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Multifunctionality: The Sweet (and Sour) Spot for Color Cosmetics

By: Rob Walker, Euromonitor International
Posted: March 22, 2013, from the April 2013 issue of GCI Magazine.
  • The color cosmetics category seems to have a knack of bucking the trend in austerity-hit markets.
  • As the ubiquity of the BB abbreviation increases, the popularity of BB products could unravel.
  • The nail polish boom across markets seems set to continue in 2013, and could gain momentum well into the long term.
  • In Brazil, nail products will almost certainly have leapfrogged lip products as the top-selling category by the end of 2013.
  • The difference between China and its fellow BRICs is that its nail polish culture is still largely undeveloped. This points to an untapped opportunity over the longer term.

Beauty-conscious consumers worldwide splurged roughly the equivalent of $4.6 billion per month on color cosmetics in 2012. That was approximately half the amount spent on skin care, according to data from Euromonitor International. Consumers could be forgiven for thinking the disparity is narrower though. Cosmetic brands, in particular, have been falling over one another in pursuit of multitasking beauty solutions, especially in cash-strapped developed markets. When purse strings are tight, consumers want more bang for their buck. As a result, it has become increasingly difficult to differentiate between categories.

Brands in the color cosmetics category have taken to this challenge more fervently than those in other categories, with multifunctionality dominating brand owners’ strategic thinking. There are now more brands boasting BB (beauty balm) benefits than you can shake a stick at, for example. And BB products are the flag bearers of multifunctionality.

In Western Europe and North America, the beauty market has become so flooded with functionality that it is not only hard for consumers to differentiate between categories but also, in many instances, to understand what a brand actually purports to do. BB products, and the way they have evolved, are prime instigators of this confusion.

In their core incarnation, BB creams are at once a moisturizer, primer, illuminator and foundation—and usually a sunscreen to boot. And all of this packaged in one tiny tube. Little wonder there has been such strong demand in 2012–13. The problem is that BB has become so popular— and so supremely marketable—that brands have been tempted into applying the BB abbreviation to products that are not strictly speaking beauty balms (Une’s BB Bronzer, Iman’s Skin Tone Evener BB Crème SPF 15 and Lab Series BB Tinted Moisturizer are, arguably, valid examples).

This is all well and good, but there is a risk that BB will become overexposed and that the original concept behind BB creams will get lost, or at best diluted. It does not help that BB used to stand for blemish balm before its more common incarnation as beauty balm. This type of brand schizophrenia is a side effect of the marketing pressures behind the concept.

Crucially, as the ubiquity of the BB abbreviation increases, the popularity of BB products could start to unravel. Consumers, especially those with more sophisticated tastes, tend to shy away from products that have become overpopularized. This is something often seen in the fashion industry. Cue the need for a new concept, likely the rollout of CC (color and correct) creams, which are, wait for it, even more multitasking than their BB forerunners.

The first mass CC cream to be introduced in the U.S., the biggest market in the world for color cosmetics (by retail sales), was Olay Total Effects CC Tone Correcting Line, which arrived on shelves toward the end of 2012. The product claims to treat seven signs of aging, as well as providing color correction and UV protection. It hits all the right spots, but in multiple categories—and that might encourage brand cannibalization trends going forward.

The CC development is clever, and like BB, the trend originally came from Asia. In effect, CC creams have taken a concept that has worked extremely well and given it a marketing overhaul just at the moment when demand was starting to look vulnerable. The world’s biggest soft drinks manufacturers activate this rebranding strategy all the time in order to stay ahead of the game. And it usually works.

Make no mistake about it, CC creams and their spin-offs will be a big hit in Western markets in 2013—and they could blur the boundaries between skin care and makeup even more than BB creams. As yet, it is unclear whether that will have negative implications over the long term. It might be that consumers simply get used to what in effect is a new and fast-growing beauty care category, made up of skin care/makeup hybrids.

Bucking the Trend in Advanced Economies

Love them or loathe them, multitasking brands have helped the color cosmetics category not only stay afloat in developed markets post-2008 but also prosper. This is no mean achievement given that a squeeze on discretionary spending ought (logically) to lead to a slow down in demand for non-essential products.

Indeed, the color cosmetics category seems to have a knack of bucking the trend in austerity-hit markets. Nail polish has been critical to the growth story too. But, just like BB creams, growth has not all been about the emerging markets, actually far from it. In the U.S., compound annual growth in nail polish retail expenditure ran at 17% over the 2007–2012 period, for example. The U.K., Germany, Italy and France were also among the top 10 growth markets in absolute terms, according to data from Euromonitor International.

The strong performance of developed markets helped push the global retail value of nail polish to more than $45 billion in 2012, compared with less than $3 billion only five years prior. What seems to have happened is that women in Western markets have rediscovered nail polish as a must-have fashion accessory, and one that is positioned at accessible price points.

The fashion for nail care first became visible in away-from-home salons. In the U.S. and the U.K., express nail bars opened 10 to a dozen. And this was tied up with a new type of pampering culture for tougher times, whereby consumers showed a propensity to spend money on morale boosters and pick-me-ups, even though they were cutting back on almost everything else.

The salon trend filtered positively into DIY nail care, fueled by the availability of an ever-widening range of trendsetting brands (and color schemes) at mainstream retailers. And it was not only mass brands generating a retail buzz. Compound annual growth in premium nail polish ran at 46% in the U.S. over the past five years, fueling more than $200 million in absolute growth. This was helped by professional salon brands crossing over into retail.

The nail polish boom—both in Western markets and in the broader global picture—seems set to continue in 2013, and could gain momentum well into the long term, especially if the global economic climate remains unstable. A decade from now, we could even be talking about consumers worldwide spending more on nail products than on lip products. That would have been unthinkable five years ago.

This shift in power from lip products to nail products is already on the cusp of happening in some influential markets, notably Brazil. Brazilians spent a little more than $1 billion on retail nail products in 2012, which was almost on a par with lip products. By the end of 2013, nail products will almost certainly have leapfrogged lip products as the top-selling category.

What is more, Brazil’s retail spending on nail products is in addition to a vibrant away-from-home market, driven by around 1.5 million beauty parlors. The average Brazilian woman will typically get her nails done at a beauty salon once a week (even in lower-income neighborhoods), and this has been the platform for an upswing in retail, especially in the northeast region.

Venezuela, Argentina, India and Russia are also key emerging growth stories for nail care products, based on data from Euromonitor International. China is absent from this list, but, in the wider color cosmetics picture, China is integral to global forecast growth. The difference between China and its fellow BRICs is that nail polish culture is still largely undeveloped. This points to an untapped opportunity over the longer term. But, for the moment at least, China is a market still dominated by lipstick and foundation/concealers.

The absence of any significant nail polish footprint in China is an apt measure of the category’s remarkable global achievement over the past five years. So many consumer goods categories, from shampoo to champagne, have become dependent on China to shore up global top lines. Yet, nail polish has been one of the fastest-growing consumer categories in the world without the People’s Republic.

The secret to success has been exploiting key changes in consumption culture in developed markets—specifically, consumers’ desire to look and feel good without spending lavishly. This is also why fast fashion has performed strongly in Western Europe, for example. And, rather like the shifting trends in fashion, the latest generation of nail polish brands and multifunctional creams will need to keep innovating and bringing new products to market. BB and CC creams have broken new ground, but they are only the beginning.

Rob Walker, senior fast-moving consumer goods analyst, Euromonitor International, can be contacted at rob.walker@research7.euromonitor.com.

Did you know that colorants are the most highly regulated chemicals used in cosmetic products?

Coloring the Cosmetic World: Using Pigments in Decorative Cosmetic Formulations covers the state of today’s regulations in the United States, EU, Japan and China in Chapter Two.

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