EVOLVING HABITS IN GLOBAL BEAUTY

IN-COSMETICS 2015, BARCELONA

ILDIKO SZALAI – SENIOR ANALYST - BEAUTY AND PERSONAL CARE

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Euromonitor International: Strategic Global Market ResearchPRIVATE LABEL AND CONSUMER TRENDS IN EUROPE

GLOBAL INDUSTRY HIGHLIGHTS

NEW FRONTIERS IN EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS

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2008 2009 2010 2011 2012 2013 20140

1

2

3

4

5

6

7

Total / Premium / Mass Growth

Total Beauty Premium BeautyMass Beauty

% V

alue

Gro

wth

Beauty Industry Growth Sustained GLOBAL INDUSTRY HIGHLIGHTS

Premium vs Mass Proportion Historic vs Forecast

Premium Beauty Mass Beauty

Note: Inner circle 2009-14, outer circle 2014-19

Global BeautyUS$465bn in 2014,

up by US$23bn

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Power Shift to Emerging Markets Continues Despite SlowdownGLOBAL INDUSTRY HIGHLIGHTS

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019-100,000

0

100,000

200,000

300,000

400,000

500,000

600,000

-1

0

1

2

3

4

5

6

7

41%51%

Developed vs. Emerging Markets in Total Beauty

Developed Emerging % Growth Developed markets % Growth Emerging Markets

US$

mill

ion

% G

row

th

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New Prospective Markets Beyond China and Brazil GLOBAL INDUSTRY HIGHLIGHTS

Beauty Forecast Growth by Country

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Skin C

are

Hair C

are

Colour

Cos

metics

Fragr

ance

s

Oral C

are

Bath an

d Sho

wer

Men's

Groom

ing

Deodo

rants

Baby a

nd C

hild B

PC

Sun C

are

Depila

tories

0

20,000

40,000

60,000

80,000

100,000

120,000

0%1%2%3%4%5%6%7%8%9%

Beauty Category Growth Performance 2013 vs 2014

Retail Value Sales 2014 US$ mn % Growth 2013% Growth 2014

US$

mill

ion

rsp

% v

alue

gro

wth

Top 4 Beauty Categories Maintain Growth Momentum in 2014GLOBAL INDUSTRY HIGHLIGHTS

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Skin Care and Hair Care Largely Dominate Future Potential GLOBAL INDUSTRY HIGHLIGHTS

Top Category by Country

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Top Growth Segments Bring New Lucrative OpportunitiesGLOBAL INDUSTRY HIGHLIGHTS

Top Growth Beauty Categories

GLOBAL INDUSTRY HIGHLIGHTS

NEW FRONTIERS IN EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS

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100 1,000 10,000 100,0000

1

2

3

4

5

6

7

8

9

10

China

Brazil

India

Saudi Arabia

Indonesia

Argentina

Mexico

Iran

Thailand Turkey

South Africa

Pakistan

Chile

United Arab Emirates

Colombia

Peru

Vietnam

Poland

Morocco

Philippines

Venezuela

Malaysia

Nigeria

Emerging Markets’ Growth Prospects 2014-2019

Absolute Market Value Growth 2014-2019 – US$ mn rsp

% C

AGR

201

4-20

19New Emerging Frontier Markets NEW FRONTIERS IN EMERGING MARKETS

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Emerging

markets growth

Expanding middle class

Young populations

base

Intense expansion

of multination

als Urbanization

Beauty habits

sophistication

Common Growth Driving Factors in Emerging MarketsNEW FRONTIERS IN EMERGING MARKETS

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Indonesia

France

Middle East

Russia

Colombia

Turkey

Spain

India

0 10 20 30 40 50 60 70 80 90 100

Daily Grooming Time

More than 1 hour 31-60 minutes16-30 minutes Less than 15 minutes

Minutes Spent Daily on Grooming

Average Daily Grooming Routine Exceeds Half an HourNEW FRONTIERS IN EMERGING MARKETS

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Bar Soa

p

Shower

Gel

Standar

d Shampoo

s

Conditi

oner

s

Manual

Tooth

brush

es

Power

Tooth

brush

es

Tooth

paste

Dental

Rinse

0

50

100

150

200

250

300

350

400

450

Middle East and Africa

US$

mn

rsp

Bar Soa

p

Shower

Gel

Standar

d Shampoo

s

Conditi

oner

s

Manual

Tooth

brush

es

Power

Tooth

brush

es

Tooth

paste

Dental

Rin

ses

0

500

1,000

1,500

2,000

2,500

Asia Pacific

US$

mn

rsp

Staples in Developing Markets Set for Higher Absolute GrowthNEW FRONTIERS IN EMERGING MARKETS

Staples Non-essentials

Absolute Market Value Growth – 2014-2019 (US$ million)

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China

Russia

Turkey

Japan

Mexico

US

UK

France

0 20 40 60 80

Ratio of Con-sumers Using Face Masks at Least Weekly

% of respondents

Mexico

Indonesia

Colombia

Brazil

Spain

Germany

China

Turkey

0 20 40 60 80

Ratio of Con-sumers Using

Body Moisturizer Daily

% of respondents

Japan

India

Indonesia

US

Mexico

China

Brazil

Middle East

0 10 20 30 40

Ratio of Con-sumers Apply Hair

Oil Daily

% of respondents

Export of Beauty RoutinesNEW FRONTIERS IN EMERGING MARKETS

UAE: 13% CAGR 2014-2019

33% y-o-y 2014

15% y-o-y 2014

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Premium Beauty

Mass Beauty

Mass vs Premium Opportunities in Emerging MarketsNEW FRONTIERS IN EMERGING MARKETS

86%Of Face Masks in China is

Mass

96%Of Hair Care in India is Mass

99%Of General Purpose Body

Moisturisers in Brazil is Mass

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Premium Skin Care and Fragrance PotentialNEW FRONTIERS IN EMERGING MARKETS

GLOBAL INDUSTRY HIGHLIGHTS

NEW FRONTIERS IN EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSIONS

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Customisation

Product experienc

e

Tailored solutions

‘Asianification’

Asia inspired concepts

International

expansion

Niche

Developed markets

Intensifying

acquisition

Digital

Consumer engageme

nt

Diversifying retail

Key Drivers to Define the Industry in 2015 and BeyondKEY INDUSTRY THEMES

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Age Gender

Ethnicity

Format

Texture

Function

Tailored

Solution

Format: Miracle Cushion Foundation Texture: Rodin Olio Russo

Function: Clear Scalp & Hair Tailored: Clinique Smart Custom Serum

The Evolving Trend of CustomisationKEY INDUSTRY THEMES

CU

STO

MIS

ATIO

N

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Product Customization Themes – Global Versus Regional FocusKEY INDUSTRY THEMES

Anti-pollution

Scented products

Product safety

initiativesBrightening Whitening

Growing sophistication in grooming

regimesRaising the

bar on ingredients

Growing premium potential

Niche category

focusMultiple benefits

add value

Niche category

focus

CU

STO

MIS

ATIO

N

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Asian Concepts Expanding into International MarketsKEY INDUSTRY THEMES

Textures

AS

IAN

IFIC

ATIO

N

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•Clarins Extra-Comfort Anti-Pollution Cleansing Cream

Anti-pollution

•Mise En Scene hair care range

Scented products

• Hwa-Hae mobile app provides information on beauty product ingredients - South Korea

Product safety

initiatives

• Wardah product range - Indonesia

Halal beauty

Further Potential Asian Waves Heading to International StageKEY INDUSTRY THEMES

AS

IAN

IFIC

ATIO

N

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2009

2011

2013

0.00.20.40.60.8

AmorePacific Corp: Korean Brands’ Performance in China

BPC 2009-2014MamondeLaneígeInnisfree

% m

arke

t va

lue

shar

eGrowing International Demand for ‘Brand Korea’ KEY INDUSTRY THEMES

Sulwhasoo on Amazon.co.uk

Best selling AmorePacific brands in the US

The FaceShop2003: Establsihed2014: 2,300 stores in 29 countries

AS

IAN

IFIC

ATIO

N

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P&GAvon

AmwayBeiersdorf

KaoShiseidoUnilever

Johnson & JohnsonJala (Group)

HenkelShanghai Inoherb

Nu SkinYunnan Baiyao

Mary KayEstée LauderAmorePacific

Proya CosmeticsL'Oréal

-3 -2 -1 0 1 2 3

China: Share Growth in Selected BPC Companies 2009-2014

Market value share growth (percentage points)

Asian Players Intensify CompetitionKEY INDUSTRY THEMES

Internationals ‘ eroding market value share

AS

IAN

IFIC

ATIO

N

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Regional Players Shake Up the Rankings KEY INDUSTRY THEMES

Global Ranking - Regional Players

AS

IAN

IFIC

ATIO

N

2005 20140

5

10

15

20

25

30

35

40

45

50Top Beauty Players Market Share

Henkel AG & Co KGaA

Shiseido Co Ltd

Avon Products Inc

Johnson & Johnson Inc

Estée Lauder Cos Inc

Beiersdorf AG

Colgate-Palmolive Co

Unilever Group

L'Oréal Groupe

Procter & Gamble Co

% v

alue

sha

re

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Dry Shampoo: Herbal Essence

Multi-Cultural: Carol’s Daughter

MEA: Gliss for covered hair Exclusive: Le Labo

Wide Range of Niche Growth Drivers KEY INDUSTRY THEMES

NIC

HE

GR

OW

TH D

RIV

ER

S

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La Labo

Rodin Olio

LussoParfums Frédéric

Malle

Glamglow

NYX Cosmetic

s

Niely

Carol’s Daughter

Magic Holdings

X x

Penhaligon’s

L’Artisan

Parfumeur

Xx

Rochas Parfum

e

REN

Intensifying Acquisition Activities for Niche Brands – 2014-2015KEY INDUSTRY THEMES

NIC

HE

GR

OW

TH D

RIV

ER

S

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Fastest Brands Globally – Where is the Next Acquisition? NOVEL GROWTH CONCEPTS

InnisfreeRodan + Fields

Nip + FabBulldog

CiatéGlamglowBlack Up

Al QurashiBeauty Diary

ByredoBaylis & Harding

InglotAesop

Kiko MilanoCatrice

MudBioderma

0 20 40 60 80 100

Fastest growing brands 2013-14 %(17-90% growth)

The Face ShopCoreana

HerboristRodial

Urban DecayJurlique

ProyaMake Up For Ever

Black OpalMarubiPerfectDaburImanIope

Jo MaloneGodrej

MG

0 5 10 15 20

Fastest growing brands 2013-14 %(10-17% growth)

NIC

HE

GR

OW

TH D

RIV

ER

S

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Multi-channel retailers

Pure e-tailers

Company websites

Social media sites

Mobile application

s

Direct sellers

In-store digital

Beauty boxes

From Niche Categories to Diversifying Niche PlatformsKEY INDUSTRY THEMES

DIG

ITA

L

Digital

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Appare

l and

Footw

ear

Consu

mer Elec

tronic

s

Media

Produc

ts

Food

and D

rink

Consu

mer App

lianc

es

Beauty

and P

erson

al Care

Consu

mer Hea

lthca

re

Home C

are0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

0

5

10

15

20

25

30

35

40

Internet Retailing Growth by Industry 2009-2014

2009 2014 % CAGR 2009-2014

US$

mill

ion

% C

AGR

200

9-20

14

Internet Retailing Still a Relative Small Channel in BeautyKEY INDUSTRY THEMES

DIG

ITA

L

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Building Blocks of Digital Beauty StrategiesKEY INDUSTRY THEMES

‘Best price’ Purchase Motivation Comparability

Retail CurationSelf-service Retail Focus on Target Audience

PersonalizationVirtual ‘Try –On’ Customized Solutions

Brand EngagementBrand Building Consumer Analysis

DIG

ITA

L

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Buy something online

Visit price comparison websites

Read reviews of products and services

Upload/share photos or videos

Participate in microblogging

Use an internet banking service

Stream or download audiovisual content online

Visit social networking sites

Visit online news sites

0 10 20 30 40 50 60 70

Frequency of Online Activities 2011/2013

2011 2013% consumers with online activity once a week

Selling to More Informed and More Engaged ConsumerKEY INDUSTRY THEMES

DIG

ITA

L

GLOBAL INDUSTRY HIGHLIGHTS

NEW FRONTIERS IN EMERGING MARKETS

KEY INDUSTRY THEMES

CONCLUSION

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21,052

10,1444,052

3,7112,228

2,112

20,097

China BrazilUSA IndiaSaudi Arabia IndonesiaOthers

20,115

7,568

7,3175,820

5,780

5,212

4,0013,675

3,457

Skin Care Colour CosmeticsHair Care FragrancesOral Care Men's GroomingBaby BPC Deodorants

Future Growth Highlights CONCLUSION

Absolute Beauty Market Value Growth by Country and Category – 2014-2019

Categories marked with orange forecast to exceed global beauty growth of 2.6% CAGR 2014-2019

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Reinvention in Global Beauty Required to Sustain Growth CONCLUSION

asianification

customisation

Cross-category

personalisation

Exclusive

Multi-benefit

Niche segments

premium

multi-culturalreinvention

reinvention

Digital

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

reinvention

THANK YOU FOR LISTENINGIldiko SzalaiSenior Beauty and Personal Care AnalystIldiko.Szalai@euromonitor.com