May 2010 In this month's edition of Beaute' we look at how the by sdsdfqw21


									                                                                                   May 2010

In this month’s edition of Beaute’ we look at how the green personal care
market is experiencing rapid growth rates even during the recession. We look at
L’Oreal’s strategy in Africa and how they plan to achieve growth in this relatively
new consumer market, and we look to the good old USA for some insight into
which product categories are stable investment areas.

                                GREEN trend: Green personal care market set to
                                experience ‘rapid growth’.
                                The market for green personal care products has remained
                                relatively buoyant despite the economic downturn, and is
                                expected to outperform the market for conventional personal
                                care products in terms of sales growth during 2010, according
                                to Mintel.

                                   In the market research company’s recent report, ‘Are
American’s willing to pay more green to get more green’, it was predicted that rapid growth
would continue in this sector as the economy recovers. As one of the most mature markets for
green products, personal care product sales increased 18 per cent between 2006-2008.
Although this fell to 1.2 per cent for 2009, the segment recorded positive growth in a time
where other market segments experienced declines, according to Mintel.
Room for growth in natural and organic market - For the purpose of the report, green products
were defined as goods that minimize environmental impact in one or a number of ways
including the use of recycled materials and less-energy intensive manufacturing processes.
Consumers who used natural and organic personal care products at least once a week
continued to do so during the recession, with over half increasing their product use during
2008, the report revealed. However, one-third of all consumers had not tried natural and
organic personal care products, indicating large growth potential. Additionally, Mintel claimed
that as younger consumers continue to dominate market spending, the longer-term prospects
for this sector are ‘very good’.
Growth driven by niche products - According to Mintel’s Global New Products Database
(GNPD), products boasting an organic or natural claim accounted for nearly 10 per cent of all
beauty and personal care product launches through 2008 and 2009, compared to 5 per cent in
2006. In 2008, niche brands were a key growth driver in the natural and organic personal care
market, noted Mintel, with retailers such as Ulta and CVS Beauty 360 providing an opportunity
for such brands to find shelf-space. According to Mintel Senior Analyst Chris Haack, this trend,
seen through the launch of brands such as Ec-Ooh-Chic, is expected to continue. “We expect to
see a growing trend toward upscale green personal care products targeted to spas, salons and
other high-end retail outlets in the coming years,” said Haack.
Natural and Organic standards still confusing - Mintel’s report also revealed that despite
several natural and organic standards against which personal care products can be certified;
consumer uncertainty prevails, with 37 per cent claiming to be confused or sceptical about such
product claims. According to Mintel, the lack of consistent standards ‘can only undermine the
appeal of the segment as a whole’. If a clear definition of ‘natural’ and ‘organic’ existed for
personal care, the market research company argues, this would help to ensure the long term
future of the industry.

                          COMPETITOR STRATEGY:

                          L’Oreal focuses resources on “untapped” Africa.
                           L’Oréal has a range of products that span facial care, fragrances and
                           hair care that are targeted at markets ranging from the professional
                           salon to the budget consumer. L’Oréal SA MD Philippe Raffray says
                           Africa has become a strategic market for the L’Oréal Group. “With a
                           total population of almost 1 billion people, Africa offers large markets
for our products. Africa remains a largely untapped market where consumers are screaming out
for quality products adapted to their specific needs.”

L’Oréal has subsidiaries in SA, Ghana, Morocco and Egypt. Its products are available in most
African countries and its plant in Midrand manufactures SoftSheen Carson products, which are
exported across Africa, the Middle East and Europe. The firm recently developed and launched
Dark and Lovely body lotions, developed specifically for the dry African skin, which is part of its
determination to establish its SoftSheen Carson signature across the continent.

“Our strategy in Africa is very marketing driven, where product demand is created through
specific local marketing drives,” says Raffray. “L’Oréal will continue to launch technologically
advanced products, backed by strategic marketing campaigns, into the African market. This will
continue to give us a major competitive advantage that will ensure that L’Oréal maintains its
leadership for the next 100 years.”
It is a challenge to bring products of quality, such as the Dark and Lovely brand,
which remains relatively expensive, into these markets. But the perceived value of
the brands has led to good take-up of the SoftSheen Carson portfolio of brands
across Africa. Raffray says as a result of SoftSheen Carson, a brand which
performed strongly last year, the company offers a range of hair care products
across the continent.

“Dark and Lovely relaxers remain the brand of reference across the formal and
informal hairdressing sector. Almost 10 years ago, L’Oréal created SoftSheen
Carson by merging two US hair care firms specifically catering to the needs of
consumers of African descent,” says Raffray. “Today, SoftSheen Carson is world
leader of hair products for people of African origin.”

Based on scientific research into the properties of African hair and skin, the brand
has developed anti-breakage and relaxer formulas, a razorless hair removal system
for men, a wide range of oil-based therapies, a line for kids and a brand new skincare line with
the launch of the Dark and Lovely body lotion range in April this year. Since its launch last year,
Garnier Even & Matte has also been doing exceptionally well with African consumers, he says.

Raffray says the company already has a presence on the continent upon which it aims to build.
A key market is the African woman, and L’Oréal is seeking growth and expansion into this
market, which will require balancing technological innovation with the need for prudent
spending. It has grown through innovation, and through targeting products at specific markets.
Products are designed to offer consumers something they may not have thought they needed,
such as an oscillating mascara wand. Raffray says the black market has been ignored for far too
long. “You have to listen to what consumers say.” This will give the beauty company, which has
15,8% of a €110bn global market, room to grow on a continent where challenges may include
hairdressers not having enough water to rinse off relaxer, Raffray says.



US market for prestige beauty products suffered in 2009
Sales of prestige beauty products in the US declined by 6 percent in 2009, according to market
research company NPD Group, who presented a look at the 2009 end year results for skin care,
make-up and fragrance categories across the US and globally.
“Make no mistake, 2009 was a most challenging and difficult year for the
prestige beauty industry,” said Karen Grant, vice president and senior
global industry analyst at the NPD group. NPD noted that all the US
prestige categories experienced dollar declines, with the biggest decline
being in fragrances, followed by prestige make-up and skincare.

Signs of recovery in the fourth quarter - Despite falling sales, Grant
noted that signs of recovery were evident in the fourth quarter of 2009.

“Those could be found in the positive sales of products like smaller size
women’s fragrances, innovations in foundation and concealer products,
anti-aging and specialized basic skincare, and hair care,” she explained.

The Food/Drug/Mass channel fared better than the prestige market overall, with an increase in
make-up sales and flat growth in skincare. Like in the prestige market, mass fragrance sales also

China shows strongest growth - According to NPD findings, the strongest market surveyed was
China, who showed ‘impressive’ sales growth across all three prestige categories, with sales
increasing by 17 percent in 2009. The European market for prestige products has also fared
better than the US, with France showing the smallest decline in prestige sales, with a drop of 1
percent, followed by Italy and Spain with decreases of 4 and 5 percent respectively. At the time
of publication, NPD said that it had not released any sales figures for the prestige beauty
market to the public.

Anti-aging spells big opportunities - Although prestige beauty sales declined across the US, the
anti-aging skincare sector could spell big opportunities for cosmetics companies. According to
NPD’s recent women’s skincare report, which surveyed 6,403 online panelists above the age of
18 about their purchasing habits, anti-aging is the key motivator when it comes to making a
purchase. More than 53 percent of the women surveyed selected anti-aging benefits as the key
factor. However, 21 percent of respondents said they did not use anti-aging skincare, which,
according to Grant spells a need for an increase in education and communication in order to
attract more consumers to this particular market segment.


Information sourced and edited by: Fiona Kerr (Strategic Planner / REDSKY)

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