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Balancing on a Bubble

Carrie Lennard, Euromonitor International
  • Positive growth overall is forecast, with Euromonitor International predicting an average 2008–2013 annual global growth rate of 2%.
  • Consumers in the key regions of North America and Western Europe are moving away from less expensive bar soap toward higher-priced liquid soap and body wash/shower gel.
  • A kind of polarization in body care is becoming evident, with some consumers unwilling to cut back on premium-priced body care products tempered by a more dominant consumer trend toward lower-priced baby moisturizers and private label products.
  • Introducing segmented products to target different consumer groups is among the tactics to maintain market share.

The bath and body segment has been one of the most susceptible to consumer trade down during the recession, with one of the highest levels of private label penetration in the entire beauty industry. Yet despite the threat from less expensive brands, positive growth overall is still forecast for the coming years, with Euromonitor International predicting an average 2008–2013 annual global growth rate of 2% in constant value terms. How exactly is the sector managing to maintain growth in these difficult economic times, and where do future opportunities lie?

Even in the most developed regions, bath and body products still put in a respectable performance. Western Europe posted 2% value growth in 2008, which is impressive given the maturity of the sector in the region and the fact that consumer usage is already at a maximum. The answer to this lies in the continuing trend in the key regions of North America and Western Europe where consumers are moving away from less expensive bar soap toward higher-priced liquid soap and body wash/shower gel. In both regions, bar soap has been in decline for several years—although, interestingly, 2008 was the first year for a return to growth for the category in North America. As the recession hit the U.S. particularly hard, consumers began to look for ways to cut back on spending. This compares unfavorably with the fate of other areas of personal care during the global economic slowdown, such as facial skin care. Growth of nourishers/antiagers, for example, has remained virtually unchanged in Western regions. In Western Europe, sales of nourishers/antiagers dropped from 8% in 2007 to 7% in 2008, an indication that, for many consumers, bath and body just about tops the list of the types of products with which they are willing to make sacrifices.

In body care, prior to the recession, a pattern of trading up from standard products to value-added body moisturizers was seen in mature Western markets. Growth of firming/anticellulite body care consistently outperformed general purpose body moisturizers globally over the past few years, and this continued in 2008, even as the economy took a turn for the worse (6% compared to 5% for general purpose). A kind of polarization in body care is becoming evident. On the one hand, there are some consumers who are unwilling to cut back on their (often premium-priced) body care products, which explains why growth is still slightly outpacing standard body care. On the other hand, a more dominant trend for buying lower-priced baby moisturizers and private label products has emerged among another segment of consumers who feel that they do largely the same job as standard branded moisturizers. This has had a rather negative impact on sales of both general purpose body care (growth declining from 7% in 2007 to 5% in 2008) and firming/anticellulite products (down from 9% value growth in 2007 to 6% in 2008), according to Euromonitor International.

Growing consumer skepticism about the efficacy of anticellulite products is set to dampen sales further in the coming years. This is a result of comparatively poor media coverage. Unlike facial care, where new products are frequently and enthusiastically reviewed, most of the market-directing fashion press take the position that firming and the reduction of cellulite require exercise and diet improvements, rather than creams. As a result, sales are set to slow 2008–2013 to 3% globally, and, even worse, decline by 3% in the key North American region.

Private Label Gaining

In North America, the share of private label in bath and body products climbed one percentage point in 2008 to 6% of total sales, with only four major brands individually accounting for a larger share. Recession-induced retailing trends are largely to blame for this. In crucial markets such as the U.S. and the U.K., more and more consumers are opting to shop in less-expensive grocery discounters, where private label toiletries are often the only choice available. Even where branded goods are available, discounting has become far more prevalent. Given the low level of consumer brand loyalty in the segment, this is a problem—with many consumers willing to simply buy whichever brand happens to be on sale.

This is a real problem for brand owners, who have tried to overcome these challenges through innovation and marketing strategies. Private label products are becoming increasingly sophisticated, often mimicking the style of branded bath and body care. Because of this, brands are increasingly offering both value-added products and combination products that claim to offer numerous added benefits in one go.

Antibacterial, firming, antiaging, sun protection, whitening and exfoliating are some of the most commonly found added benefits. In April 2008, Colgate-Palmolive introduced the Softsoap Spa Radiant line to the U.S. market. The line consists of three types of body washes—Purifying (with aromatic botanicals), Exfoliating (with mineral sea salts) and Moisture Wrap (with essential oil).

In deodorants, a similar trend for value-added products has emerged, with the likes of hair minimizing, antiaging (both seen in Unilever’s Dove range) and underarm whitening deodorants.

Targeting Consumer Groups

Introducing segmented products to target different consumer groups is another tactic to maintain market share. Men have become a key focus, and much of the recent new product activity from brands has centered around male consumers—as evident in P&G’s 2008 launch of the Gillette body wash range. Male-specific body lotions are becoming more common, and in 2009, Vaseline launched the Vaseline Men Hand and Body range in the U.K.—with specific claims such as “fast absorbing” and “extra strength” to stave off private label imitators.

Different marketing approaches were used to reach consumers and try to establish a greater degree of consumer brand loyalty. Colgate-Palmolive’s Aromatherapy Happyful range illustrated a trend in which brands used emotive claims about their products rather than simply emphasizing the products’ cleansing/moisturizing properties.

Regional Activity

Just as sales in Western markets begin to show signs of slowing, rising disposable income levels brought about by greater economic stability in emerging regions are generating growth in bath and body and helping to offset the decline seen in the West. In 2008, the four BRIC nations (Brazil, Russia, India and China) alone accounted for 24% of the total bath and body segment. In body care, the figure is slightly lower at 18%, as body moisturizing products have yet to become seen as an essential item in these regions. Latin America topped regional growth with an impressive 15% rise in value sales in 2008, and Brazil now accounts for $6.9 billion, making it the second largest single market for bath and body care after the U.S., as Brazilian consumers continue to trade up from bar soap to liquid soap and shower gels, fueled in no small part by promotional activities from direct selling companies, particularly Avon.

Asia is a burgeoning growth area, with India, in particular, set to add an extra $509 million to the size of its bath and body care market by 2013. Grooming and personal care are being given an ever-increasing emphasis in the country, and newly wealthy urban consumers are looking for something different and sophisticated—even in everyday activities such as bathing. Even in the notoriously difficult to penetrate rural areas, major companies, such as Colgate with its Palmolive Aroma Vitality shower brand, are successfully using sachet marketing to target lower-income consumers.

In all of the emerging regions, deodorants are enjoying a surge in sales, particularly among new middle-income consumers. Women, who are increasingly entering the workplace, are purchasing these products, as appearance and grooming become more important to their professional lives. Additionally, poorer consumers often use them in the place of more expensive fragrances. This is particularly true in Latin America, which is set to add an extra $956 million to its deodorants market by 2013.

Untapped Opportunities Remain

As traditional key markets such as the U.S. are set for very lackluster sales (0% value growth forecast over 2008–2013 for bath and body care), brand owners should continue to focus their attention on consumers in emerging regions, not least because consumers are far less jaded by a multitude of brands all trying to make themselves heard.

Furthermore, private label plays a very minor role in many emerging markets (accounting for 1% in 2008 of the Latin American bath and body market, compared to 12% in Western Europe), which will be music to the ears of brand owners who fear their latest cutting-edge innovations will simply spawn private label versions within weeks. With this in mind, many companies will find they get a far better return on their investment by looking further afield.

Carrie Lennard is a research analyst at Euromonitor International.

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