China’s cosmetics market to surpass US in 2009

National - China's cosmetics sector rose to US$2.2 (HK$17.2) billion by the end of 2006 compared to US$1.9 (HK$14.8) billion at the end of 2005, showing a 17 percent growth, according to data from TNS Worldpanel China.

The market research firm predicts if China achieves the 20 percent level of growth in the next three years, its cosmetics market will be worth US$3.8 (HK$29.7) billion and it will eclipse the US cosmetics market estimated at US$3.6 (HK$28.1) billion at the end of 2006, and which grew by less than 0.2 percent compared with 2005.

Factors driving the growth of China's cosmetics market include rising prices, consumers trading up to more expensive products, growing demand for anti-ageing products and the official relaxation of an earlier ban on direct sales in 2006.

China's recent liberalization of direct sales have provided major foreign brands with fresh opportunities as data reveal the share of spend from the direct sales channel in China shot up, rising 82 percent in 2006 over the previous year for skin care products and 92 percent for make-up.

Avon was the first direct sales player granted a license to sell at national level in China. Other brands include Mary Kay and Amway.

 "This is an exciting market for cosmetics brands from the US and Europe with the promise of growth followed by yet more growth in the next few years. China clearly stands out from its neighbours in this respect, with average spend per household at the end of 2006 in urban areas of just US$26 (HK$203), far lower than the US$191 (HK$1492) level seen in Korea and US$176 (HK$1375) in Taiwan. The average spend on cosmetics per trip in China - at just US$7 (HK$55) - compared to US$31 (HK$242) in Korea and US$26 (HK$203) in Taiwan further underlines the opportunity for overseas brands to sell more products," Jason Yu, regional account development director for TNS Worldpanel said.

TNS outlines five key trends major foreign brands should monitor in the China cosmetics sector including Chinese consumers trading up, the rise in demand for anti-ageing products, room for growth in direct sales, potential for China's 2^nd tier cities to become the new frontier and Chinese consumers buying and using broader combinations of cosmetics products.