Beauty and Personal Care in Brazil

Beauty and Personal Care in Brazil

The Brazilian beauty and personal care market saw a moderate performance in 2011 when compared
with the growth rates observed in the period 2006-2011. On the demand side, there was an overall
slowdown in the economy, with a significant proportion of consumers' disposable incomes destined to
pay off debts acquired in the past, along with rising food prices and an overall increase in the cost of
living in major urban centres. On the supply side, the weak performance of major direct sellers and
disruption in distribution systems, allied with growing competition, marked a year which surprised most
observers.

Leading direct sellers face major disruptions

Both the leading direct selling companies in Brazil - Natura Cosmeticos and Avon Cosmeticos -
presented a weaker than expected performance in 2011. According to trade sources, both companies
faced structural problems. Natura faced problems mainly due to factory expansion and the poor
implementation of new information systems, whilst Avon had problems mostly related to its transfer to
a new distribution centre in Cabreuva.

The leading beauty specialist retailer presents healthy growth

Botica Comercial Farmaceutica (O Boticario) performed well in 2011, presenting strong double-digit
growth in the year. In recent years O Boticario made important investments in production capacity and
new distribution centres. Continued product innovation and heavy marketing spend supported its
recent growth, and also mean a positive outlook for the company.

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Health and beauty retailers gains share of distribution

Whilst grocery retailers lost share of distribution within the beauty and personal care market between
2006 and 2011, health and beauty retailers increased its share from 31% in 2006 to 32% in 2011. Two
main reasons explain this trend. On the one hand, O Boticario quickly expanded the beauty specialist

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retailers channel with new franchised stores. On the other hand, parapharmacies/drugstores also
expanded sales of beauty and personal care products due to more physical space on shelves, which
became available due to tighter restrictions on product display by the Brazilian health watchdog ANVISA
a few years ago.

Brazil may have lost some of its shine, but a positive outlook remains for 2011-2016

The beauty and personal care market in Brazil is expected to see a good performance between 2011 and
2016, with a CAGR of 7% in constant value terms. Hair care and fragrances will remain the largest
categories in value terms, accounting for a combined 37% share of overall value sales in 2016.
Depilatories is expected to register the most dynamic performance over the 2011-2016 forecast period.
Consumers are also expected to trade up to more complex and sophisticated products in the coming
years, a trend which has already started, and will define a different quality of growth in the Brazilian
market through to 2016

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