Chile: Cosmetics Industry Overview

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Chile: Cosmetics Industry Overview

Veronica Pinto
September 10

Summary

According to the Chilean Cosmetics Industry Association, the total market size for the cosmetics industry in
2009 was USD 465 million and is expected to growth 10% in 2010. Brazil, Argentina, and Mexico dominate
the market with U.S. products representing 8% of total. Products with the highest demand in this industry
include: hair care related products, skin care preparations, hand and body lotions, make-up, and hygiene
products.

Chilean legislation requires that cosmetics products be registered at the Institute of Public Health. The health
authority also mandates that only companies - local or foreign – that are legally established in Chile may file
for registration. Additionally, there is a list of prohibited cosmetics ingredients that may be found in the
Institute of Public Health’s website www.ispch.cl .

Cosmetics are sold in supermarkets, department stores, perfumeries, pharmacies, specialty stores in
shopping malls, and through direct sales. Advertisement and promotion are done in local newspapers,
magazines, radio and TV, and billboards in subway stations, streets, and bus and train stops.

The Chilean population - 17.1 million – can be segmented into three categories: i.e. Selective (15%), Semi-
selective (25), and Mass consumers (60%). The per capita annual expenditure of Chilean consumers in
cosmetics is approximately USD103. The industry is extremely competitive and sophisticated, with local
manufacturers serving the mass consumers, and well-known brands from all over the world serving the
selective and semi-selective consumers.

Due to the U.S. Chile Free Trade Agreement, in place since January of 2004, U.S. cosmetics enter Chile with
zero import duty, provided a U.S. Certificate of Origin is presented to the customs authorities.

Market Demand

According to the Chilean Cosmetics Industry Association, this industry is expected to grow 10% in 2010.
Total retail sales of cosmetics in 2009 reached US$1.9 billion. Fragrances and make-up were the categories
that experienced the highest growth, followed by skin care treatments. The association estimates that
Chileans spend annually USD 103 in cosmetics, second to Brazil, in South America.

Adults – women and men – use on average five different cosmetics per day. These include general hygiene
products, perfume/eau de toilette, facial treatments to prevent aging and to improve skin texture, anti-cellulite
body preparations, fragrances, sun-screens, skin cleaners, hair care products, deodorants and
antiperspirants, before and after shave preparations, colored cosmetics/make-up, and nail care products.

At the higher income segment, both women and men are very conservative and self-conscious of skin care,
knowledgeable of the different quality brands, and very loyal when it comes to choosing a specific brand of
products. There is a marked presence of imported foreign brands in the cosmetics industry.

In general, the Chilean cosmetics market is comprised of large multinationals, a few local manufacturers, and
a variety of distributors of international brands. Local manufacturers mainly produce cosmetics made of
natural elements such as rosa rubiginosa (sweet briar or eglantine rose), baba de caracol (snail slime), aloe
vera, and others. Part of this production is sold locally and the rest exported.

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Market Data

The following HS Codes were used to determine the market data:

33030000 – 33041000 – 33042000 – 33043000 – 33049100 – 33049910 – 33049920 – 33049930 –
33049940 – 33049990 – 33051000 – 33052000 – 33053000 – 33059010 – 33059020 – 33059090 –
33061000 – 33062000 – 33069000 – 33071000 – 33072000 – 33073000

COSMETICS INDUSTRY in US$ million 2008 2009 2010 (*)

Imports 338 337 370
Local Production 154 154 152
Exports 54 51 57
Total market size 438 440 465
Imports from the U.S. 47 35 40
Source: Legal Publishing (*) Estimate

U.S. dollar average exchange rate 522.46 559.61 523.49

Source: Central Bank (*) Estimate

Estimate country’s economic growth fro 2010: 5%

2009 import market share:
U.S.: 10 percent; Mexico: 15 percent; Argentina: 19 percent; and Brazil: 21.6 percent.

Best Prospects

• Cosmeceuticals, for skin aging treatment and moisturizers

• Innovative body treatment for cellulite and flaccidity
• Special sun blocks aimed at U.V. radiation
• New attractive, good quality manicure and pedicure products
• Novel skin treatments for men
• Fragrances

Key Suppliers

Twenty-six key Chilean and international suppliers operating in Chile and members of the Chilean Cosmetics
Industry Association represent 75 percent of annual sales of cosmetics. The local companies include
Laboratorio Durandin, Laboratorio Maver, Laboratorio Arensburg, Cela Cosmeticos, Laboratorio Ballerina,
Cosmeticos Elcina, Laboratorio Davis, and Cosmeticos Concepcion. The multinational companies include
L’Oreal, Procter & Gamble, Unilever, Avon, Colgate-Palmolive, and Natura. Brazil, Argentina, and Mexico
had the highest 2009 import market share. The United States was fourth, with 10%.

Chilean consumers buy cosmetics in department stores, specialty stores at shopping malls, supermarkets,
and pharmacies. The booth location in department stores and shelf space in supermarkets and pharmacies
are negotiated according to sales range and brand image. All department stores give credit to their clients
with clean payment histories. This option broadens the universe of clients, as part of the semi-selective and
mass-market segments may have access to sales through this method, otherwise impossible if cash were the
only alternative.

The industry is extremely competitive and has a broad offer for the end- consumer, at various price levels.
Prices range from locally manufactured products that focus on the mass consumer, to expensive imported
brands that include: Revlon, Maybelline, St. Ives, L’Oreal, Orlane, Clarins, Helena Rubinstein, Elizabeth
Arden, Estee Lauder, Clinique, Lancome, Christian Dior, La Prairie, La Mer, Shiseido, Bobby Brown, Ralph
Lauren, Perricone MD Cosmeceuticals, Givenchy, Sybilla, Ives Saint Laurent, Biotherm, Dolce & Gabbana,
Basement, Boss, Burberry, Carolina Herrera, Kenso, Giorgio Armani, Gucci, Montblanc, Tommy Hilfiger,

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Paco Rabanne, Donna Karan, L’Occitane, H2O, La Roche Possay, Vichy, Avene, Kiehl’s, Minus Dead Sea
Cosmetics, and many others.

Source: Legal Publishing

Prospective Buyers

Cosmetics products are sold to consumers in: a) department stores: i.e. Falabella, Almacenes Paris, and
Ripley; b) special stores located mainly in shopping malls; c) pharmacy chains: i.e. Farmacias Ahumada
(currently being bought by the Mexican Casa Saba), Cruz Verde, and SalcoBrand, that have approximately
92% of the total market; and d) supermarkets: i.e. Jumbo, Lider (owned by Wallmart), and Unimarc.

General information on main distribution channels in no particular order:

Department stores

Falabella (www.falabella.cl) was founded in 1889. It has stores in Chile, Argentina, Peru, and Colombia. The
group presently operates a total of 217 department stores and expects to expand to 401, by 2014.

Almacenes Paris (www.almacenesparis.cl) was founded in 1900. It is currently part of the Cencosud group
that owns the supermarket Jumbo. It has operations in Chile, Argentina, Brazil, Colombia, and Peru. There
are some thirty-two department stores throughout the country.

Ripley (www.ripley.cl) was founded in 1956 and has department stores in Chile and Peru – a total of fifty-one -
plus strategic alliances in Mexico.

Pharmacy chains

Farmacias Ahumada (www.fasa.cl) was founded in 1969. It has over 1,200 stores in Chile, Mexico, and Peru.
The company is currently being purchased by the Mexican Casa Saba.

CruzVerde (www.cruzverde.cl) was founded in 1984. It has over 511 stores in Chile.

SalcoBrand (www.salcobrand.cl) was founded in the 1980s; Farmacia Salco and Farmacia Brand were
separate companies. In 2000, they decided to merge and form the holding SalcoBrand. SalcoBrand currently
has 319 stores in Chile and expects to reach 330, by the end of 2010.

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Supermarkets

Lider (www.lider.cl) begun operating as a supermarket in 1957; however, the history of this company goes
back to 1890. By 2007 there were some 149 stores; and in 2009, WalMart bought the supermarket chain.

Jumbo (www.jumbo.cl) the first supermarket started in 1976. Jumbo supermarkets are part of the Cencosud
holding with operations in Chile, Argentina, Brazil, Colombia, and Peru. Twenty-seven supermarkets are in
operation throughout Chile.

Unimarc (www.unimarc.cl) was founded in 1961. It operates some 122 stores throughout the country.

Source: Chilean Cosmetics Industry Association

Market Entry

According to Chilean legislation, a cosmetic is described as a preparation destined for external application on
the human body, for beauty purposes, modification of the physical aspect/look, and conservation of the
normal physical/chemical condition of the skin and or annexes; i.e. nails, hair, oral mucosa, teeth, and
external genitalia. The legislation outlines two distinct categories within this industry: a) cosmetics such as
colored make-up, body lotions/treatments, and aging skin treatments, and b) low risk cosmetics, such as
soap, nail enamel, nail enamel remover, wax body hair remover, hairsprays, hair conditioning/shampoo,
disposable sanitary pads, tissues, deodorants, shaving products, mouthwash, tooth paste, eau de toilet,
perfumes, and others.

Cosmetics, by law, have to be registered with the Institute of Public Health, ISP, (www.ispch.cl). This
regulation also mandates that the registration process is handled by a company that is legally established in
Chile. There is a list of prohibited cosmetics ingredients that is available at the agency’s website. Labeling of
cosmetics has to be in Spanish and include name, cosmetics purpose, qualitative formula with ingredients in
INCI nomenclature, and information on expiration date, storage precautions, indications, number of approved
ISP registration, etc.

A foreign company wishing to register its products may choose to contract an independent lab, a
pharmaceutical consulting company, or appoint a representative. In order to handle the registration process,
the company or distributor must have a Pharmacist on staff. According to the Institute of Public Health’s
website, the 2010 fee for cosmetics registration per product is approximately US$ 540 and is valid for five
years. The renewal fee, for the same period of time, is approximately US$ 228. In order to file for

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registration, the following items have to be presented to the health authority: product samples, complete
qualitative and quantitative formula, quality specifications, label written in Spanish, stability tests, quality
control, and a free sale certificate granted by a state or federal authority in the United States, notarized, and
legalized at a Chilean Consulate.

Market Issues and Obstacles

There are no obstacles to imported cosmetics, except for the list of prohibited cosmetics ingredients that may
be found in English, in the Institute of Public Health’s website www.ispch.cl . This year the United States and
Chile conclude their sixth year of Free Trade Agreement.

Resources & Key Contacts

Ministry of Health: www.minsal.cl
Institute of Public Health: www.ispch.cl
Cosmetics Industry Chamber: www.camaracosmetica.cl

For More Information

The U.S. Commercial Service in Santiago, Chile can be contacted via e-mail at: veronica.pinto@trade.gov;
Phone: (56-2) 330-3369; Fax: (56-2) 330-3172; or visit our website: www.buyusa.gov/chile/en

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