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Competing with Giants: The Rise of Local Competition

Strategy Briefing

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About This Report

Jul 2018

Regional and local brands increasingly fuel global beauty industry growth. The top 10 emerging markets in terms of absolute value growth are projected to contribute 57% of the global absolute market gains through to 2022. Local brands in each of these markets are consistently among the top growth drivers. Their bearing on future growth should not be dismissed. Such brands are stiffening competition, making it harder for global rivals to gain strong growth platforms in opportunity zones.

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Competing with Giants: The Rise of Local Competition

Local/regional brands fuel global industry growth

In the complex global competitive landscape amongst the fastest growing brands dynamically expanding local labels are becoming more prominent. Fuelled by their domestic markets they are rising in the global rankings.

Asia Pacific accelerates local brands most

Japanese brands have reigned in Asia Pacific, but over the forecast period it is expected that South Korean players will expand into the wider region, the challenge from Chinese brands rising significantly.

Staple categories rife with local competition

A growing number of local brands are rapidly gaining market share at the expense of international labels, with categories becoming increasingly fragmented. The penetration of local players in discretionary beauty categories is on the rise.

Benefit from authenticity and accessibility

Native brands are at an advantage to incorporate local heritage with authenticity,credibility and at price points reaching a larger consumer base than global brands.

Local brands compete on international stage

The rise of local competition in attractive opportunity zones is a significant challenge for multinationals, but additional problems arise as dynamically growing labels are expanding into new territories on the back of their home found success.

Korean beauty brands to reboot growth in China

In 2017 the 6-month diplomatic feud between China and South Korea took a toll on sales of beauty companies, and operating profits also suffered, highlighting the need to reduce such strong reliance on just one export market.

Japanese brands accelerate growth in international markets

The key factor behind J-Beauty’s growth acceleration in international markets is its successful differentiation strategies from the recent wave of Korean products.Japanese beauty is more focused on rituals, fewer steps with simple but powerful ingredients.

Introduction

Scope
Key findings

The Rising Challenge of Local Competition

Regional and local brands fuel global industry growth
Competition from local players more significant in mass beauty
Increasing proportion of new growth generated by local/regional brands
Notable diversity in penetration of international vs local brands by region
Asia Pacific, beauty’s future growth engine, accelerates local brands most
Latin America’s prospects increasingly attract internationals attention
International brands face new competitors in Middle East and Africa

Winning Strategies in Home Markets

Local players’ triple-pronged strategies in domestic markets
Staple categories rife with local competition
Local brands benefit from authenticity and accessibility
Pechoin becomes number one skin care brand in China
Young Chinese consumers turn to TCM-inspired products
L’Oréal raises the bar on research and technology in China
Growing awareness of Ayurvedic tradition drives local brands in India
Patanjali focuses to cater for the masses
An explosion of local labels in emerging deodorants category
Unilever shifts strategy to ‘imitated’ local competition in India
Halal credentials also demonstrated better by local players
Fragrance players at an advantage to capitalize on local strength
Advantages of local brands enabling growth beyond their home market

Contending on the International Stage

Multi-pronged international expansion strategies
Dabur India captures Middle East and Africa with halal certified beauty
Halal concepts in Western markets aided by ethical and health credentials
Korean beauty’s international appeal but need to reboot growth in China
Korean brands’ increasing necessity to increase global footprint
AmorePacific’s steady global expansion
International brands tapping into consumers’ interest in Korean beauty
Global beauty players add Korean brands to their stables via acquisitions
Japanese brands accelerate growth in international markets
China remains main battle ground for expanding international brands
Regional players acquire global scale brands: Natura&Co - The Body Shop
Natura remains deeply rooted in Brazil fuelling international expansion

Prospects

Finding opportunities in turbulence
Unpredictability of emerging markets
The metamorphosis of retail
Accelerating shifts of consumer needs