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| # Philippines: Cosmetics Industry                                     |
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| Dey Robles                                                            |
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| Date (08/2007)                                                        |
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####### Summary

The Philippines continues to be an excellent market for sellers of
US-brand cosmetics, toiletries, and personal care products. Total
imports of cosmetics, toiletries, and personal care products (lip and
make-up, perfumes, soaps and shampoos, skin and nail care preparations)
from all sources were valued at \$148 million in 2006.

Although domestic production dominates the cosmetics industry, imports
continue to grow. U.S. brands still maintain their reputation for high
quality and name recall among Filipino consumers who have an affinity
for US products. Among third country suppliers, Thailand is a top
exporter, as some cosmetics and most toiletries for sale in the
Philippines come from Thailand.

Among the top American imports in the sector are lipsticks, oil-free
make-up foundations, perfume, and skin care and hair care products.
American firms such as Avon, Colgate-Palmolive, Johnson & Johnson,
Procter & Gamble, and Sara Lee have manufacturing facilities in the
Philippines and other ASEAN countries with their branded products
readily available in most retail outlets.

As with most Philippine purchases, price is a primary factor for
consideration.

####### Market Demand

The Philippines imported cosmetics, toiletries, and personal care
products valued at \$148 million in 2005. Thailand was the top supplier
with a 43% market share; Malaysia with 22%; and the U.S. with 6%.

Imports from Thailand and Malaysia are primarily toiletries that were
formerly manufactured in the Philippines. These products, which are
competitive with locally produced goods, have eaten into U.S. market
share.  Thailand alone supplies 89% of the total shampoo market, but
industry notes that most of these products are also foreign brands. Even
local cosmetics and toiletries are U.S. brands manufactured by local
subsidiaries like Avon, Colgate-Palmolive, Johnson & Johnson, Procter &
Gamble, and Sara Lee.

Medicaments and dermatological agents (glutathione, metathione,
tretinoin, etc.), which are used 'as is' or as ingredients in cosmetic
and skin care formula, are gaining popularity. While Caucasians invest
in tanning products and go to great lengths to have glowing, tanned
skin, Filipinos are discovering the whitening (bleaching) and anti-aging
effects of the abovementioned products on their skin.

Local manufacturers of cosmetics, toiletries and personal care products
use whitening ingredients to address local and export demands. Most
companies now include a whitening component in their entire product
line, from soaps and moisturizers to toners and sunblocks and creams.
Philippine-made cosmetics, toiletries, and personal care products are
exported to other countries, most notably to the Middle East. Some local
products with whitening properties also contain natural and organic
ingredients from locally available sources such as green and ripe papaya
and *kalamansi*, a local lime. Other skincare preparations may contain
locally sourced avocado, aloe vera, seaweeds, or even alum.

The demand for cosmetics and hair, skin and nail care products continue
to grow with the increasing awareness for health and beauty.
Grooming-conscious consumers (mostly female) drive demand for make-up
and grooming products that are especially prepared for young skin, and
scents that are suitable for young consumers.

####### Market Data

Total Cosmetics, Toiletries and Personal Care industry is estimated at
US\$740 million, based on industry assumption that 80% is local
production, and 20% of total market is imported.

+-------------+-------------+-------------+-------------+-------------+
| ##          | **Total     | **U.S.A.**  | *           | *           |
|             | Imports**   |             | *Thailand** | *Malaysia** |
+-------------+-------------+-------------+-------------+-------------+
| 2006 TOTAL  | \$          | \$8,604,298 | \           | \           |
|             | 147,637,693 |             | $62,704,921 | $33,443,495 |
+-------------+-------------+-------------+-------------+-------------+
| 2005 TOTAL  | \$          | \$8,538,441 | \           | \           |
|             | 132,592,122 |             | $51,352,661 | $35,512,296 |
+-------------+-------------+-------------+-------------+-------------+

Source: National Statistics Office

Total imports of Cosmetics, Personal Care Products and Toiletries grew
by 11% from approximately \$133 million in 2005 to about \$148 million
in 2006. The Philippines imported about the same amount of Cosmetics,
Personal Care Products, and Toiletries from the U.S. in 2005 and 2006.
Imports from Thailand made the biggest headway with a 22% increase from
last year while imports from Malaysia dropped by 6%.

The U.S. is strongest in eye and lip preparations; nail care; hair
lacquers; and bath salts. These are products that have little or no
domestic manufacturing operations.

####### Best Prospects

Hair care and skincare products (cleansers, toners, moisturizers,
whiteners), and make-up have best prospects for U.S. manufacturers in
this market.

A growing number of female consumers spend on facial and underarm
whitening products, hair rebonding, and quality make-up products.
Colored pressed powder; liquid foundation; rouges and blushers; and
scents, toilet water, colognes, and body sprays, have always been
consumer favorites.

Products for men and the youth also have good prospects. Although the
majority of buyers are still women, marketing geniuses have persuaded a
growing number of men to be conscious about grooming and looking good.
Manufacturers and advertisers have also identified the youth as a huge
consumer market sector and have positioned products and brands to target
them.

####### Key Suppliers

Some of the major domestic manufacturers are Avon Philippines, Cherry
Laboratories; Colgate Palmolive Philippines; J&J Philippines; Jemica
Cosmetics Manufacturing; S A Goldon Philippines Corporation; and Splash
Corporation/Hortaleza Beauty Center (HBC); while imported products
include such brands as Avon (some Avon products are imported); Sara Lee;
Mary Kay Cosmetics; Maybelline; Dial and Lander Products; Shiseido; Max
Factor; L'Oreal; Kanebo; and numerous other brands.

Besides toiletries and personal care products, which are available in
supermarkets, drugstores, and convenience stores, market top-sellers in
cosmetics are those that are distributed via direct sell -- Avon, Mary
Kay, Sara Lee. Majority of these products are US brands. These imported
goods are not only considered quality products, they are also price
competitive. If the choice between a locally manufactured product and an
imported one is a few pesos, a consumer would likely buy the imported
brand.

####### Prospective Buyers

Since toiletries and personal care products are essential to grooming,
prospective end-users are technically, the entire population. In
reality, however, about 60% of the population have disposable income or
some means of livelihood to afford basic grooming products. The rest
(40%) are dependents who do not purchase.

Market demand drivers are the country's growing population; more women
joining the workforce; better job opportunities and improved employment;
and a general awareness for good grooming.

Cosmetics spell the difference between social classes. High-end make-up
and skin and hair care have a market among women of leisure and women
executives. Middle class women buy imported as well as local cosmetics,
but may splurge on a signature cologne or lipstick from time to time.

A growing number of Filipino women are now also using whitening
(bleaching) and anti-aging products. Industry speculates that this is a
result of media influence \-- advertisers use movie stars and other
popular role models in their promotional campaigns. Movie stars either
have glowing, tanned skin or white and luminous complexion.

While majority of buyers are female, a growing number of men are now
more conscious about looking good. Many products are also being
developed for the youth sector.

**Market Entry**

The best way for a US company to sell to the Philippine market is by
working through a distributor who would register its products with the
Bureau of Food and Drugs and distribute them nationwide through dealer
or agent networks. This will ensure broad exposure for their products. A
local distributor would be responsible for a registered product that is
in the market.

Laws and regulations governing cosmetic products, including
registration, may be found in the Bureau of Food and Drugs website:
http://www.bfad.gov.ph/

Generally, local and imported cosmetic products are sold in retail
outlets -- specialty stores/boutiques, department stores, and most drug
stores and supermarkets.

 \
High-end cosmetics, personal care products and toiletries are usually
found in specialty stores or a special section of department stores. 
More affordable brands are in department stores and drug stores, or sold
through multi-level marketing.

 \
Print and broadcast media are important when introducing a product in
the Philippines to help build brand name and product recall. Most of the
popular brands, whether local or imported, promote through various
advertising media -- print, billboard, and TV.

The Philippines imposes 1%-10% tariff duty and a 12% value-added tax
(VAT) on imported cosmetic products.

####### Market Issues & Obstacles

Restrictions, allowable active ingredients, and other registration
requirements are also available in the aforementioned weblink of the
Bureau of Food and Drugs.

####### Trade Events

COSMOPROF ASIA 2007

November 14-16, 2007

Hong Kong Convention Centre

Hong Kong

<http://www.cosmoprof-asia.com/>

HOLISTIC HEALTH ASIA'08

February 14-17, 2007

Philippine Trade Training Center

Manila, Philippines

Contact: Ms. Marie Atchada

GSMI/G-Events

Phone: (632) 633-2002; 633-1452\
Fax: (632) 634-1702; 634-2387

####### Resources & Contacts

**Bureau of Food and Drugs (BFAD)**

Prof. Leticia Barbara B. Gutierrez, Director

Phone: (632) 807-0721/36 Fax: (632) 807-0751

Email: lbgutierrez@bfad.gov.ph

Mr. Joshua G. Ramos, Deputy Director

Phone: (632) 842-5606 Fax: (632) 842-5606

BFAD, Civic Drive Filinvest Corporate City, Alabang

Muntinlupa, Manila 1781

Web Site: www.bfad.gov.ph

**Chamber of Cosmetics Industry of the Philippines, Inc.**

Mr. Cecilio K. Pedro, President

Phone: (632) 823-8072 to 79 Fax: (632) 823-8881

Email: cecilio@hapee.com.ph

Km 15, West Service Road, South Superhighway

Paranaque City 1700

Philippines

####### For More Information

The U.S. Commercial Service in Manila, Philippines can be contacted via
e-mail at: <Dey.Robles@mail.doc.gov>; Phone: (632) 888-6078; Fax: (632)
888-6606; or visit our website:
[www.buyusa.gov/philippines](http://www.buyusa.gov/philippines)

####### The U.S. Commercial Service --- Your Global Business Partner

With its network of offices across the United States and in more than 80
countries, the U.S. Commercial Service of the U.S. Department of
Commerce utilizes its global presence and international marketing
expertise to help U.S. companies sell their products and services
worldwide. Locate the U.S. Commercial Service trade specialist in the
U.S. nearest you by visiting <http://www.export.gov/>.

*Disclaimer: The information provided in this report is intended to be
of assistance to U.S. exporters. While we make every effort to ensure
its accuracy, neither the United States government nor any of its
employees make any representation as to the accuracy or completeness of
information in this or any other United States government document.
Readers are advised to independently verify any information prior to
reliance thereon. The information provided in this report does not
constitute legal advice.*

*International copyright, U.S. Department of Commerce, 2006. All rights
reserved outside of the United States.*