Europe: The great East-West divide

Colipa's​ statistics show that the current value of the European market, which includes the EU 25 as well as Norway and Switzerland came in at €64 billion in 2004, making it the world's leading market.

However, a closer inspection of the figures reveals that in Western Europe, which includes the EU 15, Norway and Switzerland, a downturn in the region's two biggest markets - France and Germany - has put the dampers on growth, which stood at 2 per cent.

The figure represents a distinct decline in growth rates, which stood at 3.5 per cent in 2003 and 3.6 per cent in 2002. A downturn of 0.5 per cent in retail sales for the French market, which fell to €10.38 billion, coupled with a fall of 1.7 per cent in the German market to €11.04 billion, were the primary reasons behind the drop.

But the performance in the French and German markets was by no means indicative of all the western European markets. The biggest growth in retail sales was reported in Sweden, where SEK12.21 billion (€1.33bn) sales, meant an increase of 7.6 per cent, reflecting a robust economy and strong retail sales.

The Swedish market performance was characterized by gains of 10.9 per cent in skin care sales and a 10.4 per cent increase for decorative cosmetics - two categories that have shown consistently high growth rates in recent years.

Better performances in western Europe's other largest markets - Italy, UK and Spain also helped to prop up the poor performance in France and Germany.

The UK, which is Europe's third largest market for cosmetics and personal care, registered retail sales growth of 5.3 per cent, totalling £6.23 billion (€9.18bn), and up from growth of 3.6 per cent in 2003.

This performance was headed by growth of 12.7 per cent in the colour cosmetics category and 9 per cent in the skin care category. However, Colipa's report did also point out that some of the gains had been counterbalanced by competitive pricing in the toiletries and hair care segments.

Europe's fifth largest market, Spain, recorded retail sales growth of 6.5 per cent to reach €6.79 billion, helped by an increase of 11.4 per cent in the skin care category due the strength of anti-cellulite and anti-wrinkle products. The fourth largest market, Italy, grew by 2.2 per cent with retail sales of €8.46 billion.

In contrast to the modest growth in western Europe as a whole, sales in the 10 EU accession markets showed a sharp increase. With a total retail sales value currently put at €4.2 billion, this gives the market a 7 per cent slice of the total European market.

In its report, Colipa says that the majority of the accession countries experienced growth in the more cosmetic-driven categories such as skin care, decorative cosmetics and fragrances. The prestige market also showed dynamic growth, in line with big increases in overall consumer spending.

Poland remains the largest market, with retail sales of €1.89 billion, up 3.8 per cent on the previous year. The report highlighted that Poland's market performance has been more comparable to that of western Europe, reflecting the high level of development that already exists there.

Elsewhere significant increases in retail sales were recorded in all the other major markets, with sales in the Czech Republic growing 7 per cent and the highest growth rate being experienced in Hungary with an increase of 7.5 per cent, where skin care and depilatories were the highest growth categories.

Bearing in mind the size of the European population - 395 million people in 2004 - it is not surprising that it remains the world's largest cosmetic market. But regardless of its size, overall growth rates remain positive compared to the two other largest markets - Japan and the US.

In Japan retail sales grew 0.5 per cent in 2004 to reach JPY 2,239 billion (€16.54bn), while in the US they grew 2.1 per cent to reach $32 billion (€25 bn) - suggesting that by world standards the European market is fairing relatively well.