According to the Brazilian Association of the Cosmetic, Toiletry, and Fragrance Industry (or ABIHPEC) and Euromonitor International, Brazil’s cosmetics, toiletries, and fragrances (or CT&F) market was estimated at $43.0 billion in 2013, representing 9.5% of the global market. Brazil was ranked as the following:
- First in fragrances and deodorants
- Second in hair care, men’s and kids’ products, bath care, sun care, and depilatories
- Third in color cosmetics
According to Euromonitor, Brazil’s beauty and personal care market is slated to grow by over $10.1 billion in value terms over the 2014–2019 period. This ranks Brazil the second-highest country in terms of projected dollar value growth after China, which is projected to grow by over $21 billion over the same period.
However, the growth rate in Brazil is expected to slow down. The growth rate is estimated to be 6.6% per annum compounded over the 2014–2019 period, a slight deceleration compared to the 7% annual rate experienced over the 2009-2014 period.[1. Cosmetics Business and Euromonitor International]
The Hypermarcas advantage
Being acquired by Coty (COTY), Hypermarcas’s (HYPMY) brands are likely to prove relatively more inelastic to the economic headwinds being experienced in Brazil currently. These brands are more aimed toward the mass market and may act as a partial buffer against currency and economic headwinds, something Coty and Procter & Gamble’s brand portfolio may not be able to do entirely in Brazil.
Procter & Gamble is the largest holding in the Consumer Staples Select Sector SPDR ETF (XLP), accounting for 11.7% of the ETF’s portfolio.
Additionally, the Hypermarcas acquisition is expected to provide some unique advantages. We’ll discuss these in the next article.