Economical analysis of Cosmetic Industry


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  • Cosmetics Industry is considered to be a part of Toiletries Industry. Following products/services fall under its category:Hair Care, Color Cosmetics, Skin Care, Bath & Shower, Fragrances, Men’s grooming, Oral hygiene, Sun Care, Nail care, Baby care, and Deodorants.Depending in its total revenue, the market share of different products and services is mentioned above; and interestingly, skin care comes at no. 3 in the product list which is supposed to be the leading segment as portrayed by the word “Cosmetics”.
  • Market share of top 10 players is as follows:Procter & Gamble: 16.1%Loreal: 15.8%Unilever: 9.8%Avon: 4.65%Beirsdorf: 4.6%Estee Lauder: 4.5%Shiseido: 4.2%Kao: 3.6%Johnson & Johnson: 3.4%Henkel: 2.7%Thus the top 10 cosmetic corporations combine to control over 70% of the cosmetics market.
  • The industry is characterized by a large number of firms that attempt to differentiate their products and maintain a certain degree of control over their pricing. Government regulation (mostly related to differences in the approach to safety issues) and distribution channels appear to be the most significant barriers to entry in the cosmetics industry.Source: Global Insight
  • Market share by age is as follows:45-54 yrs: 26%35-44 yrs: 24%55-64 yrs: 17%25-34 yrs: 17%65+ yrs: 11%15-24 yrs: 5%
  • The forecasted market size for cosmetics industry is as shown. Income distribution and disposable income per capita are the major factors. China is becoming the fastest-growing market. EU27 cosmetics market is expected to grow at approximately 4.4% per year over the next decade, the cosmetics market in the new EU members will grow at a faster pace (8.8%) than the EY15 countries (3.7%). Japanese market is expected to grow 3.1% over the next 10 years while the US is in the middle of the pack at 5%.
  • Firms exporting products from the United States (U.S.) are often asked by foreign governments or customers to supply a "certificate" as a required part of the process to export a product to their country. *The FDA does not require companies to obtain an export certificate, the agency isnot required by law to issue certificates for cosmetics, and does not issue certificates for cosmetics manufactured outside the U.S.If you export cosmetics, it is your responsibility tofollow U.S. laws and regulations, and to know the cosmetics requirements of the countries to which you export.Source: UN Comtrade
  • TheFDA works closely with the U.S. Customs and Border Protectionto monitor imports. Imported cosmetic products are subject to the same laws and regulations as those produced in the United States and are subject to review by the FDA at the time of entry. They must be safe for their intended uses and contain no prohibited ingredients, and all labeling and packaging must be informative and truthful, with the labeling information in English (or Spanish in Puerto Rico). Products that don’t comply with FDA laws and regulations are subject to refusal of admission into the country and must be brought into compliance (if feasible), destroyed, or re-exported. Among the most common reasons for import refusals of cosmetics are labeling violations, the illegal use of color additives, and the presence of poisonous or deleterious substances.Source: UN Comtrade
  • The two most important laws pertaining to cosmetics marketed in the United States are the Federal Food, Drug, and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling Act (FPLA). (read slide)FDA can take regulatory action through the Department of Justice in the federal court system if it has information to support that a cosmetic is adulterated or misbranded in orderto remove it from the market.They can request a federal district court to issue a restraining order against the manufacturer or distributor to prevent further shipment of the products and they can also seize the products.
  • it bears or contains any poisonous or deleterious substance which could cause injury to users under the conditions of use prescribed in the labeling, or under customary and usual conditions of use [with an exception made for hair dyes];it consists of any filthy putrid, or decomposed substance;it has been prepared, packed, or held under unsanitary conditions that might cause it to become contaminated with filth, or cause it to be rendered injurious to health;its container is composed of any poisonous or deleterious substance which may render the contents injurious to health; orexcept for hair dyes, it bears or contains, a color additivewhich is unsafe
  • -its labeling is false or misleading; its label does not include all required information; the required information is not adequately prominent and conspicuous; its container is so made, formed, or filled as to be misleading; it is a color additive, other than a hair dye, that does not conform to applicable regulations; its packaging or labeling is in violation of an applicable regulation.-Under the authority of the FPLA, FDA requires an ingredient declaration to enable consumers to make informed purchasing decisions. Cosmetics that fail to comply are considered misbranded under FD&C.-Cosmetic firms are responsible for substantiating the safety of their products and ingredients before marketing. Failure to adequately substantiate the safety of a cosmetic product or its ingredients prior to marketing causes the product to be misbranded unless the following warning statement appears conspicuously on the principal display panel of the product's label: "Warning--The safety of this product has not been determined.”-A change in FDA's statutory authority over cosmetics would require Congress to change the law.
  • serve a key role in helping brand owners realize continued profitable growth. In our view, the top three drivers for future industry acquisitions are:- Geographic expansion: focusing on high growth, emerging markets- Channel development: to reach new consumers and new industry segments- Cost savings/synergies: driven by gloomy potential for profitable growth for some—do help with the supply chain
  • Russia poised to become the number one European market and China or Brazil are likely to occupy the number two market in the world by ousting Japan; marketers clearly need to further secure their foothold in these key markets. China has seen a steady stream of activity, including the following recent deals:Numbers from 2008Asia-Pacific Markets-$91.5 billionEuropean-$147.3 billion29 percent of the cosmetics market Imports a significant portion J&J’s 2008 acquisition of Beijing Dabao CosmeticsBeiersdorf’s late 2007 purchase of C-BonsRussia-Eye Make Up
  • in demand for active ingredients, such as enzymes, amino acids and peptides, will be propelled by continued gains in cosmeceutical skin care products and high value additives such as nanoscale ingredients. Natural products, such as botanical extracts, soy protein, and natural fats and oils, are expected to achieve healthy growth rates as their incorporation in various formulated products continues to increase.
  • Economical analysis of Cosmetic Industry

    2. 2. Products/Services<br />Product Segmentation Share<br />Hair Care 22%<br />Color Cosmetics 18%<br />Skin Care 15%<br />Bath & Shower 13%<br />Fragrances 9%<br />Men’s grooming 7%<br />Oral hygiene 7%<br />Sun care, Nail care & Baby care 5%<br />Deodorants 4%<br />
    3. 3. Top 10 players<br /> Company Beauty Sales (US Billions)<br />Procter & Gamble $26.3 <br />L'Oreal $25.8 <br />Unilever $16 <br />Avon $7.6 <br />Beiersdorf $7.5 <br />Estee Lauder $7.3 <br />Shiseido $6.9 <br />Kao $5.9 <br />Johnson & Johnson $5.6 <br />Henkel $4.4<br />
    4. 4. Market Structure<br /><ul><li>Monopolistic competition
    5. 5. Large number of firms
    6. 6. Differentiated products
    7. 7. Certain degree of control over pricing
    8. 8. Barriers to entry
    9. 9. Government regulation
    10. 10. Distribution channels</li></li></ul><li>Market segments by age<br />
    11. 11. Current Market Trends<br />Anti-aging skin care segment is growing due to large population of baby boomers.<br />Growing Metro-sexual demand.<br />Shift in customer preferences towards natural cosmetics.<br />Increased awareness of consumers towards the ingredients.<br />Value for money<br />
    12. 12. Future market size forecast<br />
    13. 13. Top Exporting Countries in 2008<br />
    14. 14. Top Importing Countries in 2008<br />
    15. 15. The Role of Government<br />The FD&C Actprohibits the marketing of adulterated or misbranded cosmetics in interstate commerce.<br />The FPLA Actrequires an ingredient declaration to enable consumers to make informed purchasing decisions. <br />
    16. 16. The Role of Government<br />A cosmetic is adulterated if—<br />poisonous or deleterious<br />filthy putrid, or decomposed substance<br />unsanitary conditions<br />poisonous or deleterious substance (container)<br />unsafe color additive<br />
    17. 17. The Role of Government<br />A cosmetic is considered misbranded if--<br />false or misleading label<br />all required information not included<br />not prominent and conspicuous<br />misleading container<br />color additive - does not conform to applicable regulations<br />packaging or labeling in violation of an applicable regulation<br />
    18. 18. Industry Trends<br />Geographic expansion<br />Focusing on high growth, emerging markets<br />Asia and Russia<br />Channel development<br />Reach new consumers and new industry segments<br />Acquisitions <br />
    19. 19. Acquisitions<br />L'Oréal Buys Essie- April 2010<br />Avon Acquires UK's Liz Earle Beauty Co. Limited-March 2010<br />Shiseido Acquires Bare Escentuals-January 2010<br />Kao AcquiresEuropean<br /> Production Facilites<br />June 2009<br />
    20. 20. New Markets<br />
    21. 21. New Markets<br />European<br />Russia to become number 1<br />Asia-Pacific<br />Japan<br />Japan accounts for 44.1% of the Asia-Pacific market<br />China taking over number 2 spot for Japan??<br />Middle East<br />Iran<br />7th largest cosmetic consumer<br />
    22. 22. Market Trends-United States<br />Chemical Demand to reach 7.6 billion-2010<br />Organic/Mineral Products<br />Demographics Diversity<br /> Aging<br />
    23. 23. Ευχαριστω<br />ありがとう<br />Спасиб<br />Благодаря<br />谢谢<br />Dank u<br />Dankie<br />Gracias<br />Grazie<br />Thank you<br />ขอบคุณ<br />Faleminderit<br />תודה<br />Cảm ơn<br />Merci<br />Obrigado<br />Multumesc<br />
    24. 24. QUESTIONS<br />