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A Rockier Road Ahead for Booming Deodorants Category

By: Rob Walker, Euromonitor International
Posted: November 18, 2013, from the December 2013 issue of GCI Magazine.

Deodorants was the fastest-growing category in the global beauty and personal care industry over the last five years, averaging annual growth of 7% at fixed U.S. dollar prices. And last year was its strongest performance yet, with sales climbing by more than $1.5 billion in absolute terms. This reflected surging demand for deodorant sprays, which fueled over 60% of the increase.

Deodorant sprays are not only driving up their share of the deodorants category, they are also eating into the retail value of fragrances and men’s aftershave. It is no coincidence that men’s post-shave products have delivered one of the beauty and personal care industry’s weakest performances in recent years, according to data from Euromonitor International.

Young men in the U.S., in particular, are opting for deodorant sprays as a low-cost alternative to aftershave or fragrance. The trend has become so entrenched that aftershaves barely get a look from the under 25s. Unilever’s Axe, the top-selling deodorant for men, retails at around 50% less than a low-price aftershave. Despite its cheap price point, the brand has built up a cachet, fueled by powerful advertising. Axe has also strengthened its position outside the U.S. Last year, a strong surge in demand in Latin America helped push global sales over $2 billion.

A Demographic Cliff

There are some critical challenges ahead for the deodorants category, however. For one thing, the demographics do not look good. Teenagers and young adults are the highest volume users of deodorants, with usage tending to decrease with age. The over 65s are the lowest volume users, and by some way.

The problem is that the number of people aged 13–45 in developed markets is forecast to contract by around 11 million to 2020, whereas the population of over 65s is set to grow by around 37 million. Populations are also aging in developing and emerging markets where the total number of over 65s is set to bulge by 161 million to 2020. The deodorants category is fast approaching a demographic cliff.

If the category is going to retain the high growth rates of recent years, it will have to work harder at targeting older consumers. Some brands, such as Unilever’s Dove (Pro-Age range) offer products geared specifically to older consumers, but the marketing is low profile compared with brands targeting young consumers. The challenge will be in developing products that are formulated to protect and enhance mature skin, as well as be supported by strong marketing campaigns.

Overdependence on Emerging Markets

Another problem afoot is the deodorant category’s reliance on emerging markets to beef up global growth. If we strip aside emerging markets, the growth of deodorants last year was only 2% (compared with the global rate of 8%). Indeed, the developed markets accounted for 46% of global sales last year, compared with 59% five years earlier. The shift in global power has happened very quickly, and the world’s biggest deodorant players are now heavily exposed to emerging market volatility.

Over the last five years, Brazil fueled more than a third of growth in absolute terms, with retail sales growing at an average annual rate of 16% (at fixed U.S. dollar prices). Consumer confidence in Brazil is at a low ebb, however, with inflation the biggest concern. Food prices climbed over 11% for the year to July, and this is squeezing household budgets for personal care. The slide of the Brazilian real (which has dropped by around 19% against the U.S. dollar in the last six months) is also pushing up the cost of imports, and raising the overall cost of living. In June, unemployment rose in annual terms for the first time in four years.

Deodorants is one of the more resilient categories in beauty and personal care, but there will inevitably be trading down activity, or lower usage, as Brazilians look to save money. It is hard to see how the category can continue to deliver double-digit annual growth rates in Brazil’s current operating environment. Argentina and Venezuela, which have also been key growth engines for the category, are in the midst of turbulent economic times too.

Fragrances Fight Back

Deodorants also will need to contend with a resurgent fragrances category. There is a budding trend for scents that are light enough to be used as body sprays, for example. These brands (a growing number are coming from the fashion houses) have a premium positioning compared with deodorants, but they are more affordable than traditional fragrances. Body spray fragrances could start to eat into the spray deodorant category, especially in Western Europe.