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State of the Industry: Will Megabrands Rule?

By: Briony Davies, Euromonitor International
Posted: June 6, 2006, from the June 2006 issue of GCI Magazine.

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Other factors fueling skin care’s growth in 2005 are the continued pre-occupation with anti-aging products, which has prompted the launch of advanced formulas from mass players (Olay’s Regeneriste, Avon’s Anew and L’Oréal’s DermoExpertise) and super-premium products from doctor brands. Men’s skin care also has been a strong performer, and potential in areas such as Eastern Europe indicate that key players in this space should begin to think about global expansion.

Segment Ailing Sectors

As usual, sun care, baby care and men’s toiletries were extremely dynamic. Africa/Middle East and Eastern Europe have been particularly significant for men’s and baby, while global sun care growth has been helped by Asia-Pacific and Latin America. All three product areas still offer up plenty of growth potential in developed markets. Sectors such as hair care, bath and shower, and oral hygiene all have been relatively slow moving since 2001 due to their high penetration. However, there is potential to eke out growth by slicing and dicing consumers into microsegments, as exemplified by hair care. There now are products for men, women and children; those for hair that is oily, curly, dandruff-prone and even straight (Garnier Fructis Long and Strong), and lines to give treatment benefits (antiaging and antipollution for example), indicating that innovation is key in mature sectors. Manufacturers that want to revive other struggling sectors can employ such a strategy.

Bigger and … Bigger

Besides heralding recovery, Euromonitor International’s data illustrates that merger and acquisition activity has shifted the landscape of the global C&T industry. The industry’s largest acquisition to date was Procter & Gamble’s takeover of Gillette for $57 billion in January 2005. This has had a huge impact on the C&T ranking, knocking L’Oréal from its number one spot in the industry. Other merger and acquisition activities saw Kao buy both Molton Brown and Kanebo. Coty signed a deal to acquire Unilever’s fragrances division, and the flurry does not look set to waver following L’Oréal’s acquisition of The Body Shop in February 2006, a move perceived as an attempt to fight back against the new superpower of personal care as well as to tap into the naturals trend.

Year of Megabrands

Megabrand was the word on everyone’s lips in 2005, with major players such as Shiseido, Avon, Unilever and Procter & Gamble focusing innovation on a handful of high-impact brands. The trend continues in 2006. Brands have been split into new categories and even extended into different sectors to scoop up sales and broaden appeal among a wider consumer base.

The year saw a number of skin care brands reach out into hair care. In April, Accantia launched a new range of perfume- and color-free hair care products under its leading Simple brand. In the same month, Estée Lauder levered its Clinique brand into the sector with the launch of True. Tapping into the ethnic category will help extend other big brands across a range of sectors. In September, Unilever filed a trademark for Sunsilk Anti-Sponge shampoo, suggesting that an ethnic hair care launch is on the cards for the Sunsilk brand; via the megabrand, manufacturers can milk broader industry trends and target new lucrative groups such as ethnics, teens, ’tweens and grays while reinforcing brand equity.

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