The combined size and rapid growth of Brazil's personal-care market represent a unique opportunity for companies looking to expand, Euromonitor's Marcel Motta noted during a discussion of emerging markets at the HBA Global Expo last month.

"Brazil hangs out with the big kids on the block, together with the top three markets, but also enjoys growth rates as an emerging market," International Analyst Motta said.

Brazil's beauty and personal-care market grew an average of 14 percent over the past five consecutive years to reach $28.76 billion last year, coinciding with a 100 percent increase in the number of households earning between $5,000 and $25,000 a year.

Hair care makes up 25 percent of Brazil's personal-care spending - making Brazil second only to the U.S. in hair-care spending. Brazil also has the largest relative demand for deodorant, which brings in 10 percent of personal-care revenue.

Mass market products make up 98.5 percent of Brazil's personal-care market.

"[The trade environment] has favored the development of direct sellers and local specialists and has created one of the largest mass markets in the world," Motta said.

He added that premium products brought into the country are subject to high import and excise taxes.

The top 10 largest companies in Brazil hold 62 percent of the total market; Brazilian direct-seller Natura commands 13 percent, itself. Multinational firms Unilever, Procter & Gamble, Avon and Colgate-Palmolive fill out the top five.

As a group, direct-sellers hold 29 percent of the market and are gaining in popularity; they have taken 9 percent of the market from store-based retailers over the past decade, Motta said.

Personal-care products often are sold in Brazil's small pharmacies, of which Brazil has more than any other country - about 58,000 in total.

Additional shelf space for personal care will soon be available in pharmacies, as recent regulatory action in Brazil requires over-the-counter medications to be moved behind the counter, according to Motta.

"If you're a player in the beauty and personal care market and you're not in Brazil, you're not only missing the third-largest market in the world, but you're also missing one of the most dynamic markets," he concluded.

Russian Consumers Savvier, Less Sensitive

Brazil is not the only nation enjoying unprecedented purchasing power as incomes rise and the middle class expands.

In Russia, consumers have more disposable income now than ever before, says Carrie Mellage, an analyst with market researcher Kline & Company.

Russians are becoming savvier and less price-sensitive than in the past, and they are willing to trade up for luxury products, which are viewed as a status symbol (¹ Also see "With Communism Down, Fragrance Sales Are Up As Russians Gorge On Luxury" - HBW Insight, 15 September, 2008.).

When it comes to skin care, Russians tend to gravitate to locally-made products. "They feel that Russian skin is very unique, especially with the cold climates, and that only the local brands can really meet their needs," Mellage said.

Almost 8 percent of Russian cosmetic purchases are lipstick, compared to 3.8 percent in the rest of the world.

"Russian consumers - they love their lipsticks; that's a really core beauty category. It's really well ingrained into consumers," Mellage said. "With a cold climate, it's often the only part visible and they need to keep their lips moisturized."

The fragrance category continues to appeal to consumers interested in luxury brands such as Dior and Chanel . "They really take pride in being able to afford these fragrances," the analyst noted.

Oral-care sales are picking up in Russia, according to Mellage. "One of the key drivers here in oral care is really the collaboration between dentists, pharmacists and schools to really educate consumers about the benefits of oral hygiene," she explained.

Colgate's education outreach efforts in Russia have helped the firm secure 35 percent of the oral-care market (² Also see "Colgate Discusses Share-Grabbing Marketing Moves In Emerging Markets" - HBW Insight, 14 September, 2009.).

P&G leads Russia's personal care market, followed by Avon and L'Oreal. Multinationals account for 60 percent of sales, while local companies make up about 38 percent.

Direct-selling is the largest distribution channel in Russia because it allows firms to reach consumers in rural, less-developed areas.

Avon's revenue in Russia grew 14 percent in the firm's second quarter due to a 20 percent increase in its sales representatives, Chairman and CEO Andrea Jung said during a July 30 call.

Specialty retailers are trying to gain market share by broadening their scope to include areas beyond traditionally targeted cities.

"You can see that there's really a lot of opportunity left in Russia. It's a country in transition, a country where wealth is increasing, and the power of the consumer can really help to boost the sales of cosmetics and toiletries going forward," Mellage said.

China Boasts Growing Urban Demand

The industrialization shift in China and the growing allure of large cities will result in urban population growth of 200 million by 2013, according to Carrie Lennard, beauty and personal-care analyst for Euromonitor.

Urbanites make more money than their rural counterparts and are increasingly drawn to personal-care products, she said.

The rise in wealth will increase sales of premium cosmetics, she added, noting that China is expected to have the largest population of wealthy households by 2015.

Skin care is the "biggest, dynamic category," with $3 billion in sales in 2003, Lennard said. The segment is expected to grow to $11 million by 2013.

The Estee Lauder Companies expects to launch its Origins brand in China in March 2010 (³ Also see "Estee Lauder Companies' FY 2009 Sales $1 Bil. Short Of Pre-Recession Target" - HBW Insight, 17 August, 2009.).

Within skin care, sales of sun care and skin-whitening products are escalating fastest.

"The sun-care category has really been driven by the desire in China to keep a pale complexion. There's a widely held notion that pale skin, particularly on the face, is the beauty ideal in China," she said.

Almost half of consumers ages 25 to 34 use skin-whitening products. "We're not expecting the trend to slow. Almost all products are trying to include whitening [benefits]," Lennard remarked.

However, by 2013 men's grooming and baby care will be the fastest-growing markets, she predicted.

Men's grooming is being driven by consumers' adoption of western ideas and the influence of men's magazines such as FHM that often feature sections on men's grooming.

Baby care will be in demand due to a mini baby boom. Lennard also noted that female consumers are buying baby products for themselves "because they're seen as being milder and gentler than the adult version of skin-care products that are available."

Reaching China's rural consumer base means negotiating the country's fragmented distribution system. "It's important for companies wanting to enter the Chinese market to get with these local networks to achieve a high level of brand penetration," Lennard said.

P&G was faced with that challenge when it entered the market in 1985. "Thanks to their longevity in the market," the analyst said, "they had time to build strong relationships with consumers and the authorities, and they now have a total of 31 manufacturing plants which makes it hard for new entries to reach similar levels of distribution."

Developing markets represent 30 percent of P&G's business and are expected to provide one billion new consumers over the next few years, according to CEO Bob McDonald (⁴ Also see "P&G To Recover Eroding Market Share With Innovation Investment" - HBW Insight, 1 June, 2009.).

Specialty retailer Sephora has had success in China, expanding from three stores in 2005 to an expected 100 stores in 2010. According to Lennard, retailers still have ample room for growth in the area of online sales.

India: Personal Care By Region

India's personal-care market differs from region to region, according to Anshu Karundia, founder of Orna Skincare.

Northern India "is ripe for the personal-care industry," she said. The region experiences four seasons and extreme temperatures, so consumers are interested in skin-care products that address their dry, chapped skin in the winter and oily skin in the summer.

The west is more of an "equatorial climate." Its sophisticated consumers reflect "Hollywood combined with Wall Street combined with West Palm Beach," Karundia said. Sun-care products, anti-aging solutions and formulas for acne-prone skin are in demand.

Consumers in southern India are most interested in natural ingredients. With a concentration of spas in the area, many residents embrace the concept of holistic well-being, according to Karundia. At the same time, they tend to have darker skin and frequently are drawn to lightening and whitening products, she noted.

Across India, personal cleansing products constitute the largest market, reflecting the buying habits of the country's rural populations. Unilever holds half of that market segment (⁵ Also see "Increasingly Urban India Shifts Its Personal Care Preferences To Costlier Items" - HBW Insight, 22 September, 2008.).

Karundia noted that consumers mostly shop for personal care products at kiranas, or "mom and pop" independent stores that carry a variety of merchandise. However, shopping at malls and department and specialty stores is becoming increasingly common.

Oftentimes consumer shopping excursions coincide with "gifting" seasons throughout the year, Karundia said. Gifts - often personal-care items - are purchased for friends and family to celebrate regional festivals.

- Lauren Nardella ( ⁶ l.nardella@elsevier.com )

Analysts Direct Burgeoning Brands To Personal-Care Hot Spots Abroad

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