10th June 2022
MADARA Cosmetics AS
Sector Overview Cosmetics Industry According to Cosmetics Europe, in 2020, the region’s retail market for cosmetics and personal care was worth EUR 76.7bn. Collectively, Europe’s market is the largest in the world, with Germany (EUR 14.0bn), France (EUR 11.5bn), the UK (EUR 9.8bn), and Italy (EUR 9.7bn) holding the largest market shares, followed by Spain (EUR 6.4bn) and Poland (EUR 3.8bn).
European Cosmetics and Personal Care Market (EUR bn) Germany 14.0
France
21.5
UK 11.5 3.8
Italy Spain
6.4
9.8 9.7
Poland Others
Source: Cosmetics Europe
It is estimated that the cosmetics and personal care industry brings at least EUR 29bn in added value to the European economy annually. About EUR 11bn is contributed directly by the manufacturers of cosmetic products and EUR 18bn indirectly through the supply chain. Including direct, indirect, and induced economic activity, the industry supports over 2 million jobs. In 2020, over 229,400 people were employed directly, and a further 1.69 million indirectly in the cosmetics value chain. The vast majority of Europe’s 500 million consumers use cosmetics and personal care products every day to protect their health, enhance their well-being, and boost their self-esteem. Ranging from antiperspirants, fragrances, makeup, and shampoos, to soaps, sunscreens, and toothpastes, cosmetics play an essential role in all stages of our life and have important functional and emotional benefits. Within the European industry, skincare forms the largest segment, generating about EUR 21.45bn in retail sales in 2020, followed by toiletries (EUR 21.24bn) and hair care products (EUR 14.14bn). Other larger market segments include fragrances/perfumes (EUR 10.49bn) and decorative cosmetics (EUR 9.39bn). Exports of cosmetic products from Europe totalled EUR 22.6bn in terms of trade value during 2020. France and Germany were Europe’s main exporters, together accounting for over 50% of the total global exports from Europe. In terms of intangible asset values, the industry is also vital for Europe, with the region’s leading brands valued at more than EUR 45bn – 26 out of the top 50 global cosmetics brands are European. The cosmetics and personal care industry is a science-driven and highly innovative sector that makes large investments in R&D. In Europe, most of the large-scale companies in the industry spend about 5% of their annual sales on R&D. In 2018, there were at least 77 scientific innovation facilities in Europe that carried out research for cosmetics and personal care industry. Large industry players have multiple research centres that focus on product development, market research, and regulatory compliance. An increasingly visible trend across Europe is towards greater sustainability, with a growing commitment from industry to enable consumers to benefit from products meeting these standards. MADARA is fully committed to the sustainability principle, operating specifically in the segment of natural and organic cosmetics and personal
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INSTITUTIONAL EQUITIES
care. Organic personal care and cosmetics products are made from plant extracts and natural ingredients that contain minimal or low amounts of synthetic ingredients formulated or manufactured by a chemical process and have chemically altered a substance derived from a naturally occurring plant, mineral, or animal source. These products are widely considered safer and more beneficial than regular personal care and cosmetic products. Government organisations in various countries are encouraging the use of organic ingredients over synthetic ones in cosmetic products, thereby supplementing the market growth. The recent tendency to question the side effects of many substances used in conventional cosmetics, combined with an increasing appreciation of the merits surrounding environmental sustainability, has encouraged many consumers to turn to ‘green’ cosmetics. Such cosmetics products are normally certified by ECOCERT under different certification classes depending on product specifications. Consumers increasingly prefer products labelled as ‘natural’ or ‘organic’ to conventional products. Consumer and retail analysts emphasise that there are three main factors contributing to the growth of the global organic personal care market. These include demand for (a) chemical-free, (b) multifunctional organic products, and (c) new formulations. So where is this demand coming from? Socially conscious consumers are the new driving force behind market trends. Buying ethical goods is now cooler than it has ever been before, particularly as environmental awareness is becoming mainstream in the millennial and Generation Z markets. Social media is key to the shift in consumer demand. Trends are shared more quickly and emotively, with celebrities and influencers — as well as everyday people — posting content that urges everyone to become a conscious consumer. However, it would be a disservice to the intelligence of consumers to claim that the move towards natural products is only due to celebrity influence or peer pressures. Instead, it seems that as the world changes, a new form of consumerism is emerging, based on principles of awareness and caring about people and the planet. Consumers want their purchases to be good for their bodies and good for the world. Natural cosmetics are usually priced higher than their synthetic counterparts. This is because the cost of natural ingredients changes year on year and is directly affected by uncontrollable environmental factors, and the manufacturing process for organic and natural products is more labour-intensive. However, the bigger price tag is not dampening demand. In the haircare market, for example, products containing coconut, marula, argan, and almond oils are gaining traction over products containing harsh chemicals, which are now known to damage hair. In short, increasing interest in beauty and personal care, coupled with growing health awareness, are the key factors propelling the growth of the organic personal care and cosmetic products market. Overall, these factors have fuelled the industry’s strong growth over the last decade and are likely to continue to do so, making natural and organic cosmetics the most dynamic segment of the global personal care market. According to the information available on www. reportlinker.com, the global natural and organic personal care market is estimated at USD 12.7bn in 2020 and is projected to reach USD 23.6bn by 2027. Skincare is projected to record a 10.9% CAGR and reach USD 9.4bn by 2027, while the haircare segment is forecasted to grow at an 8.3% CAGR for the next seven years. In 2020, the US market was estimated at USD 3.4bn, while China is projected to grow at a 16% CAGR to reach USD 6.4bn by 2027. Japan and Canada are projected to grow at a CAGR of 3.4% and 7.6%, respectively, over the 2020-2027 period. Germany is the second-largest market in the world and the largest in Europe, with EUR 1.3bn turnover, forecasted to grow at a CAGR of 5.2% during 2020-27, followed by France (EUR 0.8bn). According to another market research provider, Allied Market Research, the global organic personal care and cosmetic products
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