Health and Beauty Retail in Europe: Market Size ... - Business Insights

REGIONAL SECTOR AND CHANNEL SERIES
Health & Beauty Retail in Europe
Health & beauty retailers invest in product developments, in store services
and multi-channel strategies to attract cautious consumers and protect
market share
SUMMARY
Reference Code: DMVT0634
Publication Date: June 2010
Health & beauty has been one of the more resilient retail sectors during the recession, as financially constrained
consumers have cutback on discretionary products rather than food, personal care and health products. As a consequence,
the clothing and home-related goods sectors have suffered more than health & beauty. Despite this, we estimate that the
EU health & beauty market (excluding consumer spend on prescription medicine) suffered a 0.7% decline in 2009, as the
recession propelled the trend toward private label goods in personal care products, reducing the overall value of sales. In
response to the challenging trading environment, health & beauty retailers have focused on a number of areas, including
extending their private label, own and exclusive brands, and in-store services, in order to drive footfall.
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Table of Contents
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
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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
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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
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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
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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 176
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 184
Verdict Research consulting 185
Disclaimer 185
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TABLE OF FIGURES
Figure 1: EU27 health & beauty expenditure per capita, 2009e 24
Figure 2: Estimated EU27 health & beauty specialists sales density (€/sq m), 2009 34
Figure 3: Estimated EU27 health & beauty specialists average store size (sq m), 2009 39
Figure 4: Country shares of CEE health & beauty expenditure, 2009 42
Figure 5: CEE's share of total EU health & beauty expenditure (%), 2004 and 2009e 43
Figure 6: CEE store numbers, 2004 and 2009 44
Figure 7: A Marionnaud store in Paris, 2010 48
Figure 8: A Sephora store in Paris, 2010 50
Figure 9: French health & beauty expenditure, 2004–2009e 51
Figure 10: BIO par Marionnaud range, 2008–2009 52
Figure 11: German health & beauty expenditure, 2004–2009e 55
Figure 12: Italian health & beauty expenditure, 2004–2009e 60
Figure 13: The exterior and interior of a Sephora store in Rome 63
Figure 14: The cosmetics department in La Rinascente in Rome 64
Figure 15: Spanish health & beauty expenditure, 2004–2009e 67
Figure 16: UK health & beauty expenditure, 2004–2009e 72
Figure 17: UK health & beauty expenditure (£m), 2004–2009e 73
Figure 18: Superdrug store in Brighton focusing on health products and services 75
Figure 19: EU27 health & beauty expenditure growth between 2007 and 2009 78
Figure 20: EU health & beauty specialist sales growth between 2007 and 2009 79
Figure 21: Proportion of consumers trading down on their skincare and cosmetic products 80
Figure 22: Change in expenditure of OTC medicines, and fine fragrances and cosmetics 82
Figure 23: Health & beauty retailers’ key areas of focus in response to recession 84
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Figure 24: Core benefits of a strong own and exclusive brand 86
Figure 25: Casino’s Ysiance private label cosmetics range, 2009 87
Figure 26: Display of George Cosmetics range at Asda, 2010 88
Figure 27: Topshop’s marketing e-shot promoting launch of own brand makeup, May 2010 89
Figure 28: Promotional campaign for By H&M range 90
Figure 29: Spa in El Corte Inglés, Callao, Spain, 2010 92
Figure 30: Post recession outlook and key market drivers for health & beauty, 2010 93
Figure 31: Strategies for reinventing the health & beauty area in hypermarkets 97
Figure 32: Cosmetics and fragrances offer in Tesco MY Narodni store in Prague, Czech Republic,
2009 99
Figure 33: Comparison of EU age groups, 2009 and 2019 102
Figure 34: Health & beauty retailers’ areas of focus for an ageing customer profile 103
Figure 35: EU member states that do not allow non-pharmacists to hold a majority stake in
pharmacies 105
Figure 36: Impact of an ageing population on pharmacy markets in the EU 107
Figure 37: Impact of liberalisation on the Swedish pharmacy market 108
Figure 38: ICA Cura pharmacy provisional store concept, 2010 109
Figure 39: Estimated EU market shares of leading European health & beauty retailers, 2009 111
Figure 40: Leading European health & beauty retailers' EU store space (000 sq m), financial year
end 2008/09 113
Figure 41: Leading European health & beauty retailers EU store numbers, financial year end
2008/09 114
Figure 42: Leading European health & beauty retailers' EU sales densities (€/sq m), financial year
end 2008/09 115
Figure 43: Leading European health & beauty retailers' average EU store size (sq m), financial
year end 2008/09 116
Figure 44: AS Watson estimated European health & beauty store portfolio split, December 2009 132
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Figure 45: AS Watson estimated European perfumeries & cosmetics store portfolio split,
December 2009 133
Figure 46: AS Watson European store estate, by country and fascia, 2009 135
Figure 47: A selection of dm-drogerie’s private label product ranges 139
Figure 48: Interior of a dm-drogerie store in Germany with Kodak kiosk facilities 140
Figure 49: Babycare department in a dm-drogerie store selling lotions, clothing and nappies 142
Figure 50: A beauty salon inside a dm-drogerie store in Austria 146
Figure 51: A Douglas store in Boulogne-sur-Mer in France, 2008 158
Figure 52: Interior of Rossmann’s cosmetics department 162
Figure 53: Rossmann’s newest own brand range, Isana Beauty Age, launched in early 2009 163
Figure 54: Rossmann’s EnerBiO product range displayed in a Rossmann store 164
Figure 55: A large format inner-city Rossmann store in Frankfurt’s Nordwest shopping centre 165
Figure 56: Exterior of a Kaiser's Drugstore converted to a Rossmann outlet, October 2003 169
Figure 57: Variety of formats in domestic store estate 171
Figure 58: Example of product offer and layout in Schlecker XL store 173
Figure 59: Schlecker’s private label AS products 174
Figure 60: Examples of Schlecker’s customer publications 175
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TABLE OF TABLES
Table 1: EU27 health & beauty market definition 17
Table 2: EU Health & beauty market overview, 2004 and 2009e 18
Table 3: EU health & beauty market expenditure (€m), 2003–2009e 19
Table 4: EU health & beauty expenditure, Y-o-Y growth rates (%), 2003–2009e 20
Table 5: EU health & beauty expenditure (€m), by country, 2003–2009e 21
Table 6: Share of EU expenditure on health & beauty (%), by country, 2004 and 2009e 22
Table 7: EU27 health & beauty expenditure ranking matrix 23
Table 8: Specialist health & beauty retailer revenues in EU (€m), 2004–2009e 25
Table 9: EU health & beauty specialist sales, Y-o-Y growth rates (%), 2003–2009e 26
Table 10: Health & beauty specialist sales (€m), by country, 2003–2009e 28
Table 11: Share of EU health & beauty specialist sales (%), by country, 2004 and 2009e 29
Table 12: EU27 specialist health & beauty retailer sales ranking matrix 30
Table 13: Estimated health & beauty specialists selling space (000 sq m), by country, 2004–2009e31
Table 14: Share of EU health & beauty specialists selling space (%), by country, 2004 and 2009e 32
Table 15: EU27 specialist health & beauty retailer selling space ranking matrix 33
Table 16: Estimated EU27 health & beauty specialists sales density change, 2008–2009 35
Table 17: Estimated EU health & beauty specialists store numbers, by country, 2004–2009e 36
Table 18: Share of EU health & beauty specialists store numbers (%), by country, 2004 and 2009e37
Table 19: EU27 specialist health & beauty retailer store numbers ranking matrix 38
Table 20: CEE health & beauty expenditure, 2004–2009e 40
Table 21: CEE health & beauty specialists, 2004–2009e 40
Table 22: French health & beauty expenditure, 2004–2009e 47
Table 23: French health & beauty specialists, 2004–2009e 47
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Table 24: German health & beauty expenditure, 2004–2009e 54
Table 25: German health & beauty specialists, 2004–2009e 54
Table 26: Italian health & beauty expenditure, 2004–2009e 59
Table 27: Italian health & beauty specialists, 2004–2009e 59
Table 28: Spanish health & beauty expenditure, 2004–2009e 66
Table 29: Spanish health & beauty specialists, 2004–2009e 66
Table 30: UK health & beauty expenditure, 2004–2009e 71
Table 31: UK health & beauty specialists, 2004–2009e 71
Table 32: Estimated EU sales of leading European health & beauty retailers (€m ex VAT), 2007–
2008 112
Table 33: Alliance Boots company overview, 2010 117
Table 34: Alliance Boots health & beauty division trading record (£), 2007–2009 120
Table 35: Alliance Boots health & beauty division trading record (€), 2007–2009 120
Table 36: Alliance Boots health & beauty division, revenues by country (£), 2007/08–2008/09 121
Table 37: Alliance Boots health & beauty division, revenues by country (€), 2007/08–2008/09 122
Table 38: Alliance Boots EU benchmarks (€), year ended March 2008e and 2009e 123
Table 39: Alliance Boots EU benchmarks (£), year ended March 2008e and 2009e 123
Table 40: Alliance Boots store portfolio, March 2009 124
Table 41: AS Watson company overview, 2010 127
Table 42: AS Watson trading record, 2004–2009 129
Table 43: AS Watson European trading record, 2004–2009e 130
Table 44: AS Watson EU Health & beauty and luxury perfumeries & cosmetics divisions, year
ended December 2008e and 2009e 131
Table 45: AS Watson estimated European store numbers and space, December 2009 134
Table 46: dm-drogerie markt company overview, 2010 137
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Table 47: dm-drogerie markt trading record, 2005–2009 143
Table 48: dm-drogerie markt EU benchmarks, year ended September 2008e and 2009e 144
Table 49: dm-drogerie markt store portfolio, 2005–2009 144
Table 50: dm-drogerie markt store portfolio, by country, 2007–2009 145
Table 51: Douglas Holding company overview, 2010 148
Table 52: Douglas Group trading record, 2004–2009 151
Table 53: Douglas Group turnover, by business segment, 2008 and 2009 152
Table 54: Douglas perfumeries benchmarks, year to September 2008 and 2009 153
Table 55: Douglas perfumeries trading record, 2004–2009 153
Table 56: Douglas perfumeries sales split, 2008–2009 154
Table 57: Douglas Group store portfolio, 2008 and 2009 155
Table 58: Douglas Perfumeries store portfolio, 2008–2009 156
Table 59: Douglas perfumeries store numbers and space, 2009 157
Table 60: Rossmann company overview, 2010 160
Table 61: Rossmann trading record, 2002–2009e 166
Table 62: Rossmann EU benchmarks, year ended 2008 and 2009 167
Table 63: Rossmann store portfolio, 2002–2009 168
Table 64: Schlecker company overview, 2010 Error! Bookmark not defined.
Table 65: Schlecker trading record, 2004–2009 177
Table 66: Schlecker EU benchmarks, year to December 2008e and 2009e 178
Table 67: Schlecker store portfolio, 2007 and 2009 179
Table 68: EU27 health & beauty market definitions 181
Table 69: Conversion rates used for company financials and market figures, 2003–2009 183
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