September 9 marks International Beauty Day. It is a good opportunity to summarise the recent activity of the Polish cosmetics industry and its international position.
The largest cosmetics market in the world is Europe. According to Euromonitor International, the value of the European market measured in retail prices rose by 1.5% in 2019 to EUR 79.8 billion. The next places are taken by the United States and China. Looking at individual European countries, the leader is Germany with a turnover of EUR 14 billion, followed by France, the United Kingdom and Italy.
According to Cosmetics Europe, more than half of the value of the retail market in Europe is made up of skin care and personal hygiene products. Their share of the market in 2019 was 27.1% and 24.8% respectively.
The European cosmetics industry directly employs 207,000 people, and 1.6 million work in related sectors. It is worth emphasising that 63% of those employed are women. The sector is quite fragmented, because in addition to large corporations it comprises around 5,900 small and medium-sized enterprises.
Poland ranks sixth in Europe with retail cosmetics turnover of EUR 4.1 billion. The potential for growth of the domestic market still appears large. Average spending on cosmetics in Poland in 2018 amounted to EUR 100 per inhabitant, compared with the EU average of EUR 127. The highest averages were recorded in Norway (EUR 229/person), Switzerland (EUR 220/person) and Sweden (EUR 194/person), and the lowest in Bulgaria (EUR 58/person).
Euromonitor International estimates that the domestic cosmetics industry in 2019 consisted of 531 manufacturers. According to GUS, 83 entities employing more than 9 people were involved in cosmetics production in that period, employing a total of 16,000 people.
– The value of sold production of domestic manufacturers (with more than 9 employees) amounted to PLN 7.5 billion in 2019. However, foreign trade in cosmetics took place on a larger scale. Poland's exports have grown continuously since the country joined the European Union. According to GUS data, between 2004 and 2019 its value increased fivefold, from PLN 3.0 billion to PLN 14.8 billion. The main sales markets are Germany, Russia and the United Kingdom. Skin care products are the most in demand abroad, accounting for 44% of export value – says Radosław Pelc, sector analyst at Santander Bank Polska.
Exports as the growth engine
Poland is a net exporter of cosmetics. The share of exports in trade turnover remained in the range of 59-64% in 2004-2019. Due to the growth in total foreign trade turnover, Poland's trade surplus increased from PLN 1.0 billion in 2004 to PLN 6.1 billion in 2019. Last year, cosmetics worth PLN 8.7 billion were imported into Poland.
Polish exports were resilient to the 2008-2009 crisis. Available data (up to April this year) show that the domestic cosmetics sector also faced the Covid-19 pandemic. Admittedly, as a result of the turmoil associated with the lockdown, there was a 12.5% year-on-year decline in April. However, it was low enough that in the first four months of this year, exports from Poland increased by 6.2% compared with the same period of the previous year. As a result, it offset somewhat the more abrupt declines recorded on the domestic market.
– The pandemic confirmed that the domestic cosmetics industry can respond efficiently and flexibly to emergency situations. It was not easy – plants temporarily closed, registration problems with antibacterial products or a lack of ethyl alcohol. But this period also allowed Polish brands to establish themselves where it was harder for them to sell before the pandemic. For example, in April, export growth to the demanding markets of Sweden and Denmark was recorded at nearly 30% year-on-year, and to Switzerland at over 150% – comments Radosław Pelc.
Forecasts for the cosmetics market in Poland for the coming years
Forecasts for the cosmetics market vs changes in consumer behaviour
The Covid-19 pandemic is a period of intensified growth in e-commerce sales. It is precisely cosmetics that have gained strongly in this sales channel. According to a Kantar Millward Brown survey, one in three Poles now buys cosmetics online. It is also a segment that compensated for sales declines in the traditional channel caused by the closure of shops in shopping centres
The growth of cosmetics sales in the online channel reinforces the trend of growing interest in independent cosmetics brands. It gives consumers access to a greater number of cosmetics brands than just those offered in local shops. Consumers are more willing to experiment with niche cosmetics brands that were previously unknown. As a result, brand loyalty is decreasing. At the same time, the pandemic may make it easier for large cosmetics companies to implement a strategy of taking over such small independent brands, which coped less well in the crisis, and their acquisition offer becomes particularly attractive to them at this moment.
During the pandemic we take care of our beauty
Santander Bank Polska analysts also looked at customers' card spending* in hairdressing and beauty salons. Of course, during the lockdown, card spending in beauty and hairdressing salons fell significantly, below PLN 5 million on average per week. The rebound, however, looks extremely interesting. Already at the end of May this year, average weekly card spending by Santander Bank Polska customers in beauty and hairdressing salons exceeded PLN 18 million and oscillated around this level throughout the summer.
– We remember that during the lockdown there were many media reports about how troublesome the inability to use hairdressers or beauticians was for Poles. That is why, immediately after they reopened, we observed a V-shaped rebound. Currently, our customers spend more on services in beauty and hairdressing salons than ever before. From May until now, the level of spending has remained at 45-63% higher than in the corresponding periods of 2019 – says Przemysław Chojecki, data scientist at Santander Bank Polska.
Summary
The Polish cosmetics market in 2019 was worth EUR 4.1 billion, which gives it sixth place in Europe. The industry is based mainly on exports, which have increased fivefold since joining the EU and proved resilient during the pandemic – in the first four months of 2020 they grew by 6.2% year-on-year. Domestic producers, such as analyst Radosław Pelc of Santander Bank Polska, emphasise the industry's flexibility in crisis, as evidenced by the dynamic growth of exports to Scandinavian markets. The pandemic also accelerated the development of e-commerce, where cosmetics are gaining, and card transactions show that after the lockdown Poles use hairdressing and beauty services more willingly than before the crisis.
