Personal care is one of the most attractive sectors for the chemical industry. Global sales of finished products are approaching $300 billion at the retail level, realising global growth of at least 4.6% per year over the past five years (2004-09).
The market continues on a positive expansion track, demonstrating that unlike other markets, cosmetics and toiletries escaped any major hit from the recent economic recession. While some regional markets experienced a limited decline, emerging country markets continued to grow, spearheaded by Argentina and the BRIC countries of Brazil, Russia, India, and China, which boasted double-digit growth rates. Europe continues to capture the largest share of the global personal care market with over 35% of the business. However, with key European markets including France, Germany, and Italy showing low growth rates of less than 3% CAGR, other regions are cutting away at Europe’s position. The European and North American markets have lost 2% of global market share each between 2003 and 2008. Much of this share has been taken by Latin America, which has seen a 3% market gain over the same time period, propelled forward by the doubledigit market growth in Argentina and Brazil. Strong growth is occurring in the cosmetics and toiletries markets of China and India, which are benefiting from extremely strong growth drivers. Steadily increasing disposable income levels in these countries are changing the spending habits of the countries’ sizeable populations. Whereas price sensitivity contributed to slow industry growth in the past, thriving demand for products with better functional benefits is expected to bring about a significant change. Growing awareness for new formulations is also creating new opportunities for specialty personal care ingredients suppliers. With a volume growth rate for personal care ingredients expected to reach nearly 10% between 2010 and 2014, India and China have the potential to become major ingredient consumption markets. In the meantime, Europe remains the largest market for personal care ingredients post-recession, followed by the United States. The total volume of the personal care ingredients markets of Europe, the United States, Japan, China, and India was estimated at around 575,000 metric tonnes in 2009. Europe and the United States accounted for over 70% of this volume. Furthermore, China has gained significant momentum over the last five years and overtaken Japan in volume sales, positioning itself as number three in the global market, increasing its share from 9% in 2005 to 14% in 2009. Japan’s share has declined from 6% to 5% during the same time period. In real terms, however, Europe is keeping pace with China. Even with the lower growth rate over the next four years the volume demand for personal care ingredients consumed in Europe will remain similar to that in China.
Among personal care ingredients, specialty surfactants dominate consumption with 34% of market share (Kline defines specialties as those surfactants which achieve a price over e1.50 per kg on a 100% active basis and are used in smaller volumes.) Specialty surfactants are the leading product category consumed in Europe, Japan, China, and India, and rank second in consumption in the United States. Their applicability in a broad range of products accounts for their major volume shares. This is also true of conditioning polymers including polyquaterniums, silicones, and proteins, which account for 20% of consumption in the aforementioned regions. Emollients come in at third place with 18% of market share. This product mix is unlikely to change significantly over the next few years; however, boosted by increased consumer awareness of sun exposure side-effects, the use of UV absorbers has extended to an increasing number of skin care products, ranking them among the most rapidly growing markets. In India, many traditional commodity chemicals, including sodium lauryl sulfate and sodium lauryl ether sulfate, are used in formulations. There has been less demand for specialty chemicals and the majority of existing demand remains satisfied through imports. However, an increasing number of personal care products now incorporate specialty ingredients in their formulations. Among specialty ingredients, specialty surfactants are the leading product category, followed by conditioning polymers, accounting for a combined volume market share of over 40%. In the market for emollients, domestic players lead sales. This is in sharp contrast to the market in China, which is dominated by large multinationals including Cognis and Croda. India now has the potential to become one of the major consumption markets for personal care ingredients. The highest volume growth is expected for emollients, with a projected 11.3% increase by 2014. Emollients are also a key growth area in China.
Emollients set to grow
The emollients market has benefited from the development of the natural personal care industry. As one of the most widely used product categories in personal care, emollients are effective in facial creams and cleansers, wipes, and other skin-care products for their moisturising, softening, and anti-ageing properties. Ingredients that are naturally derived have a strong share within this product category, constituting just over 50% of the market. By their very nature, emollients are more readily available, accessible, and affordable to derive from natural sources such as mineral and vegetable oils and as a result, there is a general movement in the industry away from synthetics and animal-based ingredients (such as lanolin). A consumer shift towards natural products would add to the category’s growth over the next five years. In a wider sense, plant-based ingredients other than emollients are also benefiting from the naturals trend. Botanical sales in Europe, for example, exceeded e2 billion in 2008 and have a forecast double-digit CAGR. Other opportunities for growth sit not only at the formulator level, but also at the manufacturer level. While great strides have been made in some ingredient categories, other categories remain a challenge. One area within personal care which has historically been a “non-natural” business is surfactants. However, sustainable and naturally derived surfactants are now gaining traction in the mass personal care market. On average, natural surfactants are growing at around 4% at the global level in contrast to their synthetic counterparts whose outlook is less rosy at 2%.
Innovation in personal care
In terms of industry development, innovation provides the stimulus for growth in mature markets. While in the 1990s the personal care market grew with the introduction of affordable and high performance skin care in mass, the last decade saw radical innovation in both product categories and sales channels. Antibacterial hand sanitisers, teeth whitening systems and sunless tanners were a big hit, and customers turned to online sales and vertically-integrated specialty stores. Today, growth platforms that provide a new value proposition tied closely to consumer needs offer the best potential for success. Skin care will likely continue to be at the forefront of adopting new innovative and break-through technologies in the short term. Chemical companies are driving innovation in this product class with new specialty actives such as proteins and peptides and also delivery systems which enhance the benefits of the product within segments such as anti-ageing. Skin care is the largest and fastest growing market within the personal care market. It accounts for nearly one third of all personal care sales and has been growing at a rate over 5% CAGR from 2004-08. Development in the category will continue to be driven by persistent marketing efforts to capture the attention of the increasingly value-driven post- recession consumers. As consumers are pursuing better quality products, there has been a shift in demand from medium- to low-end products toward high-end products. Improvements in living standards and the rapid expansion of cosmetic specialty stores in China and India will also help drive the consumption of skin care products in those regions.
The top three
Three dominant growth platforms in the personal care market include nutricosmetics, home skin care devices, and natural personal care. Natural personal care is now a multi-billion business. Prior to the recession, the segment experienced double digit growth, achieving growth rates as high as 15% in Europe in 2008, for example. Although the recession has curtailed some of this growth, the European natural personal care market enjoyed a healthy growth of 9%, and reached sales of e3.3 billion in 2009. In the US, the recession lowered growth; however, this market registered a healthy 8% sales gain in 2009. On the other hand, Brazil, the third largest market for natural personal care products, has ballooned at a 20% CAGR since 2005. Consumer awareness for natural products is growing; however, the understanding of “natural” continues to vary by region. Whereas the natural concept is well established in Europe, it remains a special market in the US. In India and China, naturals form a mass market with low pricing. The segment has greatest proliferation in Brazil, where the natural and herbal tradition is part of everyday life.
Going forward, growth in this segment will be driven by increased customer demand for natural products, but also by demand for sustainable manufacturing processes among brand marketers. Natural products are becoming increasingly affordable due to a constantly increasing number of private labels and more retail shelf space opening up to these products in all types of retail channels. Growth in Europe is forecast at 10.3% from 2010-14, with the market reaching e5.3 billion in 2014. Europe has been at the forefront of the global cosmetics and toiletries market for many years. Although Europe is still dominating both the global sales of personal care ingredients and the cosmetics and toiletries end product market, other countries are now coming in to shake things up. As seen from the results of Kline’s recent research studies, some of the emerging markets are successfully chipping away at Europe’s sizeable market share. This has provided opportunities for expansion and growth in markets which have traditionally not been big industry players, including India, China, and Brazil, but which are now experiencing a boom due to increased customer demand and changing purchasing patterns. Brazil and several of the Asian markets are also capitalising on the naturals trend, as naturally derived cosmetics have always been an integral part of formulations of locally sourced personal care products. Positive market factors in India and China are expected to see local growth rates rebound after the recession to double digit numbers by 2014, creating the potential for these countries to become major ingredients consumption markets. However, potential for new opportunities certainly also continues in the mature markets. While Europe may fall behind on China’s or India’s market growth rates, it still outperforms competitors in terms of volume output of personal care ingredients. As attention returns to innovation post recession, new formulations and product developments will increasingly provide a stimulus for growth in all global cosmetics and toiletries markets, creating new opportunities at both the formulator and manufacturer levels.
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