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Can Oral Care Keep Up the Pace?
By: Irina Barbalova, Euromonitor International
Posted: February 2, 2009, from the February 2009 issue of GCI Magazine.
- The oral care market is expected to experience a 2% compound annual growth rate 2007–2012.
- Organic, internal growth will be increasingly difficult to develop.
- Asia-Pacific and Latin America are anticipated to see respective growth rates of 19% and 24% 2007–2012.
- Chemical ingredients are being replaced by plant-based ingredients as functional claims for these ingredients increase.
- The key to sustained growth may be consumer education.
- Volume sales are likely to remain solid, but there is likely to be an increase in response to private label products.
According to Euromonitor International, in 2007 the global oral hygiene market grew 6%, broadly in line with overall cosmetics and toiletries market trends. The category is a solid and dependable sales engine—people always need toothpaste—and, as such, it has become far more commoditized than other parts of the cosmetics and toiletries market.
This has influenced the strategies of most leading manufacturers, which typically look for the consolidation of leadership positions by developing scale and global share rather than category-creating innovation. In short, the oral care category is proving difficult to add meaningful value to, as the scope for innovation narrows and mass-market imitations of products such as battery toothbrushes and whitening toothpastes quickly lessen the impact of new product categories.
Nonetheless, the category has continued to develop in value terms despite the enormous price pressure brought to bear on oral hygiene. This pressure is especially strong in the developed markets of Western Europe and North America, which accounted for a combined 49% share of global oral hygiene sales in 2007. Retailers such as Wal-Mart and U.K.-based Tesco are able to dictate pricing terms to producers, lower retail prices to consolidate market share, and carry extremely plausible and surprisingly sophisticated private label products.
Punitive Costs of Development
To counter price pressures, brand owners have had to resort to an increase in the number of product launches in order to stay ahead of trends. Colgate-Palmolive, for example, is leading the global oral hygiene market with a 24% share (60% of its business is in oral hygiene), and claims to have launched 772 new products in all categories of its cosmetics and toiletries portfolio in 2007—with the bulk of those being oral hygiene products. How much of this is genuine innovation is debatable. Most new products coming to market appear to be new flavors or packaging, or toothbrushes with strong claims for increased cleaning power. This looks like tweaking, and these new launches typically do not provide gains beyond the short term.