German personal care market turns the corner

Total sales of cosmetic products increased by 0.2 per cent to reach €11.1 billion, a turnaround compared to 2004 when spending levels for the sector actually fell by 1.4 per cent. This gives a per capita spend on cosmetics products of €134.60.

Although the rise is modest, the figure reflects a turn about for the cosmetics industry, despite the fact that overall the retail sector is still stagnant. Indeed overall consumer spending in Germany fell by 0.5 per cent, reflecting tough economic conditions, high unemployment and a fiercely price sensitive and competitive retail sector.

The largest categories in the personal care market - hair care and skin care - rose by 0.1 per cent and 3 per cent, reflecting market diversity and the continued interest in anti-ageing products.

Oral care also saw healthy rises in market spend, up 2.2 per cent to €1.2 billion, as did the bath and shower category, which rose 0.4 per cent to €724 million and the deodorant category which rose 1.5 per cent to €668 million.

However, where consumers have been cutting back on spending is in the coloured cosmetics and male cosmetics categories. Sales of coloured cosmetics fell by a significant 5.8 per cent to reach €1.18 billion, whereas male cosmetics fell by 1.9 per cent to reach 636 million.

Overall the picture for the German retail market remains fairly stagnant, reflecting over-expansion during the start of the decade. For the beauty sector this means fierce pricing competition, which in turn has cut profit margins down to a bare minimum.

With retailers continuing to consolidate their operations it is believed that, likewise, the beauty sector will see an increase in its profit margins, as retail competition eases off. But this should be a long-term, gradual process.

Looking ahead to 2006, IKW​ believes that the strengthening of the German economy will lead to a more active year for the personal care industries, with another year of small revenue gains to come.