FRANKFURT -- The German prestige beauty market -- a $1.19 billion arena and second in Europe only to France's $1.4 billion -- is in the midst of fundamental change.
Just as retailers are in the throes of consolidation and widespread experimentation, price wars have erupted in a country long used to uniform pricing.
In many ways, the country's predicament is similar to that of its neighbors -- but with a Germanic twist. The recession that has swept all of Europe is intensified here because of the costs of integrating the former East Germany, with its 16 million people.
As the largest mass and prestige cosmetics market in Europe, with sales of $8 billion, Germany could prove pivotal in shaping the future of how cosmetics and fragrances are marketed on the Continent.
The years of double-digit growth in prestige cosmetics ended in 1992, when growth fell to 5.4 percent, according to the German cosmetics industry federation, Industrieverband Koerperpflegeund Waschmittel. When the final figures are tallied, growth for 1993 is expected to be even lower.
The future doesn't look much brighter. The market research organization, Gesellschaft fuer Konsumforschung (GFK), or Society for Consumer Research, projects average growth in the German fragrance market of no more than 3 percent annually for the three years through 1996. "The market is not in good shape," said Walter Farnsteiner, president of Eurocos Cosmetic GmbH, a prestige market subsidiary of Procter & Gamble, which manufactures the Laura Biagiotti, Hugo Boss and Otto Kern fragrances. He said the marginal gains of 1993 came chiefly through price increases and introductions.
At Parfumerie Douglas, Germany's leading fragrance and cosmetics retailer, the outlook is more sanguine. Michael Brixner, a managing director of Parfumerie Douglas, noted that the entire chain's comparative-store growth for 1993 was only 0.5 percent, and for this year he expects sales to be flat.
Brixner pointed out that from 1989 through 1992, Douglas was chalking up comparable-store sales gains of 10 percent. The outlook may be flat, but even at zero growth this year, volume will be at a much higher point than in the mid-Eighties.
"We mourn at a high level," he said. "When the recession ends, we will take off like a shooting star."
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