changing habits in hair care

Changing Habits in Hair Care

March 2010

© Euromonitor International

2

Cosmetics & Toiletries: Hair Care

Introduction

Global Snapshot

Regional Overview

Competitive Environment

Forecast Overview

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Scope

Introduction

• This briefing on the global market for hair care covers the following products:

HAIR CARE

Salon Hair Care

Perms & Relaxants

Shampoos2-in-1

ProductsConditioners

Styling Agents

Colourants





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• The objective of the report is to provide an assessment of the Hair Care category performance by region and by

category in 2008, with some preliminary insights into 2009, and in the forecast period

• It aims to identify and analyse the key trends behind sector performance.

• For the purpose of this analysis, Hair Care has been classified in three groups:

• Basic: includes Shampoo, Conditioner, 2-in-1 Products

• Non-essential: includes Salon Hair Care and the premium segment

• DIY Hair Care: includes Perms and Relaxants, Styling Agents and Colourants

• In the Competitive Environment section, the report aims to analyse both the successful and the less successful

strategies of the key leading global companies in recent years, and their strategic positioning for the future, including

key markets in which to invest.

Objectives of the Report

Introduction




5


2008/2009: value

slowdown while volume

sustained

Slowdown in growth rather than real declines, with the exception of NA. Volume

growth has been sustained, thanks to changing habits in developing markets.

However, consumption rationalisation does not mean downgrading at all costs.

Static competitive

landscape

Static competitive landscape in global hair care a threat to sales growth, especially in

developed markets. Leading companies are still too dependent on specific regions

and expansion through local company acquisitions, with greater or lesser success.

Innovation and

segmentation key

Still room for growth through innovation and further segmentation, and even premium

if justified. In the US and Western Europe, consumers are keen on low maintenance

hair styles, meaning demand is high for standard products and DIY hair care.

Changing habits in BRICs Sales in China and India proved resilient with increased awareness about hair care

and product sophistication. Brazil's new Escova Progressive technology may be a

threat, while in Russia there are signs of maturity but sustained interest in premium.

Winning and losing

categories

DIY HC performed well: P&R was the fastest growing category in 2008, while 2009

was a good year for colourants. Due to its dependence on developed markets (87%)

Salon HC has been worst hit as consumers go back to more staple items.

Uneven development in

distribution

Internet retailing still fails to convince NA consumers of its good value, but increased

in Europe, AP and LA. Discounters missed an opportunity as hair care offer is not

developed enough and consumers are seeking choice even for basic products.

Frontier markets lead

sales

Middle-East Africa and Latin America led growth in both 2008 and 2009. Frontier

market HC sales were not directly impacted by the global economic slowdown, and

growth was driven by local factors.

2009 and beyond for

global hair care constant

value sales

EE halved its growth in 2009 (from 9% in 2008). The leading markets of the US and

Japan saw declines that will persist in the next five years. Global hair care sales

showed resilience in 2009 and sustained the growth levels seen in 2008 (3%).

Key Findings

Introduction




6


Introduction

Global Snapshot

Regional Overview


Forecast Overview




7


• Hair care, the third largest sector in cosmetics and toiletries, grew by just over 3% in both 2008 and 2009,

representing a slowdown from previous years and the lowest growth rate in the industry after the premium segment

• Though growth in global hair care spending decelerated by 1.3 percentage points, the size of this relatively mature

sector still made it the second largest contributor to absolute value growth during the review period.

• Slowdown in growth was driven by discounting, promotions and a weak demand in most established markets, such

as the US, as consumers traded down from premium priced salon hair care products to cheaper brands and private

label.

Hair Care Delivers Worst Growth Results

Global Snapshot

Baby Care

Deodorants

Hair Care

Colour Cosmetics

Men's Grooming

Oral Care

Bath & Shower

Fragrances

Skin Care

Depilatories

Sun Care

0

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0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000

Gro

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$)

2008 size (US$ million, fixed exch rate)

Cosmetics & Toiletries Performance by Category




8


• The effect of the economic downturn on hair care differs

according to the product type.

• Although considered an essential purchase, shampoos

have still been hit by the slowdown. Many companies

have begun to discount regularly to try to maintain pre-

recession sales levels. This is resulting in consumers

developing a habit of only purchasing shampoo when on

offer. Growth levels were sustained in 2009 (5%), which

indicates that basic and staple items show greater

resilience despite economic woes.

• Conditioners, still have a relatively low penetration rate

in some key emerging markets, such as China, and are

not considered a necessity. This means that as the

recession deepens, in many households conditioners will

be dropped altogether from the weekly shopping list.

• The 2-in-1 category saw its decline slow in 2008,

although it could have taken more advantage of the

rationalisation of demand. No effort was made to

upgrade its image or support it in terms of innovation.

The category saw its fortunes reversed in 2009 ,

however, as it posted positive results after years of

decline (+3%). This was supported by increased

expenditure levels in Eastern Europe and Latin America.

• Better insulated segments include naturally positioned

hair care products, while added benefits, such as anti-

ageing and UV protection have helped maintain average

unit prices.

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Hair Care Performance 2008

US$bn %

Shampoos Withstand Economic Pressures

Global Snapshot




9


• Perms and relaxants have seen significant

growth, but in-depth structural long-term

changes in consumer habits are not expected.

As a result, P&R is doomed to have difficulties

to get out of its core consumer target.

• The highest per capita consumption of P&R is in

Latin America. Going to the hairdresser is

deeply anchored in everyday culture in this

region. Going to the hairdresser for the perms

and relaxant routine is almost as important than

the result itself, as it is a social and cultural

event. Even in times of recession the majority of

women stay loyal to their hairdresser rather

than going for cheaper at-home products, as

this would mean losing much more than a

professional result for the hair. It is a key part of

the culture and lifestyle and not just a simple

beauty step.

• In the forecast period, a third way to consume

P&R could appear in this region in the form of

informal at-home salons, where friends and

family meet up at a home to use P&R products,

while retaining the social aspect.

• Consumption of P&R is deeply linked to

lifestyle. As a result changing habits for the

category are not sustainable and are just the

consequences of short-term factors.

Are Long-term Changes in Consumer Habits Realistic?

Global Snapshot

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AA EE AP WE MEA NA LA

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P&R 2008 Value Sales and Growth

2008 % growth 2007/2008




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• Premium cosmetics grew by just 2% in 2008 (-0.4% in 2009), as they bore the brunt of the effects of falling consumer

spending. Going forward, sector growth will be pressurised as reduced disposable incomes lead consumers to trade

down to varying degrees. This will affect primarily basic toiletries products, such as hair care.

• Actual sales of premium hair care products only decreased in North America and, to a lesser extent, in Western

Europe, but it was enough to see premium hair care's share fall from 13% to 12% between 2007 and 2008 (down to

11% in 2009). The decline in premium hair care had started earlier, but 2008 and 2009 saw its strongest decrease.

• Premium hair care sales have been decreasing since the 2001 economic crisis in the US, and the sector has not

recovered since. With North America, and the US in particular, being the largest market, the region's sales impact

strongly on global performance.

• This should not overshadow the otherwise good performance of premium, which is still gaining share of hair care in

the Middle East and Africa and Latin America. In the case of Eastern Europe, premium took a dip in 2009, as the

economic crisis hit home.

Premium in 2009

• Some lower end retailers are trying to

increase their premium offerings in an effort

to retain the new customers they have gained

during the recession, many of whom were

previously devotees of high-end retailers.

Time will tell if this tactic will retain these

consumers in the long term.

• This strategy is especially important in

developed markets, as premium HC is not

likely to recover before 2011, meaning there

is a real opportunity for lower end retailers to

sustain these changing habits of shopping for

premium products in non-luxury outlets.

What's Next for Premium?

Global Snapshot

% of Premium Sales (US$) 2006-2008

Region 2006 2007 2008

North America 31.6 31.7 30.6

Middle East and Africa 18.0 17.9 18.2

Australasia 13.9 13.9 13.7

WORLD 13.5 13.1 12.3

Asia-Pacific 11.2 11.2 11.3

Western Europe 10.3 10.5 10.2

Eastern Europe 2.2 2.4 2.5

Latin America 1.6 1.6 1.5




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• Department stores – the main channel for premium products – tend

to suffer first in an economic crisis. Hence, not surprisingly, it was

hit hardest in 2008 and 2009 with an estimated 6% fall in global

sales for the year. There have been double-digit declines in key

national markets, such as the US, Japan and Germany, as

hundreds of outlets closed. However, it has not only been the

developed markets that have been affected. Sales in Russia have

fallen by nearly a third.

• A slump in the department store channel added to difficulties in non-

grocery channels in North America and Western Europe. Beauty

specialists saw decreases in Asia-Pacific and Latin America.

• Grocery retail has been growing faster than non-grocery retail since

2007, and 2009 saw the latter tumble into negative territory in terms

of growth for the first time in a decade or more. Grocery channels

fared better than non-grocery, being seen as more affordable and

benefiting from one-stop shopping habits, taking consumers from

specialists.

• Within grocery retailing, discounters' share remained stable at best,

as they missed the opportunity to gain significant share in a time of

economic hardship. The geographic reach of this relatively young

format is still limited.

• 2009 was a landmark year for non-store retailing. For the first time

in a decade, Internet retailing was not the fastest growing retail

channel, dropping into single-digit growth. Internet retailing has

proved a success but is still a niche. In geographical terms, the

development of non-store retailing varied, with success in Europe,

Asia and Latin America, a lacklustre performance in North America,

Australasia and the Middle East and Africa.

Changing Habits in Channel Distribution

Global Snapshot

0

20

40

60

80

100

WE EE NA LA AP AA MEA

2008 Distribution Split, % Value

Grocery retailers

Mixed retailers

Health & Beauty retailers

Other Non-grocery (includes Outdoor markets)

Non-store retailing




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Introduction

Global Snapshot

Regional Overview


Forecast Overview




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• Global growth in hair care slowed down in

2008 and 2009 (+3%), despite dynamism in

Eastern Europe (down to 5% in 2009) and

Latin America. It was held back by an almost

2% fall in North America (-3% in 2009) and

just 1% growth in Western Europe. The two

mature regions together account for 44% of

the world hair care market.

• The biggest region for hair care in 2008 was

Western Europe, but it was overtaken by Asia

Pacific in 2009, the gap becoming even more

pronounced by 2014. With value sales of just

under US$3 billion in 2009, Germany alone

accounts for higher hair care value sales than

the Middle East and Africa (US$2.8 billion).

• The biggest single market for hair care is still

the US, with value sales of over US$10 billion

in 2009, or a 16% share of the global hair care

market. Americans are also the biggest

consumers of salon hair care, with an annual

spend of US$2 billion in 2009. In 2008, the

category's sales nose-dived by 6%, as

consumers cut back on their spending. This

contributed to an overall decline in US hair

care value sales, a trend that continued in

2009. All product categories, except 2-in-1

products, saw declines in North America in

2009.

Key Regions at Play

Regional Overview

WEEE

NA

LA AP

AA

MEA

Regional CT Value Share (US$)

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Hair Care Value Sizes and Growth 2008

US$ bn %




14


• North America, Western Europe and Japan account for

54% of hair care sales and have the highest per capita

consumption. Hence, any change of market dynamics

in these regions impacts global sales significantly.

• Taiwan, the US, France, Israel and Sweden saw

declines in hair care sales in 2008, with a clear

negative shift versus 2007 (except in the case of

France). The US market alone lost US$200 million in

that year. Sales declines in those markets continued

into 2009.

• In France, hair care value started declining in pre-crisis

years, due to the high level of maturity of the sector,

but for other national markets it was a complete U-turn.

• Even while they saw positive growth, a number of

developed markets, such as Canada, Japan, Spain

Germany and the UK, were still impacted, with growth

rates slowing by 1-2 percentage points.

• Consumers stopped testing and buying different

products and stayed more loyal to one, resulting in a

slowdown in growth for "basics" products, such as

shampoo and conditioners.

• In Japan, growth slowed down further in 2009 (-2%), as

consumers adopted more conservative spending

patterns and discounting activity was prevalent in

shampoos. The only categories which posted positive

growth levels were conditioners and medicated

shampoos.

Developed Markets Worst Hit by Recession

Regional Overview

Hair Care % Growth – Least Dynamic Markets

Country 2007 2008 Country 2007 2008

Taiwan 4.9 -3.7 Portugal 1.4 0.4

US 1.1 -1.9 Austria 1.7 0.4

Sweden 3.3 -1.7 Germany 2.4 0.6

France -0.4 -1.2 Canada 2.4 1.0

Israel 4.5 -0.5 Italy 0.4 1.1

Greece 1.2 0.0 South Korea 1.4 1.3

UK 0.5 0.3 Finland 3.5 1.7

Japan 0.4 0.3 Netherlands 1.1 1.8

Section Summary: The key trend is "Back to basics",

with consumers seeking low maintenance, easy to use

and straightforward products in order to fit their more

conservative spending patterns, aiming to "consume

less but better".

However, this trend does not overshadow the

continuing need for innovation. Segmentation is still key

for growth, especially in mature markets and product

categories, such as shampoo and conditioners.

The low maintenance hair cut is popular, as it fulfils

demand for cutting back on spending on higher end hair

care products.




15


Winners

Losers

DIY Hair Care: Perms and

Relaxants, and Colourants

P&R enjoyed the strongest growth in 2008 thanks to strong performances

in NA and LA, while standard shampoos were the best performer in 2009.

Colourants enjoyed smaller but still significant growth in WE and NA, with

the success of cheap at-home kits, such as Tesco's 99p line in the UK.

2009 showed a clear increase in sales, with products such as Clairol

Touch Ups successfully promoted as an interim at-home solution for in-

between salon visits.

Discounting and cheaper

products

In order to maintain volume sales, manufacturers increased promotional

offers. Discounting became more widespread, with offers like BOGOFs

multiplying in order to boost sales in the very mature developed markets.

Private labels also saw their shares increase in North America, Western

Europe and Japan, although their success was limited.

Premium and Salon hair careSalon hair care has been hit hard, with Japan and North America the

main casualties, thus global sales declined in both 2008 and 2009.

Premium hair care sales decreased in Western Europe and North

America, as well as Eastern Europe which saw the category decline

sharply in 2009 (-5%) from double digit growth rates in previous year.

Styling agents and 2-in-1

products

In the midst of the "back to basics" trend, styling agents and 2-in-1

products underperformed in 2008. Styling agents were made redundant

in their two main markets – NA and WE – as consumers sought a

"natural" look, however, 2-in-1s managed to make a come back in 2009

after years of decline as consumers sought the benefits of multi-

functionality

Developed Markets: DIY Hair Care vs Non-essential

Regional Overview




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• In 2008, hair care in Eastern Europe was unaffected by recession. Growth continued, driven by premiumisation, with

sales rising by 9%. The traditional department stores channel suffered while the new Internet retailing channel

boomed (+157%) as it gives more choice to consumers seeking novelty and innovative products.

• The recent development of highly specialist shops has helped drive strong demand for salon hair care, as the

category is still niche and the range on offer is expanding rapidly. While salon hair care in Ukraine and Russia

expanded by a massive 30% in 2008, both countries, as well as the overall region, dipped into negative territory in

2009 as spending was heavily reduced and consumers cut back on non-essentials.

• The economic crisis had a much later impact in Eastern Europe, and 2009 showed a substantial turnaround in

fortunes, as real GDP growth slumped from 4.9% in 2008 to -6.3% in 2009. Secondly, growth rates in 2008 were

artificially boosted by high inflation rates, with hair care sales actually declining by 0.4% in real terms in that year.

2009: A reversal of fortune

• The whole region, and Russia in particular, was not

greatly affected in 2008, but the situation changed

completely in 2009. The repercussions of the global

credit crunch were felt fully in Q1 2009, with collapsing

commodity prices, exports and credit access. The

region's economy is expected to contract by 6%, with

a slight recovery in 2010 (0.8% real GDP growth). The

downturn will be sharper in CIS states including

Russia, the Baltic states, as well as Hungary.

• Russian consumers stocked up on premium cosmetics

as the economic crisis intensified in Q4 2008, and the

rouble continued to depreciate. Spending on premium

products declined in 2009 hurting perfumeries and

smaller store-based beauty retailers in particular, with

Arbat Prestige having recently gone bankrupt.

Slowing Growth in Eastern Europe

Regional Overview

Russia44%

Poland17%

Ukraine9% Czech

Republic7%

Hungary4%Romania

4%Slovakia

2%Belarus

2%

Lithuania2%

Bulgaria2%

Other Eastern Europe

7%

Hair Care 2008 Value Share (US$)




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• In LA, the perception of conditioners is gradually

changing from that of a non-essential item to one that

60% of women buy regularly.

• Demand for pricier products is high, boosting the

average unit price. Salon HC saw a 11% rise, and only

colourants prices decreased in 2009. Premium HC sales

in LA are still a niche.

• In markets where premium is already developed, such

as Japan, no significant changes in habits were

witnessed, thanks to strong consumer loyalty.

• 2009 saw the highest contributions from Asia-Pacific in

volume terms, while value growth was maintained (at

4%) thanks to the good performance of Indonesia and

the Philippines. On the other hand, after being strong in

the review period, LA's volume growth rates decreased

sharply in 2008 and 2009

• Taiwan's poor performance contributed to unit prices

depreciating overall (except for 2-in-1s), due to stiffer

competition, with widespread discounting and BOGOF

offers, although no real increase for private label.

• Salon hair care sales were lacklustre in AP in 2009, held

back by Japan, but posted double-digit growth in LA.

Mass brands tried to move their image upmarket, with

the Pantene Shine Hair Spa in Australia and a pop-up

hair salon by Unilever.

• From negative results in 2008, Brazil's Salon HC market

posted positive growth in 2009 due to an increase in unit

prices and depreciation of the local currency against the

US$. Volume sales, however, continued to decline.

• DIY hair care, such as styling agents and colourants,

performed well in Latin America (with the exception of

colourants in Brazil - below regional average - due to

Escova Progressive). Colourants are very popular

among teens and young adults. Product penetration is

high and should increase further, as consumers reduce

their visits to hair salons and are seeking at-home

alternative.

• AP, on the other hand, saw sales of DIY hair care

remain stable in both 2008 and 2009, as consumers

were not shifting towards at-home solutions.

Premiumisation in Asia-Pacific, mass at its

highest level in Latin America

DIY hair care: styling agents and colourants

going up in LA, but stable in AP

Disparities in volume consumption/depreciation

in average unit price due to discountingChanging habits and perception impact sales

Regional Developments: Disparities and Similarities

Regional Overview




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• A key driving force behind the success in the emerging regions have been the BRIC economies. Five years ago, the

BRICs were identified as the key market drivers for FMCG growth on a global level. In 1997, BRIC sales represented

10% of global HC sales, while in 2009 they represented nearly a quarter of sales worldwide.

• However, after seeing double digit growth in previous years, their combined sales increased more moderately in

2008 and 2009 due to a slowdown in Russia and Brazil.

• Despite the slowdown, the BRIC hair care market continued to perform above the global average, with India up by

15% to US$1.5 billion in 2009, China (10%), followed by Russia (5%) and Brazil (7%). There was a noticeable

reduction in demand in perms and relaxants and styling agents in Brazil; and major cutbacks on styling agents and

salon hair care in Russia. In Russia and China, sales have been slowing down because they have started to reach

certain saturation levels, and new consumers are more difficult to attract.

Few opportunitiesEscova Progressive to hit some categories

in Brazil

• Premium products sustained their share and

growth even in more difficult economic times

across all four markets with high-income

consumers aspiring to upgraded luxury

alternatives.

• Brazil and Russia witnessed significant

success for 2-in-1s in 2009 due to extensive

promotional offers by Unilever and Procter &

Gamble in Brazil and at the expense of huge

expenditure cutbacks on conditioners in

Russia.

• Escova Progressive is a recent type of blow-

dry technique, which is highly favoured by

consumers in Brazil. Its success directly

impacted hair care sales. However, numerous

products, such as colourants, cannot be

applied on hair using the Escova Progressive.

• This new technique could, however, create a

new segmentation, with HC products

specifically developed to be used in parallel

with it.

BRICs: Brazil and Russia Take the Plunge

Regional Overview




19


• Significant changes in consumption habits are apparent in India and China. In China, after focusing on very basic

products, such as 2-in-1s, in the 1990s, more added-value products, such as conditioners and styling agents, are

now being introduced, helped by the development of specialist retailers.

• In India, consumers historically bought shampoo and conditioners as general or family-use products, but by 2009,

with growth in disposable income levels and greater awareness about hair care, purchases have become more

targeted, with consumers starting to opt for specific hair type variants. Hair colouring is also catching up and

colourants have been growing dynamically in both markets.

• Premium hair care still performed well in the RICs in 2009,creating over US$40 million in additional sales.

Russia more fragile?

• Russia saw a substantial rise

in the share of Internet

retailing between 2007 and

2008, from 0.8% to 3.1%.

Internet retailing provides

easier and more convenient

access to an extensive range

of products, including

premium brands.

• Russia is now facing a more

grim outlook, as it was

strongly hit by the recession in

2009. Consumers are

expected to shift their habits

considerably in 2009, with

salon HC declining, while

standard shampoo and 2-in-1

see strong increases.

India and China Sustain Their Sales

Regional Overview

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Salon HC Shampoos 2-in-1 Conditioners Styling Agents

Colourants

RIC Hair Care Sizes (US$ Million) 2007-2008

2007 2008




20


• In the past, the BRICs were among the most rapidly developing countries, with the greatest potential for hair care

growth. With these countries gradually maturing, the next tier of emerging economies has come to the forefront.

The Next BRICs: Frontier Markets

Regional Overview

Fastest Growing Markets – Historic vs Forecast

Absolute Growth in Hair

Care: US$ mn 2003-08

Key Markets for Hair Care

Growth: % CAGR 2003-08

Absolute Growth in Hair

Care: US$ mn 2008-13

Key Markets for Hair Care

Growth: % CAGR 2008-13

Brazil 3,038 Venezuela 33 China 1,432United Arab

Emirates12

China 1,154 Belarus 26 Brazil 765 India 9

Russia 1,051 Argentina 21 India 664 Peru 8

Mexico 624 Uzbekistan 21 Mexico 193 China 7

India 510 Azerbaijan 19 Russia 174 Belarus 7

Spain 491 Ukraine 18 Peru 171 Tunisia 7

USA 464 Uruguay 16United Arab

Emirates128 Morocco 5

Venezuela 457United Arab

Emirates16 Poland 110 Vietnam 5

Argentina 451Dominican

Republic16 Spain 96 Ukraine 4

Japan 341 Romania 15 Ukraine 95 Azerbaijan 3




21


• Hair care in Argentina grew by 33% in 2008

(+24% in 2009) more than twice its 2007 growth

rate and eight times the global average. This was

attributable to rises in disposable income,

supported by population expansion and a high

inflation rate.

• As the Brazilian market saturates and matures,

and growth slows, all eyes will be on Argentina.

• Premium products gained share in hair care (as

well as in all other beauty and personal care

categories) as the recent years of strong

economic growth created a feeling of economic

security.

• As a result, consumers became less careful about

spending, and began to purchase premium

products that had previously been out of their

financial reach during the economic crisis.

• The success of premium products (+41% in 2008,

+ 15% in 2009) was also underpinned by changes

in distribution patterns. Beauty specialist retailers

and "other" health and beauty outlets have both

gained market share over the last two years.

• While volume sales growth in 2009 was

maintained for basic categories, such as

shampoo, there was reduction in demand for less

staple products, such as colourants and styling

agents.

Country Focus: Argentina

Regional Overview

Summary: Argentina's strong performance effectively

represents a relatively fragile growth boosted by

inflation rather than real long-term changes in

consumption habits.

Argentinian consumers show a clear taste for premium

products when they can afford it, but readily switch back

to more basic offers if economic circumstances dictate.

In the last economic crisis of 2001/02, the share of

premium hair care sales dropped by half a percentage

point. Similarly in 2009, the premium segment

decelerated sharply by losing a third of its value growth

seen in the previous year.

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00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08

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Argentina Hair Care Category Performance 2000-2008

Salon HC Shampoos ConditionersStyling Agents Colourants 2-in-1




22


Introduction

Global Snapshot

Regional Overview


Forecast Overview




23


• Since 2006, the global share of the top five companies has fallen slightly, from 58% to 57%. Together, smaller

players will less than 1% shares gained one percentage point over the same period. In comparison, in the overall

beauty and personal care market, the top 5 (and the top 10) companies combined gained one percentage point in

value share between 2006 and 2008.

• In hair care, while Procter & Gamble, L'Oréal and Kao saw their shares decrease, Unilever saw a slight increase,

while Henkel maintained its share at the same level.

Hair Care: % Value Shares US$ 2008

Rank Name Global NA WE AME AP AA EE LA

1 Procter & Gamble Co, The 20.1 25.7 19.2 26.5 18.2 25.5 19.8 16.8

2 L'Oréal Groupe 18.8 26.4 33.0 13.8 3.8 21.8 13.6 14.1

3 Unilever Group 10.7 7.2 6.5 12.1 15.1 13.9 7.1 15.4

4 Henkel KGaA 4.8 0.9 11.0 3.1 1.3 13.6 13.8 0.8

5 Kao Corp 2.7 1.5 2.4 0.2 7.7 - - -

6 Alberto-Culver Co 1.9 6.2 1.4 1.0 0.4 10.1 0.1 0.9

7 Shiseido Co Ltd 1.8 0.4 - - 7.3 - - -

8 Colgate-Palmolive Co 1.7 - 1.4 1.5 0.9 4.0 1.3 5

9 Beiersdorf AG 1.6 - 2.8 1.9 2.1 - 3.3 -

10 Private Label 1.6 1.0 4.5 0.0 0.7 0.9 1.1 0.2

Static Competitive Landscape





24


• In shampoo, Procter & Gamble lost share to L'Oréal in Latin America, with L'Oréal focusing on product development

to cater to local tastes. L'Oréal introduced a shampoo called Volume Control, designed for Brazilian hair types. The

product was well received by Brazilian consumers.

Share Movement in Key Markets


Hair Care Company Performance

NA WE LA AP China Brazil Russia India Comments

P&G Doing well in Asia-Pacific, thanks to Pantene

Pro-V brand.

L'Oréal

Good coverage and performance, gaining

ground on P&G and Unilever. Should focus

more on AP in shampoo (for example with

Garnier) and LA for colourants.

Unilever

Amongst the high growth sectors, Unilever 's

main coverage is in hair care. Like its

competitor L'Oréal, Unilever might focus

more on other categories, such as skin care,

with the Pond's brand.

Beiersdorf - - - -

Beiersdorf should continue to focus on HC in

China to regain competitive edge. Strong

increase in 2007 in WE shows future

opportunities are still there, notably in France.

Shiseido -Limited regional focus but good opportunities

through targeted expansion in China.

Kao - - - -

Kao should focus on regional expansion,

given that Japan is a saturated market. The

company will benefit particularly from

pursuing growth opportunities in China's skin

and hair care markets.




25


Product development and packaging innovation to gain share

• Procter & Gamble's innovations in packaging were a success in 2008. Clinicare offered a smaller one wash

treatment pack, and Pantene introduced the concentrated Miracle Line for treating highly damaged hair. Miracle Line

also claims anti-ageing properties. It is now difficult to challenge Procter & Gamble's position in China, as it operates

31 manufacturing facilities across the country, with a deeply entrenched distribution system. One approach for a

newcomer is to acquire a local company which has expertise in local products, in addition to owning manufacturing

units and having an established distribution network.

• Unilever has been investing in advertising and sponsoring popular TV programmes. Its maintaining share is positive,

given the intense competition, but improving its packaging may help it actually increase its share.

• Beiersdorf's growth in hair care in China fell below overall sector growth in 2008. China's hair care sector saw

Bawang's launch of products based on traditional Chinese remedies to address hair loss amongst the middle aged

and the elderly.

• L'Oréal's value share remained stable in 2008, as it focused more on skin care. Given the choice between skin care

and hair care in China, skin care is a better option, since it is a bigger sector and has greater growth prospects.

However, in the long run, L'Oréal may focus on the hair care sector.

Case Study: P&G in China – First Mover Advantage


China: Hair Care % Value Share 2005-2008

2005 2006 2007 2008 Rank

Procter & Gamble Co, The 34.3 33.5 32.5 32.9 1

Beiersdorf AG 1.2 1.3 9.4 8.7 2

Unilever Group 9.3 9.4 8.7 8.7 3

L'Oréal Groupe 1.5 1.5 1.5 1.5 8




26


L'Oréal focuses on product launches

• In 2008, L'Oréal's value share in Brazil's hair care sector increased marginally. L'Oréal has been investing heavily in

new product development and publicity campaigns, appointing Angelica, a famous Brazilian celebrity, as its brand

ambassador. L'Oréal introduced new shampoos and conditioners under the Garnier Fructis and Elsève brands

during 2007, which continued to do well in 2008. The main launch under Elsève was Elsève Volume Control, which

was backed by a television advertising campaign. L'Oréal Imédia and Garnier Nutrisse are important brands in

L'Oréal's portfolio, and offer a wide variety of colourants inspired by fashion trends.

Big spending not helping – Unilever

• Unilever is the sector leader, but lost share in 2008, due to increased competition from L'Oréal. Unilever's strategy in

this market has involved investing in advertising, broadening its distribution network and offering competitively priced

products, but the company needs to invest in product development to beat its competitors.

P&G's share continues to slide

• Procter & Gamble's market share

declined in 2008. The company's

products are considered expensive, and

price is a major issue for Brazilian

consumers. In 2007, Procter & Gamble

signed a contract with well-known

Brazilian model Gisele Bündchen to

promote the Pantene brand, which has

been totally revamped, but still accounts

for only a small share of sector sales.

Procter & Gamble needs to market

products at more competitive prices to

succeed in the Brazilian market.

New Product Development Helps L'Oréal in Brazil


0

2

4

6

8

10

12

14

16

18

2004 2005 2006 2007 2008

% m

ark

et sh

are

% Market Share Hair Care Brazil 2004-2008

Unilever Group L'Oréal Groupe Procter & Gamble Co, The




27


L'Oréal puts pressure on Unilever

• Unilever and L'Oréal are the two major players in the

Indian hair care sector. Unilever leads the market, but

L'Oréal is increasingly closing the gap.

• L'Oréal gained approximately two percentage points

in share in 2008. Its strategy involves investing in new

product launches and promotional activities. Elvive

Revitalising Conditioner was one of the most heavily

advertised brands in 2008. In addition, L'Oréal's

Garnier Fructis brand is becoming popular for its

competitive pricing and natural positioning.

• Hindustan Unilever saw a further share decline in

2008. Dove was one of the most advertised hair care

launches in 2007. Apart from advertisements in print

and on television, Dove was also promoted through a

tie-up with Yahoo India. The site hosted interviews on

hair care and Dove. The company also carried out a

Dove "hair wash experience" at leading malls, which

further reinforced brand recall. Despite the heavy

promotional activities, Unilever's share dipped, due to

competition from L'Oréal. Unilever should consider

allocating advertising spending to its other major

brand, Clear Plus, the share of which fell significantly.

• Along with 100ml and 250ml plastic bottles, sachets

continue to play an important role in promoting sales

of hair care, especially shampoo, and also in

encouraging new consumers to make trial purchases.

L'Oréal Closing Gap in Hair Care in India


0

5

10

15

20

25

2004 2005 2006 2007 2008

% m

ark

et sh

are

% Market Share Hair Care India 2004-2008

Unilever Group Marico Ltd L'Oréal Groupe

0

5

10

15

20

25

0

50

100

150

200

250

Fore

ca

st %

US

$ m

illio

n 2

00

8-2

01

3

Hair Care Prospects India

2008-13 Absolute 2008-13 CAGR %




28


• In general, the leading firms have been focusing on salon HC, with P&G, L'Oréal and Unilever acquiring salon HC

brands. This has not yet proved very successful for P&G and L'Oréal, as investing in salon HC is a long-term

strategy. Investing in expanding the shampoo business could deliver quicker and more concrete results in terms of

sales.

Major Players Look to Expand Salon Business


Key M&A Activity

Acquired

company/

brand

Sector Year Strategic assessment

Estée LauderForest

Essentials

Cosmetics

and toiletries2008

Estée Lauder bought a minority stake in the Indian company to

gain greater exposure to the natural/organic market in the

country.

Johnson &

JohnsonDabao

Cosmetics

and toiletries2008

Aims to increase exposure in the Chinese market and leverage

the distribution channels of a local company.

L'Oréal

Columbia

Beauty

Supply

Professional

hair care2008 Can further exploit the opportunities in the hair care market.

L'Oréal

Le Club des

Createurs de

Beauté

Cosmetics

and toiletries2008

Le Club des Createurs de Beauté sells via mail order and the

Internet. L'Oréal bought a 50% stake in the company, giving it

access to an alternative distribution channel to regular retail

outlets. Its hair care brand is Jean-Marc Maniatis.

L'Oréal

PureOlogy

Research

LLC

Premium hair

care2008

PureOlogy is specially designed for coloured hair. In the year

prior to the acquisition, PureOlogy's sales were worth US$57

million. The brand is popular in the US, and L'Oréal aims to

market it in other parts of the world.

Procter &

Gamble

Frederik

Fekkai

Salon hair

care2008

Will help gain exposure in premium salon hair care, which

operates with high margins as people are willing to pay extra.

Unilever TigiSalon hair

care2008 Will increase exposure in the salon hair care sector.




29


Companies Active in Acquisitions/Divestments


Major Company Activity

Beiersdorf

Beiersdorf has had a cautious approach to acquisition. In 2007, the firm acquired C-Bons, to

enter China's hair care sector, which is predicted to grow by more than US$1.4 billion in

absolute terms between 2008 and 2013, leading growth in global hair care. Beiersdorf has

also stated that it will make future acquisitions if they fit with its overall business strategy.

Procter & Gamble

Procter & Gamble has been streamlining its business to focus more on its billion dollar brands.

Johnson Products Company (comprising around 30 hair care products for African-Americans,

including the Gentle Treatment and Ultra Sheen brands) was sold to an entity comprising

several private equity firms. The disposal is one of a long line in company divestitures,

including the sale of Noxzema to Alberto Culver, as a move to free up resources for its core

brands.

Unilever

Unilever has been lying low in terms of acquisitions. The company's strategy has been to

focus on limited markets in mass product sectors, such as bath and shower products and

deodorants. However, towards the end of 2008, the firm acquired salon hair care brand Tigi,

which may not have been a good move, given that its competitors L'Oréal and P&G have

suffered from similar acquisitions. Unilever has acquired Sara Lee's personal care products

arm, which has men's hair care brands like Brylcreem. Unilever now has the task of investing

in product development to make the brand Brylcreem more up-to-date. It may be worth the

investment, since men's hair care has good growth prospects.

L'Oréal

L'Oréal has been on an acquisition spree, buying a number of cosmetics brands. It has

acquired three salon hair care brands in the US, which, however, pulled down the company's

revenues due to unfavourable market conditions. In 2008, L'Oréal acquired the beauty division

of Yves Saint Laurent, a premium brand. This again may not immediately bear positive results,

given the current economic downturn, which has led to a trend away from premium cosmetics,

but the purchase of Yves Saint Laurent gives L'Oréal greater regional coverage in both

Western and emerging markets.




30


• Private label sales amounted to US$1 billion in 2008, with their share static at 1.6%. HC was one of the sectors

within C&T with the lowest share for private label, just marginally ahead of colour cosmetics and fragrances. Within

the sector, its strongest presence was in styling agents (3.6%), followed by shampoo and conditioners (both 1.8%).

• Private labels share increased only in North America and Western Europe, the two regions where it is most

developed. However some local initiatives show potential. In India, many retailers have recently introduced tiered

pricing in private label (long favoured by retailers in the West) to cater to a wider audience.

• Recession and rationalised demand had the potential to cause private label sales to boom in 2008 and 2009, but this

was not the case. While some consumers reduced their consumption, they remained concerned with quality. In

addition, discounts on many branded products overshadowed private labels' main selling point, price.

Private Label, Where Are You?


Global Private Label Share (US$, Fixed Exchange

Rate) 2001/2005/2008

% value 2001 2005 2008

Hair care 1.6 1.6 1.6

P&R 0.3 0.4 0.1

Shampoos 2.5 2.1 1.8

2-in-1 1.1 1.2 1.4

Conditioners 1.7 1.8 1.8

Styling agents 2.8 3.3 3.6

Colourants 0.2 0.3 0.5

Asia-Pacific

Australasia

Eastern Europe

Latin America

MEA

North America

Germany

Spain

France

UKOthers WE

Private Label Value Share Per Geography (US$ - 2008)

Switzerland




31


• Switzerland has the highest share of private label in

hair care, at 14% in 2008. In some categories, such as

2-in-1, its share is as high as 19%.

• Private label's success is down to the dominance of

Migros, the leading Swiss retailer (34% of grocery

retailing). Migros offers a very comprehensive range of

private labels, from budget (M-Budget) through herbal

and natural (Belherbal, I am Natural), to high-end

"masstige" (Golden Hair Professional), and even highly

specialised (Bircal Expertise, the scalp specialist).

• In stores, Migros products take up to half the shelf

space allocated for hair care. In other categories, such

as packaged food, Migros products can take up to 90%

of the shelf space.

• Far from a discounter image, the products are

perceived as the equivalent of branded products. Price

is not the main consideration, it is more about the wide

choice.

• Slovenia is the country with the next highest private

label share (10%), and this is for similar reasons: high

quality products offered at reasonable prices by

specialist retailers, such as the drugstores dm-drogerie

markt and Mueller.

• In Germany and Austria, where the discounter culture

is much more developed, private labels are perceived

as cheaper alternatives above all, and cannot really

compete with brands in terms of quality appeal.

Country Focus: Switzerland


Small Grocery Retailers

6%

Beauty Specialist Retailers

7%Others

6%

Distribution Hair Care in Switzerland 2008

Supermarkets/

Hypermarkets

42%

Discounters

8%

Department

Stores

20% Chemists/

Pharmacies

2%

Parapharmacies/

Drugstores

9%

Top Five % Shares – Hair

Care Switzerland 2008

L'Oréal Groupe 31.8

Henkel KGaA 15.1

Procter & Gamble

Co, The14.6

Private Label 14.0

Beiersdorf AG 7.2

Private Label % Share

– Switzerland 2008

Shampoos 13.3

2-in-1 Products 19.3

Conditioners 12.5

Styling Agents 16.2

Colourants 15.5




32


• Products helping DIY and low maintenance routines are

forecast to be a hit. Examples are everyday products to

maintain hair styles between more thorough hair care

sessions (eg colourant products to re-touch roots only).

Demand is increasing for "easy and straightforward"

solutions, minimising the products used but without

going as far as "all-in-one".

• In all cases, manufacturers need to offer added value

through segmentation and specific claims. Consumers

are not looking for one product good for all issues, but

for simple products adapted to their specific needs.

• L'Oréal acquired the Turkish hair care company Ipek in

2007, which lifted its share in the hair care market in

Turkey from 9% in 2006 to 19% in 2007. In 2008,

L'Oréal was able to increase its share in Turkey's hair

care further, to 20%, through product development.

• Beiersdorf may consider incorporating C-Bons under its

overall Nivea hair care brand in China. which may help

the brand to benefit from the overall Nivea brand equity.

as well as advertising synergies.

• The leading companies are still too dependent on

Western markets. This is even truer for the Asian giants,

apart from the Salon HC category.

• Beiersdorf needs to focus more on product development

in the regions in which it operates, such as China, by

offering products to suit local needs.

• However, the arrival of a strong actor can help boost

sales, as shown in France, where Nivea Hair Care was

launched in September 2007 and contributed to 90% of

growth in conditioners in 2008.

• Beiersdorf paid US$81 million for an 85% stake in the

Chinese C-Bons hair care business in 2007. This led to

Beiersdorf's share in China's hair care sector increasing

from 1.3% in 2006 to 9.4% in 2007. However, in 2008

Beiersdorf's growth faltered, as a local hair care

company, Bawang, launched a product for hair loss

based on a natural Chinese remedy, and the product

became very successful, generating growth in China's

hair care sales.

• Colgate-Palmolive has announced expansion plans in

hair care, but no acquisitions are planned yet.

Too dependent on just a few markets, but

Western markets should not be overlooked

Expansion in emerging markets through

acquisitions to reduce exposure to West

Local knowledge and understanding the way

forwardIn which categories to expand in the West?

Exploiting the Geographic Dividend to the Maximum





33


Introduction

Global Snapshot

Regional Overview


Forecast Overview




34


• Recession does not mean a major disaster for hair care in the long term, but it certainly means manufacturers will

have to work harder than during the review better to sustain similar value sales.

• Consumers still need hair care product but will be pickier, more demanding and less sensitive to marketing bluff.

• While a majority of markets are set to show resilience, considerable sales declines in the next five years are

expected in France due to high saturation levels and in Japan, with the economy still facing deflation and a weak

demand forcing many operators to cut prices. Although not significantly, sales in the USA, Greece, Taiwan and a

number of Eastern European markets are also likely to suffer as economies remain volatile and consumers opt for

cheaper alternatives and low end-outlets.

Hair Care Shows Relative Resilience

Forecast Overview




35


• 2009 may prove to be the worst year for hair care, with a notable decline in North America and sales in the key

region of Western Europe remaining virtually flat.

• Global growth is expected to pick up again in 2010 on the back of improved sales in Asia Pacific and Western

Europe, and a slight bounce back in Eastern Europe. In actual terms, hair care will remain the second largest

contributor to global sales (after skin care) with and additional US$6 billion of extra revenue by 2014.

• Salon hair care value sales are likely to suffer further in 2010 due to the sector's overdependence on developed

markets. Volume consumption should, however, recover mid-way through the forecast period.

• Respectable sales growth in staple products, such as shampoos and conditioners, as well as the recent upsurge in

colourants are likely to follow the same path in the short to medium term. After sales increasing in 2009, 2-in-1

products will retain their popularity, with further expansion opportunities seen in Latin America and Eastern Europe.

2010: Recovery Ahead?

Forecast Overview

-5

0

5

10

15

20

25

07/08 08/09 09/10 10/11 11/12 12/13 13/14

Hair Care Nominal Value Growth (%)

World

Asia Pacific

Australasia

Eastern Europe

Latin America

Middle East and Africa

North America

Western Europe




36


• Developed markets should still account for almost 50% of hair care constant value sales by 2013.. As in the review

period, this will be more a reflection of the rapid growth in developing markets than of decline in developed ones.

• Across the board, higher demand for innovation and segmented products shows that innovation is a safe bet to

balance both maturity in developed markets and slowing growth in developing ones. Additional claims of benefits

should flourish, focusing more on long-term effects (eg the possibility of washing hair less often). In terms of

segmentation and innovations, the forecast period should see the success of refills, which are already a big success

in Japan, thanks to lower prices and eco-friendliness.

• In the distribution landscape, Internet retailing could provide a strong opportunity to both manufacturers and

consumers, through reduction of costs by cutting out middle-men and a large range of products available in one

place to fulfil segmentation demand. Discounters, on the other hand, will need to upgrade their game and image if

they want to take advantage of the down-trading trend, as so far only cheaper branded products and to a lesser

extent super/hypermarket private labels are taking advantage of it.

Future key trends and product

development

• Natural and HW trends: Products marketed as

fair-trade, eco-friendly and organic should still

grow well, albeit at a lower rate than previously

expected.

• Technical products: Anti-ageing is still in its

early stages, while medicated hair care will

increasingly become part of routine hair care.

HC for pregnant women is already on the map.

• "Beauty from within" trend: Hair supplements to

be developed together with hair care products,

as witnessed in skin care products, with the

use of key functional ingredients such as aloe

vera.

Developed Markets: Back to Basics, But With Added Value

Forecast Overview

0

2,000

4,000

6,000

8,000

10,000

WE+NA+Japan Sales (US$ Million Constant) 2008/2013

2008 2013




37


• EE and MEA had in common a very positive volume

growth rate until 2008, but stagnation is expected in

the forecast period. This is due to demand maturing,

coupled with difficult economic situations in South

Africa and Iran.

• However, Iran's high inflation means in current

terms the value growth should be very positive,

even if it is to the detriment of real added value in

the sector.

• The poor forecast for Eastern Europe is largely due

to Russia's slowdown. In constant value terms, EE's

sales will be maintained, as premiumisation and

high demand for salon products continue, even

though this will be dampened by economic

recession.

A real opportunity for 2-in-1 products

• There are clear development opportunities for 2-in-1

products in Middle East/Africa, Latin America and

Eastern Europe, thanks to changing habits. 2-in-1

should seize the opportunity it missed in developed

markets: convincing consumers of real added value,

high quality and appropriate segmentation regarding

hair type and hair style, for a lower price and a more

convenient format than other hair care products.

• Between 2008 and 2013, 2-in-1s are expected to

grow by 9% in EE and 7% in LA in constant value

terms, and by 11% in volume terms in MEA.

Stagnation of Eastern Europe and Middle East and Africa

Forecast Overview

-3

-2

-1

0

1

2

3

0

200

400

600

800

1,000

Ye

ar-

on

-ye

ar

% g

row

th

US

$ b

illio

n

MEA 2013 Value Sizes and 2008-2013 Growth

MEA US$ bn MEA % growth

-1

0

1

2

3

0

500

1,000

1,500

2,000

2,500

Ye

ar-

on

-ye

ar

% g

row

th

US

$ b

illio

n

EE 2013 Value Sizes and 2008-2013 Growth

EE US$ bn EE % growth




38


Strengths

Opportunities

Weaknesses

Threats

• Consumers are keen on

high-value products and

switch as soon as they

can afford it, meaning

even if growth is fragile it

can recover much more

quickly than in more

developed markets.

High interest for high

value products

• AP has one of the lowest

per capita spends, at only

US$4.

• Average per capita spend

is much higher in LA

(US$21), but some key

countries, such as Mexico,

as still far behind.

Low per capita gives

room for growth

• Escova Progressive will

continue to dampen hair

care sales in Brazil –

particularly of shampoo

and conditioners, at least

in the short term.

Local HC habits can be a

threat to HC products

• Japan, South Korea and

Taiwan (49% of AP HC

sales in 2008) all forecast

decline while giants Brazil,

Mexico and Argentina

(78% of LA HC sales)

should slow down.

Key markets slowdown

• Mexico will create US$200

million additional sales

over the forecast period

and should still be a focus

for companies.

• Other key growth markets

are China (7% CAGR)

and India (9%).

Where is the growth?

• High demand for premium

and value-added

products, with claims

inspired by skin care and

salon HC

• HW impact with natural

promises around

protection and prevention

Premium and added-

value product

• Economic boom is

expected to slow growth in

Argentina (2% CAGR

forecast).

• This is a threat to sales

development: consumers

will not be willing to go

premium at all costs.

Economic slowdown

• Discount and BOGOF

strategies are to be used

with care. These can be

damaging in the long

terms, as in Taiwan,

where constant value

sales are forecast a -2%

CAGR.

Price image irreparably

damaged in Taiwan?

Asia-Pacific and Latin America: What's Next?

Forecast Overview




39


• By 2014, the BRICs should add an extra US$4billion to global hair care revenues. China and India will still be the

ones driving growth, with overall increases of 42% and 52%, respectively. In India, hair care represents 24% of total

industry sales and should remain key, accounting for 27% in 2013.

• Even though China has by far the largest population, Brazil still has the bigger cosmetics and toiletries market. This

is largely because the Chinese economy is still partially controlled by the government – and foreign manufacturers

wanting to operate in the country still have to partner with a Chinese company. Brazil's economy is a lot freer and this

has made it easier for foreign investors.

• The biggest challenge will be Russia's hair care market. Maturity and increasing saturation are expected, as the

market is seen as having peaked, and growth will thus slow down. With 2009 having seen a strong decrease in sales

on the back of a very fragile economy, the development of premium hair care products will take a big step back, with

forecast growth halved compared to the review period. The exception is 2-in-1 products, as consumers find a new

interest in low added-value and very basic products.

Hair care as cosmetic and added-value

product

Russia reaching its limit while Brazil has

particular local challenges

• The men's HC niche is showing promising

results. By becoming more mainstream men's

HC influence HC perception as a whole and

contribute to change habits in the long term.

• Salon HC – still negligible in China – should

perform extremely well in India, more than

doubling in size and sustain well in Russia,

with only a small step back in Brazil (-US$1

million between 2008 and 2013).

• Russia is reaching maturity and even slight

saturation, and with more difficult economic

times ahead, consumers will not turn to

premium products as quickly

• In Brazil, Escova Progressive will continue to

see success, meaning hair care will suffer

further. Manufacturers need to come up with

products adapted to this type of treatment, or

with a credible at-home alternative routine.

Challenges for the BRICs

Forecast Overview




40


Frontier Markets: Volume Growth Forecast to Slow

Forecast Overview

Opportunities in Key Frontier Markets

CountryForecast

synopsisStrategic assessment

United

Arab

Emirates

Val (US$, con):

+12% CAGR 08-

13

Vol alternative

(units): +12%

CAGR 08-13

UAE consumers will demand more added-value products, specifically adapted to

harsh climatic conditions. The most important factor to consider is even while slipping

into economic slowdown, UAE consumers are not likely to trade down, but will rather

look for special discount offers on premium products.

Another big trend is the strong demand for natural and herbal products. The success

of the Himalaya Herbals range is inspiring manufacturers in the same vein.

TunisiaVal: +7% CAGR

Vol: +7% CAGR

Tunisia is forecast to see strong growth in hair care. Sales may be boosted by

segmented products, such as Style Sunsilk Bouncy Curls, as conditioners and styling

agents are the two fastest growing categories.

ArgentinaVal: +2% CAGR

Vol: +2% CAGR

Argentina's value growth is very fragile, as it is mostly based on high inflation and the

strong economic performance in 2008, which will be difficult to sustain all the way to

2013. Consumers are happily trying new high value added products ,such as Capilatis

UVA Hair Therapy – a range of anti-ageing HC with UV protection.

VietnamVal : +5% CAGR

Vol: +4% CAGR

The market is being driven predominantly by the under 25s, who represent a sizeable

proportion of the population of over 85 million. In stark contrast to most Western

markets, the population is very young, with an average age of only 26, making it very

interesting for cosmetics and toiletries manufacturers.

ThailandVal: +3% CAGR

Vol: +2% CAGR

Demand for high-value added products is increasing, with the share of premium HC

sales expected to reach 16% by 2013, a one percentage point increase compared to

2008. Salon HC has the most positive forecast, with Thailand entering the top five in

AP in per capita terms for the category. Mini-sized packaging is already very

successful in skin care and fragrances and should be the next big thing in hair care

too.




41


No gloom and doom for

hair care

Economic factors only have a limited impact on hair care sales, impacting habits only

in the short term, and reducing consumption rather than stopping it altogether.

Consumers become pickier and more demanding, but still need hair care products.

India and China still top

of the class

Manufacturers have invested heavily in China in recent years, and India should be

next. With significant room for growth and changes in habits, multinationals need to

get closer to local hair care manufacturers.

Discounting strategy to

handle with care

Private label is not a major threat in the sector. While consumers are price sensitive,

discounting strategies should be used with care, as they can compromise the long-

term image of a brand and category, as seen in Taiwan.

Premium not to be left

aside

Premium still has opportunities, even if only in second half of the forecast period,

especially in Eastern Europe. A high quality image is essential to sustain sales in hair

care, as shown by Migros's private label range in Switzerland.

Capitalise on changing

habits

More people changing their habits in China/India and frontier markets means more

potential consumers. Manufacturers need first mover advantage, to adapt to local

needs and address consumer education.

DIY hair care to push

further

DIY hair care is doing reasonably well, but could do much better if supported

properly. There is a need for more products for maintenance between hairdresser

visits, and real alternatives to the "hairdresser experience" in colourants and P&R.

Going the extra mile with

innovation and

segmentation

Manufacturers need to go the extra mile with additional claims (eg anti-age, hair spa

salon by major shampoo brands) for the same price. This is key especially in

developed markets, which should not be overlooked despite their maturity.

Frontier markets next to

be in focus

BRICs might still be the key markets to invest in over the forecast period, but with the

slowdown of sales in Russia and Brazil, frontier markets such as the UAE should be

the next in line for manufacturers looking for first mover advantage.

Conclusions

Forecast Overview




42


• Developed markets: North America, Western Europe and Japan

• BRICs: Brazil, Russia, India and China

• Frontier markets: Argentina, Bulgaria, Croatia, Estonia, Kazakhstan, Kenya, Lithuania, Nigeria, Pakistan, Romania,

Saudi Arabia, Serbia, Slovenia, Thailand, Tunisia, Ukraine, United Arab Emirates, Vietnam

• Escova Progressive: progressive blow-dry technique very popular in hair salons in Brazil. The product contains

formaldehyde, which smoothes and straightens the hair. Women are advised not to wash their hair for a few days

and to reduce the frequency of washing during subsequent months. Use of colourants is also proscribed.

• Grocery retailers: includes Supermarkets/Hypermarkets, Discounters, Small Grocery Retailers and Other Grocery

Retailers

• Mixed retailers: includes Department Stores, Variety Stores and Mass Merchandisers

• Health and Beauty retailers: includes Pharmacies/Chemists, Parapharmacies/Drugstores, Beauty Specialist Retailers

and Other Health and Beauty retailers

• Other Non-grocery: for the purpose of this comparison includes Outdoor Markets

• Non-store retailing : includes Vending, Direct Selling, Homeshopping and Internet Retailing

• Unless stated otherwise, all sizes and shares are in US dollars, fixed exchange rate value. In the Trends and

Competitive Environment sections, value sales are quoted in current terms (including inflation). In the Forecasts

section, value terms are in constant terms (ie real terms, without inflation) unless otherwise stated.

Abbreviations

• HC: Hair Care

• P&R: Perms and Relaxants

• 2-in-1: 2-in-1 Products

• PL: Private Label

• Regions: AA= Australasia, AP=Asia-Pacific, EE= Eastern Europe, LA= Latin America, MEA= Middle-East Africa,

NA=North America, WE=Western Europe

• C&T: Cosmetics and Toiletries

Definitions and Abbreviations

Report Definitions




43


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