Health & beauty has been one of the more resilient retail sectors during the recession. However, we estimate that the EU health & beauty market declined by 0.7% in 2009 as the recession propelled the private label trend in personal care goods.

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Introduction

Health & beauty has been one of the more resilient retail sectors during the recession. However, we estimate that the EU health & beauty market declined by 0.7% in 2009 as the recession propelled the private label trend in personal care goods. In response to the challenging trading environment retailers have focused on developing new strategies to drive footfall to their stores.

Scope

•Key health & beauty statistics for the EU27 including sector expenditure, specialist sales, stores and retail space data.
•Dedicated chapters on CEE and the five core European markets examining developments in areas such a legislation, consumer demands and the retailer mix.
•Consumer and competitor trends surrounding issues such as premium products, private labels, e-retail and new competition, including fashion multiples.
•Comprehensive profiles of AS Watson, Schlecker, Boots, dm-drogerie, Rossmann and Douglas, detailing key operational metrics and strategic developments.

Highlights

The value of the EU health & beauty market fell by 0.7% in 2009 as the recession propelled the private label trend, reducing the overall value of sales. Relatively robust growth from countries such as Poland and the Czech Republic was not enough to offset more severe declines in Spain and the Baltics.

Health & beauty specialists have been responding by investing in category and service diversification. This includes boosting loyalty schemes and targeting new customers, such as the male population. Furthermore specialists sales have been aided significantly by higher revenues from prescriptions.

Hong Kong based AS Watson, owner of Superdrug, Drogas, Watson's, Kruidvat and Trekpleister, maintains its leading position as the largest health & beauty retailer in Europe. Following a series of acquisitions the company has considerably boosted its share of the EU health & beauty market from 1.2% in 2002 to an estimated 5.8% in 2009.

Reasons to Purchase

•Make informed investment decisions by understanding the size of EU health & beauty sector and the activities of its new and established retailers.
•Understand the dynamics of the market and which product categories, services and consumer segments will produce further market share gains.
•Develop innovative strategies to enhance your retail proposition in areas such as in-store services, private label product development and e-retail

TABLE OF CONTENTS

Summary 1
Executive Summary 2
Health & beauty expenditure was relatively resilient during 2008/09 2
Overall, health & beauty registered a marginal decline in 2009 2
There was a mixed performance across nations in the EU 2
Mature western markets command the highest health & beauty expenditure in the EU 2
Rising expenditure levels are boosting CEE’s share of the EU health & beauty market 2
Poland has stormed ahead of the Netherlands in health & beauty expenditure 2
Specialists’ sales growth has been boosted by category diversification 3
Space growth and weaker revenues have put pressure on specialists’ sales densities 3
Retailers responded to the downturn with a number of strategies 3
Private label investment continues to be a popular strategy 3
Specialists are extending own and exclusive brands to remain competitive 3
Boots exemplifies the benefits of a strong and exclusive private label 3
Additional services offer a further point of difference for specialists 4
The uncertain post recession outlook is encouraging retailers to focus on growth areas 4
The ageing population is driving health spend 4
Pharmacy liberalisation is on hold, following the European Court of Justice’s ruling 4
Retailers aim to continue growing their health offer despite the regulatory ruling 4
Deregulation in Sweden has opened up the market to pharmacy competition 4
Luxury cosmetics and fragrances have suffered but look set to recover in 2010 5
Health & Beauty Market Structure 17
Health & beauty market definition 17
The EU health & beauty market suffered a marginal decline in a challenging 2009 18
Health & beauty expenditure is dipping slightly as consumers cut back 19
Poland is storming ahead of the Netherlands for health & beauty expenditure 21
Health & Beauty specialists definition 25
Specialists’ sales growth is being boosted by category diversification 25
Specialists’ space growth and weaker revenues are putting pressure on sales densities 31
Sales densities are under strain across Europe 34
A wider assortment of categories is boosting store number and average store sizes 36
Health & Beauty Market in Central & Eastern Europe 40
Rising expenditure levels are boosting the overall EU health & beauty market's share 40
Outlook - store openings will continue 45
Health & Beauty Market in France 47
France is now the second largest health & beauty market in the EU 47
Specialist cosmetics chains have the most extensive store portfolios 48
Grocers are dominating the market in toiletries and personal care 49
Average sales densities are being boosted by the high prominence of premium perfumeries 49
Beauty expenditure growth is falling as consumers cut back on discretionary expenditure 51
Private label use is on the rise, pushing retailers to launch new ranges 51
An ageing population and self diagnosis will continue to drive OTC growth 52
The French pharmacy market is still tightly regulated 52
Outlook – consumers trading down will boost sales of health & beauty at hypermarkets 53
Health & Beauty Market in Germany 54
Revenues are continuing to rise as store networks increase 54
An ageing population is supporting the OTC retail sector 56
Strict regulations in Germany prevent retailers from increasing sales of health products 56
Private label products are attractive to German consumers 56
The German market continues to be dominated by three of Europe’s health & beauty giants 57
Outlook – the already concentrated market is set to heat up further 57
Health & Beauty Market in Italy 59
Slow economic growth is stalling health & beauty expenditure in Italy 59
Italians place high value on premium quality products and strong customer service 61
The Bersani-Visco law supports the expansion of small domestic players 61
Sales of skincare products have experienced the strongest growth 62
Italy’s health & beauty market is extremely fragmented 62
Outlook – increased competition will drive innovation and further polarisation in Italy 64
Health & Beauty Market in Spain 66
The health & beauty sector in Spain has been resilient relative to other sectors 66
Health expenditure resilience is unable to offset the fall in beauty expenditure 67
Fragrance sales were hit hardest in 2008, falling by 4.0% 67
The use of personal care products is on the rise 68
Health expenditure is set to rise on the back of Europe’s ageing population driver 68
The face of health & beauty distribution in Spain is changing 68
Specialist chains are suffering and closing stores as consumption is weakening 68
Yves Rocher has turned to store revamps to drive footfall 68
Bodybell will restructure its estate as the integration of Juteco gets underway 69
Non-specialists are diversifying, but their fragrance offerings remain limited 69
El Corte Inglés is relying on promotions to shift its products 69
Outlook – Spain’s sharp fall into recession will weaken growth in health & beauty in 2010 69
Health & Beauty Market in UK 71
The UK health & beauty sector remains robust, driven by the growing OTC sub sector 71
A rapidly ageing population continues to drive the UK health & beauty sector 73
Eased entry regulations have promoted competition in the sector 74
Continued innovation in skincare and men’s toiletries is keeping these categories buoyant 74
Grocers are leading the health & beauty market, but niche specialists are performing well 74
Outlook – health & beauty will continue to be a strongly growing sector into 2010 76
Strategic Issues – The Impact of the financial crisis 78
Health & beauty expenditure and specialist sales showed resilience over 2008–2009 78
Consumer habits showed signs of change during the downturn 80
Consumers are trading down to cheaper products, driving private label growth 80
Luxury products are taking a back seat 81
Consumers are more willing to give up spending on fine cosmetics than OTC healthcare 81
Young people are cutting back the most on fine fragrances and cosmetics purchases 83
Strategic Issues – How retailers have responded 84
Health & beauty retailers are initiating new strategies to retain customer spend 84
Specialists are placing more entry level products on their shelves 85
Retailers are extending their ranges of own and exclusive brands 85
Grocers and clothing retailers are also getting in on the act 86
A focus on loyalty and customer service is becoming increasingly important 90
Retailers are providing additional services in-store to incentivise customer spend 91
Strategic Issues – Post recession outlook and growth strategies 93
Keeping an eye on product growth areas will enhance a retailer’s competitive edge 93
New distribution growth areas open up opportunities for retailers 96
The ageing population will have a pronounced impact on health & beauty retail in the EU 101
Pharmacy liberalisation is on hold: is this a sign of things to come? 104
Spend on luxury cosmetics and fragrances is seeing a resurgence 109
Company comparisons 111
AS Watson continues to lead the pack, while Alliance Boots' ranking has dropped 111
Despite store closures, Schlecker continues to outnumber its rivals 113
Prescription revenues provide a boost to Alliance Boots' sales density 115
dm-drogerie markt has the largest stores 116
Alliance Boots 117
Retailer summary – Boots is an international specialist with stores in over 20 countries 117
Recent key events – Boots is growing sales by launching innovative products and services 118
Financials – Boots saw an uplift in sales in the first half of 2009 120
Benchmarks – Boots has one of the highest sales densities among its main competitors 123
Stores – Boots is expanding its presence in Ireland, where it is already a market leader 124
Outlook – Boots is on the path to continued success but faces growing competition 125
AS Watson 127
Retailer summary – AS Watson is the world’s largest specialist in terms of store numbers 127
Recent developments – new services are helping to boost revenues and footfall 128
Financials – global retail turnover is continuing its upward trend, despite the downturn 129
AS Watson’s European health & beauty division is proving resilient 130
Benchmarks – AS Watson generates the highest sales due to its large store estate 131
Stores – Rossmann is AS Watson’s largest chain, making Germany its biggest market 131
Outlook – a diverse store estate is fuelling AS Watson’s strong performance in Europe 136
dM-Drogerie Markt 137
Retailer summary – dm-drogerie markt’s total turnover broke the €5.0bn mark in 2009 137
Recent key events – dm is enhancing its operations and continuing to target new markets 142
Financials – total sales have been boosted by the outperforming international estate 143
Benchmarks – dm-drogerie has seen the highest growth among its core competitors 144
Stores – expansion in Germany is set to continue at a faster pace 144
Outlook – dm’s extended private label and loyalty scheme will help to drive sales growth 147
Douglas Holding 148
Retailer summary – Douglas is a lifestyle retailer with a presence in multiple categories 148
Recent key events – Douglas is exploring new retail and distribution channels 150
Financials – total group sales have been boosted by new store openings 151
Stores – consolidation and rationalisation of its store estate has been a core strategy 155
Outlook – Douglas’ focus on service, online and own brand will help shore up revenues 158
Rossmann 160
Retailer summary – Rossmann is Germany’s fastest growing health & beauty retailer 160
Recent key events – Rossmann continues to take advantage of new sales opportunities 163
Financials – Rossmann has maintained double digit growth in all markets since 2002 166
Benchmarks – Rossmann stores have seen the sharpest drop in sales densities 167
Stores – Rossmann’s international store estate is growing faster than its domestic portfolio 168
Outlook – Rossmann has adapted to a polarised market, helping to expedite growth 169
Schlecker 170
Retailer summary – Schlecker generates the highest turnover out of all of its competitors 170
Recent key events – Schlecker is consolidating its estate to strengthen performance 175
Financials – growing international sales keep turnover buoyant 177
Benchmarks – Schlecker has benefitted from the strongest growth in sales per outlet 178
Stores – Schlecker’s extensive store network has shrunk by 15% since 2007 179
Outlook – investment in new store formats and brands may not raise Schlecker out of debt 180
APPENDIX 181
Definitions 181
Abbreviations 182
Financial statistics 182
Source – Verdict Research 183
Ask the analyst 183
Verdict Research consulting 184
Disclaimer 184

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