Introduction to the Italian Cosmetic System Luca Nava General Director November, 17. 2016

Cosmetica Italia - the personal care association ✓about 500 companies associated (95% of them are SMEs) ✓Industry employees: 35,000 direct (200,000 including indirect workers) ✓Member of Cosmetics Europe (the european personal care association) ✓ Achieved ISO 9001-2000 certification since June 2008 and ISO 14001-2004 since June 2013

Cosmetica Italia - the personal care association General Assembly Council (50) Managing board (14) President (+2 Vice-Presidents) Six product area groups cosmetics in pharmacies cosmetics for beauty salons professional products for hairdressers contract manufactoring cosmetics in herbalist shops cosmetics in perfume shops

Activities and servicies Cosmetica Italia - the personal care association Activities and servicies Technical and Regulatory Area Taxes and Economic affairs Area International Relations Area Statistics and economic analysis ABC-cosmetici.it (our consumer focused website) Certification and testing Training School and university Communication and external relationships Local meetings with entrepreneurs

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

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

Developments in the Cosmetics Industry figures in million euro final figures 2014 variation % 2014/13 final figures 2015 variation % 2015/14 forecasts % 2016/15 Turnover Italy (sell-in) 6,116 -1.0 6,207 1.5 Traditional channels 5,610 -0.7 5,713 1.8 2.0 Professional channels 506 -3.5 494 -2.4 -1.5 Exports 3,333 4.9 3,810 14.2 10.0 Global turnover 9,449 1.0 10,013 6.0 5.0 2015 10,030 global 62% Italy 38% exports (35% in 2014)

Structure of the Cosmetics supply chain INDUSTRY RAW MATERIALS MACHINERY PACKAGING TOTAL SUPPLY CHAIN Turnover 2014 (var.% 2014/13) 9,419 (+1.2%) 870 (+2.5%) 295 (+2.0%) 2,990 (+2,1%) 13,574 (+1.5%) Turnover 2015 (var.% 2015/14) 10,030 (+6.6%) 895 (+3.0%) 300 3,140 (+5,0%) 14,365 (+5.8%) Forecast % 2016/15 +5,0% +2,0% +3,0% +3.5% Exports 2015 3,810 (+14.3%) 305 225 (+1.0%) 1,500 (+3,0%) 5,840 (+8.5%) Exports/turnover 2015 38% 34% 74% 48% 41% Figures in million euro

million euro Italian consumption of cosmetic products in 2015 The cosmetic products market in 2015 1,2% 9,847 million euro Italian consumption of cosmetic products in 2015 (var.2015-14 +1,4%) 4.134 Self service Discount Traditional grocery Single brand stores 1.024 +1,5% +0,9% 1. (+12,7%) 1.9401 +8,1% -2,2% 2. 701 +2,9% -3,2% (-1,7%) 3. 4. figures in million euro 1. Self Service Specialist Drug 2. Super/Hypermarket 3. Domicile 4. Mail order and e-commerce figures in million euro

Macroeconomics ’04-’16 Italian cosmetics industry exports Italian GDP forecast Italian cosmetics industry exports Million euro Billion euro Italian GDP processing by Cosmetica Italia Statistics Dept. of ISTAT data

% weight on total export in 2015 Italian cosmetics industry exports - top 10 % weight on total export in 2015 exports % var. ’15/’14 ranking 16. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. processing by Cosmetica Italia Statistics Dept. of ISTAT data, figures in million euro

Italian cosmetics industry exports to South Korea - 2015 49 million euro Worldwide Exports 3.810 million euro

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

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

Introduction to the Italian Cosmetic System Thank you Luca Nava General Director November, 17. 2016