Developments and Expectations in Turkey's Cosmetics and Cosmetic Packaging Sector

Cosmetics Sector

Turkey's cosmetics sector is experiencing rapid growth and ranks as the most competitive consumer market sector. Many companies operating in the sector are large-scale operations affiliated with multinational partnership companies. One of the most important characteristics of the cosmetics sector is competition among firms. There is intense competition at the retail end of the sector. Particularly in recent times, competition has intensified in the category featuring brands targeting middle-income groups. Reasonably priced and trendy products offered by certain major brands in their stores or kiosks in shopping malls are receiving strong consumer interest. In the domestic market, the sector faces intense competition particularly in the category comprising brands targeting the 'middle' segment. Acquisitions and new investments in the sector are primarily directed towards brands targeting the middle-income bracket. Production, which amounted to 643 thousand tonnes and USD 4 billion in 2012, reached 807 thousand tonnes and USD 4.7 billion in 2016. Over the past five years, production showed an average annual increase of 5.8% by volume and 3.5% by value. Production is expected to reach 842 thousand tonnes and USD 4.78 billion by the end of 2017. Turkey's cosmetics sector continues to show rising export trends. Sector companies now export to over 190 countries. The sector's main export markets are ranked as Iraq, Iran, Russian Federation, Germany and France. Exports, which amounted to around 177 thousand tonnes and USD 621 million in 2012, increased to 189 thousand tonnes and USD 696 million in 2016. Exports, which showed an average annual increase of 2.9% over the past five years, are expected to reach 197 thousand tonnes and USD 698 million in 2017.

In 2016, Turkey generated a trade surplus of 47 thousand tonnes in cosmetics products, but recorded a deficit of USD 419 million by value due to import prices being higher than export prices.

The sales volume of cosmetics products in Turkey's domestic market has exceeded USD 5 billion. Domestic market consumption, which amounted to around 579 thousand tonnes and USD 4.471 billion in 2012, increased to 760 thousand tonnes and USD 5.088 billion in 2016. Over the past five years, the domestic market has grown at an average rate of 7% by volume and 3.3% by value. Market volume is expected to reach 797 thousand tonnes and USD 5.3 billion in 2017. In the ranking of best-selling products in Turkey's domestic market, skincare occupies first place with a 34% share, followed by hair care with 24% and makeup products with 17%. The cosmetics sector holds an important share in Turkey's economy. The sector creates employment opportunities for tens of thousands of people. The cosmetics sector, which serves 200,000 sales points reaching every home and business each day with a variety of products, accounts for 20% of total national advertising expenditure. Consumer disposable net income, product prices and advertising heavily influence cosmetics demand. Due to continuously increasing competition, many companies in the sector incur high advertising expenses to bring their products to market. Turkey's cosmetics products sector has significant potential. Rising living standards, increasing disposable income per capita and an aging population are driving higher demand for cosmetics products.

Cosmetics Packaging Sector

Parallel to Turkey's cosmetics manufacturing, cosmetics packaging production and consumption continue to grow. Production of cosmetics packaging, which amounted to 505 thousand tonnes in 2012, increased to 585 thousand tonnes in 2016, while domestic consumption in the same period rose from 440 thousand tonnes to 510 thousand tonnes. In Turkey's total cosmetics packaging sector, approximately 8% of consumption is met through imports, while approximately 20% of production is exported. Turkey generates a trade surplus in cosmetics packaging. The trade surplus reached approximately 75 thousand tonnes in 2016. In Turkey's total cosmetics packaging materials consumption, rigid plastics account for 50% and flexible plastics account for 10%. Based on this assessment, plastic accounts for approximately 60% of total cosmetics packaging materials. After plastics, paper and board account for 15% and metal and glass account for 10%. Creative and efficient modern packaging, in addition to extending the shelf life of the product it contains, attracts customer attention and helps increase product sales. Since the cosmetics market is highly consumer-focused, aesthetic packaging plays an important role in cosmetics product sales. Increasing consumer disposable income and beauty awareness are the most important factors driving higher demand for cosmetics packaging materials. Changes in consumer lifestyles and pace of life require cosmetics to be packaged in more convenient and aesthetically pleasing ways.

In Turkey, 68 companies operate in the plastic cosmetics packaging sector, with 78% of these companies located in Istanbul. Companies operating in Izmir and Kocaeli account for 6% of the total number of firms.

In the plastic cosmetics packaging sector, between 2010 and 2015, production increased at an average annual rate of 5.4%, rising from 262 thousand tonnes to 341 thousand tonnes, while imports increased at a rate of 7.9%, rising from 14 thousand tonnes to 21 thousand tonnes. During the same period, exports increased at a rate of 11.3%, rising from 47 thousand tonnes to 81 thousand tonnes, and domestic consumption increased at a rate of 4.2%, rising from 229 thousand tonnes to 281 thousand tonnes. In 2015, 24% of production was exported and 6% of domestic consumption was met through imports. Packaging material depends on the type of cosmetics product to be packaged. Continuous innovation is critical in the cosmetics packaging sector to gain competitive advantage through effective packaging. Companies driving the sector are increasing their research and development activities in cosmetics packaging materials to boost cosmetics product sales and are introducing innovative packaging solutions to the market. It is acknowledged that plastics are the most suitable packaging materials for innovation in cosmetics product packaging. For this reason, particularly the demand for rigid plastic cosmetics packaging materials is expected to increase progressively in coming years due to its superior properties such as coloring characteristics, cost advantages, easy storage and transport, and reliable protection. Barbaros Demirci / PAGEV Consultant