Italian personal care experiences market resurgence

The beauty and personal care (BPC) market in Italy ended 2015 on a positive note, recording marginal growth in market sales, production and exports, according to a December 2015 report, Trends and Investments in the Cosmetics Sector, released by the national cosmetics trade association, Associazione Italiana delle Imprese Cosmetiche (Cosmetica Italia).

The report reveals that BPC sales in the domestic market grew by almost one percentage point in 2015 compared with 2014, reaching €6.05bn (US$6.5bn); and 2015 closed with the sector commanding a total market value of €9.74bn ($10.5bn), up 4.1% from 2014.

The Cosmetica Italia report forecasts similar numbers for 2016, as domestic consumer spending is expected to grow only marginally this year due to Italy’s still sluggish national economy; its government predicts anaemic growth of around 1% in 2016.

“We should not expect huge changes in 2016 in terms of the world economy nor the domestic economy,” said Fabio Rossello, President of Cosmetica Italia, when releasing the report. “Though the BPC sector’s return to growth will not be extraordinary next year [2016], we do expect it to remain stable through 2016. This relative growth also means that profit margins for Italian BPC companies will continue to be minimal, since we expect them to continue producing more and selling for less. The sector will once again rely on exports, which, like previous years, will help sustain profits.”

The country’s industrial employers group Confindustria has estimated Italian gross domestic product (GDP) growth will be 0.8% for 2015, while, in November 2015, the Organisation for Economic Co-operation & Development’s (OECD) forecast summary for Italy projected a rise in GDP growth to 1.4% in 2016 and 2017.

Regarding domestic BPC sales, British market research company Euromonitor International’s latest Beauty in Italy report, released in June 2015, showed a slight drop in 2014 sales, to $12.18bn from $12.29bn in 2013. BPC sales in all categories showed drops compared with the previous years, except for colour cosmetics, perfumes and sets/kits, both of which recorded minimal value growth.

Italy C&T market, US$M, constant prices, year-on-year, % change

Source: Euromonitor International

What's in store

Regarding consumer spending trends, Italians continue to prefer value for money products, while a portion are still willing to spend on more expensive premium brands and products. “You can see these trends in the BPC sales at different distribution outlets; the growth of the perfumery retail channel in 2015 was mainly due to increased sales of premium, luxury products. Luxury is one category that never declines,” says Gian Andrea Positano, Director of Cosmetica Italia’s research centre.

Indeed, perfumeries were among the better performing retail channels in 2015, closing the year with €2.1bn ($2.2bn) in annual sales (up 1% in Q2 2015 compared with Q2 2014), according to the Cosmetica Italia report. Other winners were supermarkets and hypermarkets (up 0.5% in Q2 2015), with annual sales reaching €3.8bn ($4.1bn) and herbalist shops, which recorded higher annual sales at €430m ($466m, up 3%), “reflecting the still strong eco-beauty trend”, as Positano explains.

The direct sales channel posted the biggest gains in 2015, growing 2.7% in Q2 2015, with annual sales valued at €550m ($595m), according to Cosmetica Italia. Comprised of door-to-door, e-commerce and correspondence sales, the most dynamic part of this channel is e-commerce, Positano says, valued at €180m ($194m) in 2015 and expected to grow year-on-year as more and more brands look to take advantage of the sales and retail potential of the internet.

The losers remained hair salons, with annual sales for professional and retail hair care products down 2.3% year-on-year in Q2 2015, valued at €560m ($606m) and spa centres, which contracted by 3.2% in Q2 2015 to €230 million ($249m) in total annual sales of professional and retail skin and body care products, according to Cosmetica Italia. The association’s report said these channels still suffer from a loss of identity and focus, and need to better align with a new generation of consumers through more product promotions and a renewal of services.

Positano notes that today’s Italian consumer is turning to a variety of retail channels. “Italian consumers are no longer loyal to one distribution channel, as they were in the past; more and more they are purchasing beauty products through different retail outlets depending on product selection, price and convenience,” he explains.

Interestingly, many BPC companies have responded to this new trend by distributing in different retail channels, he adds, “so you’ll be able to buy different products of the same brand in different retail outlets; some through a brand’s e-commerce site or Amazon, while others will be at the local supermarket or thanks to a promotion in a perfumery”.

Export dependent

The Cosmetica Italia report showed that market stability in the BPC sector in Italy continues to depend on exports, which represented almost 30% of total BPC sales in 2015 and a market value of €3.3bn. The report also revealed a 10.5% jump in exports in 2015, showing that Italian manufacturers have continued to focus on more favourable foreign markets in response to the contracted domestic market.

One of these is the Bergamo-based KIKO Milano cosmetics brand, which continues its strategy of internationalisation through planned expansion projects in emerging markets, especially in Asia, the Americas and the Middle East, said KIKO CEO, Stefano Percassi, in a December 2015 interview with the local newspaper L’Eco di Bergamo. In 2016, the company plans to open ten bricks-and-mortar shops in Spain, bringing the total number of KIKO stores to 140 in the country. Percassi said KIKO, which reported €432m in revenues in 2014, up 3.4% from 2013, was aiming to close 2015 with a 10% increase in sales.

Percassi said he was also concentrating on new European store openings for sister BPC brand Womo, dedicated solely to men. “Spain and France are our primary markets for Womo,” he said.

Meanwhile, Italy-based global producer of colour cosmetics and skin care products Intercos will deepen its presence in the Asian market, according to a December 2015 announcement of a new joint venture with a leading South Korean beauty and fashion retailer, Shinsegae International. Aimed at boosting its presence in Asia, one of Intercos’ key markets, the joint venture will include the opening of a state-of-the-art innovation and production facility in South Korea, slated for completion this year.

“The facility will help us tap into the beauty trends coming out of Korea – the biggest beauty influencer in Asia. There, we will create innovative, new beauty products for both Asian and global consumers. It will also strengthen our presence in East Asia and bring us closer to the Chinese market,” Anna Dato, Marketing Manager for Intercos’ Asia division, reveals to SPC.

Italy’s BPC exports in 2015 remained in line with 2014 figures, accounting for approximately 40% of Italy’s BPC sector sales in 2015 – 61% sold outside the EU countries using the euro (the Eurozone) and 39% within the Eurozone. Italy’s top ten trading partners in Q1 2015 for BPC products, said the industry association, were: France (12.2% of total exports), which mainly imported colour cosmetics and skin care creams and soaps; Germany (10.4%), importing mainly fragrances and skin care creams; the US (8.1%), importing mainly fragrances, skin care creams and hair care products; Britain (8%), importing mainly fragrances, skin care creams and colour cosmetics; Spain (7.2%), importing mainly fragrances, skin care creams and hair care products; Hong Kong (4.1%), importing mainly fragrances and skin care creams; the United Arab Emirates (4%), importing mainly fragrances, skin care creams and colour cosmetics; Holland (3.6%), importing mainly fragrances; Poland (3.2%) importing mainly nail care products, skin care creams and hair care products; and Russia (2.4%), importing mainly fragrances, skin care products and hair care products. Record growth was recorded in exports to the United Arab Emirates (up 33.9% compared with Q1 2014) and Hong Kong (up 30.7%), while there was a major slowdown in exports to Russia (down 30.3%) and a slight (0.2%) drop in exports to Germany.

Made-in-Italy colour cosmetics continued to be in high demand in Q1 2015, up 12.7% from the same period of the previous year, 7.3% of which was for eye make-up. Fragrance exports also grew by 13.3% in Q1 2015 compared with Q1 2014, of which there was a 13.5% jump in cologne and eau de toilette, and a 12.7% increase in perfume and eau de parfum, according to Cosmetica Italia.

Home-grown ingredients

In terms of product innovations and trends, Euromonitor analysts noted that Italy remains at the forefront in the adoption of products that are made from locally-sourced, natural or organic ingredients. “Consumers are increasingly keen to purchase products that show organic certifications or are made by local manufacturers,” Euromonitor says. Stefano Focolari, CEO and Managing Director of Mktg Industry, a company based in Crema, southeast of Milan, which offers custom packaging solutions and personalised marketing services, agrees that the eco-beauty trend is still important in Italy.

“Eco-beauty and eco-packaging in particular are a must nowadays. While it is true that the northern European countries are far ahead of Italy with respect to eco-sustainability issues, I believe the so-called millennial generation are becoming more important in Italy; they are the most influential target and are very aware and demanding about natural formulas, eco-packaging, eco-design and eco-beauty, in general,” he explains.

The ‘green’ beauty trend has definitely been part of the winning formula for Italian family-run skin and hair care producer, Davines. Based in Parma, a key farming centre, Davines is known for its minimalist, eco-friendly packaging and use of natural, biodegradable ingredients. It tapped into the now-popular ‘farm to table’ food trend with its 2015 launch of a hair care line, Essential Haircare, in collaboration with the Italy-based Slow Food Foundation for Biodiversity, which promotes local food cultures and traditions. Each of the 25 products in the range utilise an active ingredient from one of Italy’s 250 products sporting a foundation ‘Slow Food’ label, such as capers grown on the volcanic island of Salina, Sicily, and Caprauna turnips, grown in the town of the same name in Piedmont.

Established in 1983, Davines today exports to 70 countries, including the US, where in August 2015 it opened a flagship salon, Ion Studio NYC, with celebrity hairstylists Marco Santini and Leonardo Manetti, in New York City’s SoHo district. From its beginnings, it has made sustainabile beauty and environmental awareness part of its mission. Today, all of its products are made using energy from 100% renewable sources and packaged in its branded Zero Impact-carbon neutral primary packs (mostly in food-grade plastic bottles that can be re-used as containers or planters or aluminium) and recyclable paper for its secondary packs.

Collistar's Sublime Black line

Another example of mixing food and fashion trends is one of Collistar’s new product launches in January 2016, which includes the Sublime Black line. Collistar’s Research and Development Supervisor, Monica Broccoli, says: “In an analysis of trends, we noted the launch in America and Asia of a large number of products, especially detoxifying and illuminating masks, that were using activated carbon, a raw material already used in food and known for its digestibility and cleansing properties. This, together with a grand return of the colour black in clothing, materials and in some cosmetics, marked the ‘black’ trend.”

The result is a black-coloured trio of technologically advanced facial products (serum, cream and mask), which, utilising active ingredients such as black orchid extract, white gardenia stem cells and hydrolysed black pearl, have a brightening, detoxifying and reparatory effect.

Celebrating its 13th consecutive year as Italy’s best selling beauty and personal care brand in perfumeries in 2015 (citing figures from US-based market information service NPD), Collistar is continuing its successful ‘Ti Amo Italia’ project, aimed at celebrating Italian creative talent and excellence.

“2016 opens with the most extraordinary and unexpected of collaborations,” says Alessandra Asnaghi, Senior Product Manager at Collistar, citing a marketing tie-in with Italian auto manufacturer Fiat for Ti Amo 500 (‘I Love You Italy’), a limited edition cosmetics capsule collection.

Regulatory ramifications

Regarding industry association Cosmetic Europe’s recommendation for its members to discontinue the use of microbeads in hair, face and body scrubs, Director of Scientific Relations and Regulations at Cosmetica Italia, Stefano Dorato, says Italian manufacturers are keen to comply with the recommendation, noting that there are already products on the market containing a natural replacement for synthetic beads, for instance, using apricot seed granules, so “compliance should not cost manufacturers too much”.

Looking towards the planned Transatlantic Trade & Investment Partnership (TTIP), Dorato says Italian manufacturers are generally supportive of the treaty, which would lower trade barriers considerably between European and American companies. For the cosmetics industry, negotiations will need to be focused on finding harmonised scientific safety tests and assessments, and how to classify and label ultraviolet sun protection creams and filters, Dorato says.