All in all, the German C&T markethad a successful year in 2014. According tofigures by industry association IKW, theentire cosmetics and personal care marketreached turnover of just over t13.01bn in2014, an increase of 1.6%. With theexception of smaller categories like men’saftershaves, depilatories and so on, all of theimportant product sectors registered solidincreases last year.

HAIR FALLS FLATHair care (including styling and colourants)is always the biggest C&T sector inGermany. In 2014, this category registereda mediocre performance according to IRIGermany, with rather flat sales of t1.72bnand a turnover increase of 2.8% to 746.65million units in volume.

The market is dominated by two

companies: German C&T manufacturerSchwarzkopf & Henkel and the world’sbiggest cosmetics group, L’Oréal. Bothbrands have an extensive hair care, stylingand colourants portfolio and keep eachbusy with a high launch pace. Otherimportant brands include Beiersdorf ’sNivea, P&G with its Dove, Pantene, HerbalEssences and Vidal Sassoon Pro ranges andKao Corporation with its Guhl and JohnFrieda brands.

Still among the major trends last yearwas hair oil – most brandsthese days already havetheir own range of hair

October 2015 SPC 37

oil, so oil is now appearing as a keyingredient, like in L’Oréal Elvital’s ÖlMagique hair care range or inSchwarzkopf ’s recent Gliss Kur OilNutritive launch. Another skin careingredient that is starting to appear in haircare is hyaluronic acid. Gliss Kur, forexample, introduced the six-sku Hyaluron+ Haar Auffüller (Hyaluron & Hair Filler)for mature hair last summer.

Brands are also increasingly launchingsalon and professional ranges. Years agoSchwarzkopf ’s Syoss was the very firstbrand to do so, but now drugstore shelvesare full of premium ranges, like L’Oréal’sEverRich and Hair Expertise ranges, forexample, as well as Dove’s new AdvancedHair Series.

ANTI-AGEING ACCELERATES Facial skin care, on the other hand, had avery successful year. According to IRIfigures for January to September 2014, salesof women’s face care grew 4.1% tot590.19m with volume increasing 4.3% to 10.970 million litres. And althoughmoisturisers for ‘normal’ skin accounted for the largest share of the market – wortht238.01m – anti-ageing is quickly turninginto a major growth category, increasing5.6% to reach value sales of t183.94m.

TABLE 1: GERMANY, TOTAL HAIR CARE MARKET, 2015*

Category Value +/-% Volume +/-% w/m m/unitsTotal 659.10 -1.5 280.97 2.9Hair care 372.45 0.7 165.96 1.3Hair styling 161.41 -6.4 81.38 -4.1Colourants 125.25 -1.6 33.62 1.4* January to May 2015. Source: IRI Germany

Oil is appearing as a keyingredient in many brands’new launches, such asSchwarzkopf’s Gliss Kur OilNutritive

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StorewarsWhile the German C&T market is going from strength to strength, the past year hasproved less than stable for its key beauty retailers, as Annemarie Kruse discovers

Image: DM

The big brands in this market includeL’Oréal with Garnier and L’Oréal Paris,Schwarzkopf with Diadermine and Aok,Beiersdorf with Nivea, P&G’s Oil of Olaz,J&J with Bebe and Bebe More and, ofcourse, DM’s Balea and Rossmann’s Rivalde Loop proprietary ranges.

Hybrid products like optical perfectorsand illuminators continued to be a majortrend last year. And considering thatGermany has one of the fastest-ageingsocieties in the whole of Europe, it is notsurprising that anti-ageing creams arebecoming more important every year.Popular ingredients include hyaluronic acidand oils; brands are starting to launch faceoils, oil creams and even oil-serums whichpromise to moisturise, repair and rejuvenatethe skin.

In the cleansing sector, micellar watersare just starting to take off in Germany,propelled by Garnier’s high-profile MicellarWater, launched in January. Cleansing wipesremain popular thanks to limited editionwipe launches – especially from thedrugstores’ own label brands – andcleansing oils are making a tentativeappearance too; L’Oréal has recentlylaunched its first cleansing oil.

COLOUR CLOSE TO HOME According to IRI Germany, the colourcosmetics market grew 4.1% to t1.47bn invalue and 3.8% to 269.81 billion units. Eyeproducts, the largest sub-category, grew3.3% to t543.89m, followed by face colourproducts which grew 4.5% to t466.20m.Lip colour products did even better withan increase of 6% in value to t241.42m.

The market is dominated by Germanbrands, especially Cosnova’s Catrice andEssence, Maesa’s P2 and Coty’s Manhattan.All four brands have a strong launch pace,and Catrice and Essence in particular keepthings interesting with their monthlylimited editions and very innovative NPD.

The big product trends last year includedeyebrow products but also mascaras andeyeliners. In the lip colour category, multi-purpose and crossover products are popular,such as long lasting lip colour with a glosseffect and the durability of a lip stain, forexample, and while BB creams have losttheir steam in the face category, CC creamsand illuminating or perfecting faceproducts still rule.

THE SCENT OF FASHIONWomen’s fragrances also registeredsatisfactory results, growing 2.8% tot966.45m in 2014, while volume climbed1.9% to 37.15 million units. As far asfragrance formats were concerned, EdPswere the most popular category, followed

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by EdTs, EdCs and perfumes.Besides the usual international

mainstream fragrances, masstige, fashionand celebrity perfumes remained amongthe bestsellers on the German market.German consumers love their drugstorefragrances – the classic sports brands likePuma and Adidas are perennial bestsellers,and so are the fragrance offerings ofGermany’s fashion brands like s.Oliver,Esprit, Mexx, Tom Tailor or Betty Barclay.

At the same time the German finefragrance sector continues to grow, withnew labels appearing every year. Admittedlymost of these fragrance brands are small,but with their highly selective distributionand luxe pricing, they nevertheless add abit of sophistication to the Germanfragrance market.

MULTI-TASKERS FOR MENMen’s care, especially facial skin care, had apretty good year. The category has beenone of the growth drivers for the entireC&T market in recent years and 2014proved no exception. According to IRIGermany’s figures, men’s groomingproducts grew 1.4% to t601.35m. Men’sshower products grew 2.5% to t191.03min value, while deodorants put on 2.5% to

t271.82m. Face care, meanwhile, grew0.3% to t68.40m. Shaving preps andaftershaves, on the other hand, registeredlosses in both value and volume.

Men’s face care is becoming a lot moresegmented, with serums and especiallymulti-purpose products much in evidence.The big players include L’Oréal MenExpert, Florena Men and Nivea Men, anddrugstore own label brands, especially DM’sBalea Men.

Among the major Balea launches lastyear were a 6-in-1 anti-wrinkle fluid in theLift Effect range and a Vulkanstein Peeling+ Maske product formulated with volcanicrock particles. The multi-purpose productcan be used as a scrub for problem skin oras a cleansing facial mask.

L’Oréal Men introduced All-in-1Feuchtigkeitspflege (a combination ofmoisturiser and aftershave) in its HydraEnergy range, and Florena Men relaunchedits Comfort and Sensitive ranges with newingredients and new packaging.

LUXURY LOSSES The premium market registered a rathermore disappointing performance in 2014,says perfumery trade associationVKE-Kosmetikverband. The VKE member

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TABLE 4: GERMANY, WOMEN’S FRAGRANCES, 2014

Category Value +/-% Volume +/-% w/m m/unitsTotal market 966.45 2.8 37.15 1.9EdPs 530.25 5.8 16.32 6.2EdTs 401.70 -1.0 19.02 -2.1EdCs 18.82 10.8 1.42 7.9Perfume 8.50 -3.7 0.18 6.4Body fragrance 6.23 6.6 0.19 17.7Source: IRI Germany

TABLE 3: GERMANY, COLOUR COSMETICS, 2014

Category Value +/-% Volume +/-% w/m m/unitsTotal market 1,471.00 +4.1 269.81 +3.8Eye products 543.90 +3.3 100.08 +3.4Face products 466.20 +4.5 58.93 +6.6Lip products 241.43 +6.0 41.72 +9.6Nail products 207.97 +2.7 67.63 -1.1Source: IRI Germany

TABLE 2: GERMANY, WOMEN’S FACIAL SKIN CARE, 2014*

Category Value +/-% Volume +/-% w/m m/unitsTotal market 590.190 4.1 10.97 4.3Anti-ageing 183.942 5.6 1.36 3.8Mature skin 81.392 5.0 0.87 -0.3Basic 238.006 3.6 6.47 5.8Young care 86.851 1.6 2.27 2.1* January to September 2014. Source: IRI Symphony Group

Fragrances fromfashion brands suchas s.Oliver continuedto be popular withGerman consumers

In spring, it launched an online store andin June, a new own label colour cosmeticsbrand followed.

However, competitor Rossmann isn’tsitting still either. Although DM is still inthe lead, Rossmann is starting to catch up.In 2014, the retailer announced turnover oft5.38bn for its 1,919 German stores, anincrease of 7.9%. Total group turnover(including 1,334 stores in five otherEuropean countries) grew 8.7% to t7.2bn.Rossmann has also announced investmentsof t170m to open 340 new stores.

The retailer is also investing in theinterior design of its stores and is currentlytrying out an entirely new look – morestylish and spacious, with an increased focuson the presentation of colour cosmetics.

ATTACK OF THE DISCOUNTERSDespite the fact that drugstore retail stillrules supreme in the personal care market,the German discounter sector is starting to slowly move into DM’s, Müller’s andRossmann’s territory.

Traditionally Germany’s aggressivediscounter segment, led by Albrecht-ownedAldi group but with the Schwarz group’sLidl chain a close second, have focused on own label food brands which are sold at rock-bottom prices and withminimal overheads.

However, over the last few years – andespecially since the demise of drugstorechain Schlecker in 2012 – Aldi and Lidlhave started to expand their personal careportfolio with more retail brands. Last year,for example, Aldi started to sell skin carebrand Nivea (Beiersdorf) and oral hygienelabel Blend-a-Med (P&G).

And a few months ago Aldi madeheadlines with the announcement that it

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companies had expected at least a small risein turnover. Instead, the sector barelymanaged to maintain its 2.4% increase fromlast year.

Women’s fragrances are the main driverof the luxury sector and this category inparticular performed badly last year,growing a meager 2.1%, which directlyaffected the performance of the sector as a whole.

Facial skin care and sun care alsostruggled last year; this category onlymanaged a scant 1% increase. The reasonsfor this, VKE says, are the ongoing pricingwars which have been dogging theperfumery sector for years, but also theincreasing competition from hypermarketsand discounters who are starting to offerhigher-priced beauty products.

The dynamics in the sector were alsoshifting in 2015. With market leaderDouglas dominating the perfumery market,especially in terms of pricing andpromotions, the majority of Germany’sindependent perfumeries are organised into cooperatives.

Beauty Alliance is the leading perfumerycooperation in Germany, with more than950 privately owned perfumeries. In May,the association announced that it wouldjoin forces with perfumery cooperationTopCos, which currently comprises 300independent perfumery stores. BeautyAlliance and TopCos say that the newmerger will further strengthen andconsolidate the independent perfumeryretail sector. For 2015, Beauty Alliance isexpecting at least moderate growth.

RETAIL RUMBLE In terms of retail, 2014-15 wastempestuous. Three of Germany’s biggestbeauty retailers changed hands during thelast twelve months. Perfumery chainDouglas was sold to a Luxembourg-basedprivate equity group, department storeretailer Karstadt went to an Austrianinvestor and department store chainKaufhof was recently sold to a Canadianretail group.

DRUGSTORES IN FRONT Despite these dramatic changes, the basicretail structures remained in place.Germany’s competitive drugstore market isstill the biggest distribution channel forpersonal care and this sector continues to besuccessful. The market is led by GötzWerner’s DM chain, followed by DirkRossmann’s eponymous Rossmann chain.Both chains have extensive store networksacross Germany and are bitter competitors,so this rivalry is keeping the drugstore sectorfast moving and lively. The third-biggest

chain is the southern German Müller group,which has its biggest presence in the southof the country, while number four in themarket, Budnikowsky, is a small regionalretailer from the northern German city ofHamburg.

Each year, the market share of Germany’sdrugstore retailers is growing – usually atthe expense of department stores andperfumeries – and 2014-15 was noexception. Market leader DM has had aparticularly busy year so far. The retailer isalready in a pretty solid position; in 2014,DM’s 1,686 German stores grew 9.6% tot6.40bn, while total group turnover(which includes an additional 1,453 outletsin 11 European countries) reachedt8.32bn, up 8.2%. And in the first half of2015, DM’s German business has alreadygrown 10.5% to t3.48bn, while the totalgroup reached t4.48bn, up 9.4%. But DMisn’t resting on its laurels. Instead, theretailer has been stepping up the pace.

October 2015 SPC 41

Department store Kaufhof (top) was sold toCanada’s HBC this year, while south Germany’sMüller is the country’s third-largest drugstoreafter DM and Rossmann; drugstores areGermany’s largest C&T distribution channel

would start stocking a further 50 food andpersonal care brands. This has stirred Aldi’smain competitor Lidl and the Schwarzgroup’s second big discounter chainKaufland into action. All three retail chainsare currently engaging in an aggressiveprice battle. At the moment these pricingwars take place primarily in the foodsector, but it is only a matter of time untilthey also reach the discounters’ personalcare brands – and then there is a realchance that this price development will also affect Germany’s big drugstore retailers.

Although Aldi, Lidl and Kaufland are stillfar from being a threat to DM andRossmann, Germany’s drugstore giantshave already started to slash some of theirprices. And while German consumersmight rejoice in this development,Germany’s personal care manufacturers anddistributors are the ones who are reallystarting to suffer. Industry observers arealready worried about where thedownwards price spiral will lead, and howfar DM and Rossmann are willing to go.

DOUGLAS DOMINATES Germany traditionally has a very strongindependent perfumery sector. Most storesare family-owned and although there are afew independent smaller chains, not manyof these have more than six or sevenoutlets. Market leader Douglas – with its440 perfumeries in Germany – continuedto dominate the market, especially in termsof pricing and distribution.

In June, investment group AdventInternational announced that it had soldthe Douglas chain to Luxembourg-basedprivate equity fund CVC Capital Partners.Advent International acquired Douglas in2012 and immediately announcedambitious expansion plans for its newbeauty retailer. In 2013, Douglas took overFrench perfumery chain Nocibé fromEuropean investor Charterhouse and, inJanuary, Douglas acquired Munich-basedperfumery chain Himmer, announcing that it would look for further purchaseswithin Germany.

With the Douglas acquisition, CVC nowhas a significant foot-hold in the Europeanperfumery retail market. CVC has alreadyannounced that it is anticipating majorgrowth potential for Douglas in Europe,both organically and through acquisitions –according to industry rumours, Douglas hasalready expressed an interest in Italianperfumery chain Limoni Profumerie – andthat the group would also consider furtherexpansion outside of Europe.

Within Germany, Douglas has alsostarted to focus more on its online retail

for KaDeWe, Alsterhaus and Oberpollingeris not yet certain, but the three stores havesuch a high profile that major changes to the retail concept or store closures arevery unlikely.

For the rest of the Karstadt group,however, things are still very much up inthe air. Four stores in smaller German citieswill close down by early 2016, Signa hassaid, and there will be, yet again, a newretail concept for the remaining Karstadtstores. Instead of (unsuccessfully) drawingin younger customers with internationaltrend fashion brands, Karstadt will return to its core target group: the olderdemographic.

At around the same time, Karstadt’s maincompetitor Kaufhof was sold to Canadianretail group HBC for t2.8bn. The purchaseprice includes the German Kaufhof chain,the Sportarena chain of sports stores,Kaufhof ’s Belgian retail chain Galeria Innoplus the respective real estate. According tomedia reports, the Signa group had alsomade an offer for Kaufhof. In the end,however, HBC won the bid.

The new owner has promised to keepKaufhof ’s current group constellationwithout closures or job cuts; investing intothe current set-up with a focus on furtherdeveloping cross-channel retail structures.

As far as beauty is concerned, theGerman C&T market should continuewith at least moderately successful resultsover the next few years. If the discounterprice battles will actually affect thedrugstore market, turnover might go down a bit. But, in general, the GermanC&T market is in excellent shape. On theretail side, however, it is still uncertain howall of the big M&A changes are going to play out. The Karstadt situation, inparticular, remains precarious, and Douglasis setting out to conquer the Europeanbeauty retail market.

activities. The retailer’s online storewww.douglas.de was introduced in 2000and is still the biggest online perfumery inGermany. Earlier this year, in a bid to profitfrom the constantly growing natural beautymarket, Douglas launched a smaller onlineshop for organic cosmetics;www.natureme.de currently sells tenorganic and natural beauty brands and,interestingly enough, has no obvious ties to the Douglas perfumeries or thewww.douglas.de online store.

DEPARTMENT STORE SHAKE-UPThere were major changes in thedepartment store sector, too. The tworemaining department store retailers inGermany, Kaufhof and Karstadt, were bothsold to international investors. Karstadtwent to Austrian Signa Group inmid-2014, while Metro Group announcedthe sale of its Kaufhof chain to Canadianretail group Hudson’s Bay Company(HBC) in June 2015.

Despite – or perhaps because of – theSigna acquisition, things are simply notimproving for ailing department storegroup Karstadt. In 2010, US investorNicolas Berggruen acquired the bankruptretail group, which at the time included 83stores across Germany, a chain of sportsstores and the luxury KaDeWe Groupdivision with three of Germany’s mostfamous department stores: Berlin’sKaDeWe, Hamburg’s Alsterhaus andMunich’s Oberpollinger.

Initially Berggruen had announced bigexpansion plans for Karstadt. Very quickly,however, things turned sour and, insummer 2014, Berggruen sold Karstadt toAustrian investor René Benko’s Signagroup. This June, just one year later, Signasold 50.1% of the KaDeWe Group toItalian department store group laRinascente. What la Rinascente’s plans are

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Leading Germandrugstore DM(pictured) has keptcompetitive with thelaunch of an onlinestore and an own labelcolour cosmeticsbrand this year