British Shoppers Highest Spenders On H&B In Europe
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Carol Ratcliffe, Retail Analyst at Verdict Research, and co-author of the report, said, "The average UK consumer spends 375 a year on health & beauty products  far more than most of our European neighbours.  We spend almost 50% more each year than the Spanish for example, and 43% more than the average European."

Table 1: showing per capita expenditure on Health & Beauty products in the six largest EU markets for 2007

Note: Currency conversions at annual average exchange rates
Source: Verdict Research

 The UK's high level of spend per head can be attributed to easy access to a wide selection of health & beauty products, a strong consumer appetite for innovative and upmarket items and a shift to more premium, higher priced, product. This high level of spending combines with its large population to make the UK the second biggest market for health & beauty products in Europe, behind only Germany.

But British retailers have made only a limited impact on mainland Europe. Of the top six health & beauty specialists in the EU, only one, Alliance Boots, is from the UK (although even it is planning to relocate its headquarters to Switzerland). Instead, Germans dominate the leaderboard, occupying four of the top six places, while the leading retailer is Hong Kong based A.S. Watson, part of the Hutchison Whampoa group.

Verdict Research argues that the leading German retailers (Schlecker, dm-drogerie markt, Rossmann** and Douglas) can attribute their success in part to the comparatively consolidated nature of German health & beauty retail and the favourable central location of the country for international expansion. "In contrast, the most successful UK specialists are often pharmacy-focused, which can make international expansion tricky due to local regulations over pharmacy ownership," comments Ratcliffe.

The report also notes the dramatic rise of A.S. Watson. From a market share of just 1.2% in 2002, A.S. Watsonhas expanded through a series of acquisitions to take an estimated 5.3% of the EU health & beauty market in 2007. A.S. Watson now has 10 chains in the EU: Marionnaud, Superdrug, Kruidvat, Ici Paris XL, Savers, Trekpleister, Drogas, The Perfume Shop, Watsons and Rossmann*.

Schlecker, in third place with an estimated market share of 4.3%, has the largest amount of store space. With over 14,000 stores Schlecker has more than double the number of A.S. Watson and more than five times that of second-placed rival Alliance Boots. Though its stores are typically small compared to those of other major retailers, this massive network gives it the largest amount of floorspace by a significant margin. However, it also has the least productive space due to its value positioning and the cannibalisation of sales due to an over-intensive store network in its core domestic market of Germany where, according to the retailer, customers can find a Schlecker outlet every three kilometres.

Table 2: showing the leading health & beauty retailers in Europe

Source: Verdict Research

Romania, Estonia and Latvia are fastest growing markets

The 12 new members of the EU are attracting major investment from the likes of Douglas and dm-drogerie markt because of their high growth rates and future growth potential. With stiff competition in the mature EU markets and weak consumer confidence likely to limit spending growth in the short term, there is much to be gained from geographical diversification into these smaller markets. 

Verdict Research examined retail sales of health & beauty products across the 27 countries of the European Union for its latest report, and found that Romania, Estonia and Latvia have seen the fastest growth - albeit from small bases. 

Spain has been the fastest growing of the major EU markets (Germany, UK, France, Italy, Spain, Netherlands). Spanish category expenditure increased by almost a third between 2002 and 2007  more than twice the rate of any other major market. This has been driven by strong economic growth with Spanish GDP rising 44.0% over the period.

Table 3: showing the 2007 Health & Beauty market size in the fastest growing EU markets

Note: Currency conversions at annual average exchange rates
Source: Verdict Research

Date article published: 22/08/2008