Od4961 lipstick manufacturing industry report

WWW.IBISWORLD.COM Lipstick Manufacturing in the US January 2012 1
IBISWorld Industry Report OD4961
Lipstick Manufacturing in the US
January 2012 Mary Gotaas
Lasting color: Demand stayed strong during the
recession, but growth will require innovation
2 About this Industry
2 Industry Definition
2 Main Activities
2 Similar Industries
2 Additional Resources
3 Industry at a Glance
4 Industry Performance
4 Executive Summary
4 Key External Drivers
6 Current Performance
8 Industry Outlook
10 Industry Life Cycle
12 Products Markets
12 Supply Chain
12 Products Services
13 Demand Determinants
13 Major Markets
15 International Trade
16 Business Locations
18 Competitive Landscape
18 Market Share Concentration
18 Key Success Factors
18 Cost Structure Benchmarks
20 Basis of Competition
21 Barriers to Entry
22 Industry Globalization
23 Major Companies
23 The Procter Gamble Company
24 The Estee Lauder Companies Inc.
25 Revlon
27 L’Oreal SA
29 Operating Conditions
29 Capital Intensity
30 Technology Systems
30 Revenue Volatility
31 Regulation Policy
32 Industry Assistance
33 Key Statistics
33 Industry Data
33 Annual Change
33 Key Ratios
34 Jargon Glossary
www.ibisworld.com | 1-800-330-3772 | info@ibisworld.com

Companies in this industry
manufacture lipstick. Companies that
make a wide variety of cosmetic
products, however, only the
manufacture of lipstick, primarily
manufacture lipstick and lip stains are
included within this industry (lip gloss
and lip balm are excluded).
The primary activities of this industry are
Manufacturing of lipstick
Manufacturing of lipstain
32561 Soap Cleaning Compound Manufacturing in the US
Companies in this industry are primarily engaged in manufacturing and packaging soap and other cleaning
compounds, surface active agents, textile and leather finishing agents and toothpaste.
32562 Cosmetic Beauty Products Manufacturing in the US
This industry blends, compounds and packages beauty products and cosmetics. Industry products include
perfumes, make-up items (including lipstick), hair preparations, face creams and other toiletries.
44612 Beauty, Cosmetics Fragrance Stores in the US
Stores in this industry sell a range of beauty products including make-up, hair-care, bath and fragrance
products.
Industry Definition
Main Activities
Similar Industries
Additional Resources
About this Industry
For additional information on this industry
www.cosmeticindustry.com
Cosmeticsindustry.com
www.revlon.com
Revlon
www.census.gov
US Census Bureau
www.fda.gov
US Food and Drug Administration
The major products and services in this industry are
Lip stain
Matte lipstick
Other (e.g. lip liner)
Sheer lipstick
IBISWorld writes over 700 US
industry reports that are updated up
to four times a year. To see all reports,
go to www.ibisworld.com

Index
100
60
70
80
90
1703 05 07 09 11 13 15Year
Consumer sentiment index
SOURCE: WWW.IBISWORLD.COM
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Revenue Employment
Revenue vs. employment growth
Products and services segmentation (2012)
45.6%Sheer lipstick
40.4%
Matte lipstick
9%
Lip stain
5%
Key Statistics
Snapshot
Industry at a Glance
Lipstick Manufacturing in 2012
Industry Structure Life Cycle Stage Mature
Revenue Volatility Low
Capital Intensity High
Industry Assistance Low
Concentration Level High
Regulation Level Medium
Technology Change Medium
Barriers to Entry Medium
Industry Globalization Medium
Competition Level High
Revenue
$2.1bn
Profit
$228.4m
Exports
$262.6m
Businesses
69
Annual Growth 12-17
3.2%
Annual Growth 07-12
2.8%
Key External Drivers
Consumer
sentiment index
Demand from beauty,
cosmetics and
fragrance stores
Demand from
department stores
Number of adults
aged 20 to 64
Trade-weighted index
Demand from pharmacies
and drugstores
Market Share
The Procter
Gamble Company
25.7%
The Estee Lauder
Companies Inc.
17.4%
Revlon 16.5%
p. 23
p. 4
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33

Key External Drivers Consumer sentiment index
The consumer sentiment index reflects
trends in unemployment and disposable
incomes. When sentiment is high,
consumers are more likely to purchase
this industry’s high-end goods. This
driver is expected to increase during
2012, creating a potential opportunity for
the industry.
Demand from beauty, cosmetics
and fragrance stores
Beauty and cosmetics stores create strong
demand for the industry’s products,
especially as they rise to prevalence and
favor among consumers. As Americans
switch to this type of retail format, away
from department stores, this driver will
increase, causing industry revenue to
grow. IBISWorld expects this driver to
increase during 2012.
Demand from department stores
The level of demand derived from this
key market segment has a strong
influence on the performance of the
industry. Many lipstick products are sold
in department stores. However, some
department stores are losing ground to
competitively priced mass
merchandisers. This driver is expected to
increase slowly over 2012.
Number of adults aged 20 to 64
Women aged 35 to 54 are the primary
buyers of products within this industry.
As the number of people in this group
contracts or expands, demand for
Executive
Summary
The Lipstick Manufacturing industry has
experienced long-lasting growth in the
past five years. Regardless of volatile
consumer sentiment and disposable
income, consumers continued to demand
new lipstick. During the recession,
consumers indulged themselves in
smaller luxuries, such as lipstick, to lift
their spirits. Then as the economy began
to recover, they continued to buy new
products to keep up with fashion trends.
This growth did require effort from the
manufacturers. Changing consumer
preferences and fashion trends
necessitated new products, and
companies had to continually innovate.
From 2007 to 2012, industry revenue is
expected to grow at an average annual
rate of 2.8% to $2.1 billion. In 2012
alone, revenue will increase about 4.1%
as consumer spending rises.
From 2012 to 2017, industry revenue
will continue to remain lush. High
disposable income and consumer
sentiment will enable consumers to
spend more on discretionary products
such as cosmetics. In addition, the
industry will continue to focus on
innovation and new products will drive
growth. In the five years to 2017, revenue
is forecast to expand an average 3.2% per
year to $2.4 billion. Profit margins will
also rise since firms improved efficiency
during the recession by cutting costs and
as sales continue to increase.
Although the industry experienced
growing revenue, the industry has been
consolidating. From 2007 to 2012,
company numbers have decreased by
about 1.4% per year to 69 companies. In
order to gain more market in the
saturated cosmetic market, larger
companies have been acquiring smaller
ones. As company numbers have
dropped, employment numbers have
followed. In the past five years,
employment numbers have decreased an
average 3.4% per year to $127.9 million.
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
The saturated industry will continue to focus on
innovation and new products to drive growth

Key External Drivers
continued
lipsticks will likely fluctuate in line. This
driver is expected to increase slowly
during 2012.
Demand from pharmacies
and drugstores
Drug stores, mass merchandisers and
supermarket chains make up the largest
market segment; therefore, the level of
demand generated from this segment has
a strong bearing on the performance of
the industry. However, as consumers
move to higher end lipsticks, drug stores
will feel the competitive pinch from
specialty stores. This driver is expected to
decrease slowly during 2012, posing a
potential threat to the industry.
Trade-weighted index
Because this industry is moderately
involved in international trade, an
appreciation of the US dollar makes
cosmetic products less attractive
internationally. This driver is expected to
increase during 2012.
%change
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Demand from department stores
Index
100
60
70
80
90
1703 05 07 09 11 13 15Year
Consumer sentiment index

Lipsticks last through
the recession
Lipstick is a discretionary product and
is, therefore, affected by changes in
consumer sentiment and disposable
income. During the recession, when
unemployment rose and the stock
market plummeted, disposable income
and consumer sentiment declined. As a
result, many Americans refrained from
making discretionary purchases and
industry revenue decreased 1.9%. This
decline was not as drastic, however, as
many other industries that produce
discretionary goods. Although
disposable income was limited, many
consumers indulged themselves in
smaller luxuries, such as a fancy cup of
coffee and lipstick, which helped boost
consumer morale during a difficult
time. Consumers did reduce the
amount they spent on lipstick, though.
Color cosmetics has traditionally been
one of the few areas in beauty products
that has been dominated by brands, but
in 2009 sales of retailers’ private-label
cosmetics increased as consumers
looked for cheaper lipstick options.
When the economy began to rebound
in 2010 and 2011, the Lipstick
Manufacturing industry followed suit.
Disposable income increased and
Americans’ confidence in the economy
rose, prompting consumers to expand
their spending. Cosmetic sales
expanded, especially for higher-end
producers like Estee Lauder, as
consumer who had switched to cheaper
make up during the recession switched
back to previous products.
In addition to rising income,
consumers spent more on lipstick in the
past two years as lipstick wearing
became a rebounding trend in
cosmetics. Prior to 2010, lip gloss was
extremely popular among consumers.
Lip gloss is cheaper and is often a better
moisturizer for lips. In 2010 and 2011,
however, lipstick wearing became more
fashionable. Nude and bold color
lipsticks invaded runway beauty looks
and consumers quickly began to
demand lipsticks once again. This trend
of nude and bold colors is expected to
continue: as such, major player Estee
Lauder introduced nude and neon lip
color under their Bobbi Brown brand.
New lip colors include atomic orange,
neon pink and uber beige.
Along with increasing sales, profit
has been expanding. In 2012
IBISWorld expects profit (earnings
before interest and taxes) to reach
11.1% of industry revenue, compared to
Current
Performance
The Lipstick Manufacturing industry
has been more than resilient in the
past five years. Despite volatile
disposable income and shifts in
consumer sentiment, industry revenue
is expected to grow at an average
annual rate of 2.8% to $2.1 billion from
2007 to 2012. Consumers indulging in
smaller luxuries during the economic
downturn and new consumer makeup
trends kept lipstick sales afloat during
this time period. However,
manufacturers have had to continually
introduce new products to keep up
with American makeup trends and
competition with other facial products,
such as lip gloss. In 2012, industry
revenue is projected to grow 4.1% as
consumers purchase new lipstick to
conform to new makeup trends.
During the recession,
consumers opted for
cheaper, private-label
lipstick varieties

Lipsticks last through
the recession
continued
10.0% in 2007. Companies have been
consolidating their manufacturing
facilities, which have reduced costs
and improved profit margins. Also
rising sales have continued to boost
total profit.
Consolidation Although industry revenue has been
rising, the industry has been
consolidating. From 2007 to 2012,
company numbers have declined at an
average annual rate of 1.4% to 69 firms.
Industry players face high competition,
and organic growth can be difficult to
generate due to a very saturated market.
Therefore, firms gain market share and a
larger customer base by acquiring other
companies. In 2010, for instance, Estee
Lauder acquired Smashbox Cosmetics,
which increased the company’s customer
base among younger women.
Along with consolidation, the
industry’s establishment numbers and
employment numbers have been
declining. With declining sales during the
Trends and
innovation
Introducing new products and
improving existing products is a key
factor in keeping sales constant in the
Lipstick Manufacturing industry.
Manufacturers need to be aware of
beauty looks on fashion runways and
overarching consumer trends. Overall
consumer preferences have shifted in
the past five years, resulting in new
kinds of lipsticks. One major consumer
trend is that Americans’ schedules are
becoming fuller and therefore
consumers are looking for convenient
and time-efficient products. As a result,
this industry continues to focus on
producing long-lasting lipstick. In
2009, Revlon introduced Revlon
ColorStay Ultimate liquid lipstick, with
patented long-wearing technology and
food-proof wear for up to 12 hours.
Since then, the product has been
improved and is advertised to last up to
24 hours. Also with busier schedules,
consumers have less time to keep their
face primped and healthy, so lipstick
producers continue to focus on offering
lip color that not only looks great but
improves the healthiness of lips. Major
player Procter Gamble recently
introduced CoverGirl LipPerfection
Lipcolor. The product is said to improve
the moisture levels and smoothness of
lips in just seven days.
Another rising trend among consumers
is an increased demand for natural and
organic products. Americans are
becoming more health-conscious and are
becoming more aware of the chemicals in
their everyday consumer products.
Increasingly, Americans are moving away
from chemical-based products and toward
more natural products. This trend holds
true in cosmetics too: Americans are
demanding cosmetics with natural
ingredients. Smaller niche cosmetic
producers have been able to benefit from
this trend. Companies such as Bare
Escentuals pride themselves on producing
100.0% natural cosmetics. The company
offers 100.0% natural lip color under its
bareMinerals brand. These products do
not have parabens, sulfates, synthetic dyes
and petrochemicals.
Manufacturers are
increasingly catering to
Americans’ demand for
natural products

Consolidation
continued
recession, companies focused on
improving manufacturing efficiencies and
closed down underperforming facilities.
As plants closed, employment numbers
declined an average 5.0% per year to an
estimated 2,092 employees in 2012.
Consumer preferences
and new products
Similar to the previous five years,
innovation will remain very important
to this industry’s growth potential.
With so many choices of lipsticks,
industry participants will continue to
roll out new lipsticks to attract
customers. Long-lasting lipsticks and
moisturizing lipsticks will keep being
introduced into the marketplace. These
improvements cater to the busy
American who does not have time to
re-apply makeup or improve the health
of their lips. The irony of these
improvements is they do not come
hand and hand. Sheer and stain
lipsticks tend to be more moisturizing
than other types of lipsticks, but their
pigmentation is weaker, which may
cause the color to fade faster.
IBISWorld also expects
manufacturers to change the
packaging of their lipsticks. With so
many consumers constantly on the
run, industry participants are expected
to produce goods that are easier to
apply. For instance, industry player
Exude! offers lipsticks in clear tubes
that twist to release the gel color
formula. The company’s lipstick
applicator makes it easier for women
to put on lipstick without a mess.
Improved applicators will help prompt
new revenue for this industry.
Manufacturers are also projected to
reevaluate the ingredients they put in
their lipsticks. Like the previous five-year
period, consumers will demand organic
and natural products. In order to stay
Industry
Outlook
The Lipstick Manufacturing industry is
not projected to experience much change
over the five years to 2017. The industry is
mature and lipstick is widely accepted
among consumers, so improvements in
the products entice customers to
continually buy new lipsticks. With these
factors taken into account, IBISWorld
expects industry revenue to grow at an
average annual rate of 3.2% to $2.4
billion. The industry will display other
traits that are typical of a mature industry,
including greater exports and higher profit
margins for industry participants.
The rebounding economy will
positively affect the industry, prompting
consumers to continue in their
spending on discretionary items. In
2013, revenue is forecast to grow 3.8%
as disposable income increases and
consumers increase their confidence in
the economy. Meanwhile, the number
of companies participating in the
industry is expected to fluctuate,
ultimately displaying an average
increase of 0.3% from 2012 to 2017.
With a saturated market, new entrants
will find it difficult to establish
themselves among large players like
Procter Gamble and Estee Lauder;
however, some firms may be able to
survive by catering to a niche market.
With so many lipstick
choices, producers will
roll out new lines to
attract customers

Consumer preferences
and new products
continued
competitive, firms will have to create new
goods that attract these customers. In
addition, consumers are concerned over
having animal by-products in their
cosmetics and are expected to steer away
from these goods. If large lipstick
producers do use animal by-products,
IBISWorld expects them to create a
lipstick line without these ingredients to
attract customers with these concerns.
With all these shifts in consumer
lifestyles and preferences, research and
development (RD) will remain a key
cost for this industry. In 2012, RD is
expected to account for about 14.8% of
industry revenue. Cosmetic laboratories
and highly skilled workers make
innovation a high cost for the industry.
RD is expected to rise in the next five
years, but with revenue increasing, RP
cost margin will remain the same.
Meanwhile, profit margins are expected
to grow. With improved efficiency in the
previous five-year period and growing
demand for lipstick, profit margins will
strengthen to about 11.5% in 2017. Along
with profit, total wages are forecast to
increase. From 2012 to 2017, wages are
projected to rise at an average annual
rate of 2.5% to $144.7 million.
Business abroad Although innovation boosts revenue for
an industry in a saturated market, selling
products internationally also gives the
industry a push. Over the five years to
2017, exports are expected to increase by
an average annual rate of 6.4% to $358.3
million. Growing income in emerging
economies is expected to facilitate higher
lipstick sales overseas. Some
manufacturers have already established
operations overseas, and IBISWorld
expects this trend to expand in 2016.
Manufacturers will have to change some
products to appeal to international
customers. For instance, many consumers
in the Middle East follow a halal diet and
therefore cannot use any goods that
contain pork by-products or alcohol.
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Revenue Exports
Revenue vs. exports

This industry is highly competitive,
limiting the number of participants
Product segments are well defined, but
innovation drives demand for new products
The industry’s value added remains
in line with US GDP
Life Cycle Stage
30
25
20
15
10
5
0
–5
–10
–10 100 20–5 155 25 30
%Growthofprofit/GDP
%Growthofestablishments
Decline
Crash or Grow?
PotentialHiddenGems
Future Industries
QualityGrowth
High growth in economic
importance; weaker companies
close down; developed
technology and markets
TimeWasters
Hobby Industries
Maturity
Company
consolidation;
level of economic
importance stable
Shake-out
Shake-out
QuantityGrowth
Many new companies;
minor growth in economic
importance; substantial
technology change
KeyFeaturesofaMatureIndustry
Revenue grows at same pace as economy
Company numbers stabilize; MA stage
Established technology processes
Total market acceptance of product brand
Rationalization of low margin products brands
SoapCleaning
Compound
Manufacturing
PharmaciesDrugStores
DyePigmentManufacturing
CosmeticBeautyProductsManufacturing
DepartmentStores
Lipstick
Manufacturing

Industry Life Cycle The Lipstick Manufacturing industry is in
the mature phase of its life cycle, most
strongly indicated by its stagnant
contribution to the US economy. Industry
value added (IVA) is forecast to grow at
an average annual rate of 2.4% over the
10 years to 2017. Gross domestic product
(GDP) is expected to grow 1.9% per year
over the same time, so the industry adds
only marginal value to the economy.
Additionally, the number of industry
players has been declining in the five
years to 2012 and is expected to remain
stagnant over the next five years. This
trend indicates that opportunities are not
readily available for new entrants, leaving
the existing operators dominant. The
domestic market fully accepts the
industry’s products, so little room is left
for new products. Manufacturers have
increased their exports over the past five
years, growing at an average annual rate
of 5.9%. In 2012, international markets
account for 12.8% of industry revenue.
IBISWorld projects that the market
will expand even further to account for
14.9% of revenue by 2017.
Product innovation is a key component
of industry growth. Over the five years to
2012, introductions and developments of
new varieties of lipstick have boosted
consumer demand. Promises of long-
lasting color and healthier lips have kept
manufacturers viable and profitable.
This industry
is Mature

Products Services
Although many industry operators
produce a variety of lip cosmetics, this
industry includes only the manufacturing
of lipstick, lip stain and some lip liner
products that use the same production
processes and facilities. The industry
does not include the manufacture of lip
gloss. Sheer lipsticks account for about
45.6% of total industry revenue, while
matte lipsticks currently account for an
estimated 40.4% of industry revenue.
Sheer lipsticks generally contain a
significant amount of oil, with less wax
and pigment than matte lipsticks, making
them more translucent. Matte and
semi-matte lipsticks contain more waxes,
filling agents (such as silica) and
pigment. Lip stains are estimated to
make up 9.0% of industry revenue. Lip
stains are mostly water and gel, though
Products Markets
Supply Chain | Products Services | Demand Determinants
Major Markets | International Trade | Business Locations
KEY BUYING INDUSTRIES
44611 Pharmacies Drug Stores in the US
Pharmacies and drug stores selling an array of cosmetics including lipstick.
44612 Beauty, Cosmetics Fragrance Stores in the US
Specialty beauty supply stores sell a range of industry products.
45211 Department Stores in the US
Department stores sell high-end industry products.
99 Consumers in the US
A number of players and subsidiary brands in the industry sell their products directly to
consumers, through websites, catalogs and manufacturer owned stores.
KEY SELLING INDUSTRIES
32513 Dye Pigment Manufacturing in the US
Lipstick manufacturers purchase key product ingredients from this industry.
32519 Organic Chemical Manufacturing in the US
Lipstick manufacturers source organic chemicals from companies in this industry.
56191 Packaging Labeling Services in the US
This industry provides lipstick manufactures with contracted packaging and labeling services.
Supply Chain
Products and services segmentation (2012)
Total $2.1bn
45.6%Sheer lipstick
40.4%
Matte lipstick
9%
Lip stain
5%

Products Markets
Major Markets Mass merchandisers and drugstores
Markets for the Lipstick Manufacturing
industry range from mass merchandisers
to direct sellers. In 2012, IBISWorld
estimates that mass merchandisers and
drugstores account for nearly half of all
sales (46.4%). This segment’s share of the
pie has been relatively steady over the
Demand
Determinants
A wide array of discretionary variables
sways demand for industry products. For
example, fashion trends, new product
developments and heavy industry
marketing play a strong role in
influencing demand.
Industry players spend significant
sums on developing and marketing new
products to increase demand in an
otherwise mature and saturated
marketplace. Marketing is aimed at
convincing consumers of better quality,
multifunctionality and convenience.
Furthermore, fashion swings and trends
can have a significant impact on industry
performance and it is crucial for industry
operators to market themselves as
fashion forward and in-step with current
trends. For example one factor boosting
industry sales over the current period is
a return to rich and dramatic lip colors
in high profile runway shows. This
fashion trend has helped boost lipstick
sales and decrease external competition
from more muted industry substitute lip
glosses and balms.
Physiological and environmental
attitudes also determine demand for
industry products. Like the broader
cosmetics and beauty sector, industry
products featuring natural and organic
components are increasingly gaining
favor on the market. This trend reflects
wide concerns about the health and
safety of products as well as also growing
concern over environmental factors and
heightened interest in more sustainable
lifestyle choices.
Disposable income and consumer
confidence also play a role in
determining demand for industry
products. While most industry products
are viewed as discretionary they are not
always cut out when consumers face
tough of uncertain economic times.
Some consumers do not eliminate their
use completely, but switch to lower price
point products. At the same time, lipstick
is often viewed as a small luxury, in
which many consumers indulge when
having to cut back or postpone larger
luxury purchases. This factor has helped
to boost demand for lipstick over the
past three years and pushed a strong
industry growth despite a sluggish
economic recovery.
Products Services
continued
some have added oils combined with
synthetic or natural dyes. Lip stains can
last up to 18 hours, are less viscous than
lipsticks prior to application and more
smudge-proof after application.
A few trends have been impacting the
industry’s product lines over the past
five years, including health concerns
and increasing demand for organic
products. Health concerns about skin
cancer have opened consumers’ eyes to
the risk of unprotected sun exposure.
As a result, an increasing number of
industry products have released
products with added sunscreen
protection. Additionally, the recent
push for organic and environmentally
friendly cosmetics has boosted industry
players’ new product development and
marketing efforts aimed at
capitalizing on environmentally
conscious consumers.

Products Markets
Major Markets
continued
past few years. The recession made these
buyers more of an important resource for
the industry during the height of the
recession as cash-strapped consumers
flocked to the low-priced retailers. As the
economy recovers from the global
financial downturn, however, sales to
department stores have been increasing
at a faster rate than food, drug and
mass-merchandise retailers.
Department stores
Sales to department stores are estimated
to account for about 21.6% of total
industry revenue in 2012. Demand from
this market segment dipped over 2008
and 2009, when consumers have opted to
make similar purchases at drugstores and
mass merchandisers to save money.
Beginning in 2010, though, demand from
department stores has been rising at a
faster pace than the overall industry as
consumers began spending more on
small luxury items while delaying larger
purchases in the face of economic
uncertainty and the sluggish pace of the
recovery. Additionally, retail sales in
high-end consumer product markets
across the board have fared far better
than the general retail sector during the
economic recovery, helping to boost this
market segment.
Direct-to-consumer sales
Avon and Mary-Kay are direct sellers
characterized by their door-to-door
cosmetic sales. These companies either
purchase their products directly from
producers or integrate manufacturing
capabilities within their own supply
chains. This type of business model
focuses on cost savings by eliminating
storefronts and other associated
expenses. Other industry players, such as
L’Oreal (The Body Shop) and Estee
Lauder (MAC), own and operate their
own branded storefronts and sell
industry products direct to consumers.
Sales through this market segment have
declined slightly over the past five years
and are estimated to make up about 8.0%
of industry revenue in 2012.
Exports
The US Lipstick Manufacturing industry
makes about 12.8% of its revenue
internationally. This portion has been
steadily increasing over the five years to
2012, growing from about 11.0% in 2007.
Because it is in the mature phase of its
life cycle, industry players have been
seeking out new markets for their
products. So far, this move has been
successful since overseas retailers depend
on the appeal of American-made goods
Major market segmentation (2012)
Total $2.1bn
46.4%Drug, food and
mass merchant retailers
21.6%
Department stores
12.8%
Export markets
11.2%
Other (Wholesalers,
specialty beauty
supply and
cosmetic stores)
8%
Direct to
consumer

Products Markets
International Trade The Lipstick Manufacturing industry has
a moderate level of international trade,
with exports only accounting for 12.8% of
revenue and imports accounting for
12.1% of domestic demand. Nevertheless,
the role of international trade is still an
important one within the industry. Over
the five years to 2012, exports have
grown faster than the industry itself, at
an average annual rate of 5.9% to an
estimated $262.6 million in 2012. This
accelerated growth has increased exports’
share of domestic revenue from 11.0% in
2007. The perception of high-quality
makes American products appealing to
international consumers. In addition, the
weakened US dollar made US products
cheaper during 2008 and 2010, boosting
exports 8.7% and 15.1%, respectively.
Imports have grown at a five-year
annualized rate of 7.1% to an estimated
$247.3 million in 2012. The United
States mainly sources high-value,
high-quality lipstick products from
France, Canada and Belgium.
Together, these three countries account
for nearly half of all import values.
China and India supply some lower-
end products, which are mostly sold in
drugstores and through mass
merchandisers. Imports declined
strongly in 2009, though, as a result of
the weakened domestic economy and
consumers’ unwillingness to buy
discretionary beauty products.
Canada and Mexico are both large
destinations of trade within this industry.
Their proximity to the United States and
the advantage of duty-free trade enjoyed
under the North American Free Trade
Agreement (NAFTA) allow these two
nations to engage in high levels of trade.
Major Markets
continued
for their perceived high quality.
Additionally, the weakness of the US
dollar has made domestic products
cheaper on the international market,
increasing their appeal.
Other market segments
Other industry markets include
wholesalers and specialty cosmetic and
beauty supply retailers. Although
wholesalers have been losing market
share, they still represent about 5.5%
of all sales. Over the five years to 2011,
the trend of wholesale bypass has
increasingly edged out this part of the
supply chain. Large retailers, such as
mass merchandiser Walmart, have
looked past the middleman and
sourced directly from manufacturers to
cut purchasing costs. Manufacturers,
in turn, have increasingly sold directly
to retailers, offering them an agreed-
upon price and retaining margins.
Specialty cosmetic and beauty supply
retailers represent 5.7% of revenue.
These specialty boutiques have lost
market share because many of the
industry products they carry are
incorporated into one-stop-shop
retailers, like department stores,
drugstores, mass merchandisers or
online-only shops.
$million
500
−400
−250
−100
50
200
350
1804 06 08 10 12 14 16Year
Exports Imports Balance
Industry trade balance
Level Trend
Exports in the
industry are
Medium and
Increasing
Imports in the
industry are
Medium and
Increasing

Products Markets
Business Locations 2012
MO
1.0
West
West
West
Rocky
Mountains Plains
Southwest
Southeast
New
England
Great
Lakes
VT
0.2
MA
1.9
RI
0.1
NJ
13.8
DE
0.2
NH
0.2
CT
4.0
MD
6.6
DC
0.0
1
5
3
7
2
6
4
8 9
AdditionalStates(as marked on map)
AZ
0.5
CA
6.0
NV
0.3
OR
0.7
WA
1.0
MT
0.3
NE
0.2
MN
0.3
IA
0.4
OH
16.0
VA
0.8
FL
2.0
KS
0.2
CO
0.2
UT
0.2
ID
0.5
TX
2.1
OK
0.0
NC
15.9
AK
0.1
WY
0.1
TN
1.0
KY
0.4
GA
0.5
IL
2.3
ME
0.2
ND
0.0
WI
0.2 MI
0.6
PA
0.4
WV
0.0
SD
0.1
NM
0.0
AR
0.2
MS
0.1
AL
0.2
SC
0.2
LA
0.2
HI
0.6
IN
0.5
NY
16.5
5
6
7
8
3
21
4
9
Mid-
Atlantic
Revenue(%)
Lessthan3%
3%tolessthan10%
10%tolessthan20%
20%ormore

Products Markets
Business Locations The Lipstick Manufacturing industry is
highly concentrated in the Mid-Atlantic
region of the United States, accounting
for about 37.5% industry revenue. New
York (accounting for 16.5% of revenue),
New Jersey (13.8%) and Maryland
(6.6%) are among the top revenue-
producing states in the industry and are
located within this area. This region is
an attractive location for cosmetic and
beauty product manufacturers because
it is close to upstream suppliers like
chemical producers and also close to
key downstream markets in
metropolitan areas like New York City.
Facilities in New York and New Jersey
are also close to major shipping ports,
which have become increasingly
important over the past five years as
an increasing number of operators
have engaged in importing and
exporting products to expand the
industry’s market.
For similar reasons, the Southeast
region is the second most concentrated
area for this industry, accounting for
21.5% of revenue. In the Southeast,
North Carolina brings in the most
revenue with 15.9% of the industry total.
A number of upstream suppliers are
located in the region, which cuts down
transportation costs for lipstick
manufacturing companies. Additionally,
Florida – one of the most populous
states – is a key market for lipstick
brands, so manufacturers that set up
shop in the area can get their product to
downstream markets quickly.
The Great Lakes region accounts for
19.6% of industry revenue, with Ohio
holding the largest portion for the
region at 16.0% of the industry’s total.
Upstream manufacturers, including the
Inorganic and Organic Chemical
Manufacturing industries (IBISWorld
reports 32518 and 32519, respectively)
are highly concentrated in this region.
Being in close proximity to suppliers
cuts costs for these facilities and allows
for larger profit margins.
The West only contributes 8.7% of
industry revenue, and a typical
establishment in the West does not
bring in a large amount of revenue.
While a large market for the industry’s
products exists in the state’s large cities,
upstream suppliers are not plentiful in
the region, creating high transportation
costs. The rest of the regions make up
the remainder of revenue for the
industry (12.7% of the industry total).
No other region accounts for more than
10.0% of revenue.
%
40
0
10
20
30
Southwest
West
GreatLakes
Mid-Atlantic
NewEngland
Plains
RockyMountains
Southeast
Revenue
Population
Revenue vs. population

Cost Structure
Benchmarks
Costs and returns vary by firm and
depend on its size, location, supply
contracts and mix of products
manufactured. The following figures are
industry averages.
Profit
Profit (earnings before interest and tax)
for lipstick manufacturers is relatively
high, accounting for an estimated 11.1%
of revenue, up from 10.0% in 2006.
Consolidation within the industry and of
production operations have helped
industry operators improve profit
performance over the past five years,
despite the economic downturn.
Additionally, the low price point of the
industry’s luxury products makes them
less vulnerable to decreases in disposable
income levels. In fact, sales of lipstick,
particularly at the higher end, have risen
substantially over the past three years,
while the economic recovery has been
sluggish. This has occurred as consumers
have increased consumption of smaller
luxuries, while having to postpone larger
purchases during times of economic
hardship or uncertainly.
Purchases
Purchases are the largest cost for the
average operator within this industry,
Key Success Factors Having contacts within key markets
High brand visibility is important in
increasing sales and market share in the
industry.
Access to niche markets
If not a major player, niche and ultra-
niche positioning is important for success
in this industry.
Ability to control stock on hand
If not a niche player, significant market
strength is required for success.
Having marketing expertise
In this highly competitive industry,
marketing and brand awareness are very
important in gaining market share.
Development of new products
Lipstick manufacturers rely on product
innovation to stimulate growth.
Production of goods currently
favored by the market
Lipstick manufacturers must be aware
and be able to adapt to fashion and
lifestyle trends in order to remain
competitive, although some of the larger
manufacturers may set trends rather
than follow them.
Market Share
Concentration
Industry concentration measures the
extent to which large companies
dominate the industry. IBISWorld
estimates that, in 2012, the top four
industry participants will hold a
combined share of about 73.8% of total
industry revenue. This suggests a high
level of concentration since the majority
of market power is spread over a small
number of operators.
The level of industry concentration in
the industry has been gradually
increasing over the past decade. While
there are a number of small players in the
industry specializing in product lines to
serve niche markets, major players in the
industry will continue to expand and gain
greater market control. Major player
L’Oreal, for example, has well-recognized
brands in a variety of price points,
including Maybelline, Lancome and Yves
Saint Laurent.
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Level
Concentration in
this industry is High
IBISWorld identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

Cost Structure
Benchmarks
continued
accounting for 30.4% of revenue.
Manufacturers must buy inputs such as
wax, dyes, essential oils and lotions. Any
changes in raw material prices affect the
overall costs and the bottom line. Also,
the purchase of packaging materials
represents a substantial cost within this
category; a significant amount of product
sales depend on product presentation
and appearance. For instance, operators
that manufacture luxury lipsticks for the
high-end market spend more on
attractive packaging than their mass-
market counterparts. Over the past five
years, this cost category has remained
relatively steady.
Wages
Wages account for 6.2% of total revenue,
and human capital is important within
this industry. Employees must perform
inspection and quality control to ensure
the highest-quality products are delivered
to downstream buyers. Additionally,
experienced and highly educated
employees are essential to the corporate,
marketing and research and development
(RD) activities in this highly
competitive industry. Over the past five
years, wages have declined as a portion of
revenue as the combined effects of cost
cutting during the economic recession
and the general trend toward
consolidation and automation have taken
hold.
RD and marketing
RD is a significant cost for operators,
at about 14.8% of revenue. New
product development is a key
competitive factor in this mature and
saturated industry. RD costs have
increased over the past few years as
companies have vied to set themselves
apart by offering new and
differentiated lip color products to stay
Sectorvs.IndustryCosts
■Profit
■Wages
■Purchases
■Depreciation
■Utilities
■Rent
■Other
AverageCostsof
allIndustriesin
sector(2012)
IndustryCosts
(2012)
0
20
40
60
Percentageofrevenue
80
100
9.1
14.5
1.1 2.03.1
59.2
11.0
11.1
43.0
3.2
3.0
3.1
30.4
6.2

Basis of Competition Companies within the Lipstick
Manufacturing industry are highly
competitive among each other. In a
mature industry with relatively low
barriers to entry, operators aim to stand
out from the crowd in several ways.
Price is particularly important for
industry products targeted towards the
drugstore and mass-merchant retail
outlets. Because products within this
subsegment are highly undifferentiated,
their price can push downstream buyers
to choose one brand over another. In
high-quality markets, price is less of a
competitive factor because consumers
purchase the product based on its
promised performance, brand appeal
and level of fashion.
Marketing and brand awareness are
very important bases of competition
within the industry. The industry’s
largest players have extensive
marketing departments that oversee
far-reaching and often high-profile
campaigns; however, this factor is
somewhat less important in the niche
and ultra-niche markets.
Quality is another important basis of
competition for industry participants.
High-end lipsticks (or those perceived as
such) carry a price premium, which
boosts company revenue and profit.
Premium packaging is an indicator of
product quality, so over the past five
years, midtier product manufacturers
have invested money in appearance to
attract consumers on the basis of
perceived high quality.
Research and development of new
products is growing in importance as a
basis of competition. In a saturated
industry, companies look for new
opportunities in untapped markets or
through satisfying unmet needs for
existing consumers. Along these lines, the
ingredients in cosmetic products
increasingly sway consumers. Over the
past five years, the focus on naturally
made or organic lip color products has
intensified. A company’s ability to
respond to ingredient changes is
important to its survival.
External competition
US lipstick manufacturers compete
against substitute products such as lip
gloss and lip balm as well as imported
lipsticks. Competition from substitute
products is currently on the decline as a
result of fashion trends toward bold lip
colors. Such trends are expected to
continue to influence consumer
Cost Structure
Benchmarks
continued
relevant. In addition, the growing
demand for restorative and protective
products (adding components like
moisturizers and sunscreen) and the
development of environmentally sound
products have also contributed to the
need for increased research.
Marketing and sales costs are also a
significant industry expense, resting at
about 23.8% in 2012. The industry’s
largest companies have traditionally
spent a significant amount of revenue
on prime advertising outlets, including
national network television
commercials and major fashion
magazines. Competitors are also
known for investing in marketing
campaigns that include significant
expenses for celebrity endorsements.
Other costs
Depreciation accounts for an estimated
3.1% of revenue, which is slightly lower
than the sector average of about 5.0%.
This expense has decreased slightly over
the five-year period due to the
consolidation of manufacturing facilities
and equipment within the industry.
Other industry expenditures include
distribution and administrative costs.
Level Trend
Competition in this
industry is High and
the trend is Steady

Barriers to Entry Barriers to entry into the Lipstick
Manufacturing industry are not high, but
they are moderate. Established
manufacturers, which benefit from
economies of scale and scope, can pose a
barrier for potential entrants. These
operators have cost-minimizing
measures, established relationships with
downstream markets and extensive
resources for marketing. These factors
ensure an advantage in competing for
the shelf space necessary to market
products in the largest downstream
markets. Their established and
sometimes well-known brand names are
also a deterrent for new entrants.
The mature and somewhat saturated
nature of the market tends to act as a
further barrier, limiting the scope for new
entrants with new products. However,
niche and developing markets (e.g.
organics, vegan and halal makeup) as
well as product innovation can offer an
opportunity for aspiring lipstick
manufacturers. Capital investments can
also act as a barrier for new entrants.
Lipstick and lipstain manufacturing
requires production equipment and
industrial space, which can add up to a
substantial cost. Securing financial
means is a hurdle new operators must
overcome to enter the industry.
Basis of Competition
continued
preferences in the future, which will most
likely add some volatility to industry
revenue. Imports have increased
substantially over the past three years,
following the recession. This growth is
expected to decelerate over the next five
years and imports are expected to
increase only slightly as a share of total
industry demand to 13.6% by 2017, from
12.1% in 2012.
BarrierstoEntrychecklist Level
Competition High
Concentration High
Life Cycle Stage Mature
Capital Intensity High
Technology Change Medium
Regulation Policy Medium
Industry Assistance Low
Level Trend
Barriers to Entry
in this industry are
Medium and Steady

Industry
Globalization
The Lipstick Manufacturing industry has
a medium level of globalization. While
most of the industry’s largest players are
located in the United States, operators
are subject to an increasing level of
exposure to the international market.
Each of the largest companies operates
on a global scale, reflecting the industry’s
worldwide reach. In addition, one of the
top four companies in the industry,
L’Oreal, is foreign-owned and accounts
for nearly 15.0% of industry revenue.
The industry is also subject to
moderate levels of imports and exports,
which have strengthened their grasp on
the domestic industry over the past five
years. Imports have increased their share
of domestic demand from 9.9% in 2007
to an estimated 12.1% in 2012. Unlike
other consumer product industries where
rising import levels signal rising demand
for lower cost import products, this
growth reflects an increase in high-end
lipstick brands over the past three years.
High end lipsticks are more likely to be
manufactured overseas (mainly Belgium,
France and Canada), while lower price
point brands are more often
manufactured within the US. Over the
same period US exports are expected to
grow to represent 12.8% of revenue (up
from 11.0% in 2007). This level of
globalization exposes the industry to
global conditions, including fluctuations
in exchange rates, supply levels and
socio-political factors.
Level Trend
Globalization in
this industry is
Medium and the
trend is Steady
TradeGlobalization GoingGlobal:LipstickManufacturing2000-
2012
Exports/Revenue
Exports/Revenue
200
150
100
50
0
200
150
100
50
0
Imports/DomesticDemand Imports/DomesticDemand
0 040 4080 80120 120160 160
International trade is a
major determinant of
an industry’s level of
globalization.
Exports offer growth
opportunities for firms.
However there are legal,
economic and political risks
associated with dealing in
foreign countries.
Import competition can
bring a greater risk for
companies as foreign
producers satisfy domestic
demand that local firms
would otherwise supply.
Export ExportGlobal Global
ImportLocal ImportLocal
Lipstick
Manufacturing 2000
2012

Player Performance The Procter Gamble Company (PG), a
consumer goods company that brings in
nearly $20.0 billion in annual sales, was
first incorporated in 1905. It operates
globally, with a physical presence in
about 80 countries. The company’s sales
primarily come from drug stores, grocery
stores and mass merchandisers, of which
Walmart and its affiliates bring in 16.0%.
PG divides its operations into three
reportable segments: beauty and
grooming, health and well-being and
household care. It operates within the
Lipstick Manufacturing industry through
its beauty and grooming division.
Within its beauty and grooming
operations, PG owns several brands,
including Olay (facial skin care); Dolce
Gabbana, Gucci and Hugo Boss (all
fragrances); and CoverGirl, its makeup
line that includes lipstick products. This
reporting segment accounts for about
one-quarter of total net sales for the
company, and IBISWorld estimates
about 2.5% of the beauty reporting
segment is derived from lipstick sales.
PG has a threefold growth strategy.
The first tier is product innovation, which
focuses on introducing new, better and
more consumer-responsive beauty items.
The second part is centered on building
business with underserved customers
whose needs are not met through the
company’s current products. The final
component is the company’s global
development and expansion. Because
PG is operating in a mature industry
with little opportunity for product
innovation and a saturated domestic
market, the company is looking outside
the United States to expand its customer
base.
Financial performance
Over the five years to 2012, PG’s beauty
segment revenue has expanded at an
average annual rate of 3.0% to $20.8
billion in global sales. IBISWorld
estimates that the company’s US
industry-specific operations have grown
at an average annual rate of 3.0% to
$529.7 million during the same period.
With consumer confidence returning, the
beauty segment has benefited from
higher volumes through 2012; however,
the price of inputs is volatile and
unpredictable. With higher-than-average
commodity prices over much of 2010,
profit suffered through fiscal 2011. In the
mean time, the company continued to
Major Companies
The Procter Gamble Company | The Estee Lauder Companies Inc.
Revlon | L’Oreal SA | Other Companies
26.2%
Other
The Procter Gamble Company
25.7%
The Estee Lauder Companies
Inc. 17.4%
Revlon 16.5%
L’Oreal SA 14.2%
Major players
(Market share)
TheProcterGambleCompany
(USindustry-specificsegment)–
financialperformance
Year*
Revenue
($ million) (% change)
2006-07 457.2 N/C
2007-08 497.9 8.9
2008-09 483.1 -3.0
2009-10 497.3 2.9
2010-11 513.9 3.3
2011-12** 529.7 3.1
*Year-endJune,**Estimate
SOURCE: IBISWORLD
The Procter
Gamble Company
Market share: 25.7%

Major Companies
Player Performance Founded in 1946, The Estee Lauder
Companies is a major producer of
skin-care, makeup, fragrance and
hair-care products. Estee Lauder sells
its goods in more than 150 countries
under a number of brand names,
including Estee Lauder, Clinique,
Origins, MAC and Bobbi Brown.
Products are distributed through many
different outlets, such as department
stores, specialty retailers, upscale
perfumeries and pharmacies and
prestige salons and spas. As of June
2011, the company employed 32,300
people, with about 550 of those workers
engaged in research and development.
About 11,900 people are employed in
the United States and Canada.
Of interest to this report is the
company’s makeup manufacturing
segment. The company sells a full array
of makeup products, including lipstick,
lip glosses, mascaras, foundations, eye
shadows, nail polishes and powders.
IBISWorld estimates about 20.0% of
makeup sales are derived from lipstick,
and 50.0% of those lipsticks are made in
the United States. For instance, lipsticks
under brand names MAC and Clinique
are primarily manufactured in Belgium
and Canada, while Bobbi Brown is made
in the United States.
Player Performance
continued
introduce new products, such as the
CoverGirl Queen Collection Lipcolor line.
PG’s expansion strategy has helped
the company tap new international
markets and introduce new products to
new consumers. In the wake of the US
recession, the company was able to sustain
much of its revenue because its position in
various global markets mitigated any
isolated effects. The company is now
focused globally on creating products for
the “$2-a-day” consumer or the very
low-income bracket.
In 2010, the company turned its
focus to sustainable products, which
are in line with the industry trend of
natural products. This new long-term
plan will change the way PG
conducts business, from the power in
its plants to limiting consumer
manufacturing waste. The
sustainability commitment includes
10-year goals; by 2020, PG aims to
reduce consumer packaging 20.0%
and increase renewable energy use to
30.0% of total plant power.
TheProcterGambleCompany(beautysegment)–financial
performance
Year*
Revenue
NetIncome
2006-07 17,889 7.2 2,611 8.3
2007-08 19,515 9.1 2,730 4.6
2008-09 18,924 -3.0 2,664 -2.4
2009-10 19,491 3.0 2,712 1.8
2010-11 20,157 3.4 2,686 -1.0
2011-12** 20,788 3.1 2,740 2
SOURCE: ANNUAL REPORT
The Estee Lauder
Companies Inc.
Market share: 17.4%
Industry Brand Names
Clinique
Estee Lauder
MAC Cosmetics
Bobbi Brown

Major Companies
Player Performance Revlon entered the industry about 75
years ago. Today, it is a principal force,
with brands that include Revlon, Almay
and Ultima II. The company is also
involved in the manufacture and
marketing of various personal-care
products (including Mitchum
deodorant and Revlon Colorsilk hair
products), skin care (Ultima II and
Gatineau) and fragrances (Charlie and
Jean Nate brands). Its color cosmetics
account for about 60.0% of total
company sales; its beauty care and
fragrance products account for the
Player Performance
continued
In recent years Estee Lauder has made
acquisitions to increase its makeup
market share. In 2010, the company
acquired Smashbox Beauty Cosmetics, a
small privately held company that was
created for the needs of makeup artists
working on photo shoots.
Over the five years to 2012, industry
specific revenue has grown at an average
annual rate of 5.2% per year. During
fiscal 2011 and 2010 (year-end June), the
company’s makeup segment sales have
expanded. The acquisition of Smashbox
boosted sales, along with the
introduction of new products including
Pure Color Long Lasting Lipstick from
Estee Lauder and Vitamin C Lip
Smoothie Antioxidant Lip Colour from
Clinique. This growth was slightly offset
by the decline in other products,
however, such as Clinique’s High Impact
Lip Color SPF 15. During the recession,
this segment’s revenue declined as
consumers reduced their spending, but
new product launches during that period
brought in some revenue.
TheEsteeLauderCompanies(makeupsegment)–financialperformance
Year*
Revenue
OperatingIncome
2006-07 2,712.7 N/C 339.3 N/C
2007-08 3,000.4 10.6 359.4 5.9
2008-09 2,830.9 -5.6 279.8 -22.1
2009-10 2,978.2 5.2 416.8 49.0
2010-11 3,370.8 13.2 493.8 18.5
2011-12* 3,480.1 3.2 494.2 0.1
SOURCE: ANNUAL REPORT
TheEsteeLauderCompanies(US
industry-specificsegment)–
financialperformance
Year
Revenue
2006-07 278.3 N/C
2007-08 310.0 11.4
2008-09 293.1 -5.5
2009-10 307.8 5.0
2010-11 347.1 12.8
2011-12** 358.0 3.1
SOURCE: IBISWORLD
Revlon
Market share: 16.5%

Major Companies
Player Performance
continued
remainder. The company’s main
customers are large-volume retailers
and chain drug stores and food stores.
It also sells beauty products to US
military exchanges and commissaries.
As of December 31, 2010, the company
employed 4,900 people, with 140
dedicated to research and development.
Revlon markets several different lines
of Revlon lip makeup, including lipstick,
lip gloss and lip liner. An example of lip
products is the Revlon ColorStay
Overtime which is a two-step long-wear
lip color that lasts up to 24 hours. Revlon
Super Lustrous is the company’s main
wax-based lip color, which is made to
moisturize the consumer’s lips. The
company continues to introduce new
products improving on factors such as
longevity, moisture and weight. Revlon’s
Almay brand also offers lipstick. All of
Almay’s products are hypoallergenic,
dermatologist-tested and fragrance-free
cosmetics.
Over the five years to 2012, Revlon’s US
industry-specific revenue decreased at an
estimated average annual rate of 1.2%;
however, the company’s revenue growth
as a whole increased an estimated
average of 0.4% per year. In 2011,
company revenue expanded due to higher
sales of cosmetic products specifically in
the United States, which enabled profit to
increase. In 2011, the company acquired
Mirage, maker of Sinful Colors nail
products. During 2010, revenue declined
primarily due to lower sales of Almay
cosmetics; however, higher sales of
Revlon makeup products boosted some
sales. During the recession, sales of
Revlon and Almay makeup products
dropped, but this decline was partially
offset by higher sales of Revlon ColorSilk
hair products. Lower consumer spending
caused many Americans to reduce
purchases of discretionary products.
Along with lower sales, unfavorable
foreign currency fluctuations hurt profit
margins. The changes in currency
RevlonInc.–financialperformance
Year
Revenue
OperatingIncome
2007 1,367.1 N/C 118.4 N/C
2008 1,346.8 -1.5 155.0 30.9
2009 1,295.9 -3.8 165.0 6.5
2010 1,321.4 2.0 190.1 15.2
2011 1,348.8 2.1 179.2 -5.7
2012* 1,392.5 3.2 181.0 1.0
*Estimate
SOURCE: ANNUAL REPORT AND IBISWORLD
RevlonInc.(USindustry-specific
segment)–financialperformance
Year
Revenue
2007 361.9 N/C
2008 352.2 -2.7
2009 336.6 -4.4
2010 328.1 -2.5
2011 332.5 1.3
2012* 340.2 2.3
*Estimate
SOURCE: IBISWORLD

Major Companies
Player Performance Beauty and cosmetics company L’Oreal
SA was first incorporated in 1907. It
distributes mass-market products,
such as Maybelline, through mass
merchandisers, drug stores and
grocery stores. Its luxury cosmetics,
like Lancome, are distributed through
department stores and niche retailers.
L’Oreal divides its operations into four
segments: professional products,
consumer products, luxury products
and active cosmetics. It operates
within the Lipstick Manufacturing
industry through its luxury products
and consumer products divisions.
Primary lipstick brands include:
Maybelline, L’Oreal, Lancome and
Yves Saint Laurent.
Over the past few years, L’Oreal has
focused on emerging markets since
they are less saturated than current
markets. Two markets the company
has invested in include men, who have
shown a growing interest in skin care
and cosmetics, and an older
population, which has an interest in
anti-aging products.
From 2007 to 2012, L’Oreal’s total
company revenue is expected to grow at
an average annual rate of 4.6% to $29.2
billion (estimated in US dollars). In the
consumer products segment, Maybelline
has been driving growth with the
introduction of new products, such as the
Instant Age Rewind Eraser Treatment
Makeup. The luxury products segment
Player Performance
continued
exchanges resulted in higher costs of
goods in most international markets on
goods purchased from the company’s
facility in Oxford, NC. The company did,
however, increase its manufacturing
efficiencies and lower freight costs.
L’OrealSA–financialperformance
Year
Revenue
OperatingIncome
2006 23,383.1 N/C 3,874.1 N/C
2007 25,802.5 10.3 4,008.2 3.5
2008 24,360.9 -5.6 3,594.2 -10.3
2010 25,880.9 6.2 4,058.2 12.9
2011 28,264.6 9.2 4,565.7 12.5
2012* 29,253.9 3.5 4,615.8 1.1
*Estimate
SOURCE: ANNUAL REPORT AND IBISWORLD
L’OrealSA(USindustry-specific
segment)–financialperformance
Year
Revenue
2007 233.9 N/C
2008 258.2 10.4
2009 243.8 -5.6
2010 258.9 6.2
2011 282.8 9.2
2012* 292.7 3.5
*Estimate
SOURCE: IBISWORLD
L’Oreal SA
Market share: 14.2%

Major Companies
Player Performance
continued
has also been expanding, with strong
growth from the company’s Lancome line
and Yves Saint Laurent fragrances.
Despite the popular brands, the
recession did take a toll on the company.
In 2009, overall cosmetic sales declined
in the United States as many Americans
reduced their purchases of makeup
because of less disposable income. In
order to attract sales, L’Oreal marketed
its products more aggressively and
introduced new products.

Capital Intensity The Lipstick Manufacturing industry has
a high level of capital intensity. For every
dollar spent on labor, $0.50 is spent on
machinery, which indicates that lipstick
manufacturing is highly automated. As a
result, lipstick products are mass
produced. During the recession, the
industry came to rely even more heavily
on capital since employment was one of
the easiest places to cut costs. However,
depreciation expenses also decreased
slightly over five year period due to
industry consolidation of manufacturing
facilities and equipment. Over the next
five years, IBISWorld forecasts
depreciation costs will rise as the overall
US manufacturing sector cohesively
moves towards greater automation,
increasing the industry’s level of capital
intensity.
Operating Conditions
Capital Intensity | Technology Systems | Revenue Volatility
Regulation Policy | Industry Assistance
ToolsoftheTrade:GrowthStrategiesforSuccess
LaborIntensive
CapitalIntensive
ChangeinShareoftheEconomy
NewAgeEconomy
Recreation,PersonalServices,
HealthandEducation. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
TraditionalServiceEconomy
Wholesaleand Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
OldEconomy
AgricultureandManufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
InvestmentEconomy
Information,Communications,
Mining,FinanceandReal
Estate.To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
SoapCleaningCompoundManufacturing
PharmaciesDrugStores
DyePigmentManufacturing
CosmeticBeautyProductsManufacturing
DepartmentStores
Lipstick
Manufacturing
Capital intensity
0.5
0.0
0.1
0.2
0.3
0.4
Dotted line shows a high level of capital intensity
Capital units per labor unit
Lipstick
Manufacturing
ManufacturingEconomy
Level
The level of capital
intensity is High

Revenue Volatility Performance in the Lipstick
Manufacturing industry is driven by
steady consumer demand and
sentiment for its products through
numerous distribution channels
including department stores, cosmetic
Technology
Systems
In general, industry production involves
mixing and blending readily available
ingredients in batch operations. A wide
array of chemicals is used in
manufacturing lipsticks, including
emollients, antioxidants, pigments, oils
and waxes to provide protection, color
and texture to lips. Recent advances in
production techniques include increased
automation and mechanization. Liquid
products are mixed using batch or
continuous blending processes. In batch
blending, small amounts of ingredients
are added to the subsequent mixture at
timed intervals. In continuous blending,
the ingredients are continuously mixed
together to form a final product.
Product innovations and
reformulations define this mature
industry. Research and development
costs are an increasingly important
investment for operators, accounting for
an estimated 14.8% of industry revenue
in 2012. In addition, with such high
industry concentration, major players
will continue to aggressively market these
new product lines to capture additional
market share. IBISWorld estimates sales
and marketing costs will account for
23.8% of industry revenue in 2012.
Growing environmental concerns have
caused changes in the production process
and in the packaging of industry products
over the past few years. Lipstick products
and their packaging are increasingly
designed to minimize waste and
environmental alterations. Many lipstick
manufacturers have introduced post-
consumer plastic containers. For
example, major player Procter Gamble
introduced an eco-friendly initiative in
2010. It spans major aspects of
production, including packaging and
plant emissions. IBISWorld expects this
trend to become even more pronounced
over the five years to 2017.
IBISWorld rates the industry as having
a medium level of technology change due
to significant RD spending, the steady
rate of new product innovations and
increasing level of automated
manufacturing processes.
Level
The level of
Technology Change
is Medium
VolatilityvsGrowth
Revenuevolatility*(%)
1000
100
10
1
0.1
Fiveyearannualizedrevenuegrowth(%)
–30 –10 10 30 50 70
Hazardous
Stagnant
Rollercoaster
BlueChip
* Axis is in logarithmic scale
LipstickManufacturing
A higher level of revenue
volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
Level
The level of
Volatility is Low

Regulation Policy The major regulating body overseeing
cosmetic products in the United States is
the US Food and Drug Administration
(FDA). Lipstick manufacturers do not
have industry specific regulations they
must comply with, but they are subject to
regulations covering the larger cosmetic
product industry.
The FDA governs the laws and
regulations relating to the
manufacturing, labeling and marketing of
lipsticks. Basically, lipstick
manufacturers that distribute products in
the United States much comply with
basic regulatory requirements outlined in
the Federal Food, Drug and Cosmetic
(FDC) Act and the Fair Packaging and
Labeling (FPL) Act.
Adulterated or misbranded cosmetics
The FDC prohibits the distribution of
lipsticks that are adulterated or
misbranded. A cosmetic product is
considered adulterated if it contains a
substance that may make the product
harmful to consumers under customary
conditions of use. The FDC Act also
protects consumers against products
containing filthy, putrid or decomposed
substances. A product is misbranded if its
labeling is false or misleading, if it does
not bear the required labeling
information, or if the container is made
or filled in a deceptive manner.
Cosmetic labeling
Cosmetics distributed in the United
States must comply with the labeling
regulations published by the FDA under
the authority of the FDC and the
FPL. Labeling refers to all labels and
other written, printed or graphic matter
on or accompanying a product. The
label statements required under the
authority of the FDC must appear on
the inside and on any outside container
or wrapper. FPL requirements, such as
ingredient labeling and statement of the
net quantity of contents on the main
display panel, only apply to the label of
the outer container.
Declaration of ingredients
Cosmetics for retail sale to consumers
are required to bear an ingredient
declaration. Cosmetics not customarily
distributed for retail sale (e.g. hair
preparations or makeup products used
by professionals on customers) are
exempt from this requirement provided
these products are not also sold to
consumers at professional
establishments or workplaces for their
consumption at home.
The California Safe Cosmetics Act of
2005 requires cosmetic companies
selling products within the state of
California to disclose details to the
Department of Health Services of any
ingredients that contain chemicals
identified as causing cancer or
reproductive toxicity (particularly those
chemicals in the phthalate family). The
initial bill was opposed by the industry.
Label warnings
Cosmetics that may be hazardous to
consumers when misused must bear
Revenue Volatility
continued
stores and supermarkets. This helps
protect the industry from product-
specific spikes and keeps revenue
relatively smooth. However, factors that
may affect year-to-year industry
revenue fluctuations include changes in
fashion trends and disposable income
levels. Over the five years to 2012,
lipstick manufacturers enjoyed its
strongest growth of 6.5% in 2011 while
suffering a slight decline of 1.9% in
2009 as the overall economy
contracted. Overall, industry revenue
averaged a 2.8% annual change over the
five-year period, giving the industry a
low level of revenue volatility.
Level Trend
The level of
Regulation is
Medium and the
trend is Steady

Industry Assistance The industry is partially protected from
moderate levels of imports and exports
with tariffs with limited tariffs. These
tariffs vary depending on the ingredients
used in individual products. In general,
imported makeup preparations (includes
lip makeup preparations, eye makeup
preparations, manicure preparations,
pressed or loose powders, and rouges)
are subject to a 1.0% tariff. Imported
cosmetics are also regulated by the food
and drug administration as they are
subject to the same laws and regulations
as cosmetic products produced in the US.
Regulation Policy
continued
appropriate label warnings and adequate
directions for safe use. The statements
must be prominent and conspicuous.
Some cosmetics must bear label warnings
or cautions. Cosmetics in self-pressurized
containers (aerosol products), feminine
deodorant sprays and children’s bubble
bath products are examples of products
requiring such statements.
The FDC does not require that
cosmetic manufacturers or marketers test
their products for safety. However, the
FDA strongly urges cosmetic
manufacturers to conduct appropriate
tests to substantiate the safety of their
cosmetics. If the safety of a product is not
adequately substantiated, it may be
considered misbranded and may be
subject to regulatory action.
Other regulations
Other regulatory bodies include the
Occupational Safety and Health
Administration (OSHA), which is
responsible for the OSHA Hazard
Communication Standard, Laboratory
Safety Regulations, and General
Employee Rights. The OSHA Hazard
Communication Standard attempts to
ensure that the hazards of all chemicals
produced or imported are evaluated, and
that information concerning their
hazards is transmitted to employers and
employees. Information is transmitted
via comprehensive hazard
communication programs, which must
include container labeling and other
forms of warning, material safety data
sheets and employee training.
Also of relevance is the Environmental
Protection Agency (EPA), which is
responsible for infectious waste laws and
hazardous waste laws, and the US
Department of Agriculture (USDA),
which is responsible for animal welfare
compliance laws.
Level Trend
The level of
Industry Assistance
is Low and the
trend is Steady

Key Statistics
Revenue
($m)
Industry
Value Added
($m)
Establish-
ments Enterprises Employment
Exports
($m)
Imports
($m)
Wages
($m)
Domestic
Demand
Average Consumer Expen-
diture on Personal Items
($)
2003 1,674.3 355.4 107 77 3,112 174.7 160.4 164.5 1,660 527
2004 1,690.8 371.2 107 78 3,138 177.5 168.3 166.6 1,681.6 581
2005 1,731.7 390.8 105 77 3,064 184.8 175 167.4 1,721.9 541
2006 1,771.1 390.9 100 75 2,875 193 171.7 158.9 1,749.8 585
2007 1,795.3 389.2 96 74 2,705 197.5 175.6 152.2 1,773.4 588
2008 1,806.4 363.9 92 70 2,523 214.8 179.9 143.5 1,771.5 616
2009 1,771.5 346.7 83 65 2,248 197.4 158.8 130.6 1,732.9 596
2010 1,856.5 372.5 81 64 2,162 227.2 189.7 127.4 1,819 626
2011 1,977.3 399 79 66 2,115 232.6 228.6 126.1 1,973.3 638
2012 2,057.9 420.2 78 69 2,092 262.6 247.3 127.9 2,042.6 652
2013 2,135.8 435.9 79 70 2,152 284.1 256.6 132.6 2,108.3 N/A
2014 2,198.6 448.1 77 68 2,138 299.6 271.5 133.7 2,170.5 N/A
2015 2,245.7 459.1 78 70 2,183 328.1 284.1 138 2,201.7 N/A
2016 2,331.3 475.8 77 69 2,187 335.9 303.5 140.1 2,298.9 N/A
2017 2,408.4 493.9 78 70 2,237 358.3 322.2 144.7 2,372.3 N/A
IVA/Revenue
(%)
Imports/
Demand
(%)
Exports/Revenue
(%)
Revenue per
Employee
($’000)
Wages/Revenue
(%)
Employees
per Est.
Average Wage
($)
Share of the
Economy
(%)
2003 21.23 9.66 10.43 538.01 9.83 29.08 52,859.90 0.00
2004 21.95 10.01 10.50 538.81 9.85 29.33 53,091.14 0.00
2005 22.57 10.16 10.67 565.18 9.67 29.18 54,634.46 0.00
2006 22.07 9.81 10.90 616.03 8.97 28.75 55,269.57 0.00
2007 21.68 9.90 11.00 663.70 8.48 28.18 56,266.17 0.00
2008 20.15 10.16 11.89 715.97 7.94 27.42 56,876.73 0.00
2009 19.57 9.16 11.14 788.03 7.37 27.08 58,096.09 0.00
2010 20.06 10.43 12.24 858.70 6.86 26.69 58,926.92 0.00
2011 20.18 11.58 11.76 934.89 6.38 26.77 59,621.75 0.00
2012 20.42 12.11 12.76 983.70 6.22 26.82 61,137.67 0.00
2013 20.41 12.17 13.30 992.47 6.21 27.24 61,617.10 0.00
2014 20.38 12.51 13.63 1,028.34 6.08 27.77 62,535.08 0.00
2015 20.44 12.90 14.61 1,028.72 6.15 27.99 63,215.76 0.00
2016 20.41 13.20 14.41 1,065.98 6.01 28.40 64,060.36 0.00
2017 20.51 13.58 14.88 1,076.62 6.01 28.68 64,684.85 N/A
Figures are inflation-adjusted 2012 dollars.
Revenue
(%)
Industry
Value Added
(%)
Establish-
ments
(%)
Enterprises
(%)
Employment
(%)
Exports
(%)
Imports
(%)
Wages
(%)
Domestic
Demand
(%)
Average consumer expen-
diture on personal items
(%)
2004 1.0 4.4 0.0 1.3 0.8 1.6 4.9 1.3 1.3 10.2
2005 2.4 5.3 -1.9 -1.3 -2.4 4.1 4.0 0.5 2.4 -6.9
2006 2.3 0.0 -4.8 -2.6 -6.2 4.4 -1.9 -5.1 1.6 8.1
2007 1.4 -0.4 -4.0 -1.3 -5.9 2.3 2.3 -4.2 1.3 0.5
2008 0.6 -6.5 -4.2 -5.4 -6.7 8.8 2.4 -5.7 -0.1 4.8
2009 -1.9 -4.7 -9.8 -7.1 -10.9 -8.1 -11.7 -9.0 -2.2 -3.2
2010 4.8 7.4 -2.4 -1.5 -3.8 15.1 19.5 -2.5 5.0 5.0
2011 6.5 7.1 -2.5 3.1 -2.2 2.4 20.5 -1.0 8.5 1.9
2012 4.1 5.3 -1.3 4.5 -1.1 12.9 8.2 1.4 3.5 2.2
2013 3.8 3.7 1.3 1.4 2.9 8.2 3.8 3.7 3.2 N/A
2014 2.9 2.8 -2.5 -2.9 -0.7 5.5 5.8 0.8 3.0 N/A
2015 2.1 2.5 1.3 2.9 2.1 9.5 4.6 3.2 1.4 N/A
2016 3.8 3.6 -1.3 -1.4 0.2 2.4 6.8 1.5 4.4 N/A
2017 3.3 3.8 1.3 1.4 2.3 6.7 6.2 3.3 3.2 N/A
Annual Change
Key Ratios
Industry Data

Jargon Glossary
BARRIERS TO ENTRY Barriers to entry can be High,
Medium or Low. High means new companies struggle to
enter an industry, while Low means it is easy for a firm
to enter an industry.
CAPITAL/LABOR INTENSITY An indicator of how much
capital is used in production as opposed to labor. Level is
stated as High, Medium or Low. High is a ratio of less
than $3 of wage costs for every $1 of depreciation;
Medium is $3 – $8 of wage costs to $1 of depreciation;
Low is greater than $8 of wage costs for every $1 of
depreciation.
CONSTANT PRICES The dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using 2012 as the base year. This removes the
impact of changes in the purchasing power of the dollar,
leaving only the ‘real’ growth or decline in industry
metrics. The inflation adjustments in IBISWorld’s
reports are made using the US Bureau of Economic
Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND The use of goods and services
within the US; the sum of imports and domestic
production minus exports.
EARNINGS BEFORE INTEREST AND TAX (EBIT)
IBISWorld uses EBIT as an indicator of a company’s
profitability. It is calculated as revenue minus expenses,
excluding tax and interest.
EMPLOYMENT The number of working proprietors,
partners, permanent, part-time, temporary and casual
employees, and managerial and executive employees.
ENTERPRISE A division that is separately managed and
keeps management accounts. The most relevant
measure of the number of firms in an industry.
ESTABLISHMENT The smallest type of accounting unit
within an Enterprise; usually consists of one or more
locations in a state or territory of the country in which it
operates.
EXPORTS The total sales and transfers of goods
produced by an industry that are exported.
IMPORTS The value of goods and services imported
with the amount payable to non-residents.
INDUSTRY CONCENTRATION IBISWorld bases
concentration on the top four firms. Concentration is
identified as High, Medium or Low. High means the top
four players account for over 70% of revenue; Medium
is 40 –70% of revenue; Low is less than 40%.
INDUSTRY REVENUE The total sales revenue of the
industry, including sales (exclusive of excise and sales
tax) of goods and services; plus transfers to other firms
of the same business; plus subsidies on production; plus
all other operating income from outside the firm (such
as commission income, repair and service income, and
rent, leasing and hiring income); plus capital work done
by rental or lease. Receipts from interest royalties,
dividends and the sale of fixed tangible assets are
excluded.
INDUSTRY VALUE ADDED The market value of goods
and services produced by an industry minus the cost of
goods and services used in the production process,
which leaves the gross product of the industry (also
called its Value Added).
INTERNATIONAL TRADE The level is determined by:
Exports/Revenue: Low is 0 –5%; Medium is 5 –20%;
High is over 20%. Imports/Domestic Demand: Low is
0 –5%; Medium is 5 –35%; and High is over 35%.
LIFE CYCLE All industries go through periods of Growth,
Maturity and Decline. An average life cycle lasts 70
years. Maturity is the longest stage at 40 years with
Growth and Decline at 15 years each.
NON-EMPLOYING ESTABLISHMENT Businesses with
no paid employment and payroll are known as
non-employing establishments. These are mostly set-up
by self employed individuals.
VOLATILITY The level of volatility is determined by the
percentage change in revenue over the past five years.
Volatility levels: Very High is greater than ±20%; High
Volatility is between ±10% and ±20%; Moderate
Volatility is between ±3% and ±10%; and Low Volatility
is less than ±3%.
WAGES The gross total wages and salaries of all
employees of the establishment.
Industry Jargon
IBISWorld Glossary
FOOD AND DRUG ADMINISTRATION (FDA) A federal
agency that regulates the release, labeling and
ingredients of food and health products.
HALAL A term designating any object or an action
which is permissible to use or engage in, according to
Islamic law.
PARABEN A chemicals used widely in cosmetics as a
product preservative. Recent research has linked
parabens to cancer.

Disclaimer
This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use
by its authorized licenses strictly in accordance with their license agreements
with IBISWorld. IBISWorld makes no representation to any other person
with regard to the completeness or accuracy of the data or information
contained herein, and it accepts no responsibility and disclaims all liability
(save for liability which cannot be lawfully disclaimed) for loss or damage
whatsoever suffered or incurred by any other person resulting from the use
of, or reliance upon, the data or information contained herein. Copyright in
this publication is owned by IBISWorld Inc. The publication is sold on the
basis that the purchaser agrees not to copy the material contained within it
for other than the purchasers own purposes. In the event that the purchaser
uses or quotes from the material in this publication – in papers, reports, or
opinions prepared for any other person – it is agreed that it will be sourced
to: IBISWorld Inc.
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is more than assembling facts
It is combining data with analysis to answer the
questions that successful businesses ask
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Od4961 lipstick manufacturing industry report

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