According to China’s National Bureau of Statistics, the nation’s beauty industry in 2011 rose 18.7 percent year-on-year to $17.1 billion, up from the 16.6 percent increase between 2009 and 2010. While the numbers for 2012 aren’t in yet, brand activity gives a good indication of what the future holds.
Procter & Gamble Co. recently moved its skin care, cosmetics and personal care headquarters from Cincinnati to Singapore, heavily suggesting that Asia is its new focal point.
“China overtook Japan to become our largest Asian affiliate, and our sales there climbed 28 percent in local currency, which enabled us to again expand our leadership position,” said Fabrizio Freda, president and CEO of Estée Lauder.
Lauder has business in 58 Chinese cities, which is 20 more than last year. Add in e-commerce and the company’s reach extends to almost 350 cities. More important — according to Freda — “For every dollar of sales we generate in China, we find that we get $2 from Chinese consumers elsewhere in places like Hong Kong, New York or Paris.”
Nik Modi, a security analyst with UBS AG, reports that the Chinese market generates 5 percent of Lauder’s global sales. It could be one of their biggest markets,” he explained, adding that whereas beauty products are often purchased as a “discretionary impulse” in the West, Chinese women make them a priority purchase.
“Currently, foreign brands have gained a firm foothold in the mid- to high-end of the luxury cosmetics market in China,” said Li & Fung Research Centre’s study “China’s Cosmetics Market, 2011.” “On the other hand, domestic companies are mainly competing in the low-end market.” In 2011, Euromonitor international reported the top three skin care companies, in terms of prestige and mass business combined, to be L’Oréal, with 16.4 percent; Procter & Gamble, with 10.2 percent, and Shiseido, with 10.1 percent.
But the significant growth of Estée Lauder has enabled it to grab the top spot this year. “We are the number-one prestige beauty player in our distribution. Estée Lauder is the leading prestige brand in each distribution and La Mer is the fastest growing luxury skin care brand,” Freda said. “By 2020, emerging markets are expected to grow by about $10 billion and represent more than 20 percent of global prestige beauty sales, with the largest portion coming from China, providing untapped opportunity for our brands.”
photo credit: estée lauder