9 Min Read |

The UK Cosmetic Industry needs to wrap up warm since Brexit has blown in on the 31st January 2020. Even if we find ourselves languishing in an Indian summer ‘Withdrawal Agreement’, it would be prudent to gear up as change is now coming.

UK Trade In Global Markets

The UK is a vibrant and innovative cosmetics producer with many companies acting as distributors across the EU for principals outside the UK. Exports continued to show strength at £3.940.1 million, an increase of 9.4% in 2016.

However, imports grew at 11.1% over 2016 to £4.278 million, leaving the UK as a net importer from both the EU and non-EU regions.

The EU remained the UK’s most important trending region with exports of 65.7% of worldwide trade; the main EU markets being the Irish Republic, Germany. Belgium, France, Netherlands, Spain, Poland, and Italy. Imports from the EU made up 66.8% of worldwide trade; the main markets again showing as France, Germany, Poland, Italy. Belgium, Spain, the Netherlands and the Irish Republic respectively. Non-EU markets show the USA and UAE as in the top 10 of all exports worldwide and the USA and China in the top 10 of all imports from worldwide markets.

“You have got to have the discipline to plan and plan for about a year. You have to know your numbers. If you don't know your numbers, you don't understand your business, because you can't project accurately.

Antoni Burrell - Holistic Skincare Tweet

Cosmetic Europe Personal Care Association

Valued at €78.6 billion at retail sales prices in 2018, the European cosmetics and personal care market is the largest in the world. The largest national markets for cosmetics and personal care products within Europe are Germany (€13.8 billion), France (€11.4 billion), the UK (€10.9 billion), Italy (€10.1 billion) and Spain (€7 billion).

Socio-Economic Contribution Of The European Cosmetic Industry

SMEs and big companies are key drivers of innovation and economic growth in the industry. A large proportion of Europe’s 500 million consumers use cosmetic and personal care products. Be they antiperspirants, fragrance, makeup and shampoos, soaps, sunscreens and toothpastes, cosmetics play an essential role in all stages of life.

The cosmetics industry makes a significant social and economic contribution to the European economy. The European cosmetics market is valued at 77 billion Euros, making Europe the largest market for cosmetic products in the world. Trade is a critical component with trade in cosmetic products and ingredients exceeding 33 billion Euros. 17.2 billion Euros’ worth of cosmetic products are exported from Europe. Exports are particularly important in countries strongly affected by the Euro crisis, where the cosmetics sector is helping to secure national economic recovery. The strength of the entrepreneurial cosmetics industry lies in the mix of both big and small companies. There are 4,605 SMEs in Europe end the number is growing.

Are We At The Cliff Edge Of Brexit?

Preparing for the withdrawal is not just a matter for EU and national authorities but also for private parties. The goings-on in Parliament have not made it easy for businesses or individuals to understand where we may end up. However, notifications from Gov.uk and HMRC are asking us to prepare. Cosmetic retailers and other industry service providers are recommending suppliers who export to the EU to visit Gov.uk prepare-export-from-uk-after a-no-deal Brexit. The Cosmetic Toiletries and Perfumery Association strongly advises, “The cosmetics industry needs to prepare for the UK leaving the EU at the end of January 2020 without an implementation period or a deal being agreed. This is especially important for companies selling products into the EU (including Eire) and the UK.

Dr Emma Meredith, Director, General of the CTPA says:

“While CTPA has been working to promote regulatory alignment with the strict EU cosmetics safety laws, as the EU is the UK’s main trading partner for cosmetics, we have been urging the cosmetics industry to prepare for the possibility of the UK leaving the EU without a deal. Companies need to review their supply chains es a matter of urgency to ensure that products to market are not unduly held up. ‘No deal’ scenario contingency planning is available on the CTPA public website, including links to the UK Government’s ‘no deal’ notices to business.”

The Cosmetic, Perfumery and Toiletry Association has been leading the way in supporting the UK Cosmetic Industry and has compiled detailed booklets, online resources and webinars in preparation for Brexit, and has also lobbied Government. Dr Chris Flower – Director-General -and Olivia Santoni – Head of Regulatory & international Services – shared a live webinar in July 2017 – The Implication of the UK Leaving the European Union from the Perspective of the Cosmetic Industry.

The following June of 2018 CTPA published a document “Getting the best from our future relationship with EU”

Below were the two possible scenarios: 1) ‘No deal’ scenario or 2) ‘Withdrawal agreement’

No Deal

Withdrawal Agreement

UK leaving the EU on EXIT Day

UK leaving the EU on EXIT Day

No Transition Period

Transition period until 31st December 2020

WTO Tariffs apply*

Status Quo for Trade;

–        World Trade Organization tariffs apply at the end of the transition period unless a Free Trade Agreement is in place

–        EU law will continue to apply until the end of the transition period

–        UK law will come into place at the end of the transition period

EU law ceases to apply from day 1 of EXIT

UK law to apply from day 1 of EXIT

Table from CTPA “BREXIT – No Deal” Contingency Planning” – CTPA April 2019

Cosmetic Regulations – Contingency For ‘No Deal’

EU

  • EU Responsible Persons **
  • EU Product Information File
  • EU Cosmetic Product Notification Portal
  • Labelling requirements as per Article 19 of Reg (EC) No 1223/2009
  • Cosmetovigilance
  • Distributors obligations
  • Ingredients Annexes*

UK

  • UK Responsible Persons**
  • UK Product Information File
  • UK Cosmetic Product Notification Portal
  • Labelling requirements as per Article 19 of Reg (EC) No 1223/2009
  • Cosmetovigilanee
  • Distributors obligations
  • Ingredients Annexes*

Key Challenges That Will Need To Be Overcome

  1. Market Surveillance and Administrative Cooperation.
  2. Responsible Person(s), will be required to have RP in the UK and One RP located in an EU-27 Member state. Article 4 (1) “Only cosmetic products for which a legal or natural person is designated within the Community as ‘responsible person’ shall be placed on the market:”
  3. Roles and Responsibilities – regards to Cross Border Distributors.
    1. Who manages the Responsible Person Status?
    2. Who manages and regularly updates the Product Information File?
    3. Who maintains secure access of intellectual property?
    4. Who is overseeing and project managing notifications between EU & UK?
    5. The product label needs to have both Responsible Person(s) and language appropriate for market selling in.
      Who will be responsible for the liability of the product?
  4. Product Information File is required to comply with Recital 17 “For the purpose of effective market surveillance, a product information file should be made readily accessible, at one single address within the Community, to the competent authority of the Member State where the file is located”

Duplication Is Clearly Evident From The Above Model And Will Certainly Bring Additional Risk And Cost:

  • Additional cost for SMEs and greater responsibility for distributors which will likely require more resources to manage.
  • Intellectual property and confidentiality at risk due to the duplication of the PIF file.
  • Maintenance of the PIF which is a live document and requires regular updates from the Responsible Person who is required to maintain records based on marketing feedback.
  • Enforcement: potential increase of number of PIFs in the UK. More resources (staff and time needed).
  • Loss of EU intelligence and support in post marketing surveillance.

European Commission Director-General for Internal Market, Industry, Entrepreneurship and SMEs – Brussels 18th July 2019 REVI – replaces the notice dated 29th November 2018. WITHDRAWAL of THE UNITED KINGDOM and EU RULES IN THE FIELD OF COSMETIC PRODUCTS.

How Are Cosmetic Companies Addressing The Issue?

Jean-Paul Agon, chief executive and chairman of L’Oréal, has launched ‘Project Brexit’, a twin-tracked contingency to stockpile enough lipstick and mascara in its UK warehouse. Agon told analysts in July that the UK market was “not in great shape” with tourist spending down versus the year before on high-end products, and due to more muted consumer sentiment which he attributed to Brexit. If the UK plunges into a Brexit-induced recession, the boss of the world’s largest cosmetics company has ensured that Brits will still look good. He has also brokered a deal with HM Revenue & Customs to fast-track “essential” make-up through Britain’s ports.”

Antonia Burrell, founder of Antoni Burrell Holistic Skincare, spoke at a seminar held at the Guardian offices in January 2018 entitled How can small business prepare for Brexit? “Forward-planning and financial knowledge are vital,” Burrell told delegates, as was a “nimble mindset.” She added: “You have got to have the discipline to plan and plan for about a year. You have to know your numbers. If you don’t know your numbers, you don’t understand your business, because you can’t project accurately. It’s about having that discipline every single week – look at your numbers, look at your sales … understand how that is affecting your bottom line.” For Burrell, ensuring you weather the storm that is Brexit is all about preparing for the future. And that would apply even without the looming spectre of leaving the European Union. “Even if Brexit wasn’t a threat, we should be doing these things anyway if we’re going to succeed,” she insisted. She summed it up with the same warning given by Benjamin Franklin: “Fail to prepare, you prepare to fail.”

E-Commerce

Cosmetic E-commerce Retailers such as Amazon, Feelunique and The Hut group have supplied consumers with cosmetics from the UK and Europe thanks to the “free circulation of goods” between the UK and Europe. If a “No deal” Brexit occurs on the 31st October 2019, this would cease. Amazon and others have communicated with their suppliers to prepare for worst case ‘No deal’ Brexit and suppliers who regularly have customers in Europe have been asked to send stock to EU fulfillment centres. Amazon told the BBC the guidance was designed to ensure sellers plan and prepare for all scenarios, including the risk of border disruption. The company said it also included a copy of the UK government’s Partnership pack in the communication to the UK seller, advising how firms should prepare for no-deal scenarios. In 2017, UK sellers exported around £2.3bn of goods via Amazon globally.

 

Subscribe & Join 50,000 Fellow Beauty Industry Professionals

Get our complimentary briefing, featuring agenda setting news & analysis on the global beauty industry.

By signing up I agree to the service terms and privacy policy