BW Confidential - Issue #16 - November/December 2013 - (Page 134)

Last word Guest column Untapped niches The industry needs to look at unexplored areas to ensure future growth, says UK-based research company Euromonitor International senior analyst beauty and personal care Oru Mohiuddin Industry outlook The beauty industry proved resilient to the economic downturn, achieving a robust 5% CAGR over 2007-2012, mainly driven by emerging markets and innovations based on cross-category convergence. Now, however, it seems to be showing signs of a slowdown. The first half-year results posted by Unilever, L’Oréal and Colgate showed slower growth in 2013 compared to 2012. China and Brazil are showing signs of fatigue and in Western markets, recovery continues to be slow. While it is too early to predict full-year growth rates, leading manufacturers agree that further innovations are needed to sustain existing growth. After exploring innovations based on cross-category convergence, the scope of such opportunities is narrowing. Turning to less-explored areas could help sustain growth in the face of an impending slowdown. Ethnic beauty gains prominence An area that has traditionally remained underexplored in Western markets is ethnic beauty, primarily because its smaller size has hindered economies of scale. With global expansion, beauty companies are able to leverage their knowledge from regional markets to serve ethnic consumers in Western countries. One of the objectives behind L’Oréal’s acquisition of Kenyan beauty company Interconsumer Products in 2013 is to access the newly acquired company’s R&D facilities to develop more targeted products, not just for consumers in sub-Saharan Africa but also those of African origin across the world. Skincare and appliances The alignment of beauty and appliances has been gaining momentum, driven by both beauty and electronic appliance manufacturers. The most popular ways of approaching this 134 credit: stock.xchng “ Drawing the right balance between innovation in mainstream categories and underexplored areas, while looking at smaller economies, can [...] bring optimal growth for beauty manufacturers ” Euromonitor International senior analyst beauty and personal care Oru Mohiuddin category are either through direct presence, such as L’Oréal’s acquisition of Pacific Bioscience Laboratories to access the Clarisonic brand, or by forging a partnership with an electronics company, as Unilever has done with lightbased treatment systems company Cynosure, launching eye contour devices and other personal-care tools. A key benefit emerging from such alliances is that beauty and electronics companies complement each other with their respective knowledge, the success of which can be seen from Clarisonic’s robust growth, with sales increasing from 128,000 units in 2007 to 1,700,000 units in 2012, according to our research. While Clarisonic has been successful, other companies such as Procter & Gamble, owner of the Olay Pro-X Cleansing System, have been less so, as this is still unfamiliar territory and as such, requires that consumers be convinced of its efficacy. The high-end technology has made the category more hospitable to premium brands, as mass brands have yet to develop the same level of technology at a lower cost to make such products available within their price range. Some beauty manufacturers are using unconventional methods to create brand exclusivity for their products and key categories. Lancôme, for example, collaborated with Alber Elbaz to launch limited-edition mascara and eye shadow palettes using his signature patterns on the packaging, while Nars collaborated with well-known shoe designer Pierre Hardy to create limited-edition nail polish. This has helped create a strong buzz around these products and is expected to translate into better sales performance. More beauty and fashion alignment can be expected in the future. No big shifts ahead Although manufacturers are increasingly looking into underexplored areas to drive growth, these categories still account for a small share of the overall market. Growth will continue to come from innovations in mainstream categories. In addition, smaller economies, which are not fully covered by some manufacturers, could also provide further growth through volume sales due to their large populations. Drawing the right balance between innovation in mainstream categories and underexplored areas, while increasingly looking at smaller economies, can be expected to bring optimal growth for beauty manufacturers. n Euromonitor International is a UK-based market research company for consumer goods. For further insight, contact Oru Mohiuddin, senior analyst beauty and personal care: oru.mohiuddin@euromonitor.com November-December 2013 - N°16 - BW Confidential

Table of Contents for the Digital Edition of BW Confidential - Issue #16 - November/December 2013

Cover
Comment
Contents
Update
Brand & retail news recap
Companies on the move
Take note Market facts, figures & trends
Best of BW Highlights from our e-publication
Launches The latest in fragrance, skincare & make-up
Interview Coty ceo Michele Scannavini
Insight: Fragrance
Category overview
Regional breakdown
Launch strategies
The niche market
Retailer initiatives
Launch roundup
Strategy M&A analysis
Retail
The store of the future
Creative strategies
Store concepts
Digital Innovation strategies
Market watch: Brazil
Country overview
Natura & Grupo Boticário
International brand strategies
Prestige retailing
Trendwatch Upcoming innovation
Travel retail
Channel analysis
The CIVETs
Digital strategies
Interview: L’Oréal Luxe md travel retail worldwide Barbara Lavernos
Interview: WDFG global head of beauty Antonin Carreau
Radar Up-and-coming brands
Emerging markets Company profile: Shanghai Jahwa
Packaging
Luxury packs in the BRICs
Luxury innovations
Industry viewpoint
Last word Euromonitor International senior analyst beauty and personal care Oru Mohiuddin

BW Confidential - Issue #16 - November/December 2013