GLOBAL COLOR COSMETICS MARKET ASSESSMENT A presentation at the June 8, 2006
AGENDA Kline s Coverage and Methodology Market Overview Sales and growth Categories Trends and innovations Competitive landscape Regional breakdowns Outlook to 2010 Q&A 1
KLINE S COVERAGE AND METHODOLOGY 2
Kline Research has world class expertise in cosmetics and toiletries... Extensive series of syndicated research studies Global management team, who are known to the industry Often sought after to present papers at leading industry conferences Global network of industry experts Commitment to the personal care industry SYNDICATED STUDIES Global Cosmetics & Toiletries Specialty Raw Materials for Cosmetics & Toiletries Specialty Actives & Active Delivery Systems Professional Skin Care Beauty Retailing Salon Hair Care Home Fragrances Household Cleaning Products 3
Kline covers the entire personal care value chain... RAW MATERIALS Antimicrobials Conditioning polymers Emollients Hair fixative polymers Rheology control agents Skin whitening agents Specialty actives Specialty delivery systems Specialty surfactants UV absorbers FINISHED GOODS Fragrances Hair care Makeup Nail care Oral care Skin care Toiletries RETAIL OUTLETS Department stores Direct sales Drug outlets Food stores Mass merchandisers Salons Specialty stores Pharmacies/perfumeries 4
Kline s rigorous research methodology results in high quality and insightful reports... PRIMARY RESEARCH Unstructured interviews with: Marketers/manufacturers Retailers Distributors Suppliers Trade organizations Government agencies SECONDARY RESEARCH Trade journals Analysis of public data Corporate financial reports and literature Non-confidential data from Kline s databases RIGOROUS ANAYSIS/CROSS CHECK Insightful and comprehensive coverage 5
MARKET OVERVIEW 6
The global cosmetics and toiletries market reached $155 billion in 2005... $ Billion mfr. 200 160 $135 $141 $148 $155 120 80 40 0 2002 2003 2004 2005 7
Color cosmetics accounts for 15% of industry sales... Skin care, 27% Hair care, 21% Other toiletries, 16% Color cosmetics, 15% Fragrances, 11% Oral care, 9% 8
Sales of color cosmetics totaled nearly $24 billion in 2005... $ Billion mfr. 30 25 $20.6 $21.7 $22.6 $23.8 20 15 10 5 0 2002 2003 2004 2005 9
Growth in color cosmetics has been consistent and healthy... Change, % 6 5 4 3 2 1 0 2003 2004 2005 Makeup Total C&T industry 10
The color cosmetics market has dramatically changed over time... 1960 s Usage on rise Working women Increase in teens 1970 s Disco era Heavier usage More shades Working women+ 1980 s Heavy made-up look Product forms (oily, long wearing) Demographic segmentation 1990 s Natural look early on Makeup artist brands Long lasting Lip glosses One-coat polishes 2000 s Lip gloss early on Transfer-resistant Shift to eyes Skin matching 11
The market is driven by color trends and innovation... New shades Metallics Fashion Bold Natural Color matching Shimmer MAKEUP GROWTH Improved delivery Transfer-resistant Long lasting New forms Multi-use One-coat Curl/thicken lashes 12
Asia is the largest market... Asia, 33% All other, 4% Europe, 31% Latin America, 5% North America, 26% 13
Asia skews stronger in face makeup, while Europe and the Americas are more about color... 100% 80% 60% 40% 4.2 4.8 4.3 31.9 24.7 25.9 2.6 4.4 25.2 7.7 32.0 34.5 4.0 17.9 15.3 41.6 20% 0% 42.7 25.0 30.1 21.2 Eye makeup Face makeup Lipsticks Nail polishes Asia Europe Latin America North America All other 14
The top five players control 40% of the market; L Oréal has a distant lead... 6% 7% 7% 16% 4% Other 60% 15
The leaders have achieved their positions through strategic acquisitions... Lancôme Maybelline Yuesae Mininurse Miss Ylang MAC Bobbi Brown Cover Girl Max Factor 16
Marketers are increasingly using celebrity spokesmodels... 17
Face makeup is the largest category... Face makeup, 40% Nail polishes, 8% Eye makeup, 27% Lip makeup, 25% 18
Eye makeup registers the highest growth... Eye makeup Face makeup Lipsticks Nail polishes -1 0 1 2 3 4 5 6 7 Growth, % 19
FACE MAKEUP Skin matching and skin care claims drive sales... KEY TRENDS Skin matching technology Bronzers popular More skin care properties (anti-aging, acne, SPF) Whitening important in Asia Luxury slightly larger than mass LEADING PLAYERS 1 2 3 4 5 20
EYE MAKEUP Innovation and marketer focus propels the category... KEY TRENDS Current area of focus for most marketers Simplified merchandising Technologically advanced mascaras High growth in developing countries (China, Brazil) Mass brands 54% of sales Multifunctional products New forms of shadow LEADING PLAYERS 1 2 3 4 5 21
EYE MAKEUP Almay has rolled out a simplified, customized system... Buy based on your eye color Introduced first in eye makeup Other marketers responding with products addressing individual needs (e.g., Cover Girl Custom Compacts) 22
EYE MAKEUP Every year, more high-tech mascaras hit shelves... More volume Lash lengthening No flaking, clumping, smudging Curl lashes Subtle to dramatic Shaping polymer 23
EYE MAKEUP Shadows now come in a variety of forms... 24
EYE MAKEUP False eyelashes are back en vogue... 25
LIPSTICKS AND LIP GLOSSES High gloss and shine; additional benefits... KEY TRENDS Focus shifts away to eye and face Continues to be about glosses and high shine Additional benefits like firming, SPF protection, and plumping Moisturization and comfort More dual-ended products LEADING PLAYERS 1 2 3 4 5 26
LIPSTICKS AND LIP GLOSSES Plumpers are gaining in popularity... Celebrity influence Alternative to cosmetic procedure Can be irritating; creates need for soothing products Higher prices From mass to prestige 27
NAIL POLISHES Suffering for a variety of reasons... KEY TRENDS Suffers from low-cost nail salons Trend towards natural looking nails Cutbacks in retail shelf space Health concerns over phthalates Regulations an issue, esp. in Europe LEADING PLAYERS 1 2 3 4 5 28
OUTLOOK 29
Color cosmetics sales will approach $30 billion by 2010... $ Billion mfr. 35 30 $23.8 CAGR: 4.7% $29.9 25 20 15 10 5 0 2005 2010 30
Lipsticks are projected to advance at the fastest pace... Lipsticks Eye makeup Face makeup Nail polishes 0 1 2 3 4 5 6 Projected CAGR, %, 2005-2010 31
Latin America will be the fastest growing region... Latin America Europe Asia North America 0 1 2 3 4 5 6 7 8 Projected CAGR, %, 2005-2010 32
Growth will depend on various market forces, both positive and negative... Innovation Higher price points Anti-aging claims Marketing investment Increased penetration Fashion and color trends Moderate Growth Rise in cost of living Stricter legislation on claims and ingredients Market saturation Focus on other categories 33
Efforts will focus on two sides of the consumer spectrum... Bold and trendy Emphasis on color Newness Anti-aging Moisturizing Products that don t settle in creases 34
The market shows no signs of slowing down... Dry Enamel Strips (Avon Instant Manicure) High pigment (L Oréal HIP) Technologicallyadvanced mascaras Anti-aging lines Eyebrow products Mineral lines 35
For more information... If you require additional information about the content of this analysis or the services that Kline provides, please contact: Carrie Mellage Industry Manager, Consumer Products Phone: 973-435-3412 E-mail: Carrie_Bonner@klinegroup.com Discounts available for conference attendees! 36
Questions &Answers 37