BEAUTY SALES DOWN -13.0% IN 1Q 2009

By Generation Research, 3 September 2009

According to the global panel of retailers reporting to the Generation DataBank, during the first three months of 2009 global duty free and travel retail beauty sales dropped -13.0% compared to the same period in 2008.

"This is probably the worst quarterly decline the business has ever experienced", says Yngve Bia, President Generation Research. "However, beauty has not been as hard hit as many other categories".

In Europe, beauty sales fell -10.4% in 1Q 2009 vs 1Q 2008 calculated in the Euro. However, as the Euro depreciated by -12.7% against the US dollar in 1Q 2009 (1Q 2009: € 1.00 = US$ 1.30799; 1Q 2008: € 1.00 = US$ 1.4977) versus 1Q 2008, the statistical decline calculated in US dollars of beauty sales in Europe actually came to a much more alarming -21.4%.

"Regrettably, as earlier anticipated, the currencies and rates of exchange continue to have a heavy impact on our analytical systems and the results presented", says Bia. "When studying and interpreting sales evolution numbers, it is of utmost importance that careful attention is given to the context and in what currency these numbers are calculated and quoted".

In recent months the Euro has again started to appreciate vis-à-vis the US dollar and reached on 8 August 2009 € 1.00 = US$ 1.43870. "This development will certainly not please European and other suppliers using the Euro as their base accounting currency", says Bia. "The weaker US dollar, the less Euros are coming into these companies’ coffers which impacts on revenue levels and profit margins that have already been adversely affected".

When adding together the results in the past four quarters up to 1Q 2009 this shows that the trend in global sales – in US$ – is marginally up by +1.7%. The trend over the past three quarters has been negative, however, effectively meaning that year-on-year sales in each of the three quarters – up to and including 1Q 2009 – have been declining.

The global duty free and travel retail industry has been through – or is still de facto in the midst – of one of its toughest and most challenging times ever. As a result, the increased incidences of popular, eye-catching and exciting promotions, as well as 'new' beauty products has become a major factor in driving footfall into the stores. Today, duty free and travel retail beauty sales represent 30.8% of global sales (all merchandise), more than liquor and tobacco combined with an aggregated share of 25.4%.

Back in 2008 global duty free and travel retail beauty sales advanced +11.8%, well above the global average growth of +8.8%.

Despite a depressing second half in 2008 with declining sales numbers reaching disappointing low points in November and December especially, the industry had its fair share of successes in 2008.

Sales of Women's Fragrances rose +10.9% in 2008. Among all products sold in duty free and travel retail, Women’s Fragrances is the most important category representing 12.6% of overall sales. Among the new launches making it to the world's Top 100 Women’s Fragrances in 2008 the most successful ones were:

World Rank 2008 – Women's Fragrances: Top 12 New Launches

8. Gucci “Gucci by Gucci”
17. Giorgio Armani “Emporio Diamonds” (*)
30. Lancome “Magnifique”
31. Chloé “Signature”
36. Carolina Herrera “CH” (*)
41. Marc Jacobs “Daisy” (*)
43. Diesel “Fuel For Life She” (*)
69. Calvin Klein “Secret Obsession”
79. Escada “Moon Sparkle for Women”
88. Givenchy “Absolutely Irresistible Givenchy”
89. Jennifer Lopez “Deseo”
100. Dior “Escale a Protofino”

(*) = Also with some sales in 2007 as launched late in this year.

Source: TRPReport 2009; Generation Research, Sweden

Among the many launches in 2008, L'Oréal's roll-out of Lancôme "Magnifique" was probably the most spectacular. The magnificent launch at the Grand Palais in Paris, a beautiful glass mansion built in 1900 for the Paris Exhibition, is something that is still much talked about in the industry.

In the overall global Women’s Fragrance duty free and travel retail market, Chanel has no less than three of its fragrances among the Top 5: Chanel No.5, Coco Mademoiselle and Chance. In 2008 there was no launch of a new female scent from Chanel.

On the Men's Fragrances side there were also a number of winners in 2008. The Men's Fragrances category saw sales advance +13.4% in 2008.

World Rank 2008 – Men's Fragrances: Top 17 New Launches
 
5. Dolce & Gabbana “The One Men”
11. Diesel “Fuel for Life He” (*)
12. Boss “Pure”
20. Chanel “Allure Homme Edition Blanche” (*)
21. Davidoff “Adventure”
30. Paco Rabanne “1 Million”
38. Dior “Homme Sport”
41. Giorgio Armani “Emporio Diamonds He”
53. Gucci “Gucci by Gucci Homme”
64. Guerlain “Homme”
72. Prada “Infusion d’Homme”
73. Givenchy “Pi Neo”
75. Kenzo “Power”
84. Ralph Lauren “Notorius”
87. Givenchy “Play”
90. Montblanc “Homme Exceptionnel”
100. Alfred Dunhill “London”
(*) = Also with some sales in 2007 as launched late in this year.

Source: TRPReport 2009; Generation Research, Sweden

"One of the most interesting and successful launches of male scents in 2008 was probably Puig Travel Retail's roll-out of Paco Rabanne's '1 Million' that some claim will change the landscape for launching men's fragrances forever", says Bia. "The people in Barcelona do and have done a fantastic job. The impact of their promotions that started at London Heathrow in 2008 and are now continuing in other parts of the world – supported by clever advertising and in-store promotions – is staggering".

One week in November 2008 Paco Rabanne's '1 Million' became the top-selling SKU at London Heathrow T3 when it outsold 15,000 other lines.

Patrick Bouchard, Puig Beauty & Fashion Group General Manager, comments: "People talk about 'retailtainment' - well, here we are making it happen. I am very, very happy. At Puig we are good at brand-building – but although it looks simple, it also takes passion".

Yngve Bia comments: "Puig Travel Retail has with '1 Million' adopted a 'retailtainment' strategy with the objective of reaching and surprising the travelling consumer in a closed universe, such as at airports. Offering unexpected units and activities combined with amazing installations – eg. a giant safe vault filled with 'gold ingots' – and Haute Couture such Paco Rabanne dresses has obviously delivered stunning results, financially as well as concept-wise".