During the five years to 2012, the revenue of the cosmetic and beauty products industry in Canada has grown at meagre 0.7% per year on average to an estimated $1.7 billion. This poor performance echoed the economic crisis in 2008 and the decline in per capita disposable income in 2009.

Increased competition

In this context, competition among cosmetic and beauty products manufacturers has risen sharply, resulting in lower profit margins. “The high and rising price of crude oil, which represents a key input in most industry products, has cut into industry profitability over the past five years,” says industry research firm IBISWorld in its report on the Cosmetic and Beauty Products Manufacturing industry in Canada.

A Jean Coutu pharmacy in Shediac, New-Brunswick

A Jean Coutu pharmacy in Shediac, New-Brunswick

Industry participants also face external competition from imports. Imports satisfy 94.9% of the Canadian domestic demand for cosmetics and have risen from 89.2% over the past five years. “As the Canadian dollar has appreciated, gaining strength against its trading partners’ currencies, foreign-made goods have become relatively cheaper domestically,” comments IBISWorld industry analyst Nikoleta Panteva. “In 2009, the Canadian dollar gained significant strength over the US dollar, causing imports to jump.IBISWorld anticipates this trend will continue over the next five years as the domestic currency continues its upward trend.

Increased competition also resulted in increased market share concentration due to major players’ ability to thrive in difficult operating environments. “Well-recognized brand names like those of Unilever and Procter & Gamble, the availability of non-discretionary products (e.g. shampoo and sunscreen) and strong bargaining power with upstream suppliers have allowed the industry’s largest players to grow even as other manufacturers have suffered,” says IBISWorld.

Better years to come

As per capita disposable income is expected to continue rising slowly in Canada, IBISWorld forecasts a stronger downstream demand from wholesalers and retailers resulting in the industry revenue to fare better over the next five years. Nevertheless, competition will remain a key feature, pushing operators out of the industry.