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- With growth in disposable income levels and consumer choice in emerging markets, products are increasingly being bought for specific individuals—with more consumers demanding variants for their own hair type.
- In the majority of emerging countries, branded hair products from multinationals are still perceived as being of far higher quality than local brands.
- The colorants category, previously one of the less dynamic areas of hair care, has transformed into a hive of new product development activity and renewed consumer interest.
- With brand loyalty at a low in hair care, a unique selling proposition, particularly in developed markets, is key to growth.
Hair care is currently the largest category of the global beauty industry, according to market research firm Euromonitor International, accounting for 19% of total global industry value sales in 2008. However, it has also been one of the hardest hit during the global economic downturn. As a result of relentless discounting, “buy one get one free” offers and consumer trade down, value growth in the category rose only 4% in 2008, falling from 5% in 2007. This gave hair care the second lowest growth rate in beauty, after the dismally performing premium cosmetics category. Hair care sales cooled further in 2009, as discounting and price wars among both retailers and manufacturers intensified.
Mature Markets Hardest Hit
The markets that have endured the hardest year in hair care have been those where consumers already use conditioner as part of their grooming regimen, and where many consumers had already made a trade up from standard hair care products to more expensive salon brands. North America, Western Europe and Japan accounted for a combined 54% of total global hair care sales in 2008, and, perhaps more importantly, have the highest per capita consumption, according to Euromonitor. This means that there was far more scope in these regions to make cutbacks, and any change of market dynamics had a direct impact on global sales.
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As the recession continued to bite in key markets such as the U.S. and the U.K., many consumers have opted for less-expensive brands—with private label hair care sales rising at the expense of higher-priced aspirational brands. Some consumers have even adopted a more drastic approach by cutting out products altogether—conditioners and styling agents have proved particularly susceptible to this. This resulted in a 2% decline in value sales in North America from 2007–2008 and just 1% growth in Western Europe, enough to dampen total global hair care sales.
Booming Growth in Emerging Regions
Emerging regions did their part to prop up the sluggish performance of the developed markets. Particularly strong performances were put in by Eastern Europe (9% value growth 2007–2008) and Latin America (8%), according to Euromonitor. Improvements in distribution and retail networks is one of the main driving factors behind the strong growth of hair care in both regions. The sharp increase in chain retailers means that consumers in emerging markets are now being exposed to a wider variety of products than ever before, and this has moved sales in the category beyond basic products (like shampoo) toward conditioners and styling agents. In India, for example, consumers historically bought shampoo and conditioners as general or family-use products, but by 2008, with growth in disposable income levels and consumer choice, products are increasingly being bought for specific individuals—with more consumers demanding variants for their own hair type. The relative immaturity of these markets offers fantastic potential. In stark contrast to the developed markets, there is far more scope for long-term growth—as consumers, in many cases, are only beginning to trade up beyond basic products such as shampoo.
Preference for Branded Hair Care in Emerging Regions
Private label hair care is still in its infancy in emerging regions (in Asia-Pacific, for example, it accounted for less than 1% of total brand shares in 2008), although it is starting to develop as multinational retailers continue to expand and consumers learn to trust these store brands. In India, for example, many retailers have recently introduced tiered pricing in private label (long favored by retailers in the West) to cater to a wider audience. In the majority of emerging countries, branded hair products from multinationals are still perceived as being of far higher quality than local brands. This explains the phenomenal success of sachet marketing in emerging regions. Sales of brands such as L’Oréal’s Garnier have thrived in India thanks to sales of sachet products.
In developed regions such as Western Europe, private label is far more trusted among consumers. One of the main reasons for this is that the retail market is far more concentrated by chain stores. Companies such as Boots in the U.K. have spent a long time building trust among consumers of Boots-branded hair care ranges. This meant that as the recession hit, consumers felt far more comfortable switching to private label products associated with these kinds of retailers.
Colorants; At-home Perms Get Boost
It is not entirely doom and gloom for the retail hair care industry in developed markets. Colorants and at-home perm kit sales have been thriving. Visits to the hairdresser were one of the first things to be cut from the budget of many consumers, and salons have been forced to offer discounts to consumers in order to maintain foot traffic—a tactic that has not entirely prevented many women from choosing to color their hair at home. As a consequence, the colorants category, previously one of the less dynamic areas of hair care, according to Euromonitor (with a compound annual growth rate of under 1% from 2003–2008 in Western Europe), has transformed into a hive of new product development activity and renewed consumer interest. Many of the new launches center on products being marketed as salon alternatives or root touch-up between hairdresser visits. Sales of products such as Clairol’s Root Touch-up and Root Rehab by Kelly Van Gogh have increased among heavily indebted consumers in markets like the U.S.
Shift Toward Milder Colorants
The other major current trend in colorants currently is ammonia-free. L’Oréal launched ammonia-free hair colorant Inoa in Western Europe in September 2009.
Although no-ammonia colorants are nothing new, the product claims to achieve the same results as products that do contain the chemical. The range is professional; it will be sold for at-home use too in the future. One of the main reasons for the trend is more stringent regulations in Western Europe governing hair colorants, announced in October 2009. The new laws require hair colorants that contain oxidative ingredients to be labeled that they can cause severe allergic reactions. These risks scare some consumers and provide an incentive for manufacturers to reformulate their products in order to avoid having to print the warning on their packaging. This change in the law, coupled with the increased consumer demand, means that more innovation is likely to come in 2010.
Innovative Recession Coping Strategies
In March 2009, Procter & Gamble launched its Pantene Shine Hair Spa in Sydney, with a view to a wider rollout. The salon offers consumers a wash and blow dry for AUS$15 and uses Pantene products exclusively. The concept emulates the success of the Nivea Haus in Germany, a spa owned by Beiersdorf that uses only Nivea skin care products.
Although most new launches were in the colorants category, some new product concepts in other areas of hair care have captured the imagination of consumers and have helped to maintain interest in the category, thus stemming the flow of consumer trade down. Kairos’s anti-acne shampoo, conditioner and treatment products were rolled out in the North American market in 2009, and a strong unique selling proposition (USP) is likely to appeal—especially to the elusive teen market.
In mid 2009, the Nine Naturals launched a hair care line aimed at mothers-to-be. Its Oh Baby! shampoo and conditioner range is marketed as free from harsh chemicals and preservatives that are typical of standard products. The range is likely to prove a success—baby care has proved itself one of the most recession-resistant areas of the beauty industry as parents refuse to make cutbacks or take chances when it comes to their offspring.
Ultimately, it is likely to be ranges with a strong USP such as this that succeed in the recession and beyond, particularly in developed markets. Brand loyalty is at a low in hair care, and brands that give consumers the most convincing reasons to continue paying more for their hair care should see the best long-term rewards.
Carrie Lennard is a research analyst at Euromonitor International.