SÃO PAULO — Brazil’s beauty industry expects growth to halve next year, with the masstige and premium categories bearing the brunt of a prolonged slump in Latin America’s biggest economy.

At the same time, executives in the world’s third-largest cosmetics market are asking the newly reelected government of Dilma Rousseff to freeze taxes and cut product-registration red tape to lift its competitiveness.

“It’s difficult to predict, but if the economy continues to worsen next year, we could grow half the rate of previous years,” João Carlos Basilio, president of top industry lobby Abihpec, told WWD.

In 2014, the beauty industry was expected to grow 11.8 percent to more than $19 billion, though that target now looks less achievable.

Basilio said Brazil’s overall economy continues to underperform this year when he expects it to grow 0.5 percent, half the 1 percent current government forecast, cut from 2 percent earlier this year.

His comments mark a departure from more optimistic predictions this summer when he said the beauty sector remained “unfazed” by Brazil’s economic slump, which has since deepened.

While the industry is generally resilient to economic upswings, Basilio conceded the masstige and premium circuits will be hit in 2015.

“This will probably be the category that will be most affected,” he said. “Premium beauty sales have risen 12 to 15 percent a year in the past five years, but could grow 6 to 8 percent in 2015.”

Mass beauty sales, the industry’s workhorse, are also expected to suffer. However, as consumers seek bargains, their losses will be partly offset.

“Brazilians have high beauty consumption habits and those are hard to break,” Basilio said. “If you are used to buying hair, deodorant or facial products, you are not going to stop buying them, you are just going to find them cheaper.”

Basilio added the industry is concerned that high inflation and a weak labor market could dampen short- to medium-term purchases. He said the fledgling administration has pledged to fix the situation and that he hopes it will.

According to Basilio, Brazilian taxes are sky-high and must remain stable to help the industry, a large employer, fight the recession.

“Our first priority is to ensure taxes don’t rise,” Basilio said. “They average 40 percent, which is three times more than in Mexico or Argentina.”

In hair care, a key category, the government takes as much as 75 percent, he added.

Abhipec is also asking health-care regulator Anvisa to slash the red tape associated with new-product registration, which Basilio claimed kept nearly 3,000 products from reaching shelves this year.

“They have been asking for a lot of paperwork, which they have taken too long to review,” he said. He added the industry and the administration are working to roll out a voluntary online registration system to streamline the process that’s expected to be ready soon.

The environment is also a priority. 

Basilio said the trade is moving to come up with an emissions inventory that will be ready in the first half of 2015 to cut its carbon footprint or even become carbon neutral. There are also plans to move into green packaging and boost recycling through a national solid residues law the state is working to implement.

Contraband is also being tackled, with Abhipec requesting Brasilia to step up (or in some cases double up) custom inspections to keep illegal and fake products at bay. He said the movement of fake goods is stealing roughly $10 billion a year from the industry, but growing 5 to 10 percent annually as a business.

Basilio, who will leave next year after nearly a decade in the job, said he will endeavor to achieve as much as possible.

“Abhipec is very proactive and our members are very happy,” Basilio said. “I just want everything to go well.”

load comments
blog comments powered by Disqus