LITTLE FALLS, NJ, FEBRUARY 26, 2007 –

“The sheer size of this market alone makes it attractive,” says Carrie Mellage, industry manager for the Consumer Products practice of Kline’s research division. “Factor in the growth potential and it’s easy to see why China is becoming such a critical element in sales and marketing strategies for the global consumer products industry, especially for high-margin sectors like professional skin care.”

According to the National Statistics Bureau of the People’s Republic of China, disposable per capita income has surged by an average of 11.3% over the last five years. This has helped to drive personal care expenditures up by 13.4% each year, Kline estimates. This trend is a major force in the market for professional skin care products––sold primarily through beauty institutes, spas, and salons or dermatologist and plastic surgery clinics––with Chinese consumers focusing more of their attention––and their income––on enhancing their appearance.

Kline’s study, PROFESSIONAL SKIN CARE 2006, VOLUME III: CHINA, pegs the overall market at $720 million at the manufacturer level and rising, quickly gaining ground on the $870 million U.S. market. In fact, the facial treatments sector in China is currently the third-largest in the world, larger than any single country in Europe, according to preliminary data from Kline’s GLOBAL COSMETICS & TOILETRIES 2006 service.

While it is already a highly fragmented market space, with more than a thousand local brands competing with approximately 100 imports, the promise of a steadily expanding growth market is alluring. Kline’s study forecasts annual growth of nearly 15% in China through 2011, compared to just over 9% for the U.S. market. This will push sales in the Chinese market past the $1.4 billion mark––and the U.S. market––within this timeframe.

However, with this promise come significant hurdles. The competition between foreign imports and local Chinese brands has created a polarized pricing structure that challenges marketers to find their niche for both pricing and distribution.

“There are essentially two brand tiers: the foreign brands and the local brands,” Mellage says. “Imports are higher-end and tend to be more expensive, appealing to upscale spas and beauty institutes. The local brands, which account for a large majority of products on the market, are low- to mid-priced and are generally positioned for beauty institutes where there is less emphasis on luxury and pampering.”

The lion’s share of skin care product sales through professional channels in China belongs to the beauty institutes, with about a 70% share. However, Kline’s study suggests that the spa market is poised for a surge, which would give the foreign brands a chance at raising their market share.

“We’re expecting sales through spas in China to grow by more than 17% a year over the next five years,” says Mellage. “The emerging middle class is beginning to discover the day spa, which offers some of the same amenities of the full spa experience but at a much more affordable price.”

While the Chinese professional skin care market is younger than those of the U.S. and Europe, some of the same trends are present.

“Even more so than in the Western markets, Chinese consumers want the efficacy of a powerful clinical-type product combined with the perceived benefits of natural ingredients based in traditional Chinese medicines,” says Susan Babinsky, senior vice president and head of Kline’s Consumer Products consulting practice. “This is a very viable value proposition in China, and in fact may yield some novel new products and ingredient platforms that could offer potential in Western markets.”

PROFESSIONAL SKIN CARE 2006 is the fourth edition of Kline’s comprehensive series on professional brands sold through spas, salons, beauty institutes, physicians, and retail stores. The 2006 edition comprises separate volumes on the U.S., European, and Chinese markets, as well as an executive overview of all three markets. Each volume examines sales volume by product category and distribution channel, market share by leading brands, regional trends, and growth forecasts based on Kline’s exclusive FutureView Scenario Forecasting Model.

For more information on this study series, go to www.klinegroup.com/reports/y562.asp or contact Carrie Mellage at +1-973-435-3412. In China, contact Li Wang at +86-21-5382-6677. In Europe, contact Erin Durham at +39-0331-931807.

To learn more about Kline’s customized consulting capabilities for the consumer products industry, contact Susan Babinsky at +1-973-435-3365.

Established in 1959, Kline & Company (www.klinegroup.com) is an international management consulting and market research firm serving the consumer products, life sciences, specialty chemicals, and energy industries.