KN24034

KEY NOTE Cosmetics and Fragrances Plus: February 2004

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This report covers:cosmetics, fragrances, raw materials, processing machinery, packaging components, own label suppliers, mass market, premium, market, women's fragrances, men's fragrances, men's and women's fragrances, face make-up, eye make-up, lip products, nail products, fragrances, high street stroes, multiple grocers, direct selling, Fifi Awards, Americas, Europe, Middle East, Africa, Asia Pacific,

Companies covered include: Avon European Holdings, Estée Lauder Cosmetics, L'Oréal (UK), Proctor & Gamble, Unilever Group,The Body Shop, Boots, Chanel, Merchant Retail Group, Superdrug, Aveda, Bourjois, Groupe LVMH, Space NK, Hutchison Whampoa, LVMH Group, Shiseido Company,

EXECUTIVE SUMMARY

This Key Note Market Report on the cosmetics and fragrances market comprises women's colour cosmetics that are primarily used for adornment, and male and female perfumes and fragrances. In 2003, the UK cosmetics and fragrances market was worth £1.55bn at retail selling prices (rsp), an increase of 6.4% on 2002. BMRB International Ltd's Target Group Index (TGI) survey found that, in 2003, the penetration for perfumes was high, with 89.6% of women using them, while lipstick was the most widely used cosmetic item.

However, data from National Statistics confirm that expenditure on beauty products and treatments is discretionary and corresponds with disposable income. The terms 'fine fragrance or cosmetic' and 'mass market fragrance or cosmetic' are commonly used in the market, although the precise characteristics of each are not clearly defined. However, key factors are quality, image, in-store presentation and distribution.

Considerable advertising and promotional expenditure is necessary to sustain an established brand — let alone launch a new one — although the prestige attached to some brands attracts counterfeiting. In this way, brand owners must be as committed to protecting brands as they are to marketing them. Leading manufacturers in the cosmetics and fragrances market are the global consumer groups, Procter & Gamble and Unilever, as well as the specialist toiletries companies of Estée Lauder, L'Oréal and Avon.

On the retail side, The Merchant Retail Group's chain of The Perfume Shop (TPS) has gone from strength to strength, although it will be of interest to see whether the expansion of the luxury beauty retailer Sephora will slow its progress. COLIPA — the European cosmetics and fragrances market's leading trade association — claims that, each year, the cosmetics and toiletries industry launches more new products (with the exception of food) than any other industry sector and manufacturers must strive to encourage consumers to try new products while, at the same time, maintain brand loyalty to established products. In the next 5 years (2004 to 2008), value growth in the cosmetics and fragrances market is expected to rise steadily.

The UK's ageing population is disadvantageous to a market in which young people are the heaviest users of perfume and cosmetics, although the first 'consumer' generation of the 1960s has an interest in personal appearance and brands. In addition, the consumer base will continue to increase, as children become interested in their appearance and fashion from an ever-earlier age. On the whole, consumer spending might be slowing as cosmetics and fragrances are non-essential goods, although the `feel good' factor they create cannot be underestimated

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Text © 2004 Key Note

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Last updated by Amanda Porteous June 2004