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Markets and Dichotomies

By: Briony Davies
Posted: August 26, 2008, from the September 2007 issue of GCI Magazine.

Despite global sales almost hitting the $100 billion mark in 2006, the segment is often considered to be a drag on the overall global beauty products market—posting value growth of 27% between 2001 and 2006 compared to the 30% achieved by the larger, more lucrative cosmetics categories. However, a closer look reveals that personal care is dichotomized with large but slow-moving commoditized sectors, such as bath and shower and oral hygiene, and the smaller, more dynamic emerging areas of baby care, men’s grooming and sun care. Euromonitor International provides insight into key drivers of each of the most significant personal care categories and recommends future strategies for maximizing opportunities and avoiding possible barriers to success.

Price Pressure Prevents Growth in Developed Markets

The largest regional personal care markets, Western Europe and North America, with 2006 sales of $27 billion and $19.6 billion respectively, are plagued with low growth rates, each with less than 15% value growth between 2001 and 2006. Consumers in these markets are far more willing to economize on personal care than they are on cosmetics products, trusting that the quality of even cheap brands is of a high enough level to deliver basic hygiene—meaning that price competition is fierce between toiletries, brand loyalty is low and private label is a greater threat within these sectors. This is further exacerbated by the retail distribution of personal care in Western Europe and North America, which is dominated by price-cutting retailers such as supermarkets and discounters; in Western Europe, almost 50% of all toiletries are sold through these channels. It is therefore not surprising that encouraging consumers to trade up is central to the strategy of personal care brands in the more mature markets.

The most successful means of achieving this is through the provision of added functionality and convenience with the inclusion of cosmetic benefits—including added skin care properties, antiaging and exfoliating. The challenge that faces most toiletry manufacturers is that private label looms close behind, offering increasingly sophisticated alternatives at lower prices. U.K. supermarket chain Tesco, for example, launched an organic personal care line with approximately 40 products in February 2007, and Asda and Waitrose have now followed suit.

Emerging Sectors Booming in LA and Eastern Europe

Latin America—with double-digit compound annual growth rates across all toiletries sectors during 2001–2006 and value growth of 73.4% across the same period—is the fastest moving region for personal care products. Eastern Europe, with average annual growth rates of 9.9% and gains of $2.5 billion since 2001, is not far behind. Going forward, growth is set to be driven by underdeveloped sectors—including sun care, baby care and men’s grooming— in both regional markets.

Manufacturers will be pivotal in maximizing the potential that exists in these categories, and there will be a need for them to take on the role of educator and explain the uses and benefits of these products. In Brazil, for example, Beiersdorf’s Nivea brand sponsored campaigns on skin cancer prevention in schools and other institutions in 2006, an effort that included a play showing the importance of using sun protection products regularly. A similar strategy was employed by Russian player Nevskaya Kosmetika to drive growth in baby care; in October 2006 the company implemented a campaign in support of its Ushasty Nian brand in 87 medical establishments in 13 Russian cities, offering baby skin care training for mothers and mothers-to-be.

Bath and Shower Proves a Drain on Personal Care