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Bath & Body Flourishes Even as Middle-Class Confidence Wains

Contact Author Rob Walker, Euromonitor International
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  • Retail value of bath and body climbed 7% (at fixed U.S. dollar prices) to reach $76 billion in 2013.
  • Overall, emerging and developing markets will account for 54% of bath and body value sales in 2014, compared with 44% five years ago and 35% five years before that.
  • Fast-growing bath and body markets to look out for in the next five years include Indonesia and Saudi Arabia.
  • Bath and body care brand owners are cottoning on that at-home pampering is an attractive platform for product development. There is a new sensorial focus in bath and body creams, for example.

On the face of it, 2013 should have been a testing year for the bath and body care category. Spending power in many of its key markets—notably Brazil, the U.S., Japan and Europe—was at low ebb, and the middle class, in particular, was busy trading down across all manner of consumer goods. It managed to wave off these potentially negative pressures, however, and record its best results in more than a decade, with retail value climbing 7% (at fixed U.S. dollar prices) to reach $76 billion.

What is more, there seems little sign of any significant slowing down. This year, according to the latest data from Euromonitor International, growth is on course to top 7%. All the category’s major markets are showing an upward trajectory, new product development is at a high, and investment is ramping up across emerging and developed regions alike. It begs the question, what makes bath and body care (which incorporates bath and shower products, deodorants and general-purpose body care) so resilient?

A ‘Deal Junky’ Consumer Culture

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It is a given that consumers trade down when spending power weakens. Look no further than Western Europe and North America, where there is a seemingly insatiable appetite for discounts and promotions. It is visible in all manner of consumer industries, from fast fashion to fast food. The middle class, it seems, has grown so used to price-cutting that it now expects it, irrespective of the time of year.

This penny-pinching shopping culture is not bad news for everyone, however. Indeed, it is the key to bath and body care’s strong recent performances. Deodorant sprays, notably, have seen a huge uptick in demand as growing numbers of consumers trade down from much pricier fragrances. It is now a $10 billion a year category in its own right, with sales soaring by 11% last year. Over a five year period, global sales were up 56%, with spending in Brazil (the biggest market) more than quadrupling.

It is easy to understand why deodorant sprays have developed such appeal. Their low price point is crucial, of course, but consumers’ perception of the difference between a fragrance and a deodorant spray has also started to blur. This, in turn, reflects a graying of category boundaries in terms of advertising and marketing activity. On top of that, most of the big name brands, both in deodorants and fragrances, now have a footprint in deodorant sprays, which is driving up its retail ubiquity.

Consumer Spending Shifts Boon for Bath & Body

Nowhere is the boom in deodorant sprays more visible than in Brazil, where spending shot up by 35% in 2013, pushing the category’s total retail value to more than $2 billion. It is telling that mass fragrances grew at a third of this rate over the corresponding period, representing its weakest performance in five years.

This pendulum shift from fragrances to deodorant sprays has gathered momentum as a growing number of Brazil’s new middle class looks for face-saving ways to save cash. These consumers do not want to give up what they perceive as their most prestige products—for example, smartphones or designer handbags—so less conspicuous product categories are in the firing line.

The global rise of deodorant sprays is not all about economy brands, though. Most designer labels have diversified into the format, too, as an extension of their fragrance lines—Hugo Boss, Gucci, Yves Saint Laurent, Givenchy, Hermès, to name but a few. These brands, although positioned at substantially higher price points than mass deodorant sprays, still offer a big saving on premium fragrances. It is one of the reasons why premium fragrances are now growing globally at their slowest rate since 2009. Furthermore, designer labels have boosted the cachet of deodorant sprays, which is a big deal in markets fuelled by ‘aspirational’ consumption.

The Cocooning Factor

There is evidence too that general-purpose body care and bath/shower products have also reaped an upside from a dip in consumer confidence in key markets. This is because the middle class is spending more time at home, and cutting back on trips to hair salons, spas and beauty parlors.

Bath and body care brand owners are cottoning on that at-home pampering is an attractive platform for product development. There is a new sensorial focus in bath and body creams, for example. And overall, consumer demand for increasingly sensorial experiences with their bath and body products is driving innovation in textures (new oil and gel formats, especially) as well as longer lasting scents, new moisturizing application formats, and cooling and smoothing effects. It is about turning at-home bath and body care into a more indulgent, spa-like experience. The margins are also healthy in these categories because the consumer agenda is less about discounting and more about a burgeoning demand for innovative products.

New Frontiers

The emerging markets continue to be a key target of new investment for bath and body brands in all categories. India, notably, is a fast-growing market, and is on course to leapfrog Brazil in 2015 as the biggest in the world for bar soap. There, discounted multipacks are fuelling a big increase in demand. Brands are also pushing into formerly inaccessible rural areas, where there is huge untapped demand.

Overall, emerging and developing markets will account for 54% of bath and body value sales in 2014, compared with 44% five years ago and 35% five years before that. Brazil and India have been at the frontline of this power shift, collectively fuelling 42% of the emerging markets’ incremental growth over the last decade. China, Argentina, Russia, Iran and Mexico have also been key growth engines. New fast-growing markets to look out for in the next five years include Indonesia and Saudi Arabia.

To sustain strong annual growth globally, the category will need to keep innovating, though. Yes, trade down activity, household cocooning and investment in the emerging markets have collectively been a major spur to the recent high growth rates, but the challenge will be in holding onto consumers as economic conditions improve in key markets and as competition intensifies from other product categories. What bodes well is that bath and body is still only scratching the surface in terms of its segmentation potential.

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

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