Cosmetic Market in Thailand

1. Market Overview

The overall growth rate of the cosmetic products market in Thailand in 2006 is
expected to be at 12 percent, 3 percent more than the year before. The increasing
growth is considered to be significant considering the continuing economic slowdown
and the prolonged unstable political situation in Thailand. High quality, international
branded cosmetic products are expected to do better and may have a growth rate
between 15-20 percent due mainly to good brand image, brand loyalty and perception
of good quality. 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. Perfume from France remains the market leader in Thailand
followed by perfume from the US. Hair care and make up products maintained a
single digit growth, while skin care and perfume showed better growth at 17 and 15
percent respectively. The product lines that are considered a problem-solving
cosmetic have good growth potential. They include products such as anti-wrinkle
cream, anti-aging facial cream, and whitening facial and body lotion. More cosmetic
products especially designed for men are becoming popular. Thailand remains a
strong manufacturer and exporter of shampoos and other hair care products, color
cosmetic and skin care products. Direct sales are the preferred distribution channel
and account for 60 percent of the total market.

The cosmetic products in Thailand are available at all levels, ranging from very high-
end international well-known brands to very low-end, low quality locally produced
brands. Thailand is a major producer of cosmetic products, local production mainly
concentrates on low to medium quality color cosmetics (make up products, especially
lipsticks and nail polishes), skin care products (body lotion and soap, both bar and
liquid) and hair care products (mainly shampoo and conditioners). Leading
international companies that have production facilities in Thailand include Uniliver,
Procter & Gamble, Colgate-Palmolive, and Johnson & Johnson.

Over 60 percent of the imported cosmetic products are high-end facial and skin
cream, mostly anti-wrinkle, anti-aging, and body and skin care products. The
products from the U.S. dominate this subsector with approximately 32 percent share.
Leading international brands include: Estee Lauder, Clinique, Shisheido, Christian
Dior and Lancome, Olay, Eucerin, La Roche-Posay.

Competition among the cosmetic suppliers and distributors is always fierce and
strong. The prevailing economic slowdown makes the competition more severe,
especially among medium to low quality body care, skin care and hair care products.
The suppliers of these products always introduce new strategies not only to retain
their existing customers but also to capture greater share and enlarge their customer
base. All leading cosmetic companies invest heavily in promotional campaigns to
keep their market share and to stimulate the market. High-end international brand
cosmetic products use women’s magazines as their major advertising means to reach
their potential buyers. Premiums and point-of-sale promotional campaigns are also
used regularly to stimulate sales. Counter sales at major department stores are their
main sales channel. The counter sales account for approximately 30 percent of the
total cosmetic sales in Thailand. For low to medium quality cosmetic products, TV is
the main venue used for advertising campaigns. Sampling and giveaway are the two
leading promotional strategies utilized to introduce new products and to stimulate the
sales of existing products. Uniliver and Procter & Gamble are the leading advertising
spenders in Thailand. Direct selling, discount stores, drug stores and convenience
stores are the major channels of distribution for medium and low quality cosmetic
products.

The use of herbal supplement ingredient as a product selling point is increasing

especially among the locally produced cosmetic products. It is an effective means to
differentiate and adds value to the products. Among the many herbal supplements,
green tea is the leading herbal recognized and used in various products. The inclusion
of a whitening agent in the facial and body care products is widely accepted by the
Thai buyers too. Most Thai have light brown complexion so cosmetic products with a
whitening agent are very popular in this market. A whitening agent is popularly used
as a marketing tool to promote the products. The emergence of spa treatment and its
increasing popularity among locals and foreigners creates 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 grow between 15-20 percent. With a total
potential customers base of 18 million (women between the age of 15 to 50 years old),
most of them salary workers, Thailand’s market for cosmetic products has a very
strong group of potential buyers. Political stability after the general election due by or
before the end of this year should bring back the consumers’ confidence. Consumer
spending is expected to grow positively after a new government is formed.

Market share by subsector:

2003 2004 2005 Growth Share

Mil. US$ Mil. US$ Mil. US$ (Over 2004) % (2005) %
Hair Care 265 290 305 5 36
Make Up 253 278 297 7 35
Skin Care 155 175 205 17 25
Perfume 22 27 31 15 4
Total 695 770 838 9 100
Exchange rate 41 40 39
Baht: 1 US$
Sources: Industrial Estimate.

2004 2005 2006 (Estimated)

Total Market Size 770 838 935
Total Local Production 992 1,200 1,380
Total Exports* 403 572 686
Total Imports* 181 210 241
Imports from the U.S.* 47 46 53

*The Thai Customs Department, Ministry of Finance

Exchange rate THB39: US$1
2. Import Regulations and Import Duties

Importation of cosmetic products is controlled by the Thai Food and Drug

Administration of the Ministry of Public Health. A 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) and notarized by a Notary Public in the U.S., and 2) a full
ingredient/composition listing issued by the manufacturer and notarized by a Notary
Public. Both documents have to be 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 Deodorant 20

Contact information at the Thai Food and Drug Administration office:

Mr. Pongpraphan Susantitpong – Director

Cosmetic Control Division
Food and Drug Administration
Ministry of Public Health
Tivanon Road
Muang, Nonthaburi 11000
Thailand
Tel: 662-590-7169
Fax: 662-591-8468
E-mail: cosmetic@fda.moph.go.th

3. Best Prospect:

Best prospects for cosmetic products from the U.S. include:

- anti-aging facial treatment

- wrinkle free eye treatment
- whitening facial treatment
- whitening body lotion
- high-end body lotion
- high-end make-up and skin care
- medicated shampoo
- high-end perfume
- body spray
- cosmetic products for men
4. Distribution Channel:

Cosmetic products in Thailand are distributed through three major channels:

Direct sales (60 percent) - direct selling has been very popular for a number of years
and is expected to continue as 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 a direct
sales sector, price is more sensitive than product quality. Some international direct-
sale companies that operate 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/high
price and internationally well-known brands of cosmetic products. There are 108
department store locations concentrated in major cities including Bangkok,
Chiangmai, Cholburi, Nakornratchasima, 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.

5. Contact Information at Post:

Mrs. Ann Bacher – Commercial Counselor

Mr. Nalin Phupoksakul – Commercial Specialist
U.S. Commercial Service
American Embassy
3rd Floor, Diethelm Towers A, Room 302
93/1 Wireless Road
Pathumwan, Bangkok 10330
Thailand
Tel: 662-205-5090
Fax: 662-255-2915
E-mail: ann.bacher@mail.doc.gov or
nphupoks@mail.doc.gov

Dr. Pakdee Phothisiri

Secretary General
Food and Drug Administration
Ministry of Public Health
Royal Thai Government
Tivanont Road
Muang, Nonthaburi 11000
Thailand
Phone: 662-590-7001, 590-7003
Fax: 662-591-8636