BW Confidential - Issue #10 - May/June 2012 - (Page 50)

Market watch: China credit: istock Country overview Of bulls, bears and dragons China’s economy may be seeing a slight slowdown, but beauty players remain bullish about the market. BW Confidential analyzes where the market is headed in terms of brand offer, retail and the web by Oonagh Phillips S lowing economic growth in China is doing little to dampen beauty companies’ enthusiasm about the market. In March the Chinese government revised downwards the economy’s growth for this year to 7.5% compared to decades of average annual growth of 10%. In addition, analysts are worried about how China will make the transition from an economy based on external growth to one centered on domestic consumption and the possible downturns the country may see along the way. Despite weakening growth, Estée Lauder Companies (ELC) ceo Fabrizio Freda recently told analysts that he didn’t see any big risks in consumption. “We see China remaining robust. [There is a] softening in some same-door [sales] in developed markets like Shanghai, Beijing and other big cities, but that slowdown means that doors that were growing at 12 or 15% are now growing at 8 or 9%; it is not worrying,” he explained. Freda added that expansion of distribution and the move into new cities combined with more affluent consumers entering the 50 category ensures strong growth. This echoes comments from L’Oréal ceo Jean Paul Agon, who said at the beginning of this year that he was “very confident” that the wave of Chinese growth will continue. Like Freda, he noted that consumption in China is deepening, especially given the development of tier-four and tier-five cities. Indeed, L’Oréal said its consumer products division saw 18.9% growth in third-, fourth- and fifth-tier cities in 2011. A history of growth, a future of… Both outlooks are also based in part on a recent history of strong growth. ELC saw 33% growth in China in its last fiscal year, and the country now accounts for 4% of sales and is its third biggest market after the US and the UK. The group also says it is number-one in prestige distribution in China, a ranking that L’Oréal Luxe also claims. L’Oréal now does sales of €1.2bn in China and the market accounts for 6% of its total business. Volume there is also seeing rapid increases year on year. The group’s sales in China were up by 18% in 2011, and as an indication of the importance the market is taking in its overall business, L’Oréal revealed that for the month of January this year (month of the Chinese New Year) sales in the country exceeded revenues in France for the first time. Similarly P&G ceo Bob Mc Donald has said that he wants to move the “center of gravity” of the group to Asia and other emerging markets. P&G still holds the number-one spot in total beauty care in China. Overall market figures back up the majors’ optimism over China. Sales of beauty and personal-care products were up 10.5% in 2011 to $26.09bn, according to Euromonitor. NPD said that growth of prestige products was even more impressive, with sales increasing 22% last year. Skincare sales in the overall market continue to dominate and the category also saw one of the highest of beauty’s growth rates, rising 12.8% to $10.63bn. Risks and rewards The multinationals argue that while there may be periods of slower growth, the longterm opportunities and volumes to be had May-June 2012 - N°10 - BW Confidential

Table of Contents for the Digital Edition of BW Confidential - Issue #10 - May/June 2012

- Brand & retail news recap
- Companies on the move
Take note Market facts, figures & trends
Best of BW Highlights from our e-publication
Launches The latest in fragrance, skincare & make-up
Interview Clinique global brand president Lynne Greene
Insight: Skincare
- Category overview
- Retail technology
- Retail viewpoint
- The latest trends
- Spas & healthcare
- Spa case studies
- Inspiration from Apple
- Store concepts
Market watch: China
- Country overview
- Industry viewpoint
- Prestige retailing
- Taobao & the internet
Digital focus Social media strategies
Strategy spotlight Case studies to inspire
Travel retail: Asia Pacific
- Regional overview
- India
- Interview: Delhi Duty Free Services coo Arun Barathi
Radar Six up-and-coming beauty brands
- Make-up packs
- Innovation showcase
Last word Metis Insights director Stéphanie Morou

BW Confidential - Issue #10 - May/June 2012