Four years ago, Grupo Boticário raised the red alert: due to the pandemic, in March 2020, the company recorded its first days of zero revenue in its entire history. The period tested the thesis that the resilient beauty and cosmetics market would be able to overcome even the biggest crises.
Now, at the start of 2025, the projection is to expand its production capacity by 50%, excited about the prospects and faithful to the idea that, in the beauty market, it is difficult for things to go wrong.
The crown jewel of the ambitious project is in the city of Pouso Alegre, in Minas Gerais. An old sugarcane plantation measuring 4 thousand square meters will provide space for the company’s largest factory to date, whose maximum production capacity is 1 billion pieces per year.
The group’s projections are to reach a GMV — acronym for gross merchandise volumeor gross volume of goods, a revenue metric used in retail — from R$50 billion at the end of the cycle until 2028, when the new factory will be opened. Growth would be 38.2%.
The growth would be very similar to that projected by the data analysis company Euromonitor for the period from 2024 to 2028: 37.6%.
“We estimate growth of 12% to 15% for the beauty market next year. It grows well above GDP and continues to evolve”, says the vice-president of operations at Grupo Boticário, Sérgio Sampaio. “It may fall, but with much greater resilience than other consumer markets where people switch to cheaper products or stop consuming.”
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Until October this year, before commercial events relevant to the group such as Beauty Week and Christmas, the projected GMV for 2024 was R$35.4 billiona growth of around 15% compared to the previous year.
The ‘lipstick effect’
When executives worried about sales at the beginning of the pandemic, a theory widely adopted by retailers, the so-called “lipstick effect” — or “lipstick effect”, in Portuguese.
The idea is that self-esteem care increases in times of crisis, which maintains consumers’ propensity to spend on beauty products. None of these crises, however, had restricted circulation and events where beauty products were used.
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It turns out that isolation brought another demand: if foundation, blush and lipstick were at any risk, .
“In Brazil, we grew at double digits in 2022 and 2023 and did not suffer as much from the pandemic period as the global market. There is no single answer to explain this resilience”, says research consultant at Euromonitor International, Mariana Teixeira. “We have a set of factors that range from consumer appetite for beauty categories, to the size of our population, to the rapid adaptation of the industry to adjust to cyclical or exogenous aspects.”
The expert explains that Brazilian companies in the sector managed to establish themselves with a strong national distribution and manufacturing strategy to meet the trend-responsive profile of the Brazilian consumer.
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“During the pandemic, people discovered online shopping and started to engage a lot with influencers and creators. Content has become fundamental as a purchase driver”, says consultant and founder of Varese Retails, Alberto Serrentino. The one with brands such as Eudora, Quem disse Berenice and Vult.
Less exposed to direct sales through representatives than its main competitor, Natura, the group also reaped the benefits of the advance in online sales, says Serrentino. In 2019, Boticário had already acquired the e-commerce Beleza na Web.
‘Maximum potential’ plane
The resilience of the cosmetics, beauty and personal care market against economic challenges helped Grupo Boticário to finance its production leap in the coming years, as well as higher capex (capital expenses, such as investment in physical structure).
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The plan, called “full potential” — or maximum potential, in Portuguese — is to invest R$4.2 billion in the cycle until 2028, of which R$1.8 billion will be allocated to the unit under development in Pouso Alegre.
Another R$750 million was spent, in the last two years, on expanding the line of the company’s largest unit to date, in Camaçari, Bahia. The 1,800 meter plant, its best-seller in any comparison, and increased production capacity by 50%.
According to Sampaio, the Group’s idea with the expansion is not only to support the growth strategy, but also to reduce the fragmentation of production, which currently has 14 partner factories to support production. “We should have around six long-term partners”, he says.
At the São José dos Pinhais unit, in Paraná, there will also be an investment of R$840 million in capacity expansion.
“It is important for us to be located in the South, Center and Northeast. We are well distributed, capillarized. In crises such as the pandemic or the truck drivers’ strike, with the closure of one region, it is possible to mirror production in another”
The company brings the same standards to Minas Gerais as its factory in Bahia. The idea is to start operating at around 33% of total capacity, in 2028, and gradually evolve until reaching 100%. The factory is projected to be one of the largest in the sector in the world.
Interest and dollar rising in the account
According to the industrial director of Grupo Boticário, Leandro Balena, the rise in the dollar and interest rates in recent days should not impact the delivery deadlines for works. His assessment is that during the current plant design phase, efforts should be made to make the available investment compatible with the most efficient layout possible.
Although the idea that the sector is especially resilient seems to resist, the macroeconomic scenario may still pose challenges for consumption in the coming years.
Given the prospect that the dollar could rise between 1% and 1.5% compared to previous industry estimates, raw material costs are expected to rise. It is estimated that 30% of beauty companies’ expenditure on inputs is directly influenced by the American currency.
“We have seen a continued reduction in unemployment rates and a consequent increase in average income in Brazil,” says Teixeira, from Euromonitor. “These are two very important indicators to keep in mind. With the increase in employment, we already expect this economic translation into an increase in inflation.”
One of the remedies against inflation is raising interest rates, which can lead to greater household debt and impact purchasing decisions. “In the coming years, it is the interest rate that concerns us a little more. We have seen an increasing level of debt in recent years and with the increase in interest rates, debt may increase”, assesses the market expert.
On the companies’ side, high interest rates increase the cost of debt. Since 2020, Grupo Boticário’s financial leverage ratio — percentage of capital contracted through loans — has risen repeatedly, jumping from 29.5% to 64.9% in 2024.
Euromonitor calculates that the beauty and personal care market in Brazil should rise 9.1% in 2024, to R$170.8 billion against R$156.5 billion in 2023. Although there are gains to capture in growth, for the Group Boticário’s task of gaining market share is starting to become more difficult.
Today the company already leads the segment, ahead of Natura, which limits margins for share gains. To make matters worse, the Brazilian market is the most concentrated among the five largest in the world, with 40% of the market dominated by three players.
Euromonitor calculates that, in 2028, the segment will generate R$234.9 billion.
