamic performances as in the case of deodorants that were up by 1.6% to around €380m. These figures confirm consumers’ awareness of the variety on offer through different channels.
Face products ranked second in Italy for sales, reaching over €1.170bn. However the category dropped 0.4% compared to 2007. In this sector too only innovative products survived, such as disposable facial wipes that jumped 5% to €39m. Hair care products showed a slight improvement over 2007, inching up by 0.6%, with particular successes for lotions and extreme treatments. Fragrance maintained stable sales both for women and men reachin €910m and moving up by 1.2%. Lip products fell to €261m, a 4% loss over 2007, but that could be accounted for by the popularity of the natural look.