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The Parallel Worlds of Hair Care

By: Rob Walker, Euromonitor International
Posted: July 9, 2012, from the August 2012 issue of GCI Magazine.

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These type of salon-in-the-supermarket brands, which present a premium image but at an affordable price point, tap into the aspiration-fueled consumption of Brazil’s new C class, which has become more economically empowered over the past decade. Similar brand trends are also happening in Mexico, China, India and Russia.

In short, a key feature of the hair care category in emerging markets is that brand owners are developing a more sophisticated middle ground. It is a segmentation model that aligns with aspiration-fueled consumption patterns. Unilever now has an aspiration bridge between its mass-market brand Seda and status brand TRESemmé, for example.

Opportunities in Affordable Luxury?

Hair care has been going in the opposite direction in most developed markets though, where cash-strapped middle-class consumers typically seek out the most attractive value-for-money deals. Oftentimes this “deal of the week” culture has sounded the death knell for brand loyalty.

True, there is a trend toward affordable premium branding in Western Europe and the U.S., as evidenced by the bullish results of fashion and accessory players such as Mulberry, Coach and Michael Kors, but it is not visible in beauty and personal care categories, at least not to date.

The affordable luxury trend might present an opportunity going forward, however, as consumers in developed markets are increasingly prepared to treat themselves to luxury items, provided they are positioned at accessible price points. This is very different from the aspiration-fueled consumption of emerging markets. It is more a nostalgia-fueled consumption that harkens back to better times. The question is whether a category such as hair care can successfully tap into it.

The best opportunities would be for colorants, conditioners and styling agents—which, as non-staple hair care products, can more realistically leverage “treat yourself” consumption patterns, and there is already some evidence of this happening. Colorants was the best performing hair care category in Western Europe in 2011, for example, based on incremental growth. And conditioners, colorants and styling agents each outperformed shampoo in the U.S. in 2011.

Eco-friendly products are another potential way to beat the downward curve in Western markets. Despite weaker real spending power, the sustainability agenda is getting bigger, fueled by a Facebook culture of online opinions and consumer reviews. There is little doubt this sharing has brought the sustainability debate—and its relevance to consumer products—to a much wider and more influential mainstream audience.

Brands such as P&G’s Pro-V Nature Fusion, a line packaged in sugarcane-based bottles, illustrate how sustainability is increasing in importance in the hair care category. Brands that flex biodegradable credentials (free from silicones, parabens, sulfates and dyes, for example) are also coming increasingly into the market. Timotei Organic Delight and Garnier Fructis Pure Clean are recent cases.

Boutique M&A and Niche Categories

Beauty brand owners are looking more closely at niche categories too, where market maturity is not a barrier to growth. Hair loss treatments, for example, generated value growth of 5% in Western Europe last year, and it was one of only three categories to stave off a contraction in Japan. These types of niche products have a small revenue footprint, but they present attractive margins.

Boutique M&A represents a way to build a profile in these lower-profile markets. Church & Dwight’s 2011 acquisition of the Batiste Dry shampoo brand in the U.K. is a case in point. Retail sales of Batiste summed around $43 million in 2011, according to Euromonitor International.