Both foreign and local brands have already increased prices to compensate for the tax, reports Luciana Bruno for reuters.com. Prices of L’Oreal SA have gone up 15 – 20%, Igor Bacchi, commercial director for Brazilian cosmetics distributor BIM, tells Bruno.
Brazilian cosmetics manufacturer Natura raised prices 3.7% in February and again by 2.5% on select products in June. These lifts to offset the tax, notes Bruno, are among the more measured: “Natura has not announced further price changes for this year and its chief executive, Roberto Lima, said in April that the company would be careful ‘not to go overboard.’”
Hypermarcas, by contrast, which manufactures nail care, skin care and shaving creams increased prices 7% in April and has announced plans to raise them again this month.
A bit of a rollercoaster
The Brazilian Association of the Cosmetic, Toiletry and Perfumery Industry (ABIHPEC) puts 2014 sales of personal care products in country at 101.7 billion reais ($32bn). The trade association is now predicting that personal care sales will decline 17% this year.
In preparation, “stores and wholesalers have been stocking up on cosmetics in recent months ahead of the price increases,” João Carlos Basílio, president of the ABIHPEC tells Bruno.
So while some are bracing for the impact of the tax, the industry at large don’t seem to be anticipating a prolonged slowdown.
Full speed ahead
With the cost of personal care items going up dramatically, consumer behaviour will initially shift in Brazil. Though, the market has a fair bit of momentum behind it.
The third-largest beauty market in the world has been growing in numerous ways lately, with foreign investments coming in, exports going out, sales platforms evolving, manufacturing and research initiatives sprouting.
Earlier this year L’Oreal acquired Brazilian hair color, hair care company Niely. With that deal the beauty giant showed an interest in lower cost products: “The entire product range is levelled at an ‘accessible’ price point, which has made it popular with the burgeoning middle class that has grown on the back of the country’s increased economic prosperity over the past decade,” noted Cosmetics Design.
And hair care is a notable export too. For instance, Sweet Hair is expanding its distribution to include five Middle Eastern countries and Morocco as “the global beauty market is embracing Brazilian products,” explains Cosmetics Design.
Beauty ecommerce is also steadily improving. BelezaNaWeb just received significant series C funding from US investors. The site plans to launch its own private label brand, and grow the business by adding staff and a fuller portfolio of products from in and beyond Brazil. “The market leaders in Brazil own their distribution channels….It’s very hard to get products to people in Brazil. Ecommerce is a way to get them,” Alex Serodio, founder and CEO of the site tell the press.