COSMETICS AND TOILETRIES IN TURKEY 2004

Transcription

1 COSMETICS AND TOILETRIES IN TURKEY INTRODUCTION This report analyses the market for Cosmetics and Toiletries in Turkey. For the purposes of the study, the market has been divided into 11 sectors: Baby care Bath and shower products Deodorants Hair care Colour cosmetics Men's grooming products Oral hygiene Fragrance Skin care Depilatories Sun care 2. EXECUTIVE SUMMARY Cosmetics and toiletries recorded high growth rates in 1999 and 2000 due to several factors, particularly the growing interest in Western lifestyles and increasing advertising expenditure from manufacturers. However, after the economic crisis at the beginning of 2001, cosmetics and toiletries recorded a significant decrease in sales due to the decreasing levels of disposable income amongst all income groups in Turkey. Hair care the dominant force in C&T Hair care accounted for 32% of total value sales in 2003 and remained the largest contributor to cosmetics and toiletries over the review period. Shampoo was responsible for the bulk of sales; however, styling agents saw the most dynamic performance with strong volume growth and was the only type of hair care not to witness a decline in value sales. Sun care most dynamic thanks to increasing number of tourists Sun care reached sales of US$23,1 million in 2003 demonstrating positive growth both in value and volume terms over The growth was attributed to the increasing consciousness of consumers in Turkey about the importance of sun protection as well as to the increasing number of tourists visiting Turkey. The low base of sales also aided the positive growth rates. Supermarkets dominate Supermarkets were the dominant retail outlets over the review period due to their high penetration throughout Turkey, acceptance of credit cards, wide range of products, and most importantly the low prices and promotions they offered. The share of supermarkets increased significantly over the review period in line with the increasing number of these outlets. Positive growth expected during forecast period Euromonitor forecasts that cosmetics and toiletries will reach sales of almost US$3.3 billion by 2008, representing constant value growth of 11.2% over In line with the recovery of the economy and the growing young population, cosmetics and toiletries will demonstrate positive growth over the forecast period in contrast to the decreases during the review period. Driving factors will include increased disposable incomes, the higher number of working women, and the increasing interest of young people in Western lifestyles which will encourage them to use more cosmetics and toiletry products. Furthermore, fierce competition amongst 1

2 both local and multinational companies will lead to stronger investment in advertising, promotion and new product development. 3. COSMETICS AND TOILETRIES 2003 headlines Positive volume growth achieved Consumer expenditure dropped due to low income levels Sun care witnesses most dynamic growth in 2003 Fierce competition between local and multinational players Positive volume growth achieved despite decrease in value sales Sales of cosmetics and toiletries reached a value of almost US$2,936 billion in 2003 representing a current value decrease of nearly 3.8% over 2002 and of 11.1% over the review period as a whole. Cosmetics and toiletries recorded strong growth rates in 1999 and 2000 due to the increasing interest of young people in these products, improved retailing activity, increased disposable incomes, new value added product developments, increased product ranges and improved advertisements on television mainly from the multinational companies. After the 3rd October 2002 elections, the Justice and Development Party (AKP) won the vast majority of seats in Parliament. As a result, after 12 years, a powerful one-party government was formed and the perceived political risks were born. After the election, the economy began to recover; however, the possibility of a war with Iraq slowed down the recovery. Turkey did not enter the war and the war ended in a shorter period of time than it was expected. The Turkish economy began to grow in 2002 and the growth continues in If this trend can be sustained in 2004, the negative effects of the 2001 crisis will be greatly reduced. Promotional campaigns were the basic marketing strategy of all companies in order to preserve their sales levels at least in volume terms. Companies either gave gifts, such as trial sizes of their other products, or offered "buy one get one free" promotions in order to compete with their rivals. These promotions were very effective on the purchasing decisions of price sensitive consumers as the brand loyalty of consumers decreased significantly after the economic crisis. Even the consumers of premium products began to switch to mass products due to their decreasing disposable incomes. Sun care witnessed strongest growth in 2003 Sun care products reached a value of US$23,1 million in 2003 translating into a value growth rate of 1.6% over the previous year. The increasing awareness of consumers in Turkey regarding sun protection became an important factor to drive sales. Television programmes warning on the dangerous effects of prolonged exposure to the sun played an important role in the increases of sales. The increasing number of tourists visiting Turkey was also important for the increasing sales value in Sun protection products held the bulk of the sales in 2003 whilst sales of aftersun and self-tanning products remained minimal. Hair care dominated C&T sales Hair care products reached sales of US$ 931,8 million in 2003, representing nearly 31% of total cosmetics and toiletries value sales. The consumption of shampoos, in particular, has increased significantly in the last 15 years. People in rural areas have also begun to use shampoo instead of bar soap for washing their hair. New types of products, such as styling agents and conditioners, are mainly consumed by the young population in urban areas. In the beginning of the review period, women were the regular consumers of conditioners and styling agents; nevertheless, the consumption of these products among young men increased significantly over the review period. Manufacturers tend to target the15 to 25 year old consumer group for styling agents but even children aged below 10 have begun to use these products. Conditioners are mainly consumed by women. Women using colourants mostly also consume conditioners in order to preserve the colour and health of their hair as there is a common belief that colourants are harmful to hair. Thus, most of the conditioners are prepared for consumers with coloured hair. However, an increasing number of men also began to use conditioners over the review period. 2

3 Fierce competition between both locals and multinationals According to Hurriyet (trade press), there are nearly 2900 companies in the cosmetics and toiletries industry in Turkey. Many leading multinational firms such as L'Oréal Groupe, Procter & Gamble, Unilever Group, and Henkel KGaA are present competing with the leading local companies like Kopas Kozmetik Pazarlama San AS, Hunca Kozmetik Sanayii AS and Evyap Sabun Yag Gliserin Sanayii ve Ticaret AS. Advertising expenditure increased over the review period Cosmetics and toiletries manufacturers increased their advertising expenditure over the review period. In 1998, cosmetics and toiletries accounted for 11% of the total advertising spend in Turkey; this figure increased to an estimated 14.4% in Advertising expenditure decreased when the sales were high in Thus, the companies had to increase their advertising expenditure in order to boost their sales after the crisis. Table 1 Cosmetics & Toiletries % of Total Advertising Expenditure % share Cosmetics and toiletries in total advertisement expenditure Euromonitor Products in large sizes became popular A general trend for cosmetics and toiletries consumers was to buy larger packs in order to decrease the unit price of the goods consumed. For example, family members began to use family size shampoos instead of buying gender specific shampoos. Almost all brands began to launch bulk size shampoos in line with these changes in consumer demand. Table 2 Retail Sales of Cosmetics and Toiletries by Sector: Value US$ million Baby care ,8 60,6 53,7 50,4 47,1 Bath and shower products 767,1 804,9 841,8 767,7 750,9 743,1 Deodorants 163,5 187,2 198,6 172,8 155,4 151,8 Hair care 1110,6 1247,7 1397, Colour cosmetics ,3 231,3 209,4 Men's grooming products ,0 440,7 405, Oral hygiene 262,5 285, ,6 Fragrances 11, ,2 94,8 86,7 84,0 Skin care 240,3 270,3 298, , Depilatories Sun care 28,5 30,9 33,6 24,3 22,8 23,1 Premium cosmetics 210, ,5 138,6 Cosmetics and toiletries 3300,9 3638,4 3988,2 3334,5 3052,5 2935,8 Note: Trade associations (Turkiye Tuvalet Mustahzarlari Ureticileri Dernegi), trade press (Beauty Business News), company research, store checks, trade interviews, Euromonitor estimates Sum of sectors does not equal total cosmetics and toiletries because of double counting (for example men's skin care is included in men's grooming products and skin care) 3

4 3.1 Competitive Environment Procter & Gamble Tuketim Mallari Sanayi Ltd Skt Procter & Gamble Tuketim Mallari Sanayi Ltd AS was the biggest player cosmetics and toiletries in value terms in Turkey in The company entered Turkey in 1987 through a joint venture with Mintax AS, a strong local company at the time. Another joint venture was made with Eczacibasi in 1990 to manufacture disposable paper products. Procter & Gamble bought all of the shares of Mintax and Eczacibasi in 1998 and took the name Procter & Gamble Tuketim Mallari Sanayi Ltd AS. During the review period, the company was very strong in hair care and in oral hygiene. The most popular cosmetics and toiletries brands of the company are Pantene Pro-V, Blendax, Rejoice, Ipana, Clairol Herbal Essences, Ellen Betrix and Max Factor. The company's brand portfolio also consists of Ariel, Alo, Mintax, Ace, Ipanol, Vicks, Orkid, Prima, Pampers and Pringles. Procter & Gamble Tuketim Mallari Sanayi Ltd AS manages its operations from the General Offices in Icerenkoy Kosifler Centre and manufactures operations through wholly owned plants in Sefaköy and Gebze, and a distribution centre in Sekerpinar. Evyap Sabun Yag Gliserin Sanayii ve Ticaret AS Evyap Sabun Yag Gliserin Sanayii ve Ticaret AS is a very successful local company with a history of 75 years. Evyap started its journey with the production of soap in Erzurum-Turkey but today manufactures a wide range of products including soap, shower gels, shampoos, shaving preparations, detergents and toothpastes, which are sold in more than 100 countries. Today, Evyap is one of the biggest soap and cosmetics producers in the world and is among the top 100 Industrial Companies of Turkey. Exports make up 75% of Turkey's total soap output. In 2002, Evyap started to produce in Egypt. In addition a new facility in Ukraine commenced with soap production in In soap production, today, Evyap utilises the continuous process which allows production of the highest quality soap in the most economical manner. Steam and electrical energy are produced on site with a co-generation system significantly reducing manufacturing costs. Water used in production is purified and reused within the factory. Dalan Kimya Endustrisi AS Dalan Kimya Endustrisi AS started to produce traditional pure olive oil soap in the 1940's. The capacity in those days was very small compared whereas today the company has a product portfolio of more than 100 items. The company exports its products to 123 countries in five continents. Besides the toilet soaps, bath soaps, granulated soaps, and soap powder, it is also producer and exporter of technical grade glycerine. Dalan follows the latest technology and uses top technology in the production of its soap. The Dalan Kimya factory is situated in Izmir, which is the third largest city in Turkey. The company is expanding day by day to reach its best and to present a wider range of products to customers. Dalan, Alara, Cindy, Diana, Adalya, Nancy and Roxy are the brands sold in Turkey and in other countries. Hunca Kozmetik Sanayii AS Hunca Kozmetik Sanayii AS was established in 1957 as a family company producing cosmetics and toiletries. The company first produced hair care products but withdraw its products after its entrance in fragrances. The company entered the fragrances sector with its Madigan brand in Hunca Kozmetik Sanayii is active today in hair care, liquid soap, deodorants, fragrances, men's pre-shave and colour cosmetics. Its brands include Destiny Fresh, Caldion, Extory, Equal, Viva Cappio, Jagler, Carmina and Ivrindi. 4

5 3.2 Retail Distribution Retail distribution trends The main channel for the distribution of cosmetics and toiletries in Turkey during the review period was supermarkets and hypermarkets. This channel increased its distribution share to nearly 34% of total sales in 2003 up by over seven percentage points over This rise mirrored the general trend towards one-stop shopping as well as the growing number of these outlets. The growth of supermarkets/hypermarkets was related firstly to the increasing price-sensitivity of consumers, especially in the last three years of the review period. These outlets, especially supermarkets, offer lower prices than other outlets. Secondly, over the review period, an increasing numbers of consumers gained employment and that directed people to spend less time shopping. One-stop shopping therefore became a big attraction for time-poor consumers. In some outlets, new products were presented and advertised by sales representatives of the supermarket or the manufacturers. Thus, consumers were informed about the products and were more able to make better choices on products. Moreover, the private labels offered by supermarket/hypermarket chains became very popular amongst the price sensitive consumers in Turkey, which further helped to increases the value share of this channel. Pharmacies and drugstores become outmoded The review period recorded a considerable decline in the share accounted for by pharmacies/drugstores, falling by about six percentage points on 1997 to stand at 8.4% in Until the 1990s consumers had to buy all their cosmetics and toiletries from local pharmacies as this was the only way they could get hold of such products. Many modern department stores were opened during the review period in the eastern part of Turkey. These department stores offer almost every type of product offered in the big cities like Istanbul. After the recovery of the economy, these stores are expected to generate further demand for all cosmetics and toiletries products. Most of the department stores, such as Çarsi, Yeni Karamürsel, Beymen, and Vakko, have their own cosmetic departments and sell world wide famous brands such as Estée Lauder, Christian Dior, Lancôme, Clinique, Guerlain, La Prairie, Shiseido and Chanel. Direct sales increased their share Direct sales have become popular in almost all regions of Turkey and accounted for nearly 10% of cosmetics and toiletries value sales in Companies such as Avon Products Inc, Oriflame International and Amway compete. Direct sales companies employ sales representatives, mainly educated and enthusiastic housewives and university students who have free time, to sell their products mainly to friends, neighbours and family. As a sociable way of making purchases, the popularity of buying cosmetics products from sale representatives who are either a friend or neighbour increased in the late-1990s. The rise in shopping from online shops was also influential in raising the distribution share of direct sales by 2.5 percentage points during the review period. Direct sales provide consumers with a practical and less time consuming shopping facility. The sales representatives can give detailed information on products including colour cosmetics, skin care, hair care products and fragrances. Direct sales companies also guarantee to take back these products when any problem is experienced. Due to the decreases in the levels of disposable incomes enjoyed by consumers, many are won over by this guarantee of quality as it saves wasting money on products that turn out to be no good. All of these factors increased the share of direct sales. Specialist outlets witness a slight decrease after the economic crisis The share held by specialist retailers was 22.2% in 2003 down by one percentage point on Specialists are termed perfumeries but also sell other cosmetics products such as colour cosmetics and hair care. Perfumery chains, such as Sevil Kozmetik, dominate sales of premium products but privately-owned perfumeries also hold a very strong position. Chained perfumeries, such as Sevil Kozmetik, tend to be located in popular shopping centres or on the high streets of major cities. Discounters new but will be popular Discounters are currently fairly insignificant in the sales of cosmetics and toiletries in Turkey. There are outlets, such as Dia and BIM, which sell products at low prices, but discounters only sell a fairly narrow range of products such as baby care, bath and shower products, deodorants and hair care. They do not sell products 5

6 such as colour cosmetics or fragrances. These outlets represented nearly 3% of retail sales of cosmetics and toiletries in 2003, up by more than two percentage points on The increased price-sensitivity of consumers made discounters more popular in last three years of the review period and they will gain a stronger position until the economy recovers. Outdoor markets increased their share thanks to the price sensitive consumers The share of cosmetics and toiletries retail sales held by outdoor markets increased slightly over the review period. In 2003, outdoor markets represented almost 4% of the total retail sales of cosmetics and toiletries, whereas in 1998 they accounted for less than 3% of total value. The products sold at outdoor markets are known to be cheap and inferior but price sensitive consumers began to choose these outlets in spite of the lack of variety. Buying bar soaps, cheap shampoos, hand cream and basic shaving products from outdoor markets is still common. These cosmetics and toiletries are considered everyday necessities, for which consumers are reluctant to pay high prices. In contrast, higher-quality cosmetics and toiletries such as facial skin care and colour cosmetics are rarely bought from outdoor markets, as people believe that such products should be of the highest quality they can afford. Outdoor retailers selling their products via street vendors or bazaars tend to sell products at prices lower than other retailers as most of them neglect the legal rules relating to taxation. However, effective government measures forbidding such practices in recent years had a slight negative impact on the importance of outdoor markets in retailing cosmetics and toiletries. Table 3 Retail Sales of Cosmetics and Toiletries by Distribution Format: % Analysis 1998/2003 % retail value rsp Supermarkets/hypermarkets Independent food stores Convenience stores Pharmacies/drugstores Discounters Department stores Specialists Direct sales Outdoor markets Others Total Trade associations (Cosmetics and Toiletries Manufacturers Association of Turkey), trade press (Milliyet, Zaman, Radikal),, store checks, trade interviews, Euromonitor estimates Retailer activity Supermarkets dominated the market Supermarkets increased their share to nearly 34% of total sales in 2003 up nearly seven percentage points on The increasing penetration of supermarkets all over the Turkey, the lower prices they offered, one shopping possibility in these outlets, the promotions offered by supermarkets (other than the producers), possibility of using credit cards and the large product ranges in these outlets increased the popularity of supermarkets over the review period. Discounters and outdoor markets were other winners of the review period After the beginning of the economic crisis in 2001 the number of the discounters increased significantly in all cities of Turkey. These outlets offered less choice possibilities but the prices of the products were very low compared to specialists, department stores etc. Due to the increasing price sensitivity of consumers, these outlets increased their popularity in the last three years of the review period and held nearly 3% in 2003 up from 0.6% in Outdoor markets were still very popular in Turkey in The share of outdoor markets under cosmetics and toiletries tended to decrease in the first three years of the review period due to increasing importance on quality given by consumers in Turkey. However, after the beginning of economic crisis, the share of these markets increased with to nearly 4% up by 1% on

7 Private label trends Private labels share of C&T surprisingly fell Most of the big supermarket chains, such as Migros, Gima, Tansas, and Kiler, increased the product ranges of their private labels after the beginning of the economic crisis. Consumers in Turkey became very price sensitive after the economic crisis and the private labels offered cosmetics and toiletries at very low prices. The private labels became very popular especially under bath and shower products, hair care, men's grooming and deodorants. Private labels are produced by local manufacturers and are sold for very low prices compared to other branded products. Internet sales E-commerce is currently insignificant in sales of cosmetics and toiletries but is quickly growing. Powerful local companies made huge investments in the internet and an increasing number of internet cafés were established during the review period. However, usage of the internet is still not as widespread as in Western countries. Use of the internet is especially popular among university students and students attending high schools in large cities such as Istanbul and Ankara. Using the internet for shopping purposes is still rare in Turkey. People still do not feel that this channel is secure enough to make large purchases. The younger generation and people with high levels of education and income, however, increasingly see the internet as a modern and convenient retail channel. Internet sales are increasing as a result. As a growing number of people own computers and are connected to the internet, more are discovering the advantages and convenience of online shopping. Development of internet sales is evolving in line with the penetration of multiple grocery chains all over the country. These retail channels are beginning to focus more on selling their products through online shops, which offer a rapid shipment of orders to local customers in their homes. In addition, many smaller retailers also have websites that consumers can access to make purchases. However, these are not as well known as those of the powerful multiple grocery chains such as Migros, Gima and Tansas. In addition to retailers, many manufacturers took the opportunity to introduce themselves and their brands via websites and some of them also offered the opportunity to make online orders. However buying direct from the manufacturer was limited over the review period, since most consumers in Turkey want to see a product before they buy it. Big retail channels begin to find different ways to increase their internet sales Migros, one of the leading retailer channels in Turkey, began to offer on-line services in the coastal parts of Turkey such as Adana, Ankara, Antalya, Bodrum, Bursa, Fethiye-Göcek, Istanbul, Izmir, Marmaris and Mersin. Migros also targets the marines stationed in these regions. 3.3 Forecast Market Performance Positive factors Future looking much better Euromonitor forecasts that sales of cosmetics and toiletries market in Turkey will reach US$3,264.6 billion by 2008, demonstrating constant value growth of 11.2%, with a CAGR of 2.1%. Over the review period, the industry suffered negative growth mainly due to the earthquakes in 1999, the economic crisis that hit the country at the beginning of 2001, and the ongoing effects of the economic crisis in the last couple of years of the review period. The optimism of the industry regarding cosmetics and toiletries in Turkey is highly related to the economic, demographic, and social trends that are anticipated over the forecast period. Dynamic economic rebound = increased disposable income Turkey's economy is expected to recover over the forecast period. According to the World Bank, Turkey was the 17th biggest economy in the world in The war in Iraq had created worries for the Turkish economy; however, the end of the war means that consumers regained their confidence which is expected to help to boost the economy in the immediate future. Growth is expected to gather momentum over the 5-year period as living standards and disposable income levels reach a more satisfactory level. This will allow people to spend more on products that they would previously have considered as luxuries, such as cosmetics and toiletries. Demographic boom will drive the growth 7

8 The high birth rate and increasing number of working women will be two of the main factors underpinning the growth of cosmetics and toiletries over the forecast period. Specifically, in 2002, the birth rate in Turkey was over 20 babies per 1000 inhabitants, the highest in Western Europe, followed by Ireland where there were 15.2 births per 1000 inhabitants. According to Euromonitor estimates, the high birth rates will continue throughout the review period, at a slower growth though, at 17.6 births per 1000 inhabitants in At the same time the death rate in Turkey is among the lowest in Western Europe. The majority of Turkey's population is young and they are the target consumers for the cosmetics and toiletries companies. According to Euromonitor estimates, in 2002, 66% of the population were between 0-34 years of age. The population aged between 15 and 35 represented 36% of the total population, of which nearly half were females. According to industry experts this is significantly important since women are the main purchasers of cosmetics and toiletries in Turkey, even for products used by men. In terms of the employment of the female population, the number of working women in Turkey has shown one of the highest growth rates, just after Spain, at 15% total growth over the review period. Specifically, in 1998 there were around 6,364,000 working women in Turkey, whereas in 2002 that number increased to 7,300,000. Euromonitor forecasts that such a trend will continue increasing over the forecast period, with Greece and Turkey showing the highest growth between 2003 and Modern retail channel to improve availability and prices of C&T The increasing number of supermarkets/hypermarkets that offer different types of cosmetics and toiletries will also fuel growth of the industry over the forecast period. Despite its high 66.4 million population in 2002, there were only 3,768 supermarkets and 188 hypermarkets in Turkey. Euromonitor expects that in 2006, there will be a significant increase in the number of these outlets, approximately 5,186 supermarkets and 290 hypermarkets found not only in the big cities but also in many small towns in Turkey. Supermarkets are expected to dominate the sales of cosmetics and toiletries over the forecast period. The increasing penetration of supermarkets, lower prices they offer, as well as the ability to do shopping with credit cards in these outlets, will be the main factors for the increasing popularity of supermarkets. The availability of a range of different products and product promotions are further advantages of these outlets. Table 4 Forecast Retail Sales of Cosmetics and Toiletries by Sector: Value US$ million Baby care 47,1 47,4 48,3 49,2 50,4 52,2 Bath and shower products 743,1 751,5 763,5 778,5 800,1 829,8 Deodorants ,9 152, ,7 163,2 Hair care 931,8 940,5 954,3 976, ,2 Colour cosmetics , ,7 218,1 225,6 Men's grooming products 332,7 327,6 331,5 337, ,5 Oral hygiene 258,6 261,9 267,6 275,4 285,9 299,7 Fragrances 84,0 84,6 85,8 87,6 90,3 93,9 Skin care 186,6 188,7 191,7 195,6 200,7 207 Depilatories 85, ,1 95,4 99,6 Sun care 23,1 23,7 24,3 24,9 25,8 26,7 Premium cosmetics 138, Cosmetics and toiletries 2935,8 2952,9 2997,9 3063,6 3150, Trade interviews, Euromonitor estimates 8

9 Table 5 Forecast Retail Sales of Cosmetics and Toiletries by Sector: % Value Growth % constant value growth CAGR 2003/08 TOTAL Baby care Bath and shower products Deodorants Hair care Colour cosmetics Men's grooming products Oral hygiene Fragrances Skin care Depilatories Sun care Premium cosmetics - - Cosmetics and toiletries Trade interviews, Euromonitor estimates 4. BABY CARE Baby care market was worth US$60,6 million in 2000 and showed annual growth around 8% to 9% between 1997 and This growth was driven by rising living standards, an increase in the urbanisation, rise in overall awareness of baby care products, and an improvement in retailer's activities. Pharmacies dominated the sales of baby care at the beginning of the review period, accounting for nearly 41% of total sales value in However, as a result of the increasing penetration of supermarkets and the lower prices they provided supermarkets increased their share in 2003 to 30% up nearly nine percentage points on Pharmacies indicated a significant decrease during the review period and held 31% of the total sales value at the end of the review period. Specialists also increased their share from 16% in 1998 to 20% in 2002 due to the lower prices they provided compared to the prices of pharmacies. However, this share fell back to 16% again in Three leading companies, Kopas Kozmetik Pazarlama San AS, Johnson & Johnson Sihhi Malzeme Sanaii ve Ticaret AS, and Eczacibasi-Beiersdorf Kozmetik Urunleri San ve Ticaret AS held about nearly 72% of total sales value between them in Competition in baby care was generally in the form of promotions and price discounts, rather than advertising or product diversification due to the increasing price sensitivity of consumers. Otaci Kurtsan Ilaclari AS, Colgate Palmolive Temizlik Urunleri San ve Ticaret AS, Birlesik Ilac Sanayi ve Ticaret AS, Pinkar Kimya Sanayi AS, and Sebapharma GmbH & Co were other important companies within baby care in 2003, although each garnered substantially less than 10% value share. During the review period, families with medium or high incomes were the main consumers of these new valueadded products. This was not just because of the products' prices but also because they were generally the consumers with well-educated backgrounds who wanted the best for their children. 9

10 Forecast Sector Performance Increasing interest in baby care products Baby care products are expected to reach sales of US$52,2 million in 2008, representing constant value growth of almost 11% over the 5-year forecast period. However, together with the recovery in the economic conditions, sales are expected to be boosted during the forecast period. The westernised lifestyles of today's parents, who are more aware of the benefits of baby care products, will further boost the future sales of these products. Young parents have begun to prefer using baby care products for their babies instead of the traditional products such as bar soaps and general purpose creams. Moreover, the high birth rate in Turkey, which was over 20 per 1000 inhabitants in 2002, and the consumption of these products by adults, will be other important factors to fuel the demand for baby care products over the forecast period. Table 6 Forecast Retail Sales of Baby Care by Subsector: Value US$ million Baby toiletries 5,1 5,1 5,1 5,1 5,4 5,4 Baby hair care 26,1 26,4 26,7 27,3 28,2 29,1 Baby skin care 13,8 13,8 14,1 14,4 14, Baby sun care 2,4 2,4 2,4 2,4 2,4 2,7 Baby care 47,1 47,4 48,3 49,2 50,4 52,2 Trade press (Milliyet, Zaman, Capital), trade interviews, Euromonitor estimates 5. BATH AND SHOWER PRODUCTS Bath and shower products the C&T's second biggest force Sales of bath and shower products reached US$744 million in 2003.Bath and shower products recorded annual current value growth of nearly 5% in the first two years of the review period. Bath and shower products were not significantly affected by the economic crisis and recorded lower decreases compared to other sectors under cosmetics and toiletries. This is because the bar soaps, which make up over 90% of the total sales value, are perceived as a necessity instead of a luxury. In the latter part of the review period, multinational companies had to decrease the prices of their goods in order to compete with the prices of local producers. After the economic crisis of 2001, many companies had to agree to decreasing profit margins in order to keep or increase their sales level. Only liquid soaps recorded positive value growth.liquid soap reached sales of US$50,7 million in These products enjoyed an increased amount of retail shelf space during the review period as consumers perceived them as higher in quality and as more healthy compared to bar soaps. Bar soaps dominate sales.bar soaps reached a value of US$666 million in Amongst middle and lower income earners, bar soaps became a substitute for shampoos and body washes/shower gels in times of financial hardship. Bath additives remained a niche in Turkey in The retail sales of these products reached nearly US$2,7 million. Foam bath, bath gel and bath oils were consumed only by the high income groups during the review period due to their higher prices. These goods are mostly perceived as a luxury for the majority of consumers in 10

11 Turkey. Another reason behind the low sales of bath additives is linked with consumer preferences for bathing. Specifically, people in Turkey prefer to shower rather than to bath. The use of baths is not widespread in the country. In fact, many people, especially in the rural areas, pour water onto their hair and bodies from a bucket. Body wash/shower gel sales reached a value of US$20,7 million in 2003 down more than 2% in value terms and up by around 4% in volume terms on the previous year. Over the review period as a whole, these products recorded a decrease of 9.2% in current value terms and an increase of nearly 11% in volume terms due to the decreasing unit prices. Retail sales of talcum powders reached US$3,3 million in Almost all the talcum powder products available in Turkey are designed for babies. As a result of the economic crisis, consumers in Turkey became very price sensitive and manufacturers had to use promotions as their main marketing strategy. "Buy one get one free" promotions were very common as well as offering free gifts, such as a trial size of one of the company's other products. For example, bath and shower gels were sold with bar soaps. Another strategy was giving high priced prizes to consumers. For example Haci Sakir by Colgate-Palmolive Temizlik Urunleri San ve Ticaret AS gave away a car and holiday in a lottery for consumers. At the beginning of the review period, specialist outlets accounted for 32% of total value sales and were the leading distribution channel for the bath and shower products. However, over the review period the share of specialists decreased to 30% whilst supermarkets/hypermarkets moved into the lead, increasing their share from 29.5% in 1998 to 36% in Bath and shower products is largely the domain of three companies Evyap Sabun Yag Gliserin Sanayii ve Ticaret AS, Colgate-Palmolive Temizlik Urunleri San ve Ticaret AS and Dalan Kimya Endustrisi AS the first two of which operate in several categories. These three companies are also the leading companies in bar soap with increasing shares as bar soap sales accounted for 90% of total bath and shower product sales in Multinationals led in body wash/shower gels with Turk Henkel Kimya San ve Ticaret AS in the lead with a 25% value share in Colgate-Palmolive ranked second with a share of 14%. Three local firms held a combined share of 52% of the total sales of liquid soap. Temsu Kozmetik ve Kimya San AS was the leading firm with its Sandy brand. The company achieved wide distribution and offered low prices which helped to increase its share to nearly 20% up by nearly one percentage point over Canan Kozmetik Sanayi ve Ticaret AS followed Temsu Kozmetik with its Ipek brand which began to become established in the cosmetics and toiletries industry due to effective advertising and its low prices. Canan Kozmetik increased its share from 16.2% in 2001 to 16.7% in Evyap Sabun Yag Gliserin Sanayii ve Ticaret AS ranked third in liquid soap with its share of nearly 16% in Forecast Sector Performance Positive growth ahead Bath and shower products are expected to reach a value of almost US$830,0 million by 2008, representing constant value growth of nearly 12% over the 5-year forecast period. The Turkish economy grew in 2002 and the growth continued in The young population and their increasing education level will be one of the leading factors to underpin the growth after The young are more interested in the new types of products such as body wash/shower gel. After 1980, a high proportion of the population migrated to the big cities. In 2002, about 76% of the population of Turkey was living in big cities and a growing part of the younger generation has adopted western lifestyles. All of these factors together with the expected increase in the levels of disposable income will bring higher growth rates to bath and shower products. It can be expected that the new types of products, such as body washes and shower gels, will attract an increasing number of consumers over the forecast period. 11

12 Direct sales to increase Supermarkets are expected to dominate sales of bath and shower products over the review period due to their higher products ranges and lower prices. Supermarkets became very popular over the review period and these outlets are now easy to find even in the very small towns in Turkey. It can be predicted that direct sales will also increase its share over the forecast period. The young population is using the internet very actively and some supermarkets began online sales over the review period. Table 7 Forecast Retail Sales of Bath and Shower Products by Subsector: Value US$ million Bath additives 2,7 2,7 2,7 2,7 2,7 2,7 - Bath gel Bath oil Foam bath 1,8 1,8 1,8 1,8 1,8 2,1 - Other bath additives Body wash/shower gel 20,7 21,0 21,3 21,9 22,8 24,0 Bar soap ,2 683,4 696,3 715,2 741,6 Liquid soap 50,7 51,6 52,8 54,3 56,1 58,2 Talcum powder 3,3 3,3 3,3 3,3 3,3 3,6 Bath and shower products 743,1 751,5 763,5 778,5 800,1 829,8 Trade press (Milliyet, Capital, Radikal), store checks, trade interviews, Euromonitor estimates 6. DEODORANTS Deodorants reached sales of US$151,8 million in Deodorants increased their popularity and achieved healthy growth rates before the With the increasing education level and the growing number of working women, people in Turkey became more conscious of their personal hygiene. Also, the hot climate, coupled with a desire to avoid unpleasant odours associated with perspiration, played an important role in generating demand for antiperspirant deodorants across the country. People living in the cities, in particular, became more sensitive to body odour and strove to avoid this unpleasant condition. Women are the main consumers of deodorants but young men are becoming increasingly interested in these offerings. The average unit prices of sprays decreased to US$22 per litre in 2003 from US$24.75 in In fact, some local companies launched no name brands over the review period with much lower prices. These products increased their popularity after the economic crisis because their prices were between US$7 to $9 per litre. Moreover, many local firms launched sprays imitating the odours of the popular fragrances which became very popular in Turkey in a very short period of time. The unit prices of roll-ons decreased to nearly US$59 per litre at the end of the review period from US$70 in In the same way sticks first made an entrance at US$79 per kg in 1999 but the unit prices decreased to about US$71 per kg in This was the effect of the economic crisis and the sharply decreasing levels of disposable income. Companies had to make price discounts or conduct promotions in order to keep their sales levels. Multinationals also decreased their prices in order to compete with the products of local companies and had to agree with the decreases in their profits. Sprays reached sales of US$117,3 million in 2003.Over the review period, sprays were the most common format for consumers from lower-income groups and they used scented deodorants as a substitute for fragrances due to deodorants' lower-prices. Therefore, consumers demanded that deodorants not only eliminate unpleasant body odour but also offer a pleasant scent. 12

13 The retail sales of stick deodorants reached US$16,8 million in Sticks became popular over the review period in spite of their higher prices. These products were highly and effectively advertised on television and in magazines mainly by the multinational companies. The format is perceived to have longer-lasting properties than other formats and the products are convenient to carry in a bag. Roll-on deodorants garnered sales of US$16,5 million. Sales achieved positive growth of almost 2% in both 2002 and Creams used by high income groups.the retail sales of creams reached US$0,9 million in 2003.The sales of creams are very limited for two main reasons. Firstly, these products are not familiar to a very large percentage of the consumers and they are sold only in big cities and in expensive shops. Secondly, they are very expensive compared to the prices of sprays and other formats of deodorants. Therefore, the retail sales of these products accounted for less than 1% of the total sales value of deodorants over the review period. Deodorants is the domain of three multinational companies Eczacibasi-Beiersdorf Kozmetik Urunleri San ve Ticaret AS, Lever-Elida Temizlik ve Kisisel Bakim Urunleri San Ticaret AS (Unilever) and Turk Henkel Kimya San ve Ticaret AS (Henkel). These three companies accounted for 46% of the total sales value of deodorants in Hunca Kozmetik Sanayii AS trailed not far behind them with a share of just over 8% in Forecast Sector Performance Higher increase in sales volumes The retail sales of deodorants are expected to grow in high rates in volume terms over the forecast period in spite of a moderate growth in constant value sales. Deodorants are projected to reach nearly US$163,2 million by 2008 which represents a constant value increase of nearly 8% on The increasing awareness of personal care among consumers in Turkey, the interest of the young population in the new formats such as sticks and roll-ons, an increasing number of men using deodorants, and the fierce competitive environment of multinational and local companies, will lead to an expansion in deodorant sales over the 5-year forecast period. Value-added products will be important for the multinationals to compete with the low-priced goods of the local companies. Sensitive, functional and skin-friendly variants are expected to increase in popularity in line with the increases in levels of disposable income. Table 8 Forecast Retail Sales of Deodorants by Subsector: Value US$ million Deodorant sprays 117,3 116,4 117,6 119,4 121,8 125,1 Deodorant pumps Deodorant roll-ons 16,5 16,5 16,5 17,1 17,4 18,0 Deodorant sticks 16,8 17,1 17,1 17,7 18,3 18,9 Deodorant creams 0,9 0, ,2 1,2 Deodorant wipes Deodorants 151,8 150,9 152,4 155,4 158,7 163,2 Store checks, trade interviews, Euromonitor estimates 13

14 7. HAIR CARE Hair care sales reached a value of US$931,8 million in 2003.Hair care recorded a high current value growth rate of between 12% and 13% each year between 1998 and This healthy growth was attributed to the increased awareness of the benefits of hare care products, strong advertisements and effective promotions by the multinationals. There was a greater focus on beauty in the media, which stimulated demand from the younger generation. In addition, competition between the multinational companies resulted in a wide range of products that attracted consumers because of their contents, packaging and price. However, after the economic crisis because of the decreasing levels of disposable income, demand shifted towards cheaper brands owned by local companies or economy brands from the leading multinationals. There was increased demand for bulk-sized products in order to decrease the cost of using hair care products. In addition, people in lower-income groups returned to traditional hair washing products such as bar soaps or used bar soaps together with shampoos to decrease their hair care expenditure. Young consumers are more interested in value-added and task-specific products, such as shampoos for coloured hair, long-lasting conditioners, high-tech formulas with vitamins etc. As the bulk of the population is young in Turkey, most manufacturers targeted the young population in their advertisements as well as in their new product developments. The population in Turkey aged between 15 and 40 adds up to nearly 25 million which is why its is essential for manufacturers to win this group over. Complete hair care systems began to be launched and advertised by leading multinationals such as Procter & Gamble Tuketim Mallari Sanayi Ltd Skt in the last years of the review period. These products and advertisements tried to expand the consumer base and bring salon care systems into the home. These products did not become very popular until the end of the review period mainly due to their high prices. These offerings are only sold in salons and consumed by high income groups. Retail sales of styling agents reached US$72,3 million in 2003.Multinational companies developed new styling products targeting the young population over the review period and backed them with effective advertisements on television and in magazines. Local firms, such as Hobi Kozmetik AS, also launched different styling products which with low prices, interesting packages and promotions, made them more popular amongst the younger generations. Both the local companies and international companies increased their sales over the review period due to the increasing demand of young consumers with Westernised lifestyles. The decreases in unit prices led to decreases in the sales values after the beginning of the economic crisis and also caused difficulties for even the local producers. Some of the strongest local players faced some financial problems after the economic crisis in spite of the increase in their retail volume sales. Multinationals preferred to launch value added products in order to compete with the low-priced offerings of the local companies. They emphasised UV-protection, spray gels and innovative packaging in order to attract young consumers. However, the penetration of these products remained relatively low due to their higher prices. Gels and spray gels made up the bulk of sales in styling agents. Mousses also increased their share due to strong advertisements by the major manufacturers. The use of hair gel remained more widespread than styling mousses as these products tended to be cheaper and advertised more widely by manufacturers. Furthermore, an increasing number of young male consumers were using gels to style their hair, which stimulated its performance. Nonetheless, male-specific styling agents are not available in Turkey. Retail sales of 2-in-1 products were valued at US$213,3 million in The added convenience of 2-in-1 products made them increasingly popular. For this reason, despite being relatively new, these products enjoyed strong sales, especially among the younger population. Moreover, most of the advertising campaigns, new product development, and promotions conducted by hair care companies were within 2-in-1 products, reflecting its dynamism in volume terms. 14

15 Anti-dandruff formulas are heavily advertised in Turkey and most of the brands available have an anti-dandruff extension. Conditioners garnered sales of US$116,7 million in The increased popularity of 2-in-1 products, which served to negate the use of separate conditioners, was important in the decreases of retail sales of conditioners during and after the economic recession. However, this was somewhat balanced out by the entry of local companies, such as Canan Kozmetik Sanayi ve Ticaret AS, with low prices in last two years of the review period. The local companies backed their products with effective advertisements on television. The lower prices of these goods led to a decrease in the unit prices and decreases in the sales value of conditioners but an increase in the sales volume. Throughout the review period, young women were the main consumers of conditioner products. Newly product development by multinationals to compete the local companies and effective advertisements of these products also pushed the sales volume further in According to the trade press (Milliyet), nearly 16% of households were using conditioners regularly in 1993, this percentage increased to 23% in Industry sources claimed that value-added conditioners had become more attractive to consumers by The retail sales of perms and relaxants reached a value of US%11,1 million in 2003.The bulk of demand for colourants and perms and relaxants came from the Western and Central parts of Turkey. These are the areas where most working women live. A presentable look is important for these women and therefore they use more hair care and cosmetics and toiletries in general. Sales of colourants dropped to a value of US$86,7 million in 2003.The local companies which entered colourants over the review period, such as Kopas Kozmetik Pazarlama San AS with its Voila brand, increased their share due to their lower priced-offerings. Kopas backed its brand with effective advertising campaigns and gained a strong position in the industry. There were also other small companies that produced no name products and retailed them on a regional basis. These companies did not have a significant share for each but they played a fundamental role in pushing the unit prices down. Multinational companies had to decrease their prices in order to compete with these local companies. Colourants with value-added benefits were not sold in large amounts due to their higher prices. Kina, a natural colourant, is a popular cheap alternative to packaged colourants in Turkey. Kina is made from vegetable extracts, which gives hair a deep red colour. However, consumption of kina was not very popular among younger consumers and among women who live in urban areas. The main consumers of colourants, particularly kina, are women in their middle and older ages. However, young women who want to follow fashion and new trends increased the consumption of packaged colourants in Turkey. Also, intensive advertising of hair colourants on television and in magazines stimulated consumer interest leading to an increase in volume sales. Multinationals launched easy-to use colourants products and kits to increase their sales in the last years of the review period. Although these products were acceptable they achieved low sales levels due to their high prices. All of the mass hair products from the major manufacturers in Turkey are available in supermarkets/hypermarkets generally with lower prices than other outlets. In line with the increasing penetration of these outlets throughout Turkey, their share in sales of hair care increased significantly over the review period from 34% of retail sales value in 1998 to 40% in Direct sales gained power by increasing their share slightly to 7% in 2003 from 6% in Pharmacies, on the other hand, lost half of their share over the review period due to a common believe that their prices are much higher than the prices of supermarkets. Specialist outlets increased their share of sales at the beginning of the review period but lost it again after the beginning of the economic crisis. The share held by the outdoor markets increased over the review period mainly after the economic crisis. The product ranges sold in outdoor markets are very limited but they began to be chosen by many consumers due to their low prices. 15