Can Latin America regain its lustre?

South America’s personal care product sector is facing tougher times than usual, with some countries experiencing weaker sales last year and others faltering this year.

Brazil growth slows...

The region’s largest market Brazil is facing a rocky 2015, with a general slowdown in Brazil’s economy, expected to shrink by 1% in 2015. This is even expected to dampen sales from Brazil’s appearance-conscious consumers, whose enthusiasm boosted personal care product sales by 11% in 2014 year on year, according to market researcher Euromonitor. It had been expected that solid growth would continue this year, with personal care product sales projected to grow by 7%, but a discouraging first trimester has put these forecasts in doubt, says João Carlos Basilio, President of the Brazilian Association of the Cosmetic, Toiletry and Fragrance Industry (Associação Brasileira da Indústria de Higiene Pessoal, Perfumaria e Cosméticos, or ABIHPEC). “There were signs in November and December that personal care was slowing down, but we still grew. Now prospects aren’t that good,” he tells SPC. In January, Brazilian personal care product sales declined 0.8% year on year. For January and February combined, it was even worse, down 1.6%. Prospects for April’s statistics aren’t rosy, since the Brazilian government has ended tax breaks for distributors that are part of the supply chain, says Basilio. “There is going to be a strong concentration of sales which will be diluted by retail and wholesale in the next two or three months,” he says. Meanwhile, Brazil’s currency, the real, has fallen in value melted in the first semester of 2015 – it went from 2.40 against the US dollar last October (2014) to 3.75 in March (2015). Basilio says Brazilian personal care product companies that import raw materials and packages are not passing that burden on to consumers, which will affect their profit margins. Also the cash-strapped government is making spending cuts of US$22bn this year. Basilio fears the 7% growth is at risk if the government – which is undergoing an austerity drive – does not inflate the economy.