The Italian cosmetics system Introduction to the Italian

The Italian cosmetics system Introduction to the Italian Cosmetic System Luca Nava General Director November, 2016 Gian Andrea 17. Positano November, 17. 2016

Cosmetica Italia - the personal care association The Italian cosmetics system ✓about 500 companies associated (95% of them are SMEs) ✓Industry employees: 35, 000 direct (200, 000 including indirect workers) ✓Member of Cosmetics Europe (the european personal care association) ✓ Achieved ISO 9001 -2000 certification since June 2008 and ISO 14001 -2004 since June 2013 2 Gian Andrea Positano November, 17. 2016

Cosmetica Italia - the personal care association The Italian cosmetics system General Assembly Council (50) Managing board (14) Six product area groups President (+2 Vice-Presidents) cosmetics in pharmacies cosmetics for beauty salons professional products for hairdressers contract manufactoring cosmetics in herbalist shops cosmetics in perfume shops 3 Gian Andrea Positano November, 17. 2016

Cosmetica Italia - the personal care association The Italian cosmetics system Activities and servicies • Technical and Regulatory Area • Certification and testing • Taxes and Economic affairs Area • Training • International Relations Area • School and university Communication and external relationships • Statistics and economic analysis • ABC-cosmetici. it (our consumer focused website) • Local meetings with entrepreneurs 4 Gian Andrea Positano November, 17. 2016

Cosmetics in Italy: benchmark • The production/export ratio has gone up to 38% in 2015; other consumer goods sectors, such as the shoe market, reported a value of 80%: consequently, there are solid opportunities to further expand the internationalisation processes • The value of communication investments in cosmetics represent 44% of “non-food” products • 60% of make-up distributed around the world is produced by Italian contract manufactures The Italian cosmetics system • Since 1990 exports of cosmetic products reported an average growth of more than 5% per year; the highest percentage of the last decade was reached in 2010 with +17% • In Europe Italy is the fourth cosmetics market after Germany, UK and France; in world sales it ranks sixth (following USA and Japan) 5 Gian Andrea Positano November, 17. 2016

Cosmetics in Italy: benchmark • The industry provides employment for a total of 35, 000 people: 54% women (by comparison the average percentage in manufacturing industry is 28%) • Graduated women are approximately 1, 700 (45% of graduated working in cosmetic industry) • Considering the total amount of people employed in the sector, 11% are graduated (whereas the national average is 6%) The Italian cosmetics system • Considering contract manufacturing (third party manufacturing), women employed represent the 75% of the total workforce • Not only graduated with a Science degree, but also graduated with competences in economics and marketing are requested 6 Gian Andrea Positano November, 17. 2016

Developments in the Cosmetics Industry Turnover Italy Exports 6, 180 6, 131 6, 088 2012 2013 2014 6, 220 2, 860 3, 177 2015 2012 2013 Global turnover 3, 331 9, 040 2014 2015 variation % 2014/13 final figures 2015 variation % 2015/14 forecasts % 2016/15 Turnover Italy (sell-in) 6, 116 -1. 0 6, 207 1. 5 Traditional channels 5, 610 -0. 7 5, 713 1. 8 2. 0 506 -3. 5 494 -2. 4 -1. 5 Exports 3, 333 4. 9 3, 810 14. 2 10. 0 Global turnover 9, 449 1. 0 10, 013 6. 0 5. 0 Professional channels 10, 027 3, 810 final figures 2014 figures in million euro The Italian cosmetics system 7 2012 9, 309 9, 419 2013 2014 2015 10, 030 global 62% Italy 38% exports (35% in 2014) Gian Andrea Positano November, 17. 2016

Structure of the Cosmetics supply chain Turnover 2014 The Italian cosmetics system INDUSTRY RAW MATERIALS MACHINERY PACKAGING TOTAL SUPPLY CHAIN 9, 419 870 295 2, 990 13, 574 (var. % 2014/13) (+1. 2%) (+2. 5%) (+2. 0%) (+2, 1%) Turnover 2015 10, 030 (+6. 6%) 895 (+3. 0%) 300 (+2. 0%) 3, 140 (+5, 0%) 14, 365 Forecast % 2016/15 +5, 0% +2, 0% +3, 0% +3. 5% Exports 2015 3, 810 305 225 1, 500 5, 840 (var. % 2015/14) Exports/turnover 2015 Figures in million euro (+1. 5%) (+5. 8%) (+14. 3%) (+3. 0%) (+1. 0%) (+3, 0%) (+8. 5%) 38% 34% 74% 48% 41% 8 Gian Andrea Positano November, 17. 2016

The cosmetic products market in 2015 The Italian cosmetics system 1, 2% 4, 500 9, 847 4. 134 4, 000 Self service Discount Traditional grocery Single brand stores 1. 024 3, 500 million euro Italian consumption 3, 000 2, 500 +1, 5% of cosmetic products 1, 205 1. +0, 9% (+12, 7%) 2, 000 1. 940 1 in 2015 1, 500 1, 000 (var. 2015 -14 +1, 4%) +8, 1% 1, 834 1, 964 1, 905 2. (-1, 7%) 500 701 +2, 9% 239 3. 462 4. 431 0 Pharmacies figures in million euro Perfume shops 1. 2. Other channels Herbalist shops Direct sales Self Service Specialist Drug Super/Hypermarket 3. 4. 9 -2, 2% -3, 2% 558 Hairdressing 226 Beauty salons Domicile Mail order and e-commerce Gian Andrea Positano November, 17. 2016

Macroeconomics ’ 04 -’ 16 The Italian cosmetics system Million euro forecast 4, 500 4, 000 3, 500 3, 000 2, 500 2, 000 1, 500 Italian cosmetics industry exports '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 1550 Billion euro 1500 1450 1400 Italian GDP 1350 1300 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 processing by Cosmetica Italia Statistics Dept. of ISTAT data 10 Gian Andrea Positano November, 17. 2016

Italian cosmetics industry exports - top 10 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. exports % var. ’ 15/’ 14 % weight on total export in 2015 ranking 16. The Italian cosmetics system 1. 3 3. 2 3. 4 3. 6 3. 9 6. 9 South Korea 49 12. 2 Russia 120 Poland 123 The Netherlands 8. 6 11. 0 11. 4 14. 9 129 UAE 11. 1 135 Hong Kong 8. 4 -13. 3 15. 1 148 31. 8 Spain 262 United Kingdom 22. 7 318 United States 18. 6 326 Germany 31. 2 420 France 6. 9 436 0 100 200 300 400 11. 7 500 processing by Cosmetica Italia Statistics Dept. of ISTAT data, figures in million euro 11 Gian Andrea Positano November, 17. 2016

Italian cosmetics industry exports to South Korea - 2015 The Italian cosmetics system Alcohol-based perfume products 17. 7% Products for body care 19. 8% Products for make-up Products for hair care 65. 0% Exports to South Korea 49 million euro 5. 6% 5. 1% 2. 1% 0. 9% 0. 3% 17. 0% 24. 0% Worldwide Exports Products for men 3. 810 million euro Personal hygiene Oral hygiene Other products 12 19. 9% 3. 5% 4. 5% 10. 8% 1. 1% Gian Andrea Positano November, 17. 2016

. . . Few words on the regulatory system in place The Italian cosmetics system • Since July 2013, the EU Regulation 1223/2009 on cosmetics products is in place (it has replaced the previous Directive 76/768/EC) • One Regulation for 28 EU countries (still including UK): full regulatory harmonisation! The main pillars ü a clear and wide definition of “cosmetic” (no cosmeceutical, no quasi-drug, etc. ) ü in-market control at member state level (no pre-authorisation before marketing) ü clear roles and responsibilities through the supply chain üresponsibility for the compliance is with the Responsible Person ürisk assessment approach to assess the final product safety (Cosmetic Safety Report) üpositive and Negative Ingredient Lists 13 Gian Andrea Positano November, 17. 2016

. . . Few words on the regulatory system in place The Italian cosmetics system The main pillars ü Product notification centralised at EU level ü Good Manufacturing Practices (GMP) ü Pre-market notification of new nanomaterials üCosmetovigilance system in place ü Cosmetic claims management Italian Ministry of Health is the local Competent Authority, responsible for both the correct application of the Regulation and post-marketing controls. 14 Gian Andrea Positano November, 17. 2016

Introduction to the Italian Cosmetic System The Italian cosmetics system Thank you Luca Nava General Director November, 2016 Gian Andrea 17. Positano November, 17. 2016