A quick glance at the figures reveals Latin America’s biggest economy is already the world’s third-largest beauty market (behind the U.S. and Japan), and is on course to move ahead of Japan and into the No. 2 spot. Brazil’s cosmetics, perfume and personal hygiene products industry has posted average growth of 10.3% during the past 13 years, and the gains are getting bigger as sales rose nearly 15% to approximately $12.7 billion (R$24.970 billion) (ex-factory) last year, according to ABIHPEC, the Brazilian association of personal hygiene, perfumery and cosmetics industries. At the same time, volume increased 4.5% accounting for 1.643 million tons produced.
“We believe that is possible to maintain double-digit growth in the future,” noted Joao Carlos Basilio da Silva, president of ABIHPEC.
According to 2008 figures from research group Euromonitor, Brazil is the No. 3 market in cosmetics consumption behind Japan (No. 2) and the U.S. (No. 3).
Brazilian women are recognized all over the world for their natural beauty.
da Silva believes that with U.S. sales faltering due to the global recession, Brazil will grab the No. 1 fragrance spot when 2009 results are in. He expects the country to rise in the overall ranking, too.
Natura's Chronos skin care line addresses skin problems by age and skin type.
That kind of growth makes Brazil the star attraction among the BRIC (Brazil, Russia, India and China) countries for international cosmetics players looking for growth opportunities. The sheer size of Brazil’s beauty market, combined with rising investment in the region, should guarantee the industry’s continued expansion.
Local Players Rule
Direct sales thrive in Brazil, led by Avon and Natura. According to the Brazilian Association of direct sales enterprises (ABEVD), the number of representatives rose 15% in the first nine months of 2009 to 2.3 million. The success rate of direct sales has other companies, such as O Boticário, contemplating a move into the space.
With 2,800 points-of-sale nationwide, O Boticário is a key player on the Brazilian market. In February, the company opened a $45 million (RS85 million) distribution center in Registro, São Paulo. The new 30,000-sq. meter facility doubles distribution capacity to 700 boxes an hour. The company will also expand its existing plant located in São Jose dos Pinhais, Parana.
“The cosmetics area was not affected by the world economic crisis and to keep the self-esteem up, people are looking for recognized brands, which contributed to sales increase. So, our strategy in the turbulent economy period was to keep investments with a long term expectance,” said Artur Grynbaum, O Boticário´s president.
O Boticario remains the biggest cosmetics franchising brand in the world, with more than 2,800 stores in Brazil.
Meanwhile, Amway is targeting lower-income consumers with an array of products to be manufactured in the country.
“In Brazil [the company] will be investing around $100 million to grow the local operation,” said Amway Brazil’s managing director André Raduan.
Prestige Channel Barriers
But not every channel is posting double-digit gains. Luxury products in Brazil face a different reality, accounting for only around 6% of the market, with a turnover of $430 million in 2008. Many consumers favor local products, which are attractively priced and well made. Strict import regulations and high taxes mean the price of imported products can be 100% higher than in other markets and there is no sign of these barriers to import easing.
Due to ethnic diversity in Brazil, the bulk of beauty spending is devoted to hair care. Unilever is No. 1 with a 16.5% market share, followed by L’Oréal(12.8%) and Procter & Gamble (8.5%), according to Euromonitor figures from 2008. Local players like Niely and Embelleze also register strong performances.
In skin care, market share leaders are Natura (24.2%), Avon (20.1%) and O Boticário (4.5%), as consumers favor products that ally high technology with affordable prices. Among imported brands, Lancôme (L’Oréal) ranks first.
Makeup products are becoming increasingly popular as consumers seek products with additional benefits like moisturizing or sun protecting properties. Avon leads with a 27.7% market share, thanks to its diverse product offer, followed by Natura (13.4%). The top imported brands are M.A.C (Estée Lauder) and Lancôme.
Avon Brazil has a strong presence on the makeup segment with several options addressed for different skin types.
New Consumers Drive the Market
Thanks to the stabilization of the economy over the past decade, low-income consumers are gaining access to cosmetics, which, in turn, is propelling product development forward.
“Our industry is very dynamic and must launch approximately 20 products per day,” insisted da Silva.
The industry is also benefiting from the increased purchasing power wielded by the growing ranks of professional women, single people without children, baby boomers and seniors.
Among the key trends explored by companies are biodiversity, natural and organic cosmetics, nutri-cosmetics, spa products, nanotechnology applied in cosmetics formulas and multifunctional makeup.
Clearly, there are plenty of opportunities for new players in Brazil, but they will face strong competition from local and multinational brands. Still, in a country were beauty is almost an obligation, there is room for new brands.