LITTLE FALLS, NJ, June 5, 2006 – Multinational suppliers of specialty raw materials for the cosmetics and toiletries industry are facing mounting competition from Chinese suppliers who can now offer products of the same quality at a much lower price. This pressure means global suppliers must focus on providing innovation and value-added specialty products in order to maintain market share, according to a new study from Kline & Company.
Kline’s study, SPECIALTY RAW MATERIALS FOR COSMETICS AND TOILETRIES, Volume I: Asia-Pacific 2005, indicates that China now holds 9% of the $3 billion global market in specialty raw materials. With the expanding reach of local suppliers and a sustained trend toward overall economic growth, the market for specialty raw materials used in cosmetics and toiletries is expected to grow at a brisk pace, by about 10% annually over the next five years.
“When we examined the Chinese market just four years ago, the local suppliers were just starting to make an impact on the global stage,” says Gillian Morris, industry manager of the Chemicals & Materials practice for Kline & Company’s research division. “Now, when we look at the top suppliers in the top five specialty raw material product categories in China, the Chinese suppliers are moving in on the multinationals. There are Chinese suppliers in every product category, from hair fixative polymers to UV absorbers.”
Conditioning polymers, skin whitening agents and emollients continue to demonstrate the highest growth rate, at more than 12% each, outpacing the overall growth for the industry. In China, skin whiteners are leading the pack, as Chinese consumers continue to associate a lighter complexion with greater beauty.
While the Chinese market for both finished cosmetic and toiletry products and raw materials is growing steadily, the Japanese market offers different kinds of opportunities and challenges to raw material suppliers.
“The Japanese population has a high level of disposable income, and it spends more per capita on personal care products than any in other country in the world, but the finished products and raw materials markets are mature, offering very low growth rates in comparison with China,” says Morris. “Still, we see some of the greatest innovations coming out of the Japanese market.”
“Some very good companies like Shiseido and Kao are really at the forefront of innovative personal care products, particularly for anti-aging technologies, and this is where raw material firms will need to focus in order to remain competitive with the advancing Chinese suppliers,” she adds.
“Finished products manufacturers are now using their low-cost positions with the local Chinese suppliers to put pricing pressure on multinational raw materials suppliers,” says Eric Vogelsberg, senior vice president and head of Kline’s Chemicals & Materials consulting practice. “In order to defend their market share, the MNCs have to focus on innovation and a strong IP position. They’ll need to compete on ingenuity and their ability to serve as a consistent and secure global source of supply rather than on price.”
SPECIALTY RAW MATERIALS FOR COSMETICS AND TOILETRIES, Volume I: Asia-Pacific 2005 examines eight product segments and more than 50 individual products, including fragrances, skin care, hair care, makeup, oral care, and other toiletries. Professionals in Kline’s Shanghai office conducted more than 150 primary research interviews to compile the volume.
A companion report, GLOBAL COSMETICS & TOILETRIES, examines the finished products market in 16 countries, including volumes dedicated exclusively to the Chinese and Japanese markets.
For more information on this study, go to www.klinegroup.com/reports/y449.htm or contact Gillian Morris at +1-973-435-3412. In Europe, contact Erin Durham at +39-0331-976969.
To learn more about Kline's customized consulting capabilities for the raw materials and chemicals industry, contact Eric Vogelsberg at +1-973-435-3466.
Established in 1959, Kline & Company (www.klinegroup.com) is an international management consulting and market research firm serving clients worldwide in the specialty chemicals, life sciences, consumer products, and energy industries.
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