The economy may be slowing down – depending on which economist you talk to – but the British public’s continuing need to put on a happy face means health and beauty products continue to be one of the most dynamic sectors in the packaged goods market.
Toiletry sales rose more than seven per cent by value in 1988 to over 3.3bn, according to new figures from market analyst Information Resources. That is four per cent above inflation and 5.5 per cent ahead of food.
While the British may be more interested in looking and smelling good than ten years ago, other drivers of growth in the sector have been the introduction of added-value products on a regular basis and high levels of promotional spend.
The introduction of products such as Oil of Ulay Moisturising Body Wash in 1997, for example, fuelled growth in the shower products sub-sector. Last year, sales of shower products soared by more than 34 per cent.
Shower products are the fastest growing sector in the personal wash category, which, together with the other big toiletries market category, deodorants/body sprays, was worth about 912.5m last year with an annual value growth of 6.5 per cent.
Haircare products are also buoyant, with a value increase of eight per cent and annual sales now past the 900m-mark.
Premium-priced items, such as Fructis Shampoo and Conditioner, have had a positive impact on the category’s performance and, as with the other major categories, a high level of promotional activity is driving this growth.
High levels of new product introduction and promotional activity is becoming more common in the sector as a whole. This is particularly evident in the fastest growing markets of beauty (skincare and body products), and male toiletries, with sales up 11.2 per cent and 8.9 per cent respectively.
Tim Eales, client service director at Information Resources, says: “As a nation, we tend to be vain. Of all the money we spend on toiletries in this country, 60 per cent of it goes on products we use above the neck – and if we were to include cosmetics and fragrances here, this figure would be significantly higher.”
Not only are we becoming vainer, we are also becoming more brand conscious, at least when it comes to toiletries. It seems that we are not just concerned about smelling nice – it also has to be the right smell.
As a result, own label’s share of the toiletry market has declined over the past year and now accounts for 15.8 per cent of sterling sales. While retailer products are more dominant in some markets, such as baby toiletries, where they account for 35 per cent of the market value, IRI says in recent months consumers have increasingly been switching to branded products.
“This move has not been price-led,” Eales adds. While in the past year prices of health and beauty products have generally increased by 5.6 per cent, for branded products this increase was greater at 6.2 per cent while own-label prices remained flat. The position is reversed for grocery lines, where branded products increased by just 0.8 per cent compared with own label, which rose two per cent.
So branded health and beauty products appear to command a higher premium price than grocery products.
Indeed, in a recent analysis indexing the price of branded and own-label products against the overall grocery category, grocery brands enjoy a premium price of 11 per cent compared with health and beauty (HBA) brands of 19 per cent. And when the differential with own-label products was explored, this difference was even more marked: branded grocery had a price differential of 19 per cent with own label, while HBA brands were generally 87 per cent more expensive than the own label equivalents.
In terms of product introductions, health and beauty is a very dynamic sector.
In the past two years, IRI’s figures show that new products have contributed almost ten per cent to the market value – even more in some sectors.
New conditioning products in 1997 contributed ten per cent to the value of the market, and by 1998 these had increased to 18 per cent. In the shower sector, new products contributed a more modest 1.3 per cent in 1997, but by 1998 these introductions contributed 13.1 per cent to the category.
New activity in 1998 saw this trend continue with new products accounting for 5.6 per cent of market value.
More new HBA brands succeed compared with the grocery sector – for HBA, an average of 16 per cent met the “success” criterion (termed as products which achieved a peak share of more than two per cent of market value, or an annual turnover of 1m) compared with 13 per cent for grocery brands.
Of course there are a number of reasons for this success, such as distribution, price and marketing support.
First, in distribution terms, successful brands got an average of 91 per cent take-up in the top end of the trade, compared with only 35 per cent for unsuccessful ones.
Established brand names launching a product are more likely to achieve this level of distribution than a new player.
In price terms, successful brands were much quicker and more aggressive in their price promotion than unsuccessful brands. By comparison, after the first ten months of launch, unsuccessful brands were forced to cut their price longer term while successful brands did not.
However, even the successful brands found it hard to retain their premium price positioning in the longer term and almost two years after launch tended to settle about five per cent below their introduction price.
Trade promotion proved a pre-requisite for success. Successful new HBA brands were backed by trade promotions in their first four weeks and almost 70 per cent were promoted in the first 12 weeks. In some respects this is unsurprising given the health and beauty sector as a whole is dependent on promotions. In the past year, 31 per cent of health and beauty sales came from promoted products and at any given time, products representing 18 per cent of everyday sales will be on promotion.
Indeed, this dependence on promotion is right across the sector and is growing.
More than 35 per cent of conditioners, deodorants and body sprays, personal wash and shampoo products, for example, are sold on promotion. For such markets as male toiletries, sanitary protection, baby toiletries and toothpaste, this figure is running at more than 25 per cent. And these promotions are particularly effective in driving incremental volume.
In such markets as baby toiletries, conditioners, toothbrushes, shampoo and toothpaste, for instance, at least 55 per cent of product sold during periods of promotion were incremental to everyday sales.