+-----------------------------------------------------------------------+
| # Thailand: Cosmetic Products Market                                  |
+-----------------------------------------------------------------------+
| Nalin Phupoksakul                                                     |
|                                                                       |
| Date (07/07)                                                          |
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## Summary 

The cosmetics market in Thailand is highly competitive. Most
international manufacturers and suppliers of cosmetic products are
represented in Thailand. All of them invest heavily on promotional
campaigns as a way to retain their share of the market and to stimulate
the industry. The structure of the market is comprised of four highly
competitive sectors: hair care, make-up, skin care and perfume. Cosmetic
products from the US lead the import market with 22 percent. Perfume
products from France dominate import market with 52 percent share.
Channels of distribution for cosmetic products include direct sales,
counter sales at department stores and hanging sales at specialty
stores. The importation and marketing of cosmetic products is controlled
by the Food and Drug Administration Office of the Ministry of Public
Health. Approval by this office is required prior to the importation of
all cosmetic products.

## 

## Market Overview

The overall growth rate of the cosmetic products market in Thailand for
2007 is expected to be approximately 10 percent compared to 8 percent
for 2006. The expected growth rate is an optimistic estimation
considering the ongoing economic slowdown that began in 2005. Hair care,
make-up, and perfume products maintained single digit growth while the
skin care sector experienced growth in excess of 10 percent.

Brand image plays an important role in this market. High quality,
international branded cosmetic products are expected to do better than
medium to low quality cosmetic products and may achieve an overall
growth rate of 15 to 20 percent due mainly to positive brand image,
brand loyalty and high quality recognition. Brand retention and
identification are normally used as advertising strategies in this
market. Distributors of high quality cosmetic products tend not to
resort to price-cutting. Premiums are widely used in promotional
campaigns.

Products from the United States are highly regarded and lead the
imported market. Competition from France, Japan, the United Kingdom and
Germany is getting stronger. Perfumes from France remain the market
leader in Thailand followed by perfumes from the U.S.

Problem-solving product lines such as anti-wrinkle cream, anti-aging
facial cream, anti-dandruff hair care, and whitening facial and body
lotion have strong growth potential. Over 60 percent of Thailand's
imported cosmetic products include high-end facial cream, mostly
anti-wrinkle, anti-aging, and other skin care products. Products from
the U.S. dominate this sub-sector with approximately 32 percent share of
the market. Leading international brands include: Estee Lauder,
Clinique, Shiseido, Christian Dior, Lancome, Olay, Eucerin, La
Roche-Posay. An increasing number of products specially designed for men
have been entering the market.

Thailand remains a strong manufacturer and exporter of shampoos and
other hair care products, color cosmetics and skin care products. Local
production is mainly geared towards low to medium quality color
cosmetics (make-up, lipsticks, nail polish), skin care products (body
lotion and bar/liquid soap) and hair care products (mainly shampoo and
conditioners). Thai manufacturers of cosmetics are well known for high
quality OEM products. Cosmetic products are available in the country at
all levels of quality and brand recognition ranging from high-end,
well-known international brands to low-end, low quality, locally
produced brands. Leading international companies that have production
facilities in Thailand include Unilever, Procter & Gamble,
Colgate-Palmolive, Lancome and Johnson & Johnson.

Direct sales are the preferred distribution channel and account for 60
percent of the total market.

**Market share by subsector**:

+-----------+-----------+-----------+-----------+-------------+--------+
|           | 2004      | 2005      | 2006      | Growth      | Share  |
|           |           |           |           |             |        |
|           | Mil. US\$ | Mil. US\$ | Mil. US\$ | (Over 2005) | \(     |
|           |           |           |           | %           | 2006\) |
|           |           |           |           |             | %      |
+-----------+-----------+-----------+-----------+-------------+--------+
| Hair Care | 290       | 305       | 322       | 5           | 32     |
+-----------+-----------+-----------+-----------+-------------+--------+
| Make Up   | 278       | 297       | 319       | 7           | 32     |
+-----------+-----------+-----------+-----------+-------------+--------+
| Skin Care | 271       | 302       | 336       | 10          | 33     |
+-----------+-----------+-----------+-----------+-------------+--------+
| Perfume   | 27        | 31        | 32        | 3           | 3      |
+-----------+-----------+-----------+-----------+-------------+--------+
| Total     | 866       | 935       | 1,009     | 8           | 100    |
+-----------+-----------+-----------+-----------+-------------+--------+

Exchange rate, US\$1: 40 39 36

Sources: Industrial Estimate.

The structure of the cosmetic market in Thailand is comprised of four
main groups: hair care, make-up, skin care products, and perfume. Hair
care, make-up and skin care products have an almost equal share of the
total market at approximately 32 percent. Perfume products make up the
remaining three percent of the market. The skin care segment experienced
the highest growth in 2006 at ten percent. The perfume segment grew at a
rate of three percent in 2006 while the market for imported perfume
experienced a decrease of 12 percent for the same year.

## Market Trends

For the next few years, the Thai cosmetic product market is expected to
continue a trend of increased consumption of the following: anti-aging
skin care products, whitening products and other customized cosmetics.

Anti-aging cosmetic products in both the higher and lower ends of the
quality spectrum continue to have a strong presence in the cosmetics
industry in Thailand. Anti-aging products have become the norm among
cosmetic users-both male and female. This trend is expected to continue
for many years to come. Females seem to be more receptive to the
anti-aging concept than males. Most anti-aging products involve skin
care, especially facial care. Anti-aging facial care cream and lotion
products do very well with high-end customers with whom price is not
usually an issue. Generally, customers understand and accept the
relationship between the quality of anti-aging products and the price
where high quality usually correlates to high price.

Cosmetic products with whitening properties do very well in the Thai
market. The popularity of whitening products may be related to the dark
complexions of most Thai people and their desire to become lighter
skinned. The most popular cosmetic products containing the whitening
agent are facial creams and lotions especially those of medium to low
quality. There are not many high-end facial care products that contain a
whitening agent. Deodorant products that contain whitening agents also
do very well in the Thai market. Many roll on deodorant suppliers appear
to compete more on the basis of their product's whitening property than
the basic quality of deodorant.

The other trend that recently comes into play in this market is a
customized cosmetic designed specially for male. This trend took off
only a few years ago out of the prediction of flat growth rate of
cosmetic market that generally caters to female customers. The
customized cosmetic products open up new group of potential customer and
increase customer base in the market. The concept has not done well so
far and there are only a few players currently promote this concept.
Lever Brothers is one of the leading company that spearhead the
customized cosmetic for men. Products such as body sprays, deodorants,
and hair care specially designed and packaged for men are getting into
the Thai market. Most of them are medium quality products made by local
manufacturers.

## Import Market 

+-----------------------+--------------+--------------+---------------+
|                       | 2005         | 2006         | 2007          |
|                       |              |              | (Estimated)   |
|                       | Mil. US\$    | Mil. US\$    |               |
|                       |              |              | Mil. US\$     |
+-----------------------+--------------+--------------+---------------+
| Total Market Size     | 935          | 1,009        | 1,100         |
+-----------------------+--------------+--------------+---------------+
| Total Local           | 1,297        | 1,416        | 1,579         |
| Production            |              |              |               |
+-----------------------+--------------+--------------+---------------+
| Total Exports\*       | 572          | 628          | 722           |
+-----------------------+--------------+--------------+---------------+
| Total Imports\*       | 210          | 221          | 243           |
+-----------------------+--------------+--------------+---------------+
| Imports from the      | 46           | 48           | 55            |
| U.S.\*                |              |              |               |
+-----------------------+--------------+--------------+---------------+

\*The Thai Customs Department, Ministry of Finance

Exchange rate THB36: US\$1

In 2006, imports from the US led the import market with a share of 22
percent (\$48 million), followed by France at 21 percent (\$45 million),
Japan at 14 percent (\$30 million), China at 7 percent (\$15 million),
the United Kingdom at 7 percent (\$16 million), Germany at 4 percent
(\$10 million), and other countries including Italy, Belgium, Spain, and
Switzerland at 25 percent.

## Competition

Competition between suppliers and distributors of cosmetic products is
always strong. The prevailing economic slowdown has had an intensifying
effect on competition, especially between manufacturers of medium to low
quality body care, skin care and hair care products. Suppliers of said
products frequently introduce new marketing strategies as a way to not
only retain existing customers but also to capture a greater share of
the market by enlarging their customer base.

All leading cosmetic companies invest heavily on promotional campaigns
in order to stimulate the market. High-end international brand cosmetic
companies use women's magazines as major advertising means. Premiums and
point-of-sale promotional campaigns are also used regularly to stimulate
sales. Counter sales at major department stores are the prevailing sales
channel and account for approximately 30 percent of total cosmetic sales
in Thailand. Television is the main venue used in advertising/marketing
campaigns. Free sampling and giveaways are the two leading promotional
strategies used to introduce new products and to stimulate sales of
existing products. Unilever and Procter & Gamble are the country's
leading spenders in advertising. The major channels of distribution for
medium and low quality cosmetic products are discount, drug, and
convenience stores as well as direct sales agents.

The use of herbal ingredients as a selling point has increased,
especially amongst locally produced cosmetics. The addition of herbal
ingredients has proven an effective means of differentiation and adds
value to the products. Among the many herbal supplements used, green tea
is the most commonly used ingredient. The inclusion of a whitening agent
in facial and body care products is widely accepted by Thai buyers and
for this reason, has become a highly popular marketing tool. The
emergence and ever

increasing popularity of spa treatment among locals and foreigners has
created new demands for OEM contract manufacturing of cosmetics
specially designed for spa consumption.

The overall growth potential for the cosmetic products during the next
three years (2006-2008) is optimistically expected to be at somewhat
between 15-20 percent. With an approximated customer base of 20 million
(women between 15 and 55 years of age-mostly salaried workers),
Thailand's market for cosmetic products has a strong group of potential
buyers. Political stability after the general election expected to take
place before the end of 2007 should raise consumer confidence and
spending.

## End Users

In 2006, Thailand reported approximately 40 million inhabitants in the
age range of 15 to 55 years of age. The female to male ratio of this
segment was almost evenly split at 20 million for each group. According
to the record of the Department of Employment, Ministry of Labor, out of
the total 40 million people in this age range, 17.05 million of the
females and 19.71 million of the males were employed bringing the
combined total of employed Thais within this demographic to 36.76. These
40 million people form the major customer and potential consumer base of
the Thai cosmetic products market. The demographic can be broken down
further into three categories.

15 to 30 years of age: There are approximately 16 million people in this
age range, representing 40 percent of the total 40 million people in the
age range of 15 to 55 years of age. There are approximately 7.8 million
females and 8 million males in this demographic. Given their young age,
most of these people may still have junior employment status and may not
make very much money. This group of potential buyers is likely to fall
in the low to medium quality/price range group of cosmetic products
consumers. Five to 10 percent of the 15 to 30 years age demographic may
have the spending power to purchase higher-end quality cosmetic products
-- a result of higher family status and/or better employment due to
overseas education credentials.

31 to 45 years of age: There are approximately 16 million people in this
age range, representing 40 percent of the 40 million people in the age
range of 15 to 55 years of age. There are 8.2 million females and 7.8
million males in this group of potential buyers. They are of a mature,
working age group with mid-level to senior management. They are
considered a good prospect within the medium to high quality cosmetic
products market.

45 to 55 years of age: There are a total of 7.8 million people (4.1
million male, 3.7 million female) in this age range, representing 20
percent of the 40 million people in the age range of 15 to 55 years of
age. This group of people represent great consumer potential for high
quality/price cosmetic products. Medium quality/price cosmetic products
also enjoy great potential with this demographic.

## Market Access

The importation of cosmetic products is controlled by the Thai Food and
Drug Administration (FDA) of the Ministry of Public Health. Product
registration is required prior to the actual importation and marketing
of the cosmetic products. The registration process is not complicated,
but may take one to two months time. The basic documents required by the
Thai FDA include:

1)  A notarized Certificate of Free Sale or a Certificate of Manufacture
    issued by the manufacturer in the manufacturing country (United
    States)

2)  A full ingredient/composition listing as issued by the manufacturer

Both documents have to be notarized and legalized either by the Thai
Consulate in Washington, DC or the American Embassy in Bangkok,
Thailand.

Import Duty

  ----------------------- ---------------------------- -------------------
  HS Code No.             Descriptions                 Duty Rate (%)

  3303                    Perfume                      30

  3304                    Make Up Products & Lotion    30

  3305                    Hair Care Products           20

  3307                    Shaving Products and         20
                          Deodorant                    
  ----------------------- ---------------------------- -------------------

Official contacts for import authorization and registration of cosmetic
products are:

Food and Drug Administration

Ministry of Public Health

Royal Thai Government

Tivanont Road

Muang, Nonthaburi 11000

Thailand

Phone: 662‑590‑7273/9

Fax: 662‑591‑8480

E-mail: <siriwat@fda.moph.go.th>

Dr. Siriwat Thiptharadol - Secretary General

Cosmetic Control Division

Food and Drug Administration

Ministry of Public Health

Tivanon Road

Muang, Nonthaburi 11000

Thailand

Tel: 662-590-7169, 662-590-7441

Fax: 662-591-8468

E-mail: <cosmetic@fda.moph.go.th>

Mr. Pongpraphan Susanthitaphong -- Director

## 

## Market Entry

Direct sales (60 percent) - direct selling has been very popular for a
number of years and is expected to remain a major marketing channel for
cosmetic products in Thailand for many years to come. Direct selling is
the most effective way of introducing new medium and low-end cosmetic
products to the market. In the direct sales channel, price is more
attractive than product quality. Some of the international direct-sale
companies operating in Thailand include: Amway, Avon, Herbal Life, Nu
Skin, Nu Life, Nature\'s Best, NutriMetic.

Counter sales (30 percent) - this is a standard venue for marketing high
quality/price and well-known internationally well-known brands of
cosmetic products. There are 108 department store locations concentrated
in major cities including Bangkok, Chiangmai, Cholburi,
Nakornratchasima, Phuket, and Songkhla. Major department stores include:
Central Department Store Department Stores (17 stores), Robinson
Department Store (18 stores), The Mall Department Stores (6 stores),
Emporium (1store), Siam

Paragon (1 store), Imperial Department Stores (2 stores), ZEN (1 store),
Tang Hua Seng (1 store)

Hanging sales (10 percent) - this channel is directed toward young
buyers and the mass market for medium and low-end cosmetic products.
Major players in this sector include: Boots, Watson, Red Earth, TOPs
Supermarket, Big C, Carrefour, Testco Lotus. Major brands of cosmetic
include: Mary Kay, Maybelene, Oil of Olay, Johnson & Johnson, Procter &
Gamble, and Unilever.

One of the requirements by the Thai FDA in registering a cosmetic
product is a local contact address. This requirement limits
international suppliers to two choices: either set up an office in
Thailand or appoint local market representation. The use of distributors
or agents to import and market cosmetic products is common business
practice. A distributor or agent in Thailand facilitates market entry
and fulfils the Thai FDA's requirement of a local contact address before
an applicant may register a cosmetic product. Generally, the distributor
or agent will consider product registration as part of their job when
representing international manufacturers.

Local distributors or agents not only provide an established
relationship with buyers and end-users, they also provide assistance and
service to international manufacturers. Said assistance normally
includes product registration with the Thai FDA, customs clearing at
port of entry, warehousing and product logistics, and marketing
promotions. The distributor/agent in Thailand prefers an exclusive
rights arrangement. There are several reasons for this preference. The
leading reason is to avoid the price cutting practice that always takes
place given the presence of multiple representatives. The other reason
is the increased investment of efforts and promotional activities by the
distributor in marketing the products. With the presence of multiple
representations each distributor will more than likely hesitate to
invest in any form of promotion. It makes more sense to work with a
distributor or agent, under realistic distributorship terms and
conditions, in order to build up the business in Thailand.

## Opportunities for Profile Building

Thai Direct Selling Association

8^th^ Floor, BB Bldg., Room 3818

54 Sukhumvit Soi 21 Road

North Klongtoey, Wattana

Bangkok 10110

Thailand

Tel: 662-664-4496

Fax: 662-664-4497

E-mail: <sukanda@tdsa.org>

Ms. Sukanda Choonhachatcharachai - Manager

**Upcoming Trade Shows/Events**.

Name: Thailand Health & Beauty Show 2007

Date: November 7-11, 2007

Venue: Impact Convention Center, Nonthaburi, Thailand

Profile: International Exhibition on beauty and aromatherapy products,
spa and resort services,

Health and clinical services, cosmetic raw material, and processing
equipment.

Organizer: Department of Export Promotion

Ministry of Commerce

Website: [www.thaitradefair.com](http://www.thaitradefair.com/)

**\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_**

**ITA Team:** \[Healthcare Technologies\]

### Author/Compiler: Nalin Phupoksakul, Commercial Specialist

**Reviewers and Affiliation (ODO, FSO/FSN, MAS, etc.): James Golsen,
Commercial Attaché**

**Completion Date: 07/31/07**

####### For More Information 

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