(Last updated: 2 Mar 2009)

Trends and opportunities

The market

The UK market – one of the most progressive and dynamic in western Europe – is set for significant growth in the future as consumers buy into increasingly complex anti-ageing formulations as part of their daily skincare routine, targeting wrinkles and lips.

The looming threat of a global credit crunch and the steadily rising cost of living failed to dampen the UK consumer’s spending on cosmetics and toiletry products in 2007. Indeed, a recent report from Verdict Research indicates that consumer expenditure on health and beauty products in the UK rose by 4.7 per cent to £15.6 billion last year.

Figures from market analyst Euromonitor in 2007 show the total value of the UK cosmetics and toiletry market to be £8.16 billion, up 5.3 per cent on 2006’s £7.58 billion. Success stories included premium cosmetics, skincare, colour cosmetics, hair care and oral hygiene, which took the greatest market share. Sun care and colour cosmetics saw the best sales growth, up 10.1 per cent and 8.4 per cent respectively. Men’s grooming was up (by 7.3 per cent) as was skincare (+7.3 per cent last year compared with a massive +13 per cent in 2006).

The UK market still holds plenty of potential, despite its maturity and the modest growth.  

Opportunities

The anti-ageing trend that has driven many regional markets for cosmetics and toiletries over the past few years is also fueling growth in the British market. New product lines that promise to reduce wrinkles, plump the lips, and extend the lashes are proliferating throughout the UK, driving market growth by nearly 3.5 per cent over the last year. A detailed look at the overall market for personal care products for men and women indicates that technological advances are the driving force in many product classes.

Eco-friendly packaging, with increased use of biodegradable plastics (bioplastics) made from corn and other plants, is growing 20 per cent annually in Europe.

Facial products account for the bulk of anti-ageing sales, but hand and body lotions are also featuring skin brighteners, firming agents, and cellulite reducers with anti-ageing effects. These products will have some of the highest growth rates in the next five years. In the make-up category, sales in the UK are being driven by advances in exact matching technology for foundation, which delivers a closer colour match to the natural skin tone. L’Oreal Paris has been a champion of this movement with its True Match line, as has Maybelline with its Dream Matte Mousse products.

Men’s grooming products

UK men continue to buy into grooming, as it becomes increasingly acceptable for men to take pride in their appearance. Two different categories of products are growing in popularity – those relying heavily on science for their claims, and those that appear to have moved away from this to a more ‘back-to-basics’ approach. As a result, manufacturers continue to focus their attention on new grooming products for men, which include fake tan, waxing products and anti-wrinkle cream. Slightly slower sales growth than had been expected has disappointed players, but has not reduced the plethora of products available exclusively for the male consumer.

Natural and organic personal care products are gaining ground due to growing consumer concern about chemicals in cosmetics and toiletries and widening availability are the twin engines of market growth. Consumer concern about the possible harmful effects of parabens, sulphates and petrochemicals in personal care products is stimulating demand for products with natural ingredients.

Hair care and skincare are the largest product categories in the UK natural personal care products market with over 50 brands present in each category. Natural oral care products are the most established whilst the natural cosmetics market is projected to show the highest growth. Natural cosmetics are increasingly positioned as premium lines by manufacturers because of their high quality ingredients.

Although many personal care products contain organic ingredients, certified organic products have very low market share due to manufacturers adopting voluntary standards. Indeed, the absence of official regulations for organic and natural personal care products is stifling market growth with consumers unable to differentiate between legitimate natural products and conventional products with natural ingredients.

It’s generally accepted that using SPF and UV protection can help slow the ageing process. There has been a considerable degree of crossover between skincare and sun care with many skincare products offering anti-ageing benefits in the form of added SPF protection.

Recently, some of the biggest names in colour cosmetics have wised up to the potential of mineral foundations. Maybelline launched a base and blusher, Pure.Foundation and Pure.Blush, containing micro-mineral micas and Lauder’s Prescriptives now offers 18 shades of foundation containing amethyst and rose quartz.

Tariffs, regulations and customs

The most accurate method of determining the correct Tariff applicable to products in the cosmetics sector is to complete a Binding Tariff Information (BTI).

A BTI is a written tariff classification decision, given on request, which is legally binding on all Customs administrations within the European Community for up to six years from the date of issue. BTI is intended to give you assurance about the correct tariff classification of your goods. Obtaining a BTI about the correct tariff classification for your goods can benefit your business in that it provides certainty that you, or your chosen representative, can declare the correct commodity code for your goods on the customs entry. It will help you meet your legal obligations in respect of correct tariff classification ensuring that your liability for duties, VAT and other charges, or your eligibility for certain refunds are known in advance.

Finally it alerts you about any import or export licensing requirements or if quotas or other quantitative restrictions apply to your goods.

Cosmetic regulations

All cosmetic products supplied in the UK, whether for consumer or professional use, must comply with the Cosmetic Products (Safety) Regulations 2004 (as amended). The regulations require that finished cosmetic products must undergo a safety assessment by a suitably qualified person before they can be placed on the market. A copy can be downloaded from www.berr.gov.uk.

The standard rate of VAT 17.5 per cent was reduced to 15 per cent on 1 December 2008. This means that for any sales of standard-rated goods or services that take place on or after 1 December 2008 providers should charge VAT at the new rate of 15 per cent.

Only standard-rated sales are affected. There are no changes to sales that are zero-rated or reduced-rated for VAT. Similarly, there are no changes to the VAT exemptions.

The 15 per cent rate will remain until 31st December 2009, and from 1 January 2010 it will revert to 17.5 per cent.

Note: The information provided is current as at December 2008. Please always check for latest changes in overseas market entry requirements such as tariffs, customs and regulations (including product registrations) at the time of exporting to individual countries.

Marketing your products and services

Market entry

Unlike organic foods, there are no national and European Union regulations for natural and organic cosmetics.

Legitimate products are therefore competing against conventional cosmetics that are labelled as 'natural' because they contain some natural ingredients. The inconsistency between private standards of organisations like the Soil Association and AIAB is also dampening consumer demand.

Producers are advised to undertake marketing campaigns to educate consumers on the differences between natural and conventional cosmetics. Manufacturers are advised to adopt strategies based on product differentiation and positioning to succeed in this emerging market.

UK women are still attracted to value for money, which explains why less expensive products sell in vast quantities when their efficacy is given sufficient exposure. Aldi’s £1.89 Siana cream, another example, sold 20,000 units in a week.

Investment in the natural and organic cosmetics industry is en vogue. It is finding suitable partners that remains the major challenge. Large cosmetic companies are looking at mergers and acquisitions as a market entry route, organic food companies and retailers are investing to develop new products for existing customers, whereas the financial community is investing for financial returns.

Distribution channels

Increasing distribution is making natural personal care products more available to consumer.

Today’s time-poor consumer continues to look for ways to save time, and supermarkets/hypermarkets pander to this desire by offering convenience, a huge range of products under one roof and heavy discounting. In recent years, supermarkets/hypermarkets consistently eroded the dominance of pharmacies/drugstores.

The highest growth is in health food shops and organic food retailers due to the Food Supplements Directive causing retailers to reduce their vitamins and food supplement ranges and give more shelf-space to natural personal care products. Natural products are also making successful inroads in chemists, department stores, hair salons, beauty centres and spas.

In 2007, the channels through which natural and organic products were sold evolved as significantly as the consumers to whom they were sold. Distribution is changing and the opportunity for natural products is increasing. It is no longer the case that shoppers need to pay a premium or to visit a local specialist natural food shop to get access to these products. Major nationwide department stores, supermarkets and high street health and beauty stores are looking for natural brands that are both appropriate to their customers and can compete with the major national brands they currently stock.  

Links and industry contacts

Government, business and trade resources for the UK

Cosmetics, Toiletries and Perfumery Association – www.ctpa.org.uk
Department for Business Industry and Regulatory Reform – www.berr.gov.uk
HM Customs & Excise – www.hmce.gov.uk
International Federation of Societies of Cosmetic Chemists – www.ifscc.org  

Australian resources

Australian Self Medication Industry – www.asmi.com.au 
Complementary Healthcare Council – www.chc.org.au 
Customs Brokers and Freight Forwarders Council of Australia – www.cbfca.com.au
Therapeutic Goods Administration – www.tga.gov.au  

Contact details

The Australian Trade Commission – Austrade – is the Australian Government’s trade and investment development agency.

Through Austrade’s network of offices in over 50 countries, we assist Australian companies to succeed in international business, attract productive foreign direct investment into Australia and promote Australia's education sector internationally.

For more information on how Austrade can assist you, contact us on:

Australia ph: 13 28 78 | Email: info@austrade.gov.au

A list of Austrade offices (in alphabetical order of country) is also available.