Beauty business turns heads in Brazil

At his hair salon in Paraisópolis, one of São Paulo’s biggest favelas, Valderan Souza is ebullient about the current state of his market.

His turnover, he says, has risen by 80 per cent over the past three years. “I would never leave here,” he says. “There are so many customers.”

Mr Souza used to work in a luxury salon in one of São Paulo’s smartest shopping centres, but he says he can make much more money in Paraisópolis.

Brazil’s favelas, or shantytowns, used to be ghettos for the poorest of the urban poor. Living conditions are often still tough but the favelas are also home to many of Brazil’s new consumers, more than 20m of whom have emerged from poverty over the past six years. Since last year more than half of Brazil’s 200m people have been classified as middle income.

The resulting boom in Brazil’s cosmetics market, along with the recent slump in the US, has made it the biggest in the world for Avon, the US direct sales cosmetics group, since the third quarter of last year. Avon said sales in Brazil were worth $1.67bn in 2008, compared with R$4.9bn ($2.1bn at the year-end exchange rate) for Natura, the Brazilian market leader.

Brazil’s beauty boom

Makeover of the favelas: improved living conditions have resulted in more than 20m Brazilians emerging from poverty over the past six years, boosting the country’s cosmetics market

The recent transformation in the lives of ordinary Brazilians owes much to the low inflation and economic stability brought by orthodox economic policies since the mid-1990s – a floating exchange rate, inflation targeting by the central bank and steady reductions in public debt – and to the expansion of income transfer programmes under President Luiz Inácio Lula da Silva since 2003. These programmes pay poor people to keep their children in school and make sure they have medical check-ups.

But while Brazil’s overall economic growth since the mid-1990s has been erratic, the market for beauty products has been rising steadily at a rate of more than 10 per cent a year, according to Abihpec, the personal hygiene, perfumery and cosmetics industry association.

“The role of women in the economy has been growing steadily,” says Alessandro Carlucci, chief executive of Natura. “Women are often the source of a family’s income and as they start to have disposable income they spend some of it on themselves.”

He says only 40 per cent of Brazilian women own a lipstick, for example, so the potential for growth remains enormous.

“Income began to be redistributed with the [inflation-busting] Real Plan 15 years ago and since then we’ve seen a fantastic curve of growth,” he says.

Brazil has become the world’s third-biggest market for beauty products after the US and Japan. And it is not only the lower end of the market that is expanding. In plastic surgery, Brazil is now the world’s second-biggest market after the US.

Denise Steiner, a dermatologist whose clients include some of the wealthiest and best-known Brazilians, says the market for cosmetic surgery has been expanding since she started practising in 1982, and especially over the past five years.

“What’s really noticeable is the number of young women wanting breast implants and liposuction,” she says. “The latest fashion is for fuller lips. Brazilians are much more interested in their appearance than Europeans.”

Mr Carlucci at Natura agrees, saying his industry is driven by the importance Brazilian women place on their appearance. Brazil’s population is concentrated along the coast and therefore near the beach, which Brazilians visit all the year round. As summer approaches, many women embark on a diet and beauty regime known as verão sem kanga, or beach-robe-free summer, often lasting for three months or more.

Another driver of sales is the climate. “Closer to the equator, you can’t get through the day without taking two showers,” Mr Carlucci says. “In Belém it’s three.” This means people use a lot of shampoo, soap and other bathing products.

Natura, like Avon, uses direct selling rather than retail distribution. Both companies have more than 1m representatives in the country (with about 30 per cent selling for both).

Mr Carlucci says this model allows Natura constantly to introduce new products – 68 per cent of its sales are of products introduced during the previous two years.

“We think Brazil will continue to be an exuberant market,” Mr Carlucci says. “This is a sector that doesn’t depend on credit and there is still a lot of room for growth.”