Overall retail sales in Germany increased by 12 per cent during the period 1999-2004, to reach €2.03 billion, according to the latest market report from Mintel. Although the market continued to grow steadily until 2003, the country's economic problems took their toll on the category last year, as consumers tightened their purse strings.
This was mainly due to staple grooming products such as shampoo being increasingly bought at the lowest-priced outlets, including self-service druggists, hypermarkets and discount outlets. Self-service druggist now account for 48 per cent of the market, or €971 million in sales, showing an increase of 5 per cent during the five year period.
A closer look at the performance reveals that certain sectors suffered more than others, with factors such as changing demographics and an ageing population impacting the performance. Mintel says that considering the conditions, one of the strongest growth areas was for products that cover grey hairs.
However, revenues dipped marginally last year as increasingly budget-conscious consumers shifted towards products deemed to represent better value for money. On top of that consumers have also been making their purchases at larger retail outlets where discounts are more significant. Increased demand for value added products has been particularly driven by older consumers buying regular hair care products such as shampoo and conditioner.
But the younger consumer have also been a force behind increased expenditure, with colourants and styling products proving to be increasingly popular.
Encouraged by growth in this segment, suppliers have launched a host of new styling products on the market, including gel sprays with longer lasting hold and conditioning properties. Likewise there has also been a rash of products designed to prevent heat and sun damage to hair.
Overall styling products accounted for a third of the market value, at €665 million, followed by shampoos, taking up 28 per cent of the market with €575 million in sales and colourants having a 20 per cent slice of the market valued at €405 million.
Conditioners showed the biggest growth, with Mintel reporting that sales increased by 30 per cent, thanks mainly to big demand for intensive treatments.
In contrast home perms and hair tonics are reported to be on a long-term decline, due to the unfashionable status of these products.
The Mintel report also points out that the market remains dominated by two leading companies - Henkel and L'Oreal - which jointly account for half the value of all sales. Three other major multinational are also significant players: Proctor & Gamble, Beiersdorf and Colgate-Palmolive.
With the shampoo market pretty much stagnant due to saturation, future opportunities for growth are likely to lie in specialised products for problem hair. Mintel says that growth in conditioners will be particularly driven by intensive treatments.
Likewise colourants, despite showing a slight drop in the value of sales for 2004, are likely to be supported by growth in new product development linked to heat protection. Sales of styling products are also predicted to level off, although male specific product lines could prove the exception.