Beauty and Personal Care: Quarterly Statement Q3 2016

Strategy Briefing

About This Report

Aug 2016

The Forecast Model’s Q3 update reveals a slight downgrade of US$4 billion to the beauty and personal care industry, when compared to the Passport Baseline. While this is marginal, it indicates a protracted recovery in weak markets such as Brazil. The scenario is compounded by Brexit, which leaves the industry at the peril of further uncertainty. Mass segment players tend to be more exposed to a slowdown, while the Brexit impact calls for UK-centric players to diversify their geographic presence.

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Beauty and Personal Care: Quarterly Statement Q3 2016

Brazil holding back beauty and personal care growth prospects

The latest quarterly revision (Q3 2016) in the Industry Forecast Model indicates a moderate downgrade in growth forecasts over 2015-2020 with the global Passport baseline value CAGR slipping to 2.7% from 3%. The downgrade results from an economic recovery anticipated to take longer than expected to rebuild momentum.

Men’s grooming, skin care and hair care downgraded in emerging markets

A deterioration in Brazil’s GDP forecast for FY2016 is the single biggest contributor to the weakening projections in emerging markets. Brazil and China are largely responsible as their level of consumer spending weighs heavily on growth in beauty and personal care.

Mass industry players more likely to bear the brunt of growth slowdown

Companies such as Unilever and L’Oréal have greater exposure to market weaknesses in emerging markets as the latter remain mass-dominated in the beauty industry. The aforementioned players also tend to suffer from local rivals’ competitiveness. However, both companies have a broad geographic coverage that helps to limit revenue losses.

Brexit impact moderately negative, global presence best cushion against risk

The UK CAGR prospects over 2015-2020 have been downgraded by 0.3 percentage points. However, in the worst-case scenario of a disorderly Brexit, the impact could be stronger, and exposes those brands most that generate a substantial proportion of their sales in the UK. A diverse global presence helps to contain such risk.

Dynamic luxury segment and dermocosmetics in skin care motivating acquisitions

While growth projections in beauty and personal care are generally lukewarm, there are pockets of strength that have seen global multinationals, including L’Oréal, Unilever and Johnson & Johnson, heightening their merger and acquisition activity over Q2 of 2016, of niche luxury brands and skin care with a health focus.

Key findings
Executive summary
GDP Forecasts – Revisions over l ast q uarter

Beauty and Personal Care: Quarterly Statement Q3 2016 – Forecast Update

Hazy growth forecast in Q3 2016 as major market lapse takes grip
Growth downgrades hit Brazil hardest
Emerging market consumers rein in on the least essential
Sun care and men’s grooming fall out of favour as economy slumps
Brazil contributes 80% to men’s grooming dip in emerging markets
Beauty in India to thrive as 100 million join the middle class by 2020
Mass players more exposed to market downgrades
British brands vulnerable to Brexit
Global footprint minimises risks from external shocks such as Brexit
Disorderly, soft or no Brexit: Impact on beauty industry variable

Beauty and Personal Care: Quarterly Statement Q3 2016 – Industry Developments

Acquisitions dominate beauty industry activity over Q2 2016
Unilever’s latest niche acquisition marks its men’s shaving debut
Regional men’s grooming strengths call for tailored expansion
L’Oréal reinforcing what it does best: Luxury and dermocosmetics
Skin care flourishes on the back of dermocosmetics
J&J secures Neostrata as it bolsters its mark in dermocosmetics

Beauty and Personal Care: Quarterly Statement Q3 2016 – About Our Industry Forecast Models

About Euromonitor International’s Industry Forecast Model
Soft drivers and the Industry Forecast Model
Key applications for Industry Forecast Models