Personal Care Appliances in Argentina

Headlines

·         With 14% value growth and 4% volume growth in 2008, retail sales of personal care appliances surpass 4 million units representing ARS625 million in current value terms

·         Philips Argentina's decision to manufacture men's shavers locally in 2008 assures its leadership

·         Hair care appliances see retail volume sales climb 9% in 2008, due to the booming sales of hair trimmers

·         The unit price of personal care appliances rises due to inflation and increased raw material prices

·         Over the forecast period, volume sales of personal care appliances are expected to increase by 14% because of the increasing popularity of hair trimmers and the perception among young women that hair styling applications are a consumer necessity

Trends

·         Hair care appliances recorded 9% volume sales growth in 2008, largely attributable to the booming sales of hair trimmers to the 20-40-year-old age group. Multifunctional devices, such as Philips' launch of the Glam Kit in 2008, proved popular with adolescents who desired straight hair and an edgier appearance. Hair trimmer kits, like Philips M Style, continued to steal volume sales from economy products like men's shavers, since the kits were low priced and useful for shaving heads. The versatility of hair trimmers allows the appliance to function as a shaver, beard trimmer and hair trimmer, at a price that is less than half the cost of a typical men's shaver. These products especially appealed to younger consumers, who are using them in preference to the more traditional shavers.

·         Hair dryers remained the leading category in hair care appliances with a 42% volume share, and was also the primary component of the continued success of hair care appliances. The reason for good growth in hair straighteners was that straight hair became increasingly fashionable among adolescents and young adults. Also, consumers wanted to be able to reproduce salon styles at home to maintain their appearance since each new year seems to bring more stringent standards for beauty.

·         The unit price of hair care appliances increased 18% due to inflation and devaluation of the Argentinian peso relative to the currency of China and Brazil, which source most of these products. On the other hand, body shavers posted a 7% increase in its unit price in 2008, due to the increased participation of domestic products that helped offset the price rise of the imported products.

·         Men's shavers continued to gain popularity as a result of aggressive advertising campaigns in the print media by Phillips Argentina and Gillette de Argentina SA. The subsector also benefited from collaboration between Philips Argentina and Nivea to promote shavers among 20-40-year-old men. Depilators, on the other hand, suffered a drop of 24% in volume sales in 2008 as a result of its limited product offerings.

·         The most important distribution channel for the sale of personal care appliances is electrical goods retailer chains or multiples, which accounted for the bulk of retail volume sales, 51% in 2008. However, parapharmacies/drugstores is slowly gaining share as a distribution channel for personal care appliances. Well-known chains, like Farmacity SA, added these products to their portfolios to draw consumers and increase their profitability.

Competitive Landscape

·         Philips Argentina SA led sales in personal care appliances and achieved the highest increase in volume share, from 27% in 2007 to 33% in 2008. Philips Argentina was the leader in body shavers with a 68% volume share in 2008 (up from 49% in 2007), as a result of its extensive product portfolio that was further enlarged by its decision to manufacture men's shavers locally in 2008. The company also occupied the first place in hair care appliances with a 33% volume share as a result of its strength in hair dryers and hair trimmers. Philips Argentina also funded extensive advertising campaigns in the print media, including adverts for Philips Glam Kit in the newspapers, Clarin and La Nacion. The advertising along with its strong brand tradition and a product portfolio that covered every consumer need at an affordable price helped make Philips Argentina the leader.

·         GaMa Italia Srl followed Philips Argentina as the second leading company with a 10% volume share in 2008 as a result of its leading position in hair straighteners. On the other hand, Gillette de Argentina SA suffered the largest share decline, moving from a 14% volume share in 2007 to a 9% volume share in 2008. Industry sources attributed the share loss to integration problems between Gillette de Argentina SA and The Procter & Gamble Co that affected the sourcing of products from its manufacturing facilities.

·         Philips Argentina continued to launch new products with multifunction devices. The hair trimmer, Philips Multi Style, added a shaving function to a traditional trimmer and the company's new glam kits for adolescents included straightening and curling functions in a single hair care appliance.

·         The advertising campaigns for Philips Argentina's personal care appliances clearly focused on their ease of use, quality and the concept that its products offer a better experience compared to traditional appliances. The company's TV spots tended to show local celebrities, like actress Araceli González, using its products to demonstrate their effectiveness and lure potential customers.

·         The decision by Philips Argentina to manufacture men's shavers in Tierra del Fuego in 2008 in its existing manufacturing facility for consumer electronics spurred other major players in personal care appliances to evaluate the feasibility of local manufacturing operations. It is conceivable that Philips Argentina may start manufacturing depilators in the near future, or that GaMa Italia and Gillette de Argentina may begin manufacturing their products locally to protect their market share.

Prospects

·         Hair care appliances will increasingly rely on new customers, like 20-50-year-old women purchasing hair styling appliances such as straighteners and curling devices, as the driver of the anticipated 21% volume growth from 2008-2013. Because they are likely to purchase the latest models of appliances, 13-19-year-old adolescents are an important target consumer group. Because of the relatively low price of personal care appliances and the fact that many Argentinian consumers consider these products as essential items, its very likely that this product group could weather the economic downturn and deliver a good sales performance. Moreover, because of consumer dissatisfaction with private label products purchased from 2002-2005, most Argentinians will limit their trade down in personal care appliances to the economy products of well-known companies, like Philips Argentina and Groupe SEB Argentina, and will shun unfamiliar brands.

·         Body shavers, on the other hand, will probably see a further deterioration, with an expected 8% decline in volume growth over the forecast period. In view of the unfavourable economic climate expected for most of the forecast period, many consumers will turn to multifunction devices like the Philips Multi Style trimmers, in lieu of single function shavers. Depilators will also be negatively affected, as women seek more affordable and long-lasting solutions for hair removal, such as wax depilation.