Once isolated and out of touch, Australians have fast become some of beauty’s most discerning and voracious consumers. Add to that the country’s potent mix of savvy retailers, astute distributors and on-trend homegrown brands, and Down Under, the beauty business is blooming.
Cocooned from the global financial crisis, the Australian beauty industry flourished in the first half of last year with a record 8.5 percent growth in retail sales compared with the same period in 2008. Flush with government cash handouts intended to offset an incoming recession and low interest rates, Australians kept spending at beauty counters until mid-2009, when sales dropped off after the Reserve Bank announced a pair of interest rate rises.
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Jo-Anne Mason, of Beauty Update Australasia, a market analyst for the cosmetics industry, said last year’s robust start was forecast to grow sales 5.3 percent overall on 2008’s retail sales total of $2.5 billion, to an estimated $2.6 billion.
Overall, skin care accounted for the lion’s share of sales, with a 5.3 percent increase to $1.85 billion; color cosmetics grew 7.7 percent to $1 billion, and fragrance, 2.1 percent to $723 million.
While each category is experiencing growth, the major trend that emerged in 2009 primarily concerned skin care: As in other parts of the world, consumers responded to the economic downturn by trading down to mass market brands.
“[The consumer] is rationalizing and wanting to be economically responsible,” says Mason, “and this has resulted in a cutback for luxury and prestige skin care as consumers found a substitute in well-trusted mass antiaging ranges.”
Consequently, Procter & Gamble’s Olay brand is the top-ranking mass skin care brand in Australia, according to Mason. More than 1,000 Australian customers pre-ordered the Professional Pro-X antiaging starter pack of a wrinkle-smoothing cream, age-protection lotion and eye-restoration complex, priced at about $90, prior to its March launch date.
Discount department stores including Target, Big W, Priceline and pharmacy chains are capitalizing on customers’ growing preference for mass beauty brands by ushering in lower-priced lines with eye-catching packaging. Cassandra Nichterlein, director of Style Patisserie, which distributes Butter London nail varnishes, James Brown Haircare and Pangea Organics skin care, has dubbed the emerging category “cool masstige.”
“It is really only in its infancy and is beginning to be developed particularly in mass pharmacy chains,” says Nichterlein. “These channels are looking to satisfy the customer that has traded down from the higher end due to the economic crisis, and this has created a niche that is going to be around for a while to come. Spin-off or high-end-looking-but-a-quarter-of-the-price brands will grow as consumers are offered great-quality products, in gorgeous packaging but at affordable prices.”
Masstige’s popularity is also gaining traction in color cosmetics. Sydney-born makeup artist Napoleon Perdis launched NP Set in collaboration with Target in 2008. Priced 25 percent lower than Perdis’ prestige collection, NP Set is formulated with natural ingredients and has a sassier point of view. “It has sold phenomenally well because women like high and low for beauty as they do with fashion,” says Perdis, who notes NP Set increased his brand’s prestige business by 20 percent. “We’ve attracted new clients and many of our customers cherry-pick from both lines.” Perdis plans to expand NP Set into bath and body care this year and has signed another three-year contract with Target to distribute the line in Australia and the U.S.
Other Australian beauty brands are combining lower price points with another trend that’s thriving: natural or organic ingredients. Consumers here are drawn to natural products infused with a scientific edge and medium price point, says Brett Riddington, general manager of cosmetics at David Jones, Australia’s largest department store chain with 35 flagships.
Tucked within the store’s beauty floor is Body and Soul, an open-sell area with 70 such brands. Body and Soul accounted for 15 percent of David Jones’ total beauty area, though gained more space in new stores, says Riddington. “Australian beauty customers are very educated, and now they want natural or organic products with technology in it to make them work.”
Victoria’s Secret Angel Miranda Kerr, who is also the face of David Jones, launched her skin care line, Kora, exclusively in the store’s Body and Soul area late last year. Kora’s face and body products are formulated with antioxidant- and vitamin C–rich juice of the noni tree that grows wild in the Australian bush.
Holding court in Australia’s natural cosmetics arena is 25-year-old Jurlique, which formulates face, hair, body and baby products with herbs and botanicals cultivated on the brand’s own 153-acre farm in the hills of South Australia. Jurlique has 17 flagships in Australia and reported 20 percent growth in total retail sales, according to Sam McKay, managing director for Australia and Asia.
McKay identified sales drivers as the Asian and duty free markets, though Australia continued to have low-double-digit growth in 2009. “Natural has become a mainstream category and you have to have a point of difference, so we are now focused on telling our story, reinforcing our heritage and the authenticity of ingredients from our farm,” he says. The company is currently readying a five–stockkeeping unit, natural-based whitening skin care line for an early 2011 launch in Asia.
That desire for natural ingredients has global beauty industry manufacturers eyeing Australia’s unique indigenous herbs, flowers and trees as future resources. “Nature is a part of Australia’s DNA, and its flora is mostly unchartered by the global beauty brands,“ says Michel-Henri Carriol, president of Trimex, a Sydney-based firm that distributes, markets and manages 35 brands, including Versace, Prada and Laura Mercier, and holds a joint venture with the Clarins Group for Australia, New Zealand and the Pacific Islands. The firm recorded $119 million in retail sales last year, up single digits on 2008, and propelled Clarins to the country’s topranking prestige skin care brand in 2009.
Carriol says Christian Courtin-Clarins, chairman of Clarins Group, will spend two weeks with an Australian Aboriginal tribe in remote northern Western Australia in May, where he will participate in a spiritual ceremony and learn how Aboriginal people use native plants. “He’s recognized there is something here to be discovered,” says Carriol.
Meanwhile, Trimex recently signed on Kilian’s artisanal scents to meet Australian consumers’ fragrance tastes, which have evolved in recent years from designer brand–centric to savvy and individualistic. “The consumer once had a very British idea of beauty. Now, it’s American driven,” says Jean-Marc Carriol, executive director of Trimex, and Michel-Henri’s son.
He also says Trimex views Australia and its 22 million inhabitants as the perfect pilot country for fledging beauty brands or products hoping for a hit on U.S. soil. “Australia is big enough to be a proper test run, but much cheaper, and is a good indicator as the distribution channels are similar to the U.S.—the beverage industry is already doing this and launched brands in America after a successful trial here,” he notes. Cosmax, too, is responding to the country’s increasingly sophisticated tastes. Currently, it distributes fragrances including Dolce & Gabbana, Burberry and Gucci, and will expand into color cosmetics and skin care with the launch of Burberry’s makeup line later this year. “Young people are staying home longer so they have a bigger disposable income, and they’ve shown they like to spend that on beauty,” says managing director Frank Breen.
A mix of edgy national retailers is also spurring on spending. Jo Horgan has garnered international attention for Mecca Cosmetica, her innovative beauty boutique that has grown into 24 stores in Australia and New Zealand. The clean-lined stores exclusively sell brands such as Nars, Stila, Murad and made-to-order fragrances by Le Labo. Horgan also operates Kit, a chain of 11 hip boutiques that cater to a younger, trendier customer. Altogether, Mecca Cosmetica and Kit account for 5 percent of the Australian beauty market’s retail sales. There’s plenty of room for more, though, says Horgan, who will open another three Mecca Cosmetica stores by next year.
“There’s a solid and traditional department store channel that has such a large presence, and if you want to enter the market, you have to be nimble and take a truly consumer focus—what we have been successful at,” says Horgan. “There is quite an entrepreneurial approach to beauty in this market, which makes it much more fast paced and fun.”