Carlos Ramón Berzunza Sánchez
Director General
CANIPEC
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View from the Top

Cosmetics and Personal Care Market Ripe for Growth

Wed, 09/09/2015 - 11:25

Q: CANIPEC incorporates the National Chamber of Cosmetics Products and the National Association of the Home and Personal Care Industry - what is the association’s focus?

A: CANIPEC was initially called the National Chamber of Industry and was first designed as a branch of the National Chamber of the Transformation Industry (CANACINTRA). One of the most influential moments in the history of the Mexican chambers was when the requirement to operate as a government subsidiary was annulled. Previously, a company could not form part of the business industry without belonging to a chamber, but this clause was declared unconstitutional by the Supreme Court of National Justice due to its violation of freedom of association laws. In this way, each chamber was given the freedom to recruit companies as affiliates by offering powerful incentives. At CANIPEC, we prioritize the generation of added value, which means creating an agenda that propagates interest and supports our members. In 2010, a ten-year strategy was formed by CANIPEC affiliates in the cosmetic sector in order to align our values with the companies’ individual business plans. In a new initiative in 2011, we decided to incorporate the home care industry into our operations, and since then we have represented both industries and currently have 65 affiliate companies, representing approximately 80% of the market of each business area. Currently, Mexico is the second largest market in Latin America with a value of more than US$15 million between cosmetics and personal care products.

Q: What are the main features of this ten-year strategy?

A: We have two strategies, one designed for cosmetics, drafted in 2010, and the other for the domestic care sector that was completed in 2014. Both have various commonalities since one of our main aims was to incorporate both industries under the CANIPEC umbrella in order to generate synergies. These strategies have similar objectives in developing the national and international markets and attempting to strengthen exportations from Mexico. Currently, Mexico is in receipt of a significant amount of foreign direct investment and also possesses a strong national investment sector. In 2014 we exported US$3.9 billion worth of home and personal care products from Mexico and we imported approximately US$1.9 billion, representing a surplus of almost two to one. Within this industry, Mexico is the biggest exporter in Latin America, and at the moment we export more than the rest of Latin America combined. Currently we are in 11th place in cosmetics and 12th in domestic care products in terms of exports but one of our long-term goals is to become one of the principal exporters on a global level.

Q: What sort of growth has the market seen in recent years and how much potential is there for continued momentum?

A: The market has significant potential and, although through our strategies we have achieved significant growth, we must continue capitalizing on the momentum. The continuous expansion of this sector is around 5-6% annually, with the exception of 2014, a particularly complex year in which the personal care industry grew less than 1% and that of domestic care grew by about 3%. This environment was caused by various factors including the global economic situation, and variations in the conversion rates. Since all our measurements are taken in dollars in order to compare them with other countries, and internal circumstances like modifications in tax laws.

Q: What are the main sales and distribution networks for CANIPEC members and to what extent is this aspect changing?

A: The majority of our affiliates manufacture personal care or home care products, or belong to the value chain within this industry. We also work with companies that provide raw materials, assembly plants, traders and manufacturers of own label goods. This industry has four distinct sales channels. Firstly, the direct sales channel constitutes companies that operate through sub-contracted selfemployment, mainly through sales catalogs. Secondly, there are companies dedicated to retail sales, which generally tend to be convenience stores. Thirdly, there are prestige stores, like department stores and pharmacies. Finally, we have companies using specialized channels to distribute products, like dermatological pharmacies, spas, or professionals within beauty salons. Different sub-sectors within this market are facing an uneven evolution and one of the challenges we face is coordination of the entire market due to fluctuations in individual products. Certain products face permanent demand but others see sales corresponding with delimited periods and seasonal factors. It is not possible to determine a generalized behavior but we have seen a strong rise in own brand products.

Q: How important is it for CANIPEC to help foster innovation within the industry and what are your main strategies in this regard?

A: This industry is highly focused on R&D of new products and as a result invests heavily in this area. Our objective as CANIPEC is to create a competitive, innovative, and global business, providing added value across the industry. This covers everything from educational tools to support business decisions and we also try to provide members with useful figures and trends within the sector. The industry is extremely open to free trade, and as a result we carry out constant information exchanges with our counterparts in other countries and disseminate the trends that our companies have seen. We also try to provide our members with a more favorable business climate so that the companies can expand in both national and international markets. To facilitate foreign trade we are working closely with the government on various initiatives. Last week we attended a summit of the Pacific Alliance in Peru, which was attended by Enrique Peña Nieto along with his Latin American counterparts. These alliances present excellent opportunities, and through communication between the Business Chambers of Colombia, Chile, Peru and Mexico we managed to obtain an agreement ratified by the representatives of each country in order to allow us to present our respective governments with a unique plan to simplify the necessary negotiation processes. Our proposal is angled towards a regulatory convergence, which would facilitate market access to comply with the regulatory norms of our country, therefore fostering bilateral and reciprocal trade. These initiatives started by consensus between private sector agencies three years ago. Government representatives in the Ministries of the Economy and various health authorities analyzed the proposal and decided to approve it. This provides solid evidence of the work that the industry can perform through collaboration and has served for the implementation of better practice.

Q: Is the industry affected by the introduction of low quality products from China or India?

A: To overcome this challenge, CANIPEC is promoting more educated consumption. Our companies always seek to guarantee that the products are secure and trustworthy, since strong investments are made in the creation and promotion of their brands and therefore employing bad practices would be detrimental to their business. The regulatory authorities of each country must ensure the health of consumers, and we are working with the various authorities to promote regulatory controls within the industry. We are collaborating with COFEPRIS, PROFECO, and IMPI among others, but we must also raise consumer awareness by implementing protocols to guarantee the purchase of legitimate products, beginning with the use of legitimate distribution channels. On occasion, misleading advertising campaigns have meant that companies have claimed that products belong to a different sector or have made unsubstantiated claims about the efficacy of a product. This affects consumers and the industry equally, in terms of wasting money and fostering unfair competition. The companies that form part of CANIPEC have created a Code of Self-Regulation and Advertising Ethics for Cosmetic Products and Homecare Products (COSMEP) which incorporates 14 principles such as legality, veracity, honesty, fair competition, respect, dignity, and comparative advertising among others.

Q: With which other organizations are you collaborating?

A: We are collaborating with various organizations, such as SEMARNAT with which we have now created an agreement for the promotion of sustainable consumption. We are also working with the Undersecretary of Industry and Commerce of the Ministry of Economy in order to increase the strategic value of the personal care and home care sectors. We are currently implementing complex protocols with various stakeholders in order to promote the development of the sector, such as the integration of productive chambers that have the potential to generate more than 185,000 direct and indirect employment opportunities, notwithstanding the income generated from self-employment. We work closely with the Undersecretary of External Commerce, the Undersecretary of Industry and Commerce, and the Undersecretary of Competition and Regulations. We also collaborate with the legislative to strengthen the regulatory requirements of the sector using international practices as a baseline.

Q: What are the main trends in the personal care sector?

A: We observed an increase in the masculine care market. Previously, there were very few products focused on men and now we are seeing that the stigma associated with these products has declined. However, certain sectors such as solar protection products require promotion, as Mexicans tend not to use enough solar protection to combat the damaging effects of the sun. CANIPEC is highly involved in advertising and regulation and in promoting an informed consumption, providing the consumer with product information, tips, recommendations, and correct usage instructions. Additionally, we make a concerted effort to discredit inaccurate industry information provided to the consumer.