While much of the world wrestles with recession, the cosmetics industry remains strong in Latin America, says Cristina Kroll. So who is seeing the strongest performance?
The cosmetics and toiletries sector in Latin America seems to be so far unaffected by the current global recession with sales results continuing to show growth in most countries. A good example is the main market of the region, Brazil, which reached sales of US$11.9bn in 2008, according to the Brazilian Toiletry, Perfumery and Cosmetic Association, ABIHPEC. In fact even though over the past 13 years Brazil has had low rates of growth for industry in general, the C&T sector performed strongly, achieving 10.6% average growth, against the 2.9% achieved by the Brazilian industry in total for that period, and against the 3% of the country’s gross domestic product (GDP). In 2008 Brazilian exports grew 20.5%, amounting to US$647.9m.
Industry projections in Ecuador are also positive. In 2008 the Ecuadorian C&T industry accounted for US$400m. “Perspectives of growth in 2009 were very generous, but restrictive measures to imports taken in January 2009 changed the scenario,” comments María Fernanda León, executive director of the Chamber of the Cosmetic Industry of Ecuador. “This way, the Ecuadorian cosmetic industry was affected during the first half of the year.” But as a result of multiple complaints from the sector, circumstances changed and the industry has started to import without limits during the second half of 2009. In this context, León is very optimistic. “The cosmetic industry in Ecuador is expected to increase 20% by the end of 2010,” she says. With regard to local manufacturers, “direct sellers remain strong while local production is boosted in order to promote the national industry. In fact, the Ecuadorian cosmetic industry has the huge challenge of producing local cosmetics at international standards”.
Meanwhile, Chile’s cosmetic market is expected to increase between 2% and 2.5% during 2009. According to Álvaro Márquez Labarca, executive vice president of the Chamber of the Cosmetic Industry of Chile, the local cosmetic industry is largely an importer rather than an exporter, which is the reason it stood strong during 2008, with US$370m in imports against US$56m in exports. “Retailing in Chile saw sales of US$1.7bn in 2008,” Márquez Labarca tells SPC. “Chile is the second country in Latin America after Brazil in consumption per capita,” he adds.
And smaller countries continue to focus in a bid to gain a local niche and ensure growth in the midst of the global economic crisis. Ariel Saiz, spokesman for the Uruguayan Cosmetic Chamber, says “the industry experienced growth of 16% in Uruguay in 2008, while expectations for 2009 and 2010 are more moderate at 4%- 5% and 6%-8% respectively”. Taking into account that a large number of beauty products in Uruguay, where the turnover of C&T industry is estimated in US$220m, are imported, Saiz believes some of the primary challenges to the sector are to include “attracting new investors and partners, as well as enabling the local industry to compete with products from other markets”. He adds that “keeping a fluent dialogue with sanitary, commercial and government authorities and gaining ground in spaces to make the cosmetic industry grow in spite of the economic crisis are also a challenge for the chamber”.
Other Latin American countries are focusing on foreign markets instead of importing. In Colombia C&T exports amounted to US$738.5m in 2008, in which cosmetics stood out with 12.6% growth throughout the period of January to February 2009 in comparison with the same period in 2008, according to a report by the Chamber of the Cosmetic and Personal Hygiene Industry of the National Association of Industrials of Colombia.
CHANGING CONSUMER HABITS
The Mexican market is displaying some modifications in response to the recession. According to a report by Euromonitor, during 2008 the C&T market in Mexico saw changes in distribution in response to modifications in the economic situation and consumer purchasing habits. Retailers expanded, direct sellers continued to sell at retail level and beauty stores boomed. This was due to a need to improve sales and minimise the potential negative effects of a slowdown in the Mexican economy. Euromonitor says retail expansion is expected to continue but at slightly more moderate rates than observed in 2007 and 2008. It also underlines that the number of brands and products available in the market more than tripled in the 2005-2007 period, reflecting stronger consumer segmentation and intense competition amongst C&T manufacturers. Consumer and multipurpose segmentations are likely to remain strong over the forecast period as most companies struggle to differentiate themselves.
Consumer habits are also changing in Argentina. A report by the consultant LatinPanel Argentina surveyed 3,000 homes to study consumer behaviour in the first quarter of 2009. It found that spending in the high income sector increased by 10%, while middle class and low income spending was reduced by 2%. Personal care products accounted for the largest percentage of this gain - 14%, a figure up from 11% for the same period in 2008. Hair conditioners grew the most, seeing a 32% increase in consumption volume, followed by deodorants with a 22% increase. However, LatinPanel foresees that the economic crisis that has already had such a large effect on other sectors of the Argentine economy could show a significant impact on basic goods spending, including personal care products, during the second trimester of 2009.
MULTI-LATIN EXPANSION
C&T companies are currently aiming higher when it comes to venturing into new markets, looking to reach many countries in Latin America instead of one. Mexican OTC and personal care laboratory Genomma is to enter Brazil next August as part of its expansion plans in Latin America, which Máximo Juda, president of the company in Argentina and Brazil, says is part of its international strategy. The company opened its Argentine branch in 2007. “In 2009, the company started making a monthly launch in Argentina, which means a huge challenge in the competitive local market,” says Juda. But he also points out the important role Genomma gives to the pharmacy channel by using it to sell 100% of its products. Worldwide, the company is present in more than 30 countries, including Chile, Ecuador, Colombia, Peru, Spain, China and India. Its portfolio comprises over 90 products, commercialised through 33 brands.
In addition, packaging firm Rexam purchased the remaining 50% interest of a joint venture with plastic packaging manufacturer Pavisa Industries, based in Mexico City. Under this new agreement, Rexam has full ownership of Pavisa’s plastic packaging and extrusion blow-moulded manufacturing plant in Tlalnepantla, Mexico. The facility produces plastic containers and closures for the personal care and cosmetic industries as well as the pharmaceutical, diagnostic and health care markets. According to Rexam sources, “the plant will be used to invest in growth in the Mexican and other Latin American markets”.
Meanwhile Alicorp, which purchased Argentina’s The Value Brand last year, announced plans to continue an acquisition policy in Latin America. General manager of Alicorp, Leslie Pierce says “the company expects sales of US$2,000m worldwide by 2015”. Alicorp, which is part of the Peruvian Romero Group, achieved sales of US$1.253m in 2008. In Argentina the firm produces and markets personal and home care products for important brands such as Plusbelle, which represents more than 25% of the hair care market share in Argentina, according to market research company Nielsen.
REGIONAL DEVELOPMENT
South American C&T companies are seeking to place their products in new markets in Latin America. Argentine beauty firm Barbian disembarked in Uruguay and Peru in the first half of 2009. “We are also working to reach other markets in Latin America this year,” says Diego Botana, founding partner of the enterprise. The company has had a presence on the Polish market since last year and its products are already found in 50 perfumeries and pharmacies in Argentina. “Barbian’s star creation is a differential product that reduces shave frequency and functions as an aftershave,” says Botana.
Fabiola Pittana says it is also seeking to reach Latin American markets such as Brazil and Peru. “In a second stage we have plans to enter other continents, with the support of the Argentine government,” comments company director Fabiola Pittana. The firm’s exclusive fragrance is Mision es... based on yerba mate (Ilex paraguariensis), an ingredient used in the region to prepare the traditional infusion mate. “Mision es... represents Misiones province and that’s why the premium version of the fragrance will include wooden treasure chest shaped packaging, regional semi-precious stones and a map that describes all the marvellous sites in Misiones,” says Pittana, who wants to turn the star product into a souvenir from the province.
Chile is also looking to partner with foreign countries. The Indian Avesthagen company formed a strategic alliance with Chilean biotechnology firm Uxmal in a venture supported by the Chilean government. The initiative seeks to promote the research and development of bioactives for commercial use in cosmetics, health care and functional foods. This research will focus particularly on bioactives and tissue culture derived from Latin American medicinal plants. Avesthagen also announced its plan to set up a new enterprise, Avesthagen LatAm, near the city of Santiago in Chile, with the goal of expanding in the region.
ARGENTINA – STAR ATTRACTION
Exclusive beauty brands have set their eyes on Argentina and started launching their lines for the local market. For example, American lingerie company Victoria’s Secret introduced its Secret Beauty line through an agreement with Interbaires Company. The products are sold exclusively through the duty free shops of the airports of Buenos Aires. “We started commercialising the brand at Ezeiza International Airport last February and it arrived in the Jorge Newbery Airport in March,” says Mariaé Caballero, marketing manager of Victoria’s Secret Beauty. According to Caballero, who is also in charge of Mexico, Brazil, the Caribbean and Asian markets, the brand will also be arriving on the Uruguayan market and is already present in Brazil and Mexico.
And Gap is also targeting Argentina. According to María Laura Portaluppi, executive of beauty product distributor Greta, “Gap cosmetics will continue to expand its operations in Argentina, opening new exclusive points of sale during 2009”. The brand already inaugurated two stores last August in the exclusive Galerías Pacífico and Alto Palermo shopping centers in Buenos Aires. This arrival was made through an agreement with Greta, which represents Inter Parfums in Argentina and commercialises Gap beauty products worldwide. Gap cosmetics are also found on sale in Jorge Newbery Airport, in the southern Bariloche city and other perfumeries of Buenos Aires province, as well as having a presence in Chile and Uruguay.
Another case is label Matis Paris, which arrived in Argentina through Argentine distributor Sirap. About 40 items from six lines of the brand are available. “The products are present in eight points of sale and we are already in negotiations to expand into luxury hotels,” says Esther Castrogiovanni, director of Sirap. Matis Paris was launched in Paseo Alcorta, Unicenter and Dot Baires Shopping Centers.
Argentina was also the scene for another important launch in the first half of 2009 which played on the association between fashion and beauty. Local model and actress Araceli González introduced her fragrance Sucrerie. The perfume, developed by De Nicolo laboratory, “is very feminine and inspired by sexy women with attitude,” according to González. “The fragrance includes imported essences from France, which gives it great persistence on the skin. It’s an authentic eau de parfum.”
And continuing the fashion designer trend, the new fragrance for women, Sarkany Deluxe from Argentine fashion designer Ricky Sarkany was introduced in the context of the recently inaugurated Dot Baires Shopping Center. In fact, Dot Baires Shopping Center has become the star choice for new launchess and beauty events in Argentina, following the trend for C&T growth in the region.
