Skin Care & Make-up Products Market

An Expert's View about Medical, Health and Cosmetics Products in the Czech Republic

Posted on: 29 Dec 2011

Summary
Czech consumers are well known for being traditional, conservative and price sensitive. However, these traits do not generally apply when it comes to purchases of cosmetics and toiletries. The younger generation, which is fashion conscious and travels widely outside the country, has a greater awareness of global trends. They display different consumer patterns from their parents and branding plays an important role in purchasing decisions. Other significant factors in purchasing decisions are: first-hand experience with the product, quality, and price. Although the economic crisis has generally tempered sales of skin care and make up products, distributors have seen increases in certain price categories. Industry contacts expect that the market will improve again in the next year with growth over 10%. Reputation of the U.S. for quality and innovative products provides opportunities for U.S. cosmetics firms.

Market Demand
The Czech Republic, located in the heart of Europe, has over 10 million inhabitants. The local market is strongly influenced by foreign brands, whose market share has increased markedly since the country’s independence. Purchasing power among Czech consumers has risen steadily in the past decade; however, average per capita consumption for cosmetics and personal care products is still well below the West European average. Even with lower purchasing power, the Central and East European cosmetics and personal care market was worth nearly $16 billion before the 2008 financial crisis (the Czech Republic alone had sales totaling $1.07 billion in 2007), and had shown steady growth over the last. As incomes continue to rise, Czechs, who have relatively high disposable incomes when compared to other East European nations, are becoming increasingly fashion and health conscious, and demanding higher quality, more sophisticated skin care products and cosmetics. Products that incorporate “all-natural” and/or organic ingredients are becoming very popular. Good personal grooming has become an integral part of daily lives. Czechs use a variety of cosmetic product brands – and mixing high-end cosmetics with lower priced goods is not at all unusual.
Private labels have fared relatively well, maintaining their market share in the past few years, largely due to the sustained popularity of “house brand” cosmetics and toiletries, such as Marks & Spencer, which are largely accepted by many as high quality. Other popular private labels include The Body Shop, or L’Occitane. Sales of private label products make up an average 10-15 percent of the total retail trade.

Skincare
Sales of skin care products in the Czech Republic kept relatively stable despite the crisis, given the rise of some newer sub-sectors and products (e.g. products for men). Czech customers continue to seek new and better products. Anti-aging products are gaining in popularity since women in particular want to stay younger looking longer. The Czech market for sun care products is rapidly growing in connection with greater awareness of the dangerous effects of prolonged sun exposure. Sun-tanning products are also doing well since heavily tanned skin is a beauty trend.

Color Cosmetics
An increasing number of image-conscious women, and a growing number of adolescent girls who start using make-up at a younger age, contributed to the performance of this sub-sector. The majority of women consider color cosmetics a necessity, a trend seen in many affluent societies where there are a large percentage of women in the workforce. Thus, growth is expected to remain strong as women begin to include more items in their daily make-up routines. In recent years, women prefer fine, seemingly invisible, make-up that underlines their features and does not look “cheap”.

Market Data
The market for skincare and makeup products is dominated by imports, especially in the area of high end and brand name cosmetics, and foreign brands manufactured in country. Although the economic crisis negatively impacted rapid growth in the sector over the last few years, it is expected that there will be 14 percent growth in this segment until 2014.
Main cosmetic importers to the Czech Republic – especially in skincare – are Germany, France and Poland. Although American brands have strong recognition, the share of U.S. imports is relatively small, only around 4 percent, as many U.S. companies manufacture and import from their facilities in other European countries.

Best Prospects
Color cosmetics and skin care are the most rapidly expanding sub-sectors in the cosmetics market. Trends in this market have followed general global trends towards greater prominence for skin care products, particularly in anti-aging and sun care. Increased sales in this sector are partly due to concerns regarding the damaging effects of the sun and an increased emphasis on a youthful appearance. Products for men and youth also have solid prospects. Although the majority of buyers are still women, there are a growing number of men who want to improve their appearance. Manufacturers and advertisers have also identified the youth sector as a huge opportunity and have positioned products and brands to target them. Quality products that offer added benefits are increasingly in demand. Good potential exists for innovative products focused on areas of concern e.g. facial creams for wrinkles, cellulite treatments, firming creams, sun block and related protection from the environment, enriched lipsticks, etc. Demand for products with therapeutic effects is also expected to rise Advertising, sales promotions and pricing will all be key factors influencing market growth in the coming years. An important trend is increasing consumer sophistication and interest in all things natural. Consumers are demanding across all sectors, healthier, and more natural and organic products.

Key Suppliers
The Czech market is extremely competitive with most major international players already here. The Czech Republic has a relatively large number of medium and small-size producers of cosmetics, toiletries and perfumes. At the same time, a large number of varied products coming from other European countries and a lesser number of products coming from the U.S. and Asia are also available in the market. Besides skincare and makeup products, which are available in supermarkets, drugstores, and convenience stores, top-sellers in cosmetics are those that are distributed via direct selling – Avon, Herbalife, Oriflame (Sweden), Mary Kay, Nu Skin and Amway. The majority of these direct sales products are U.S. brands. Local subsidiaries of direct sales companies make up nearly 10% of the overall cosmetics market.
Several Czech companies hold solid positions in the market – Dermacol and Ryor among others. Dermacol was founded in 1966 at the Barrandov film studios to produce cosmetics to meet the needs of the local movie industry. The license for its Make-Up Cover product, a clinical makeup with 50 percent pigment particles, was first sold to Hollywood studios back in the 1960s. Currently, the UK company McBride has invested in Dermacol. The Czech cosmetic firm Ryor is well known throughout the entire country and its products can also be found on shelves worldwide. Today, the Ryor line includes over one hundred products - 40 for cosmetic salons and 87 sold in retail stores. Since its beginning, the firm's logo and brand name on products has been accompanied by the slogan "Natural Herbal Cosmetics." There are also a number of smaller companies that produce herbal cosmetics (Botanicus, etc.).
Large multinational firms increasingly dominate the market. The market leader is Beiersdorf AG (Germany). Beiersdorf led sales of skin care products with a 17% share in 2010 thanks to strong promotional activities and new product development. The second-largest player is L'Oreal S.A. (France). Unilever (The Netherlands/UK) and Estée Lauder (USA) also hold strong positions. Other U.S. companies with representation in the country include Johnson & Johnson.

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Posted: 29 December 2011

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