Analyst Insight by Carrie Lennard.
While Brazil may currently be hogging the limelight as the standout star performer in Latin America, Colombia quietly saw the value size of its beauty industry increase by a third over 2004-2009.
Beauty and personal care resilient to economic slowdown
Despite the fact that during 2009 Colombian GDP posted a decline over three consecutive quarters, its beauty and personal care market posted healthy growth of 6%. All categories achieved positive rates, with skin care being the star performer, almost registering double-digit growth.
Skin care sales remain very strong, driven by anti-agers
In 2009, skin care products recorded growth of 10% in value terms. Although sales growth of some skin care products decelerated in 2009, consumers focused on products with specific benefits, despite these tending to be higher in price than standard products.
Mass products dominate skin care due to the longstanding presence of brands like Pond's, Nivea and Johnson's, and more recently direct selling companies, which are rapidly introducing new products. Anti-cellulite/firming products, facial moisturisers and hand care were among the most dynamic categories, but the standout performer was anti-agers.
Skin care companies focused heavily on marketing and developing new anti-agers in 2009. As a result, anti-agers was the most dynamic category in skin care in 2009, registering a growth rate of 16%.
Women even in their twenties are starting to worry about wrinkles and so anti-ageing products are increasingly becoming an essential part of daily beauty routines. Retail brands and direct selling companies have been targeting a wider age range of women, also pushing the use of a multiple product skin care regime, including morning- and night-specific products.
Men's grooming is blooming as attitudes slowly change
Colombia is still a country where men are very reluctant to show an open interest in beauty and personal care products other than basic items like razors and blades, hair gel, fragrances and, more recently, shampoo.
Despite this, the men's grooming category posted strong value growth of 7% in 2009 and, with a value size of just over US$450 million in 2009, is also one of Colombia's larger beauty and personal care segments.
Focusing on products for particular problems and drawing men's attention to gender-specific products has proved to be a way to drive sales in underdeveloped categories such as men's hair care. An example of this was the recent launch by Unilever of Clear, an anti-dandruff shampoo for men, using football star Cristiano Ronaldo as the brand's ambassador.
Competition in personal care products for men is developing, although it still remains a somewhat unexploited area. The current battle is focused on shampoo, with hair care for men having seen rapid growth in recent years. In 2009, retail value sales of male-specific hair care grew by an impressive 33%. Other products that are now more visible on retailers' shelves include hair colourants for men, a type of product that in the past men were rather reticent about purchasing.
Although skin care for men has grown at double-digit rates, its share within the men's grooming category is still low, at less than 1% of retail sales. The category presents a good opportunity for future growth, but only if manufacturers can overcome male reluctance to use such a typically 'female' product.
Non-store retailing grows more rapidly
The share of non-store retailers in beauty and personal care rose from 38% in 2008 to 39% in 2009 at the expense of store-based retailing, which saw its distribution share contract slightly.
This was due in part to the fact that the recession attracted a growing army of Colombians to become direct sellers, particularly those from lower-income segments, as direct selling provided an opportunity to earn extra money or create self-employment. This, in turn, boosted the number of sales made through the direct sales channel.
Multinationals far outsell domestic players
79% of total beauty and personal care companies are Colombian and 21% multinationals. However, in terms of value sales the position is reversed, with an 81% value share accounted for by foreign companies and only 19% by domestic companies.
This is because most domestic companies are small or middle-sized businesses, some with rather limited geographical coverage, whilst many foreign companies have been present in the country for more than 40 years and benefit from substantial research and development budgets and generally nationwide distribution of their products.
Colombia's youthful and expanding population an opportunity for beauty firms
Colombia's population has been slowly but steadily increasing and the trend is set to continue at least through to 2020. By 2020, the country will have a population of more than 53 million, an increase of almost 25 million over 40 years.
The potential workforce (those aged between 15 and 64) will more than double over this period, soaring from 16 million in 1980 to 36 million by 2020. By 2020, nearly half the country's population will be under 30 years of age.
This marks Colombia as a prime target for manufacturers to grow currently underdeveloped beauty and personal care categories as younger consumers are typically far more likely to experiment with new beauty products.
Outlook: positive growth forecast despite threat posed by high unemployment and consumer debt
Growth in Colombia's economy is slowing much faster than expected as a result of the US recession and the weakening global economy, whilst urban unemployment was well over 10% in 2009.
Furthermore, in stark contrast to Brazil, which weathered the recession well due to low consumer debt, Colombia is more vulnerable to the effects of the global downturn than other Latin American countries because of its low rate of national savings and persistent current account deficit.
Despite this, the country is set to add over US$600 million to the size of its beauty industry by 2014 as consumers remain reluctant to reduce their spending on beauty and personal care.
Whilst forecast growth may still be a far cry from the over US$8 billion predicted for neighbouring Brazil's beauty and personal care industry to 2014, foreign beauty companies could do far worse than consider Colombia for future investment.
In comparison to certain current major markets like the US, which is set to add just US$7 million to 2014, Colombia is an attractive proposition.