Cosmetics

Cosmetics

Germany at its Most Beautiful

Close-up of eyeshadow and make-up products | © matka_Wariatka - iStockphoto.com

Source: Close-up of eyeshadow and make-up products | © matka_Wariatka - iStockphoto.com

Industry Overview

The desire to look and feel good about oneself has led cosmetics to play an important role in everyone's life. Most Germans nowadays use cosmetics on a daily basis and are very aware of the different kinds of products on the market. Especially since 2005, the European cosmetics market has grown steadily and Germany has also profited from this positive development. Today, the German cosmetics industry has a well established reputation for its quality, innovation and environmental consciousness. In addition, there is a strong commitment to demanding standards for product safety and quality.

Our Industry in Numbers

  • In 2013, the sale of personal care products in Germany increased slowly but steadily by 0.6% to approximately EUR 12.9 billion, according to the German Cosmetic, Toiletry, Perfumery and Detergent Association (IKW).
  • Hair care and skin care sales with EUR 3.06 billion (+1.2%) and EUR 2.81 billion (+0.8%) respectively, were the largest segments in the cosmetics industry in 2013. Oral care (+0.4%), decorative cosmetics (+3.4%) and women’s fragrances (-0.5%) ranked third, fourth, and fifth.
  • The top 60 medium to high-priced cosmetics companies represented by the German Cosmetics Distributors and Marketing Association (VKE) finished 2013 with a 2,5% sales increase year-on-year.Total revenue added up to 1.96 billion euros.
  • The natural cosmetics segment developed strongly again in 2013. The market expanded its volume by 7% to 920 million euros, almost hitting the 1-billion-euro-mark. From the roughly 13 billion euro global turnover, Germany’s market share of controlled natural cosmetics adds up to over 7%. With 920 million euros, Germany is the largest natural cosmetics/personal care market in Europe, as well as one of the strongest markets for natural cosmetics in the world, second only to the U.S.
  • With revenues growing strongly by 10% in the first two-quarters, expectations for 2014 are positive.
  • Approximately 45,000 people are employed in Germany’s cosmetics industry, and 300,000 more in industry-related services. The cosmetics industry in Germany makes up about 8-9% of the chemical industry.

Market Potential

Germany is the largest cosmetic market in Europe followed by France, UK, Italy and Spain.

In 2013, Germans spent over 12.9 billion euros in personal care products. The expected compound annual growth rate (CAGR) for the personal care market from 2012 to 2020 is 1.4%. Decorative cosmetics and fragrances are expected to perform above average market development with a CAGR of 2.2% and 1.7% respectively, as per VKE.

According to the German Cosmetic, Toiletry, Perfumery and Detergent Association (IKW) there was an increasing demand, especially for decorative cosmetics (3.4%), and distinctly behind, for hair care (+1.2%) and skin care (0.8%) products. Other segments like women’s
(-0.5%) and men’s fragrances (-0.2%), bath and shower supplements (0.0%), and synthetic detergents (-3.3%) hit a slight bump last year. It is expected that these segments will make up for lost ground this year.The IKW sees that demand will continue to grow in 2014.The market for detergents, household cleaning and maintenance products expanded by 0.2% to 4.33 billion euros in 2013. Strongest growth drivers in this segment were laundry detergents (0.6%) and fabric softeners (1.5%).

The largest market segments in the German cosmetic industry are hair care, skin care, oral care products and make–up. The hair care market gained 12% in 2013 and reached 3.06 billion euros. Female fragrances became a one billion euro market in Germany in 2011 – it raised that mark further in 2012 to 1.06 billion euros and stagnated in 2013. Skin care, with a 2.8 billion euro turnover, grew by 0.8% in 2013. Men’s cosmetics is a constantly growing market spurred by the increasing awareness among men for personal care products. Another segment that is rapidly growing is natural cosmetics, which expanded approximately by 7% in 2013.

Germany has around 43,000 successful cosmetic institutes which work for known brands, as well as private labels. Their success is based on guaranteed “made in Germany” quality which is also highly valued abroad.

Market Access

Regulation of the production and import of cosmetic goods is based on the European Cosmetics Directive (EU Regulation 1223/2009).

The implementation of the EU cosmetics regulation requires that all cosmetics products entering the EU must be registered in the Cosmetic Products Notification Portal (CPNP) before being placed on the market. The CPNP makes this information available electronically to the Competent Authorities for the purposes of market surveillance, market analysis, evaluation, and consumer information, and to the Poison Centres or similar bodies established by Member States for the purpose of medical treatment.

In Germany, the Federal Office of Consumer Protection and Food Safety (BVL) is in charge of the health-based consumer protection area. Nevertheless, the BVL does not license cosmetic articles to be sold in the country. Instead, producers and importers must provide evidence that the product's safety has been approved by an authority to meet the standards of the Cosmetics Directive. This inspection can only be done by authorized experts. Assistance in searching for an expert in the field can be found at the different cosmetic federations as well as at the local Chambers of Industry and Commerce in Germany.

Producers and importers have the duty to inform consumers and authorities about their products. For example, there are specific labeling requirements to be printed on the product's package. If a product is imported into the European Union for the first time, local authorities must be informed in advance at the city where the product is introduced and statements have to be made concerning the product distribution within the European Union. The German Cosmetics Directive, which is based on the European Directive, lists several ingredients that cannot be used or may only be used in cosmetics under certain conditions.

Besides the existing legislation for the importation of cosmetics, the raw materials used in the cosmetics' production also fall under the newly introduced chemical legislation REACH (Registration, Evaluation, Authorization and Restriction of Chemical Products). The main goal of REACH is to control the safety of chemicals in consumer products. Manufacturers and importers must register the chemical substances contained in cosmetics in order to make sure that the products are safe for both human consumption and the environment. REACH applies to all chemicals that are either produced in Europe or imported into the EU, including cosmetics.

ORGANIC COSMETICS - Although Germany there is no mandatory certification for natural cosmetics in Germany, many organic cosmetics on the market carry some type of ''bio'' seal offered by private organizations. The mostly used and widely recognized certification for natural personal care products in Germany is the seal ''Certified Natural Cosmetics'' from the BDIH, the Association of German Industries and Trading Firms for Pharmaceuticals, Health Care Products, Food Supplements and Personal Hygiene Products. In order to obtain this certification, products must comply with strict guidelines, which include the use of natural raw materials from controlled biological/organic cultivation and the verification that the products are friendly to the environment.

Another widely used organic certification is the European ''NaTrue'' label. NaTrue is a non-profit organization founded in 2007 by a group of European natural cosmetics manufacturers with the goal of safeguarding and promoting pure and authentic natural skin care. The group represents today more than two thirds of the European market in the field. NaTrue offers three levels of certification: Natural Cosmetics (all ingredients must be natural but do not have to be organic), Natural Cosmetics with Organic Portion (at least 70% of the ingredients must be from organic origin) and Organic Cosmetics (at least 95% of the natural ingredients must come from controlled organic cultivation or collection).

In May 2010, the European cosmetics standards working group consisting of the BDIH (Germany), BIOFORUM (Belgium), COSMEBIO (France), ECOCERT Greenlife (France), ICEA (Italy) and SOIL Association (UK), established the international non-profit Association COSMOS-standard. The association's goal is to elaborate a harmonized and recognized standard through defining minimum requirements and common definitions for organic and natural cosmetics. This European harmonization project strives to establish a single worldwide standard for natural cosmetics and personal care products. Besides introducing two levels of certification, Cosmos-Natural and Cosmos-Organic, the Cosmos standard will identify criteria regarding the products' origin, processing, composition (ingredients), packaging, labeling and disposal. The complete process for certification and the final approval of the certifying agencies is expected to be concluded in the coming months.

Distribution Channels

The main distribution channels for cosmetic products are drugstores, specialized stores, supermarkets and discounters. Foreign exporters can also enter the German market through contracting specialized sales agents to sell their products. Further information about sales agencies/representatives in Germany can be found at the National Federation of German Commercial Agencies and Distribution (CDH).

If a foreign company is interested in selling raw materials for the production of cosmetics, the contracting of a specialized importing company can be of great help. Information about manufacturers, importers and distributors in Germany can be obtained at the German Cosmetic, Toiletry, Perfumery and Detergent Association (IKW), which is the sector's industry and trade association. With almost 400 active members, it represents more than 95 percent of the companies in the industry. Eighty five percent of these members are small and medium-sized enterprises.

ORGANIC COSMETICS - Organic and natural cosmetic products in Germany are sold in organic supermarkets (Reformhaus) and specialized stores. The largest sales channels by far are drugstores, whose organic cosmetics sales in 2012 rose by 10 percent. Yet, in the first half of 2013 drugstore sales dropped for the first time. The biggest strides in 2013 sales so far were made by supermarkets, while classic channels like health stores and organic food shops stagnated. Pharmacies and perfumeries have still plenty of room to grow as outlets. With rising consumer confidence organic cosmetics should be able to build on the success of attracting especially a growing number of the ‘Lifestyle of Health and Sustainability‘(LOHAS) target group in the future and keep the market expanding.

Foreign exporters should be aware that these products are best sold, whenever customers have the opportunity to test them. For this reason, it is very important that companies think of offering potential buyers, product samples and information material. This could be done through in-store promotion or by participating in a related trade show. Trade fairs like Vivaness in Nürnberg or the Beauty International in Düsseldorf enjoy an exceptional reputation among industry experts worldwide. Participating in any of these events facilitates the direct contact with German brokers, importers and wholesalers.

Supporting Institutions

Germany has several associations that support foreign exporters in entering and establishing themselves successfully in the cosmetics market.

The German Cosmetic, Toiletry, Perfumery and Detergent Association (IKW) is the sector's industry and trade association. With almost 400 active members, it represents more than 95 percent of the companies in the industry. Eighty five percent of these members are small and medium-sized enterprises.

The Association of German Industries and Trading Firms for Pharmaceuticals, Health Care Products, Food Supplements and Personal Hygiene Products (BDIH) has over 440 members who are producers and distributors of cosmetics and natural cosmetics, food supplements, nutritional foods, over-the-counter medications and medical devices. Part of the association’s duties is to work together with leading organic and natural cosmetics producers at national and international level to develop guidelines for the reliable certification of these products.