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Canada: A Bright Spot for Beauty

Thanks to its economic resiliency and a population with a predilection for maintaining appearances, Canada is proving to be a bright spot for beauty.

CANADA

Thanks to its economic resiliency and a population with a predilection for maintaining appearances, Canada is proving to be a bright spot for beauty.


Capital Ottawa
Largest city Toronto
Offi cial languages English and French
Area 3,855,171 square miles (total)
Currency Canadian Dollar $ (CAD)
GDP $1.564 trillion (2008 est.)
Population 33,487,208 (July 2009 est.)
Internet TLD .ca
Calling code +1

 

The late Canadian Prime Minister Pierre Elliott Trudeau once remarked that “when the U.S. sneezes, Canada catches a cold,” in reference to how interdependent the two economies are. The U.S. still accounts for more than 80 percent of Canada’s exports, but unlike the U.S., Canada is one of the fewcountries where no banks have failed or received government handouts during the current economic meltdown.

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With gross domestic product growth expected to reach 2.5 percent in 2010 and 4.7 percent in 2011, versus 1.2 percent and 2.9 percent, respectively, in the U.S., retail spending is expected to rebound faster in Canada. Those numbers should be a boon for beauty. Spending on cosmetics and toiletries reached $7.1 billion last year, according to Euromonitor International, and is projected to hit $7.6 billion by 2013, an 8.6 percent increase. Canadians now spend more money per capita on beauty products than Americans—$212.70 versus $171.20 in 2008—which wasn’t the case five years ago. Moreover, the U.S. figure is expected to decline to $159.90 by 2013, while Canadians are expected to spend an average of $222.60 by then. In terms of categories, hair care sales in Canada last year were $1.39 billion, up from $912.7 million in 2003, followed by skin care at $1.21 billion,double the $607 million in 2003.

 

Makeup reached sales of $1.18 billion, versus $692.9 million in 2003. Canada’s growing proportion of aging adults is behind the rapid rise in skin care sales, the fastest growing segment.“In general terms, Canadians are more into beauty care than Americans,” says Euromonitor’s Svetlana Uduslivaia. “And the U.S. is experiencing more of a decline than  Canada in premium brands.” While U.S. consumers have shifted away from trading up to luxury goods, most Canadians are not prepared to forgo their daily beauty regimen, even in times of economic recession, according to Euromonitor. The emphasis on beauty is particularly high in Quebec. With such a strong emphasis on appearance, the Canadian cosmetics and toiletries market has showed signs of resilience.

Many product categories actually outpaced the overall market growth, including skin care, makeup, sun care and depilatories, among others. Volume sales of most products also grew, indicating that not only price increases stood behind the value gains registered, but that Canadians continued to buy beauty care products as well as essential personal care products. There is also a shift in Canada towards better quality and more expensive products, with premium cosmetics sales growing from $1.1 billion in 2003 to $1.88 billion last year, a move that hasn’t gone unnoticed by Shoppers Drug Mart, Canada’s largest drugstore chain. “Beauty is a significant and growing portion of our front shop sales,” says Tammy Smitham, director of corporate communications and corporate affairs. She notes the number of in-store Beauty Boutiques at Shoppers has grown from seven when the concept fi rst launched in 2003, to 181 last year, with 50 more planned for this year. Dermatological skin care is the most important category for Shoppers, followed by color and fragrance. “We expect that dermatological products will continue to be strong in the years ahead as the aging population creates a demand for new skin care products and treatments to keep them looking young. “Finally, we believe that green and organic beauty will continue to grow in popularity as consumers become more aware of product ingredients and demand more eco-friendly choices,” says Smitham.

 

Last year, Shoppers opened two highend, stand-alone beauty and wellness stores called Murale, with four more planned by the end of this year. With an average sale of between $55 and $75 per shopper, the retailer estimates each store could generate annual sales of $4 million to $8 million. “Murale is unlike any other beauty offering in North America with its unique combination of leading beauty and dermatological products, pharmacy and professional expert services and consultation,” says Jürgen Schreiber, president and ceo of Shoppers, who conceived the concept for Murale.  Industry veteran Shelley Rozenwald is Murale’s president. Shoppers’ share of Canada’s beauty care market is pegged at 18 percent and growing, according to Trendex North America. Still, it isn’t the only major Canadian retailer that smells an opportunity to cash in on the growing beauty care market. Loblaw Cos. Ltd., the country’s largest grocery retailer, recently launched a budget-friendly cosmetics offering called Joe Fresh Beauty to complement its line of Joe Fresh Style affordable clothing.

 

The Joe Fresh name comes from the line’s creator Joseph Mimran, founder of Club Monaco, which was purchased by Polo Ralph Lauren Corp. in 1999. Loblaw has more than 1,100 supermarkets across the country, but Joe Fresh Beauty will only be available in about 250 stores, primarily due to space limitations. Another major seller of beauty products in Canada is Hudson’s Bay Co., where total store sales have increased every year for the last 15 years, according to Brenda Yeomans, general merchandise manager, cosmetics and fragrances. “There are growth opportunities across all areas, but we expect to see the highest growth in skin care based on the changing demographics and the high degree of innovation,” says Yeomans. “Makeup will continue to be a fun and energized business and continues to have growth potential.” Newness will drive fragrance sales, boosted by launches from Givenchy, Dolce & Gabanna, Issey Miyake and Victor & Rolf, Yeomans adds. “The customer is focused on quality and is looking for specific brands with which to express this,” she notes. “We expect great growth in brands like Chanel and Dior. Customers are also looking for hard-to-fi nd brands that exude luxury. In Canada, that includes brands like YSL Beauté and Nars. “And count on MAC to come on strong, while Estée Lauder, Lancôme and Clinique will fuel their growth through continued technological breakthroughs,” she says.

 

Beauty accounts for about 18 percent of sales at the high-end specialty store Holt Renfrew and is growing, according to Natalie Penno, vice president, general merchandising manager, cosmetics and beauty services. Sales are fi ve percent ahead of projections so far this year, she adds. “Skin care, which represents about 33 percent of our beauty business, is up 8 percent and supreme luxury is up double digits over plan,” she says. “Men’s is down 5 percent.” Penno attributes strong skin care sales to women wanting to manage their daily routine without doctor consultations or surgery. “Customers are looking for brands they know because they have good [research and development] behind them and proven track records.” Pharmacies account for more than 47 percent of all beauty sales in Canada, followed by mixed retailers at 23.5 percent and supermarkets at14.5 percent. Procter & Gamble is the industry leader here, with a 20.1 percent market share, according to Euromonitor, followed by L’Oréal Canada (15.2 percent), the Estée Lauder Cos. Inc. (4.1 percent), Unilever Canada (4 percent) and Johnson & Johnson (3.8 percent). The most significant local player is Lise Watier of Montreal, who launched her own line of makeup, skin care and fragrances in 1972, following a successful television career. Today, the brand is sold in over 1,300 distribution points in Canada, the U.S., France,and the Middle East.