Industry Analysis: Global Cosmetic Manufacturing
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Global Cosmetic Manufacturing – Industry OverviewThe global industry of cosmetic manufacturing is comprised of different segments which include skincare, haircare, make-up, oral care and fragrances as the main players. Just last year, the global Beauty & Personal Care Products market was estimated to be worth USD 432.68 billion, and is forecasted to reach USD 699.45 billion by the end of forecasted period of 2023 (Global Beauty and Personal Care Products Market Forecast). Today, the main players in this industry are large, multi-national corporations that operate globally. Products of this industry are sold in department stores, grocery stores, drug stores and mass merchandise retailers. A considerable rise in disposable incomes over the past decade, growth in global economies, changing lifestyles and the rising demands of skin and sun care products due to changing climates has encouraged the growth of the cosmetic market (Rajput). Additionally, the increased demand for natural, organic and vegan cosmetic options has created opportunities for manufactures to develop products to cater to these consumer needs. New product development is a large part of the cosmetic and personal care industry and a key driver for increased profits and market share. Other key drivers include demand from department stores and demand from supermarkets and grocery stores wanting to offer their customers the latest and greatest when it comes to personal care. The various product segments within this industry are affected by specific drivers, which can be understood if we assess the demand for high end cosmetics versus the demand for essential items such as toothpaste and deodorant.  Demand for some of the product segments is more susceptible to disposable income, and the demand for necessary and essential personal hygiene items tends be more stable.  According to industry market research, “when income levels rise, consumers become more willing and able to purchase cosmetics and personal-care items” and “sales of higher-priced, value-added cosmetics and toiletries tend to increase as disposable income rises because consumers no longer feel pressure to substitute with lower-priced products” (Cohen). Barriers to Entry/Threat of New EntrantsGlobal Cosmetics Manufacturing is a largely competitive industry where new entrants seek to capture market share, which can jeopardize the profitability of the existing and well established companies. The presence of larger and well established firms in the Global Cosmetics Manufacturing industry creates challenges for other manufacturers looking to enter the market –high competition discourages new entry. While there is likelihood for new entrants in this market, there are inevitable disadvantages that new entrants will face. Entry into this industry requires a high investment and comes with high fixed costs. Larger firms can be more efficient with their greater purchasing power. Additionally, large firms such as Unilever and L’OrĂ©al have the capital and resources to manufacture their own products, without having to use contract manufacturers, which can in turn lower their costs. The buying power of large firms are much stronger than smaller brands looking to break into this market. Large manufacturers are able to achieve economies of scale, producing in larger facilities and therefore able to competitively price products. New and smaller brands need to look for large investments in order to move into the packaging and production of their goods. Large manufacturing capabilities are required in order to reach big markets and expand globally, this includes machinery as well as square footage in terms of a location to manufacture. Distribution and delivery, alongside the purchasing and access of raw materials are major factors when it comes to launching a new brand or product within the global market. Many products require specific machinery to manufacture and fill – specifically when it comes to custom packages with unique dispensing features.

Larger brands are well known, usually with a good reputation, and are more likely to be trusted. These brands have larger advertising budgets and are better able to push their new products into the market, leading to a greater presence in retailers. Brand names in this industry carry an image and value, making it more difficult for a small brand to take market share away from the multi-national corporations. Many brands possess strong brand loyalty which makes them a force to be reckoned with.  It’s important to also consider the different regulations in various markets with regard to this industry. Ingredient restrictions and specific labeling requirements in the European and Asian market can present challenges when it comes to formulations, component sourcing and printing, which can drive high production costs, especially when quantities are low. Outsourcing and licensing could be an option, though the cost for research and development, as well as the investment required to make claims on any cosmetic or personal care products is high. Access to distribution channels is much more easily accessible for large corporations, and in some cases, exclusive distribution agreements are put in place, making it even more challenging for new entrants to get any space on the shelf or counter. Threat of SubstitutesThreat of substitutes is present when market needs can be satisfied by similar products developed by competitors within the space. A low threat of substitutes makes an industry more attractive (Wilkinson). When substitute products or services within an industry are high, competition is aggressive which means that profitability of the industry is compromised as is the potential for growth.Incumbents in the Global Cosmetic Manufacturing industry face threats of substitution as consumers are becoming more educated and health conscious about the products they use. As consumers become more aware of their choices they may realize that they do not need to spend money on premium products.  Spas and beauty salons services pose a threat of substitution, as do diet and lifestyle choices such as going organic, paraben free, or vegan. Cosmetic surgery has become more price effective, and common, and could be considered another substitute for Global Cosmetic Manufacturers. Given that the Global Cosmetic Industry is comprised of many competitors, the threat of substitutes is high. If customers have easy access to alternative/substitute products, suppliers lose their bargaining power. Dissatisfaction with quality and/or price can drive consumers to purchasing a substitute. The high threat of substitutes in the global cosmetics manufacturing industry means that suppliers need to tap into their markets much more closely and carefully – creating products that they know the market wants, at a price that they know consumers are willing to pay. The cost of switching cosmetic/personal care products is low, making the threat of substitutes more prevalent in this industry. Customers are more likely to switch products when it costs them little to nothing to do so. For a consumer, switching to a more preferred shampoo, perfume or bronzer requires little to no investment (especially if the bottle or pan is empty already). The products in the global cosmetic industry do not require asset specific investment to the consumer. If we think about all of the different choices on the retail shelves when it comes to cosmetics and personal care items, the options are overwhelming – again reinforcing the high threat of substitutes in this industry.

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Personal Care Products Market And Industry Analysis. (June 30, 2021). Retrieved from https://www.freeessays.education/personal-care-products-market-and-industry-analysis-essay/