Chinese raw material suppliers now a major challenge to multinationals

Multinational suppliers of speciality raw materials for the cosmetics and toiletries industry are facing mounting competition from Chinese suppliers who can now offer products of the same quality at a much lower price, according to a new study from Kline & Company. The study, Speciality raw materials for cosmetics and toiletries volume I: Asia-Pacific 2005, indicates that China now holds 9% of the $3bn global market in speciality raw materials. Generally the market for speciality raw materials used in cosmetics and toiletries is expected to grow at a brisk pace, by about 10% annually over the next five years.

"When we examined the Chinese market just four years ago, the local suppliers were just starting to make an impact on the global stage," says Gillian Morris, industry manager for Kline & Company's research division. "Now, when we look at the top suppliers in the top five speciality raw material product categories in China, the Chinese suppliers are moving in on the multinationals. There are Chinese suppliers in every product category, from hair fixative polymers to UV absorbers."

While the Chinese market for both finished cosmetic and toiletry products and raw materials is growing steadily, the report found that the Japanese market offers different kinds of opportunities and challenges to raw material suppliers.

"The Japanese population has a high level of disposable income, and it spends more per capita on personal care products than any in other country in the world, but the finished products and raw materials markets are mature, offering very low growth rates in comparison with China," says Morris.