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Brazil, India and China show greatest potential for growth in cosmetics

By Andrew McDougall , 17-Jan-2012

Brazil, India and China show greatest potential for growth in cosmetics

In light of worrying economic times, a new survey released by the Credit Suisse Research Institute (CSRI) has noted that the cosmetic industry has picked up, driven by three of the four BRIC markets.

The CSRI published its second annual Emerging Consumer Survey, profiling consumer sentiment within the BRIC nations, Turkey, Saudi Arabia, Egypt and Indonesia; together, these consumers represent 3.5 billion people across the globe.

Despite consumer confidence slipping due to a potential economic downturn, particularly in developed markets, the cosmetics industry has not been too badly affected.

[The cosmetic industry] appears to have picked up marginally; low income groups in Brazil were important drivers here,” says the CSRI report.

Varying levels of optimism

The research suggests that confidence among emerging consumers is still reasonably strong, with optimism highest in Brazil, India and China and lowest in Egypt, Turkey and Russia.

“Having a well-positioned brand for the improving living standards amongst low and middle income earners can be just as relevant for growth as the typical focus of investors on luxury brands,” reads the report, identifying India, Brazil and China as regions where cosmetics brands are well positioned and locally owned.

In line with this, the industry has seen the big players such as L’Oréal, Beiersdorf, P&G and Unilever all expand in into these markets, citing local consumers as a key target.

Brazil top of the tree

The Brazilian consumer stands out as the most optimistic across the survey, as they typically spend not save, and are viewed as more positive.

On the contrary, China is viewed as a savings culture. This has led to lower spending on a range of discretionary items such as cosmetics and perfumes, although the outlook remains stable.

According to CSRI, the Indian consumer remains the second most confident in their personal finances looking forward, after Brazil, with the shift driven by the highest income earners.

Activity in the vast majority of categories have shown increases above that seen elsewhere, particularly in cosmetics and other lower-priced products.

Weakest BRIC in the wall

Despite the structural support there has been for the Russian economy in recent years from commodity prices, there has not been a notable trickle down to the average consumer.

Despite Unilever’s recent emergence in the market through its acquisition of Concern Kalina, CSRI says optimism in Russia remains the lowest of the BRICs, as the inequality of income suggests that growth opportunities are played mainly at the high income end.

To undertake this project, Credit Suisse engaged the leading global markets research firm AC Nielsen to conduct primary research on its behalf. The data set consists of more than 2500 interviews in both China and India and more than 1,500 in each of the other six countries.

“The survey highlights the major income and demographic differences and cultural and social drivers within the emerging world, a key consideration for spending preferences and also for the brand positioning of companies," commented Stefano Natella, head of Global Equity Research at Credit Suisse.

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