The Global Cosmetics Manufacturing Industry

Pachama Cosmetics will operate in the global cosmetics market but more specifically the niche sector of naturally derived cosmetics.  This segment differs greatly from standard cosmetic because they contain no harsh chemicals or known carcinogens.

The cosmetics industry, as a whole, is composed of companies that prepare, blend, compound, and package toiletries, personal-care products (including perfumes and fragrances, hair care, makeup, oral care, personal hygiene and skin care). The makeup business is currently dominated by large multinational organizations. Industry product is mostly sold in large retail outlets, mass merchandisers, and specialty retail stores.[1]

The main producers in the industry are:

• Colgate-Palmolive
• L'Oreal SA
• Procter & Gamble
• Unilever

Five Primary Cosmetic Segments

The cosmetic industry, specifically the beauty and personal care industry can be broken down into 5 segments, listed here as percent of sales.

1. Hair Care – 20%
2. Skin Care – 27%
3. Fragrance – 10%
4. Make-up – 20%
5. Other – 23%

Revenues from world-wide cosmetics sales are distributed pretty evenly around the world with $40 billion in North and South America, $60 billion in Europe, $60 billion in Australia and Asia, and another $10 billion in Africa. Currently, western nations spend more per person on cosmetics. However, sales in India and throughout Asia are quickly catching up.

The global economic crisis that began in 2007 had a pronounced effect on cosmetics sales. Due to declining per capita disposable income in key markets, industry revenue grew only 1.5% in 2009, which was the height of the economic recession. Profits fell to a low of 7.5% of revenue during the year, from a pre-recession level of 10.7% in 2007, as consumers opted for lower-priced personal care products. However, forecasts of cosmetics sales indicate a huge upswing in revenue. Market researchers have determined that natural cosmetics has maintained its position very well during the crisis and even recorded growth. For example, sales in Germany grew 7 % in 2009. Studies show that this sector will continue to grow to an above-average extent in years to come.[2]

The color cosmetic market represents about 15% of the overall cosmetic industry and includes products such as lipstick, nail polish, blush, eye shadow, foundation, etc. There are vast arrays of products out there and the number of color variations is practically infinite. The market is highly segmented and there is not one dominant player. However, Maybelline and Clinique are two significant brands in the makeup market.

In 2011 U.S. cosmetic and beauty product imports accounted for about 11.6% of domestic demand, while exports grow to 11.8% of industry output. According to a 2011 industry report by the research firm IBISWorld, “…national trends in consumerism will set the stage for the expansion of eco-conscious and naturally derived cosmetic enhancements”.[3]  This trend implies that the number of consumers who demand naturally derived cosmetic products will drive overall growth in the industry in years to come.

Pachama Cosmetics’ unique vitamin enriched makeup will take advantage of a growing desire for natural cosmetics but will also appeal to those who desire extra benefits from a product. Naturally derived products represent a high-growth segment of the market at 15% annually as compared to 5% for the overall market. [4]