Having grown consistently over the past five years, the EU health & beauty (EU H&B) market now looks set to change.
Strong growth in the EU health & beauty market, particularly in new member states, has encouraged cross-border expansion of pan-European chains. While the likes of Schlecker and AS Watson have found the EU to be a land of opportunity, smaller players have struggled. Moreover, with the increasing presence of grocers, the concentration of power is set to change the EU H&B landscape.

H&B grew faster than total retail in 2007 and looks set for another strong year. The EU H&B market (excluding consumer spend on prescriptions) increased by 3.9% in 2007 to E129.9 billion compared to EU total retail growth of 3.2%.

Leading EU H&B chains have been at the forefront in capitalizing on this growth. Each of the leading five players has grown significantly over the past five years, with AS Watson for example growing sales by 91.9% over the period. Organic growth has been key; however, like many of its EU rivals AS Watson has been on the acquisition trail buying smaller chains across the EU. This has not only helped build its scale but also provided a quick platform for expansion into new territories, particularly the fastest growing Eastern European countries.

Schlecker, dm-drogerie markt and Rossmann have also expanded at unprecedented pace, with Schlecker’s store portfolio now standing at more than 14,000 outlets. dm’s store estate now stretches to more than 1,800 outlets with over 900 sitting outside of its domestic German market, and Rossmann’s store portfolio extends to more than 1,841 stores, including 500+ outside of Germany.

Grocers such as Tesco, Carrefour, Auchan and Rewe have also had a pronounced impact on the H&B market. Their aggressive expansion, particularly into central and Eastern Europe, has led to significant change across a number of sectors, with grocers driving down prices and offering vast range authority. In H&B, a combination of low prices, convenience and own-brand products have put pressure on smaller specialists that lack a USP and those unable to compete with the grocers’ scale economies.

With the leading specialists continuing to build market share and grocers increasing participation, the outlook for smaller players looks set to get tougher. While the mature Western European economies offer fewer opportunities for mass expansion or acquisition, the new EU member states and Eastern European nations will potentially be a hive of activity as both large specialist chains and grocers look to cement their positions.

Related research: Anti-Aging & Beauty Attitudes And Behaviors