Term Paper

Presented to the
School of Economics
Ramon V. del Rosario – College of Business
De La Salle University-Manila
Term 3, Academic Year 2022-2023
June, 2023

In Partial Fulfillment
of the course requirements in
Introduction to Microeconomics (COBECON)

Submitted by:

Capps, Lara Ysabelle D.

Submitted to:

Paulynne Castillo
 I. Introduction

In recent years, the Philippine beauty and personal care industry has been continuously

growing. The branches of this industry are cosmetics, skincare, fragrances, and personal care

products. This paper will focus on the production of cosmetics and their positive externalities.

Large companies such as Shiseido, L’Oreal, and Unilever dominate the market but Filipino

cosmetics brands like Sunnies Face, BLK, and Happy Skin are also seeing an increase in demand

(Philippines’ Cosmetics and Skincare Products, 2022).

Filipinos can start their cosmetics business by either making their own product, reselling

existing products, or rebranding white-label products (Rey-Franc, 2022). During the pandemic,

cosmetic businesses also quickly adapted to e-commerce selling.

The Philippine Department of Trade and Industry (DTI) reports that in 2020, e-commerce

increased the nation's GDP by 3.4%. To reach 5.5% (PHP1.2 trillion) of GDP by 2022 is the

Philippines' current target for e-commerce income (Hani, 2021).

Given the information provided, this paper aims to measure the economic contribution of

the cosmetic industry in the Philippines. Additionally, this paper seeks to find how the lower

income class benefits the said production.

 II. Economic Framework

The chosen economic framework was Positive externalities. According to Henry and

Summary (2013), A positive externality is when a party that is not a direct participant in the

market transaction benefits from the production and consumption of a good or service.

The third party selected is the lower-income class in the Philippines. This real-life

application of the economic framework applies to the third party because they benefit from the

individual market decision to produce.

According to Watsons (2022), the Philippines' beauty and personal industry is expected to

have a compound annual growth rate of 4.8%. This covers the market size value of $3.3 billion

from 2018 to the projected value of $4.7 billion by 2026.

Given that the industry is continuously growing, industry growth also has an economic

impact that reaches the lower-income class. The cosmetic industry holds huge growth potential

through the growing middle class and improved logistics (Kwek, 2018).

The industry growth can help generate income and employment to help alleviate poverty

and shared prosperity (UNIDO, 2020). The growing cosmetic industry gives a positive economic

impact to the extent of helping the lower income class through positive advantages.

III. Data Presentation and Interpretation

 2018 6,280,000,000

2019 6,500,000,000

2020 5,120,000,000

2021 5,400,000,000

2022 6,340,000,000
Figure 1: Average revenue per capita of the Philippine cosmetics industry for the year 2018 to

2022. (Statista, n.d.).

Figure 1 shows the average revenue per capita of the cosmetics industry of the

Philippines from 2018 to 2022. There is a significant difference in the revenues per year, given

that the change is also evident during the period of the pandemic.

E-commerce has been a great help in marketing the cosmetic industry. Upsurge in

demand for cosmetics can boost the growth of the Philippines cosmetic market in the upcoming

years. Expansion of distribution channels of cosmetics such as onlines stores contributes also

towards the growth (Watson, 2022).

Furthermore, the Philippines is still continuing to rely on e-commerce and digital

economy to be able to manage its economic recovery after the onset of the Covid-19 pandemic .

It has been already acknowledged that the e-commerce and digital economy is significant to

growth and economic recovery (Hani, 2021).

 According to the Philippine Department of Trade and Industry (DTI), e-commerce was

able to contribute 3.4% or 12 billion US $ (599 Billion PHP) to the country’s GDP in 2020, and

as a result, DTI already intended to increase the number of e-commerce businesses to help the

economic recovery.

IV. Conclusion

In conclusion, the cosmetic industry of the Philippines are of great help in contributing

towards economic growth. E-commerce has also been of great help and is still continuing to be

of help to economic recovery ever since the onset of the pandemic.

Upsurge in demands for cosmetics is projected to boost the growth of the Philippines

beauty and personal care market in the upcoming years (Watson, 2022). The revenue was also

forecast to continuously increase in the upcoming years until 2027 (Statista, n.d.).

Moreover, any industry that is contributing to the economic progression and growth could

be of help to the lower-income class. They benefit through a variety of employment and

increased income.

V. Bonus

Yes. I belong in the household. In economics, the household is the cause for production.

If the household is not there to demand production, then there will be no production made at all.
 The impact on economic growth still depends on how the demands of the household

increase or decrease. The benefits from the impact of the cosmetic industry on the economic

growth depends on the household and is also for the household.

VI. References

Philippines’ Cosmetics and Skincare Products. (2022). International Trade Administration |

Trade.gov.

https://www.trade.gov/market-intelligence/philippines-cosmetics-and-skincare-products

Watson, J. (2022). Philippines Beauty & Personal Care Market Astonishing Growth with Top

Influencing Key players. www.linkedin.com.

https://www.linkedin.com/pulse/philippines-beauty-personal-care-market-astonishing-gro

wth-watson

Statista. (n.d.). Beauty & Personal Care - Philippines | Market Forecast.

https://www.statista.com/outlook/cmo/beauty-personal-care/philippines#revenue

Rey-Franc, A. (2022, October 25). How to Start a Cosmetic Business in the Philippines - The

Thrifty Pinay. The Thrifty Pinay.

https://www.thethriftypinay.com/2022/04/24/how-to-start-cosmetic-business-philippines/

Hani, A. (2021, September 27). E-Commerce and Digital Economy are Key Engines of Growth

for the Philippines - OpenGov Asia. OpenGov Asia -.

https://opengovasia.com/e-commerce-and-digital-economy-are-key-engines-of-growth-fo

r-the-philippines/
Kwek, S. (2018, October 24). Why the Philippines is a beauty market to watch. Mintel.

https://www.mintel.com/beauty-and-personal-care-market-news/why-the-philippines-is-a

-beauty-market-to-watch/

United Nations Industrial Development Organization. (2020). How Industrial Development

Matters to the Well-being of the Population.

https://www.unido.org/sites/default/files/files/2020-02/HOW%20INDUSTRIAL%20DE

VELOPMENT%20MATTERS%20TO%20THE%20WELL-BEING%20OF%20THE%2

0POPULATION%20FIN.pdf