Premium beauty brands are bucking the austerity trend and showing strong growth, claims a report on the sector by Kantar Worldwide shown exclusively to Marketing Week.
The average family is expected to be £10 a week worse-off than last year, but spending on premium beauty products, including skincare, cosmetics and perfume, is increasing 11% year on year, according to figures from the Centre for Economics and Business Research.
“People are still willing to invest in quality, regardless of recessionary pressure,” claims Tim Nancholas, strategic insight director at Kantar Worldpanel. “Within prestige beauty, it’s not just high-priced items that are doing well, but also brands that have significant heritage behind them such as Dior.” Indeed, double-digit growth in an economy that has grown a measly 0.5% in the first quarter of 2011 is significant, although Nancholas notes that growth is slowing down.
Conversely, mass market brands such as Rimmel, which experienced strong growth for a number of years, have seen that trend stagnate. “For the first time the market is static in value and growth. Consumers are being more careful about impulse purchases,” Nancholas states.
One item seemingly impervious to this is nail polish, which grew 12% last year. “Nail polish can be a very cheap purchase and is much more likely to be dictated by ever-changing fashion trends than eyeshadow or lipstick, which consumers generally choose to suit their colouring and rarely experiment with,” Nancholas notes.
The disconnection between so-called austerity Britain and its grooming habits continues in the beauty services sector, with professional treatments also experiencing strong sales. “I’m surprised at how well salons are doing,” Nancholas admits. “The double-digit growth the sector experienced is slowing a little but the fact that Tesco is entering this market [with in-store salons] shows there is still potential.”
Nancholas adds that innovation and the quasi-cosmetic surgery nature of some treatments such as laser and microdermabrasion (professional exfoliation) is driving consumers into salons. He also points to certain fads such as the Gruffa Fish pedicure, where tiny fish remove dead skin from feet, whose novelty value has also led to increased salon visits.
However, products that can postpone or replace more routine “maintenance appointments” such as visits to the hairdresser are also performing strongly as technological innovation makes hair dyes less tricky to apply and conditioners maintain hair’s lustre for longer. Conditioners that claim to repair split ends have grown 29% year on year, while the 10% year on year growth in the colourant category can be put down to three trends, according to Nancholas.
£1.6bn the value of the salon beauty treatments market in 2010, up from £1.4bn in 2009
£1.96bn the value of the luxury beauty products market last year, up 11%
£1.49bn the value of the fragrance market last year, up 12%
“First, technological innovations such as the mousse delivery is making application less hazardous; second, a fashion for more extreme hair colours such as vibrant auburn means fewer women are likely to be lucky enough to follow the trend naturally; and third, it saves money by not having to go to the hairdresser.”
Both the at-home and salon beauty markets are very competitive and as a result a strong promotions culture has developed. Promotions are a significant contributor to sales growth and the top two retailers in the sector Boots, which has a 29% market share, and Debenhams (16%) both rely heavily on their beauty loyalty schemes to encourage sales. “Debenhams has done very well with its beauty card and the Boots Advantage card is a big driver of sales,” says Nancholas. “Its own-brand No7 range is the biggest overall beauty brand and the retailer’s policy of frequently handing out money-off vouchers at the checkout is a significant driver behind repeat purchase.”
Skincare overall has seen a modest rise of 1% year on year, half that of sales of toiletries overall, while prestige skincare has grown by 3%. However, men’s skincare has been one of the few categories to dip, slowing by 3% year on year.
Nancholas says this is not necessarily down to men renouncing grooming as a whole, but rather that after initial strong growth when the category was created from scratch three or four years ago, the market has matured. “L’Oréal and Nivea extended men’s skincare beyond shaving,” Nancholas explains. “For two years it was up 30% year on year, but now there are many more brands and products and prices have come down. There is still room to grow and over the long term we expect to see more brand extensions.”
In the men’s market, however, shaving remains the key battleground, particularly between the market leaders Gillette and Wilkinson Sword. “The powerful brands still drive the market through innovation on razors.”
Promotions again exert a strong influence on purchasing behaviour in the toiletries market with supermarkets becoming one of the most common places to buy bathing and hygiene products in particular. “Because supermarkets have a far bigger share of the market than 10 years ago, particularly Tesco, toiletries have become part of the weekly shop.
“The buy one, get one free trend has moved into non-food and the most heavily promoted items are hand soap and shower gel, to the point where consumers very rarely have to buy these products at full price.”
“In a mature toiletries market, promotions are also the key tool to encourage brand switching. Consumers will continue to shop around to find their favourite products more cheaply but will also look to switch while pressure remains on disposable income,” he adds.
The split between prestige and mass market has already been muddied by the emergence of ’masstige’ brands over the past decade but the territories where these products might be found and the tools by which brands might reposition their products to fit are becoming more clearly defined. While Boots is the leading retailer of women’s beauty, men are buying their products more often from Tesco, while the promotions culture has made it much more acceptable to buy mass market products from discount stores like Wilkinson, Aldi and Poundland.
The strong performance of prestige beauty products, technological advances driving salon visits and the continued success of targeted products such as anti-ageing skincare and men’s shaving paraphernalia should encourage further innovation in this sector. And for brands wishing to recoup their investment, Nancholas points out/ “Consumers are willing to pay a premium for efficacy and value, which means brands can charge more the average spend is up.
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Group PR and marketing manager, Champneys
As the research suggests, people are taking more care of themselves. Grooming and wellbeing continue to matter, even in a recession. Our spas are doing just as well as ever and the health packages such as our monthly fit camp are proving very popular.
We have just relaunched our skincare range to reinforce the brand positioning of taking the spa experience home with you. Our products were initially sold exclusively through Sainsbury’s and it was good for us in the beginning, but following the relaunch in April Boots is now our exclusive stockist. In general, women don’t really buy their skincare in a supermarket unless it’s a distress purchase. Equally our men’s range, which will itself be relaunched later this year, wasn’t a huge success in Sainsbury’s.
We find that a lot of sales come in resorts where 80% of the visitors are female and may buy something for men in the shop while here because they might feel guilty about treating themselves.
Although we are repositioning with updated formulations and packaging that looks quite premium in the affordable luxury segment, Boots will have the brand in its three-for-two offers. Promotions do have an impact and encourage customers to try more products. We prefer it if promotions provide a free gift so that it gives added value. It’s important that we prevent promotions devaluing the brand.
Haircare category manager Unilever
Consumers are still visiting the salon to take care of their hair, but the current economic climate means they are stretching the length of time between those visits. As a result, we’re seeing fast growth in the colourants sector as well as strong performance in products designed to repair damage, as the research shows.
The mass market is really stepping up its game to combat recessionary pressure on sales by making more affordable but effective products that prove you don’t need to go to a salon to have high performance hair care. Despite austerity measures, consumers still want to hold onto the small luxuries in life so they’re trading down from the salon to mass market products, which improvements in product development mean are still on a par with professional ranges.
We’re also seeing an increase in damage control haircare products as a result of the increased use of styling tongs and straighteners. Ten years ago women might have gone to the salon more frequently for a blow dry but these days it’s all about doing it at home and that, combined with the very latest trends for long, sleek, straight ponytails that we’ve seen on the catwalk, has led to damaged hair.
Fashion has definitely entered popular culture through the cult of celebrity too. At home, products mean you can attempt to recreate new looks which means that the colourant sector has seen some particularly fast growth. Dip colour (where two-tone hair is created to give the illusion that hair has been ’dipped’ in a different colour) is a trend straight off the catwalks.
Commercial manager Tesco Health & Beauty
Fashion and beauty trends change so often that we find many of our customers buy a combination of classic and on-trend shades. This is particularly true of nail polish customers come to us looking for the latest style must-haves.
As the research shows, fragrance is doing well. In addition, promotions have a large role to play. Deals such as double Clubcard points help drives sales in items that are perceived to be more indulgent. As a rule, luxury items always perform well on promotion. However, even though promotions always drive sales we wouldn’t stock products that don’t sell themselves we don’t believe we have products that will only sell if they are on offer.
Customers evaluate which products are worth investing in and which are not. We make sure that we cater for all types of customer with our own-brand product, which deliver more than the brand leaders at a price that is better.