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BENEATH THE SKIN: HIDDEN LIABILITIES, MARKET RISK AND DRIVERS OF CHANGE IN THE COSMETICS AND PERSONAL CARE PRODUCTS INDUSTRY

Tim Little, Sanford Lewis, Pamela Lundquist
February 2007
Beneath the skin of the glamorous cosmetics industry lurks the ugly specter of undisclosed and unquantified risk — posing problems for investors who need to make portfolio decisions based on financial facts, rather than marketing fragrance.
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Synopsis

There is good reason, as investors as well as consumers, to be concerned about potentially harmful chemicals in cosmetics. The cosmetics industry accounts for the use of nearly one in seven of the 75,000 chemicals registered for use in the United States. However, unlike many other industries, chemicals used in the cosmetics and personal care industry are intended to be applied intimately, often daily, to our skin. Already the evidence has been mounting of health risks associated with commonly used ingredients such as phthalates and nanomaterials. Therefore, beneath the skin of the glamorous cosmetics industry lurks the ugly specter of undisclosed and unquantified risk — posing problems for investors who need to make portfolio decisions based on financial facts, rather than marketing fragrance. And, since much of the value in the cosmetics and personal care industry is vested in image and brand rather than specific products, unlike many other chemical intensive industries cosmetics companies have a special investment in their reputations and brand value.


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