Chinese economic slowdown - has it affected the cosmetics sector?

In recent months China's exports were reported as having only risen by just 1 percent from a year earlier, down from 11.3 percent growth in June, the slowest pace of growth in almost three years, despite being recognised as the world’s second-largest economy.

Economic problems in US and European export markets are also being reported as impacting consumer demand for Chinese goods, prompting widespread debate as to whether the market will further slowdown.

According to Tai Hui from Standard Chartered Bank in Singapore; “If​ China's growth does not pick up in the second half of the year then that's going to mean a very difficult second half for a lot of the manufacturers in this region​.”

State of play ​

With that, Cosmetics Design contacted Euromonitor’s experts in the Asia Pacific region to find out if they are discovering a ripple effect for the cosmetics sector.

“According to our research, the cosmetic market is far from slowing down​,” Euromonitor's Benedicte Dia told this publication.

The market researcher further reported that the color cosmetics segment in China alone increased by almost 13 percent in 2011 and is set to reach RMB16 billion by 2016, a CAGR of more than 8 percent in constant value terms.

“With the overall improvement of people’s living standards and rising disposable income levels, the pace of urbanisation and internationalisation is expected to be accelerated​,” Dia explains. 

L’Oréal China was amongst the brands to maintain its leading position with a 34 percent value share, its dynamic growth is said to have been greatly helped by its network expansion into lower tier cities, such as Yichang, Luoyang and Lanzhou.

Going forward…​

According to Euromonitor, from 2011 to 2016 cosmetic companies will experience higher manufacturing and labour costs due to a steady increase in demand, and the trend towards value-added products. Overall, it says cosmetic companies will pay greater attention to distribution network expansion, in order to reinforce market penetration and consolidate their competitiveness. 

“However, players will make efforts to minimise price increases and will conduct price promotion campaigns more frequently, so as to attract a larger consumer group​.”

In the meantime, China's leaders are said to be pinning their hopes on investment to drive growth. In recent weeks, they've been reported to have reduced fuel prices and twice cut interest rates to bolster lending, measures that economists believe will ensure the country’s growth rebounds in the coming months.