Beauty products

Call it the new (far-from) normal. With Italy and France — as well as Spain — in total lockdown mode and restrictions starting to tighten in Germany and the U.K. due to the coronavirus, Europe’s biggest beauty markets are slowing. But by how much, no one can yet say.

Here, a snapshot of the swiftly evolving situation.

Italy

Italy, the worst-affected country in Europe with a death toll now greater than China’s, started to see the negative impact of the health emergency on its beauty industry’s performance in February.

In particular, the northern Lombardy region, among the areas with the most infections and a key beauty zone, with its high concentration of cosmetics companies, reported the first case of COVID-19 on Feb. 21. Since then, the Italian government has upped measures to contain the outbreak, first by declaring the lockdown of three towns there and asking the rest of the region to self-quarantine.

On March 8, the lockdown was extended to the entire Lombardy region and 14 Italian provinces. Two days later, the whole country was placed under confinement and last week, the government decreed the closure of all nonessential commercial activities, leaving only food stores, pharmacies and newsstands open for business.

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That will have a negative impact on beauty sales, which in 2019 stood at almost 12 billion euros. Although the Italian association of cosmetics companies Cosmetica Italia declined to forecast what the fallout might be, it has been reporting weekly updates on beauty consumption in the country.

Between Feb. 24 and 28, sales declined 1.3 percent versus the former week, while between March 2 and 6 sales were down 0.4 percent. The data showed an increase in the demand for personal hygiene products, which had aggregate sales growth of 1.2 percent in the two weeks. Meanwhile, sales of other beauty categories dropped 2.4 percent.

Mass-market retailers, pharmacies and e-commerce platforms were the best-performing beauty channels, with each registering sales growth. Perfumeries, herbalist shops and beauty salons were the hardest hit, affected by the government limitations.

Nevertheless, according to Cosmetica Italia, beauty sales in the two weeks still advanced 1.2 percent and 0.8 percent, respectively, compared with the same periods in 2019.

Many Italian beauty companies said they have registered a decrease in exports and experienced order cancellations, difficulties in planning future activities and rising competition from geographic markets that have so far adopted milder measures to combat COVID-19.

The Italian beauty companies are being proactive, with strategies including finding new suppliers and speeding up their production cycles, which are positively impacting revenues.

Some beauty executives forecast the consequences of the crisis will be evident in the second half of 2020, as the ongoing reduction of domestic consumption will be an added woe to additional cuts in orders and difficulties in procuring raw materials and packaging.

Preliminary data released by Cosmetica Italia showed that in 2019, the Italian beauty industry’s sales were 11.9 billion euros, up 2.3 percent year-over-year. When the numbers were released in February, before the health crisis hit, the association had forecast similar gains for the first of half 2020.

France

Inhabitants of France have largely been confined to their homes since Tuesday at noon, while the closure of all nonessential businesses — including perfumeries and department stores, and excluding grocery stores and pharmacies — has been in effect since March 14 at midnight.

Over the past two weeks, a primary focus for numerous beauty makers has been on starting up the production of hand sanitizer, a major tool in containing the spread of COVID-19. L’Oréal, LVMH Moët Hennessy Louis Vuitton and Coty Inc. are among the approximately 30 companies to have apportioned some of their manufacturing capabilities to the making of hydro-alcoholic gel.

Tens of thousands of liters of the product, destined primarily for hospitals, clinics, retirement homes, grocery stores and pharmacies, will be produced weekly by the beauty companies, according to the Fédération des Entreprises de la Beauté, or FEBEA, France’s beauty federation.

Even before the countrywide lockdown, France’s prestige beauty sales were slowing. In February, the category’s revenues declined 2 percent year-over-year, weighed down by a 3 percent decrease in sales generated in brick-and-mortar doors, according to The NPD Group.

Although France had no store closures in the month, a calendar effect impacted purchasing by Chinese consumers, formerly big beauty consumers abroad. For one, the Chinese New Year fell in January in 2020 versus in February in 2019, and there was a dearth of Chinese tourists since flights from China had already been canceled, said Mathilde Lion, a Paris-based analyst at the market research group.

Also in February, prestige beauty sales online gained 11 percent, driven by fragrance, skin care and hair care. Overall, fragrance was the only category with positive growth, NPD statistics show.

In 2018, France’s beauty market, including all product segments, posted sales of 24 billion euros, according to the FEBEA. Twenty-one percent of the business was made in pharmacies and parapharmacies; 28 percent in selective distribution, and 51 percent in grocery stores and hypermarkets.

The U.K.

While the U.K. government hasn’t yet announced plans for a formal lockdown, on Friday night it mandated a closure of pubs, restaurants and leisure centers across London. Retailers in the country are heeding general health advice and some have already shut temporarily, including department stores such as Harvey Nichols, Selfridges, Harrods and Fenwick. The Body Shop said Friday it is following suit.

Regarding the U.K.’s beauty industry, Millie Kendall, chief executive officer of the British Beauty Council, said: “The biggest immediate damage is to salons and the self-employed. If you look at those numbers in isolation, it is around 150,000 people directly working in beauty services; 8 billion pounds in yearly revenue in that sector alone. Thirty-one percent of our industry’s total direct contribution to [gross domestic product] is in hair services.

“Around 125,000 work directly in beauty retail, and with social distancing this will have a tremendous impact on retail sales and salon services,” continued Kendall.

She said the uptick in sales of hand wash and sanitizer is adding to the U.K.’s personal-care and hygiene category’s revenues.

“But I generally think our industry is on lockdown, [so] people aren’t going to spend money on beauty — whether that be services or products — in the short term,” she said. “I do feel that the online sales will be a fallback for us, but this won’t help services. Home hair coloring is going to see a rise as we are challenged with self-isolation. Nail products may see a small rise, but these are mostly due to replacing services that we can’t have due to social distancing.”

For 2018 — the most recent year for which BBC numbers are available — the U.K. beauty industry generated 27.2 billion pounds. Of that, sales of care and maintenance products reached 10.4 billion pounds, while 8.7 billion pounds were rung up from personal enhancement products and 8 billion pounds from beauty services, according to the council.

The beauty industry contributes about 1.3 percent to the U.K.’s overall economy, with the sales it makes equivalent to revenues generated in Manchester or Glasgow. One in 60 jobs in the U.K. is in the beauty sector.

“For every million pounds spent in beauty, another million in contribution is spent elsewhere in the economy,” said Kendall. “In the same vein, every 10 jobs in the industry support six jobs elsewhere in the economy.”

Germany

In Germany, Bavaria on Friday night was poised to be the first state to put in place severe restrictions on citizens in order to try and combat the spread of COVID-19.

The German Cosmetic, Toiletry, Perfumery and Detergent Association, or IKW, assumes that the impact of the virus on business will be noticeable soon.

“The extent to which this will happen is not yet clear,” said Thomas Keiser, IKW director general, in a statement in which he explained the German cosmetics industry “is economically sound and has always been a pillar of the economic development in recent years.”

He noted positive sales developments in product categories such as hand disinfectants, like soaps and syndets, due to the authorities’ recommendation of regular hand-washing.

There have been more stock purchases in Germany, as consumers fear being quarantined and the loss of their ability to purchase personal-care products.

“On the other hand, cosmetics manufacturers are also feeling the lack of sales from foreign tourists, such as from China,” said Keiser. “In the medium and short term, IKW and the manufacturers expect negative consequences, such as supply bottlenecks, a decline in exports and a decline in consummation, as people are severely restricted in their daily operations and leisure activities.”

Douglas, Germany’s largest perfumery chain, on Tuesday said it had suspended store trading in most European markets due to COVID-19.

The IKW is not making any forecasts for the German beauty market in 2020, but earlier this year it had said 1.5 percent growth was expected.

In 2019, the business’ sales grew 1.8 percent year-over-year to 14.05 billion euros, according to IKW. The two largest categories sales-wise were skin care and hair care.

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