The NPD Group Reports Premium Skincare Products See Growth in China

Business Wire, June 26, 2008

Consistent with U.S. and French Market Trends

PORT WASHINGTON, N.Y. -- According to The NPD Group, Inc., a leading market research company, sales of premium facial skincare products have seen growth in China* in 2007.

In China, sales of prestige premium products, those priced at 800 CNY (about $113 US) and above, grew from 28 percent of the dollar share in the first half of 2007 to 31 percent in the second half of the year.

According to NPD, there is also growth in super premium skincare products in China, those selling for 1500 CNY (about $214 US). Super premium products made up 10 percent of all facial skincare sales in the first half of 2007 and grew to 15 percent of sales by the second half of the year.

"Women in China are willing to spend top dollar to look younger. The biggest sellers are anti-aging products that are priced much higher than the average facial skincare products," said Edward Wang, manager of China Beauty, The NPD Group. "Women believe if it costs a lot, and is a well-known brand, then it must be good," said Wang.

Skincare is the biggest category in the prestige beauty industry in China. Seventy percent of all dollars spent on beauty products in China are spent on skincare. Facial skincare products make up a large portion of the overall skincare category. Nearly three out of four (73%) skincare products purchased are for the face. The second largest category is makeup, which equals 17 percent of all beauty dollars, and the third is fragrance, which equals 13 percent of all beauty dollars.

"The beauty industry in China is an emerging market and I expect to see continued growth in the coming year, with skincare products at the forefront," said Wang. "We are seeing more advertisements in China both in magazines and on television for premium-priced anti-aging products. These ads play an important role in educating women about skincare usage in China," said Wang.

Similarities to U.S. and French Market

Trends in China are comparable to what is happening in the U.S. market, where, premium facial skincare dollars were up 11 percent in 2007 compared to 2006 and have been up double-digits every year for the past five years. Dollar share from products priced $70 and above has more than doubled in the past five years, and in 2007 topped out at 34 percent sales of prestige skincare face products.

Super premium skincare products priced at $150 and above now make up nine percent of the total prestige facial skincare market and have seen dollar sales grow ten-fold in just five years. Comparing 2007 to 2006, dollars were up +30% to $186.1 million.

"We see this as a truly global trend with a similar shift to premium priced skincare in France, Italy as well as China. In the U.S., we know that women will pay for products they believe in. According to NPD's Skincare Track 2007 study, more than three out of four women agree with the statement, 'I don't mind paying more for a skincare product that really works,' " said Karen Grant, vice president and global beauty industry analyst, The NPD Group.

In France in 2007, sales for the overall skincare market increased three percent compared to 2006 with an average price of EU 36,90 ($57.20 US). The premium facial skincare market, products 70EU ($108.50 US) and above was up 12 percent in 2007 vs. 2006, with sales of 145,4MEU ($225.4m US). Premium facial skincare products now make up almost a quarter (23%) of the total skincare market.

Anti-aging products are the main driver of growth in premium skincare, but there is also growth in moisturizers, gift sets, suncare products and men's skincare.

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The super premium anti aging products, priced at 150EU ($232.50 US) and up, are also growing. In 2007, super premium products made up one-sixth of the total anti-aging sales and increased seven percent vs. 2006, on top of a double digit increase the year earlier. As of April of this year, despite the economic situation in France, sales of super premium products continue to rise 13 percent year to date vs. the same time a year earlier.

"We have some consumers in France who expect very high quality when they buy a beauty product, particularly a skincare product," said Martine Ringwald, vice president beauty Europe, The NPD Group. "Women are looking for unique and rare ingredients in the premium skincare products they buy. These consumers are willing to pay a lot if the product lives up its claims," said Ringwald.

*The NPD Group tracks sales of prestige beauty products in 6 major cities in China in 2007, and has expanded the service to 12 cities in 2008.

About The NPD Group, Inc.

The NPD Group is the leading provider of reliable and comprehensive consumer and retail information for a wide range of industries. Today, more than 1,600 manufacturers, retailers, and service companies rely on NPD to help them drive critical business decisions at the global, national, and local market levels. NPD helps our clients to identify new business opportunities and guide product development, marketing, sales, merchandising, and other functions. Information is available for the following industry sectors: automotive, beauty, commercial technology, consumer technology, entertainment, fashion, food and beverage, foodservice, home, office supplies, software, sports, toys, and wireless. For more information, contact us or visit http://www.npd.com/.