The portuguese market enjoys close ties with its Spanish neighbour and despite its relatively small size has attracted investment from several international brands and retailers to provide for a dynamic market/. Sinéad Galvin reports
Portugal has been making up for its lost Empire heyday as one of the world's foremost economic, political and cultural powers with a burgeoning cosmetic and toiletries market. Although it is a small nation, it has certainly not been forgotten. The Portuguese C&T market, which closely follows the French model in terms of manufacturers and retail trade, has seen sustained growth of 48.9% to reach today's market value of €1.231bn, according to Euromonitor. The period 2005-06 in itself saw a rise of 2.8%
According to Euromonitor, the hair care category is the largest in the Portuguese market, rising 2.8% between 2005-06 to reach a high of €265.2m. This represents a compound annual growth rate of 6.1%, or a value of €90m. P&G’s Pantene Pro-V leads the pack with a 14.9% share of the Portuguese market, which has been rising steadily to grow 26.3% between 2001-06. L'Oréal’s Studio Line lags behind the Pantene dominated market with a more modest 8.1% share, but has also seen steady growth of 6.6% between 2001-06.
Scent of a nation
Fragrances also account for a large percentage of the Portuguese C&T market, with a specialist network of Perfumerias selling premium brands. The fragrances subsector grew by 3.1% year on year between 2005-06, and has increased exponentially between 1999-2006 by 40.1%, a value of €48.8m. Avon leads the fragrance brands, but has steadily declined in popularity since its heyday market share of 6% in 2001. Between 2001-06 the company’s share value fell by 20%, with the sharpest fall of 11.3% between 2003-04. Biotherm (L'Oréal) is the second most popular brand in the Portuguese market and has steadily been gaining ground on Avon, rising 5% between 2001-06 despite a brief blip between 2001-02, when market share fell 2.5%. According to Euromonitor data, Calvin Klein's ck one (Coty) only entered the top three most popular fragrance brands in Portugal in 2005, and has had a steady market share of 3.2% since then.
According to Boxnol SL, the distributor of the niche fragrance brand Diptyque in Spain and Portugal, sales of the brand have increased by 50.3% in the region. “The brand is now in just 30 outlets in Spain and five in Portugal,” say Boxnox SL directors Pedro Ros and Guillermo Jiménez. Fragrance launches came thick and fast in the region in 2006, with more planned for 2007. Inter Parfums launched Blanc, the women's counterpart to ST Dupont's Noir fragrance for men. Blanc is a white floral fragrance housed in a white glass version of Noir’s flacon.
Spanish company Perfumes y Diseno launched its seventh fragrance for the J. del Pozo brand called In White, a medley of white flowers for women encased in a pearl-like spherical bottle.
Skin care represents the second largest subsector in the Portuguese market with a value of €172.7m, growing 2.6% between 2005-06 with a steady compound annual growth rate of 5.8% between 1999-06, for a value of €56.2m.
L'Oréal Plénitude dominates in this fiercely competitive subsector, constantly jockeying for position with Beiersdorf’s Nivea. There is little between the two companies, with Plénitude holding 9% of the market and Nivea Visage weighing in at 8.9% in 2006. Plénitude put on just 2.3% in the period between 2001 and 2006, as Nivea Visage fell 3.2%. Vichy (L'Oréal) takes third position with an 8% share of the market and has seen the largest growth among the top three, rising 3.9% between 2001-06. This can be attributed to L'Oréal's aggressive marketing strategy in Portugal; the company was the biggest advertising investor on the market with a 3.7% voice share in September 2006, according to Marktest.
Men's grooming is also a surprisingly large subsector and has grown from t74.6m in 1999 to €128.4m in 2006, a rise of 72.1%. It comes as no surprise then that Gillette Mach3 (P&G) places second in a list of top brands in the entire Portuguese C&T market compiled by Euromonitor. It would seem that the close proximity of David Beckham – the face of the brand – in Spain has encouraged Portuguese men to take better care of their appearance, as well as the success of other well groomed sporting icons such as Cristiano Ronaldo.
Channelling success
Supermarkets and hypermarkets are the dominant force of distribution in the Portuguese market with a 33.9% share of the overall market, although this share fell slightly by 0.29% year on year between 2005-06.
According to AC Nielsen, the average annual sales in the hypermarket channel is t54m, roughly €7700 per sq m. Portugal's hypermarket segment is so successful that it places second in Europe in terms of sales per retail unit and sales per sq m of retail space.
Specialist stores trail behind the mass market with a comparatively paltry 16.6% share, a figure which has declined steadily since 1999 but is gradually on the rise once more. In 1999, specialist stores accounted for 19.1% of the market. The pharmacy channel has also struggled, losing 2.1% in value between 1999 and 2006. The period between 2005-06 was also bad for the channel as it dropped another 0.8% to take 12.2% of the market.
The Portuguese National Institute of Statistics reported continuing weak retail sales figures for the fourth quarter of 2006 after hopes that the nation's economy was on the rise and that improving labour market conditions would help spark consumer spending. Disposable income came under great pressure in 2006 due to slow wage growth and a higher tax burden, which has impacted on consumer spending. In December 2006 retail sales were up only 0.3% year on year, with the 12 month moving average growth dipping to 0.5%, down from 0.7% in each of the previous two months.
Department stores have a surprisingly small share in the distribution of cosmetics, but the channel has seen steady growth. Between 2005-06 alone department stores pulled off an increase of 14.3% year on year to occupy a 1.6% share. This represents 160% growth between 1999 and 2006.
International giants such as Carrefour and Royal Ahold have a strong presence in the Portuguese retail market, with the Spanish conglomerate El Corte Inglés also present with two department stores in Lisbon and Gaia-Porto. El Inglés Cut offers a beauty consultation service with professionals. New York's Bliss Spa has also revealed plans to enter into the Portuguese market: “We're focusing on widening our distribution in Europe, Asia and the Middle East next year, with planned launches in new countries, including Spain, Portugal, Italy and Greece in the first half. These new retail ventures will coincide with our strong international spa launch pipeline.”
The French chain Leclerc has 15 outlets in Portugal, generating a turnover of more than €350m, and the company is planning to open a further ten stores between 2007-08. Clearly, Portugal is seen as a highly lucrative arena for European investors.
The retail group Pao de Açucar began as SUPA Campanhia Portuguesa de Supermercados SA in 1969 and opened its first store in 1970. The company expanded into Spain in 1974 but in 1977 its fortunes took a turn for the worse when it faced technical bankruptcy. However, the company recovered and attempted to enter the Polish and USSR markets in the 1980s to no avail, although strong export links were established with the countries.
It would seem that Portuguese retailers and distributors have strong links with Eastern Europe. Retailer Jeronimo Martins has plans to open between 300 and 360 stores in Poland from 2007-09 on top of 90 more stores in its domestic market. Jeronimo Martins, who has links to Ahold, represents international brands in Portugal, including market leaders in cosmetic consumer goods industries, through PGJMJ and the select cosmetics field. Shares rose considerably in March 2007 after the company posted better than expected full year net results thanks to its Polish operations. Full year net profit of the company rose 5.2% to reach €116.2m.
As with the rest of Europe, the Portuguese C&T market is highly influenced by other European countries, especially the Spanish and French markets. That said, it is also buoyant and dynamic enough to attract investment from the big retailers and brands as well as export its unique personality to the East.