Never mind own-label detergents and food, Britain’s supermarkets are now expecting own-label cosmetics and toiletries to deliver the kind of profit margins that they once expected from the aforementioned sectors.

Safeway and Sainsbury’s have recently launched ranges of oral healthcare products (MW April 12). And both Tesco and Superdrug are now selling a much wider array of own-label toiletries.

Although marketing and advertising own-brand cosmetics and toiletries requires an approach vastly different from that required to push detergents and food, this is not proving a deterrent to supermarkets who see own-label toiletries as a market with high growth potential.

Datamonitor figures illustrate the fact that the own-label cosmetics and toiletries market had an annual growth rate of seven per cent between 1990 and 1994 – running slightly ahead of the branded sector. This is a point not lost on supermarkets keen to maintain and improve profit margins. The own-label oral hygiene market, for instance, accounted for 15 per cent of the total market value in 1994 – 63m, compared with the overall 418m.

Developing own-label cosmetics and toiletries adds another dimension to supermarkets as a one-stop shop. These products are a natural extension for supermarkets, who are providing a much wider range of services, from petrol stations to in-store pharmacies.

Supermarkets are developing cosmetics and toiletries, with all their special merchandising and marketing requirements, partly because the markets for own-label detergents and foods are already saturated. They will never replace them in volume terms, but offer a healthy return for a comparatively small investment.

Jeremy Smith, consumer goods analyst with Datamonitor, says British supermarkets traditionally enjoy higher profit margins than their European counterparts, with an average of six to eight per cent. Prior to Tesco announcing its annual results last week (MW April 12) there was concern among City analysts over profit margins. As it turned out, Tesco notched up record pre-tax profits of 675m maintaining profit margins of 6.2 per cent. Significantly, profit margins on own-label products are above the average six to eight per cent, although not by much.

“They are not interested in lowering market share (of the brand leaders). They are more interested in building a quality image and increasing brand loyalty,” says Smith.

Developing own-label toiletries is made possible by the supermarkets efforts to build trust and confidence in the main brand, be it Tesco or Safeway. Own-label products – cosmetics are no exception – exploit that brand loyalty enabling the creation of other own-label sectors.

Supermarkets initially developed cheap me-too products as own-label, but they now have the confidence to offer own-label cosmetics and toiletries at medium prices. Greater emphasis has also been placed on the style of packaging, which is similar to the images used on branded products, leading to run-ins with brand owners over the issue of copycat products.

While supermarkets have developed own-label toiletries, they have yet to tackle own-label cosmetics, particularly make-up, with any success. This, according to Smith, will take some time as it requires careful merchandising. Cosmetics are far more personal, and often a luxury premium-priced item. While a consumer will buy own-label detergent to put down the toilet, they are more wary of buying own-label cosmetics to put on their face.

Boots the Chemist has been particularly successful with the No 7 and No 17 make-up ranges because of the Boots brand heritage. In addition, the products have been developed over several decades, supported by multimillion pound advertising and marketing budgets.

Successful promotion of own-label cosmetics, particularly make-up, will require special merch- andising and marketing. This will involve providing a wide range of products, adequate space so that shoppers can try products on, as well as cosmetics personnel to advise shoppers.

Sainsbury’s, in realising the importance of creating a special space in its health and beauty sector, has created aisles that differ from the rest of the supermarket to provide shoppers with colour and variety to market their own-label toiletries products better.

A Sainsbury’s spokeswoman admits the supermarket views the health and beauty sector as offering high growth potential. It’s purchasing power allows it to offer both proprietary brands and own-label products.

Datamonitor’s Smith believes the supermarkets will eventually tackle own-label make-up products, but he thinks they will be beaten to the market by other retailers. He cites Marks & Spencer – which already has a number of make- up products – as the most likely store to exploit the opportunity first.

The M&S image is a lot closer to the Boots chemist tradition than that of the supermarkets. “I would see it as a logical competitor to Boots in the make-up department.”

Ian Hunter, No 7 group brand manager, says the two make-up ranges have been marketed separately from the Boots brand. This has resulted in a separate identity for the No7 and No 17 make-up ranges from that of the store’s main branding.

The Boots brand image has been a great advantage in launching the two make-up ranges and developing them as brands in their own right. Consumers, already loyal to Boots, are more willing to trust any own-label products made by the company.

“We did use a very different language for these brands because they are young and fun products. Trying to combine the two would not have worked. We had to make sure they were perceived differently. With Boots, we had the heritage and the comfort factor so then it was a case of building the ranges (No7 and No17) as separate entities,” says Hunter.

Simon Preece, account director with Elmwood design consultants, says British retailers are committed to being taken seriously in the sector of own-brand cosmetics and toiletries. But because they are not in a position to spend millions on advertising these products, they view packaging of the items as crucial.

Own-label toiletries are joining retailers’ detergents and food products in shoppers trolleys with ease. If the signs coming from the industry are any indication, it is clear it will only be a matter of time before own-label cosmetics join them in the grocery bag.


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