The year in review and winning strategies for the future

THE GLOBAL POST-RECESSION BEAUTY INDUSTRY: A SURVIVAL GUIDE

CARRIE LENNARD 12TH APRIL 2011, BEAUTY FOCUS, LONDON

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The year in review and winning strategies for the future

Beauty beyond the recession

Industry dynamics

Category performance

Innovation in marketing and retailing

Outlook

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The year in review and winning strategies for the future

BEAUTY BEYOND THE RECESSION

MOVING OUT OF THE RECESSION

Real GDP: % growth over previous period, annualised

10

% growth

-5

-10 World Advanced economies Developing economies

2008 2009 2010 2011 Q1 2006 Q4 Q1 2007 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q2 Q3 Q2 Q3

10

Retailing Growth

2 2006 2007 Non-Grocery Retailers 2008 2009 Non-store Retailing 2010 BPC Non-store sales

% value growth

-2

2005

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Retailing

Grocery Retailers

The year in review and winning strategies for the future

BEAUTY BEYOND THE RECESSION

THE CONSUMER IN 2011 AND BEYOND

Nuanced luxury

Valueseeking

Experiencefocused

The postrecession consumer

Digital and connected

Staying ahead and well

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The year in review and winning strategies for the future

Beauty beyond the recession

Industry dynamics

Category and pricing performance

Innovation in marketing and retailing

Outlook

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The year in review and winning strategies for the future

INDUSTRY DYNAMICS

GLOBAL INDUSTRY RECOVERS FROM THE SLUMP

8 7 6 5 4 3 2 1 0 -1 2005 2006 2007 2008 2009 % Prem growth 2010 % Mass growth % Total growth

400,000

350,000

300,000

250,000

US$ million

200,000

100,000

50,000

Total BPC

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% Value growth

150,000

The year in review and winning strategies for the future

INDUSTRY DYNAMICS

2010 COUNTRY PERFORMANCE

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The year in review and winning strategies for the future

INDUSTRY DYNAMICS

PREMIUM COSMETICS ON THE REBOUND

9%

1%

1%
2%

12%

11%
1%

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The year in review and winning strategies for the future

INDUSTRY DYNAMICS

SALES OF SUPER PREMIUM SKINCARE HELD UP WELL

Strong brand credibility linked to exclusivity

Spending among wealthy consumers more resilient and trade down unlikely Super-premium presents an attractive opportunity for price shift strategies

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The year in review and winning strategies for the future

INDUSTRY DYNAMICS

MASS COSMETICS TO DRIVE FUTURE GROWTH

10

100

90

80

72%

76%

70

60

50

% value (US$)

40

30

20

10

28%
2006 2007 2008 2009 2010 2011 2012 2013 2014

24%
2015

2005

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Global Premium Cosmetics

Global Mass Cosmetics

The year in review and winning strategies for the future

INDUSTRY DYNAMICS

ASIA AND LATIN AMERICA TO DOMINATE BEAUTY AND PERSONAL CARE SALES BY 2015

11

550

500

450

400

350

300

250

Sales in US$ billion

200

150

100

Western Europe North America MEA Latin America Eastern Europe Australasia Asia Pacific

50 2005 2010 2015

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The year in review and winning strategies for the future

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Beauty beyond the recession

Industry dynamics

Category performance

Innovation in marketing and retailing

Outlook

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The year in review and winning strategies for the future

CATEGORY PERFORMANCE

DISCRETIONARY CATEGORIES PICK UP

2010 US$mn 08-09 % growth 09-10% growth
9 8 7 6 5 4 3 2
1 0

13

US$ million

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

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% value growth

The year in review and winning strategies for the future

CATEGORY PERFORMANCE

PRIVATE LABEL MAKES INROADS IN KEY REGIONS

20 15 10 5

14

BPC PRIVATE LABEL SHARE & GROWTH BY REGION 2009-2010

% Value Share

0 -5
-10 -15
Asia Pacific Australasia Eastern Europe Latin Middle North America East Africa America Western Europe

World

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Regional Share of BPC Sales

% growth 2009-2010

% growth 2009-2010

The year in review and winning strategies for the future

CATEGORY PERFORMANCE

PRIVATE LABEL KEEPS UP THE PACE IN INNOVATION

15

Tapping into budget and high end lines

Focus on product efficacy and ingredients

Global PL growth by category Colour Cosmetics (+10%) Mens grooming (+10%) Skin Care (+8.5%)

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Oral Care (+5.6%) Hair Care (+4.4%) Bath & Shower (+0.5%)

The year in review and winning strategies for the future

CATEGORY PERFORMANCE

INNOVATION IN BRANDS STILL A PRIME FOCUS

16

Scientifically-advanced innovation

New concepts and professional status

Time-saving vs long-lasting beauty

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Beauty beyond the recession

Industry dynamics

Category performance

Innovation in marketing and retailing

Outlook

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The year in review and winning strategies for the future

INNOVATION IN MARKETING AND RETAILING

INCREASING IMPORTANCE IN BEAUTY RETAILING

Global Beauty Channel Breakdown

18

80
14 12.4 10.6 13.1 15.3 16.1

70
12.9
9.7 13.4

60

12.8
9.5 13.4

50

40

% value share

30

20
26 27

10

26.9

0 2005 2006 2007 Drugstores Super/Hypermarkets 2008 2009 2010 Department Stores

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Non-Store Retailing

Beauty Specialists

The year in review and winning strategies for the future

INNOVATION IN MARKETING AND RETAILING

BEAUTY INTERNET SALES TO BECOME MORE COMPETITIVE 19

Beauty Internet Sales 2010-15 40 35 30 25 20 15 10

16,000

14,000

12,000

10,000

8,000

US$ million

6,000

4,000

2,000
E Europe N America L America Asia Pacific

5 0

W Europe

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2010

2015

2010-15 CAGR

The year in review and winning strategies for the future

INNOVATION IN MARKETING AND RETAILING

CHANGES AFOOT IN BEAUTY ADVERTISING AND MARKETING

20

24/7 Connected consumer

Consumers shift away from traditional media

Changes in beauty marketing

Rise in global internet use

Boom in beauty blogging and vlogging

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The year in review and winning strategies for the future

INNOVATION IN MARKETING AND RETAILING

TAPPING INTO ONLINE MARKETING

21

Increasing online presence through acquisitions

Increased Facebook /Twitter presence

Retailing/ marketing online and through social networking sites

Blog/ vlog sponsorship

Beauty apps

Infomercials

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The year in review and winning strategies for the future

INNOVATION IN MARKETING AND RETAILING

IN-STORE BEAUTY EXPERIENCE VITAL FOR THE INDUSTRY

22

Beauty services challenged by at-home beauty

Creating value is key

Retailers enriching the in-store experience

Fastest Growing Beauty Sectors 2009-10 (value) (+17%) (+12%) (+9%) (8.5%) (7.6%) (+7%) (+7%) (+7%)

Nail Polish Mens skin care Mass fragrances Sun protection Anti-agers Colourants Eye liner/pencil Euromonitor International Blusher/bronzer

The year in review and winning strategies for the future

INNOVATION IN MARKETING AND RETAILING

RE-CREATING THE SPA EXPERIENCE

23

Innovative retail concepts

Health and wellness factor to drive interest in spas

Enriching in-store consumer experience

Key Spa Tourism Markets, absolute growth 2010-15 (million)

US$ 1,660 US$ 1,350 US$ 1,030 US$ 856 US$ 362 US$ 363 US$ 266 US$ 221

USA Japan China France Israel India Austria Euromonitor International Vietnam

The year in review and winning strategies for the future

24

Beauty beyond the recession

Industry dynamics

Category performance

Innovation in marketing and retailing

Outlook

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The year in review and winning strategies for the future

THE OUTLOOK

GROWTH TO CATCH UP WITH PRE-RECESSION LEVELS

25

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The year in review and winning strategies for the future

THE OUTLOOK

SKIN CARE WILL CONTINUE TO DOMINATE GLOBAL BEAUTY SALES 26

Category value sizes and growth 2010-2015
4 3.5 3 2.5 2 1.5 1 0.5 0

140000

120000

100000

80000

Value size in US$ bn

40000

20000

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2010

2015

2010-15 Constant value growth %

% value growth

60000

The year in review and winning strategies for the future

THE OUTLOOK

GLOBAL GROWTH TO BE DRIVEN BY MASS BEAUTY

27

Mass Fragrances

Mass Colour Cosmetics

Mass Skin Care

Premium Hair Care

Mass Hair Care

Premium Skin Care

Premium Fragrances

Premium Colour Cosmetics 0 0.5 1 1.5 2 2.5 3 3.5 4 % value growth (real terms) 4.5 5 5.5

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The year in review and winning strategies for the future

THE OUTLOOK

CONSUMER NEEDS BECOMING MORE DIVERSE

28

Value

Innovation

Tapping into new media

Experience

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The year in review and winning strategies for the future

29

THANK YOU FOR LISTENING

Carrie Lennard, Beauty and Personal Care Analyst Carrie.lennard@euromonitor.com

Q&A?

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