Exclusive: is the personal care category in Europe in crisis? IRI investigates

Nivea: Basic Care range taps value trend

Nivea: Basic Care range taps value trend

In a Retail Times exclusive, Emily Mayer, unit director and personal care expert, IRI, explores the retail outlook for the personal care market in Europe 

The personal care industry encompasses a variety of products from fragrances and hair care to sunscreen and toothpaste. As such, the industry is very fragmented, with many large and small scale brands looking to differentiate their products in what has become a crowded market with lots of brands competing for shoppers’ minds and money. And as the economic downturn continues to put pressure on shoppers’ budgets, categories like personal care have been more challenged than others to maintain sales momentum.

Growth in the sales of personal care products across Europe increased by just 1% in the year up to the end of December 2012 according to a quarterly Pulse Report, from IRI, a leader in delivering powerful market and shopper information. This compares to a 1% increase in 2011 and a 0.7% increase in 2010. Sales growth of personal care products, such as hair, oral, facial and body care as well as cosmetics, fragrances, deodorants and shaving products has been hit hard by the current recession.

With unemployment increasing during 2012 in France, Italy, Netherlands and Spain, and despite inflation decreasing in some countries (the exceptions being Italy and The Netherlands) the turnover within the personal care sector is certainly more dynamic, but this is due to an increase in prices and not an increase in volume sales.

While growth in sales of personal care products has increased in UK (1.8%), France (1.1%) and Germany (0.6%), the impact of the economic crisis on personal care brands is most evident in the Netherlands (-0.3%), Spain (-3.0%.), and Italy (-0.7%) where shoppers have had to make deeper cuts to their spending, presenting a decrease in sales.

The difference in sales figures varies from country to country with some products visibly outselling others from one country to another. Of course, some categories of personal care are more immune to shoppers’ recessionary behaviour. Hygiene brands are it seems deemed more essential to consumers than make-up or other items of beauty care. Hair care products and oral products, for instance, are maintaining their premium price offerings, whilst simultaneously maintaining high levels of sales.

Hair care fares well, coming out on top in terms of value sales. This is mainly due to innovation. L’Oreal, for example, has addressed the new desire for value in this category by bringing supermarket shoppers ‘salon quality’ hair care products. Although these sell at a higher price than other hair care brands, shoppers still perceive value from these luxury items and feel that that they are worth the extra spend.

Consumers are prioritising food over personal care

Nevertheless, these sales value growth increases mask some of the underlying challenges that personal care brands face. When these figures are compared alongside the average FMCG growth trend of 1.2%, it is evident that personal care manufacturers need to pay more attention to their retail strategies (if they are not already). Confronted with less money to spend, consumers are having to prioritise food purchases over personal care.

Responding with real value

Retailers, ever watchful of shoppers’ woes, are responding by extending their own label ranges. While own label traditionally provides shoppers with lower-cost alternatives to the premium-priced national brands, some are also marketing their offers as premium: Mercadona in Spain, for example, has launched its own range of premium beauty care products.

National brands are also not sitting still with some launching value ranges that appeal to consumers’ demand for cheaper beauty care with brands, such as Calgor launching its low price face cream, and Nivea its range of Basic Care products.

Use of promotion to address declining sales is also proving to be a widely adopted strategy by many personal care brands. Whilst it shouldn’t be seen as a long term strategy, at the risk of eroding the premium value that manufacturers have invested in, brands must decide whether to remain premium or provide shoppers with lower price options to maintain sales.

Crucially, brands must address innovation; paying attention to different product variations or in-store merchandising where the touch and trial aspect that is so important in beauty provides the opportunity to appeal to the consumers who will always indulge in little items of luxury.

New and innovative products are driving sales in categories such as hair care and bodycare. Hair care is being driven by market valorisations, strong launches of premium offerings, successful new oil treatments, and price increases in segments such as shampoo. Slimming and firming oil innovations and pioneering moisturisers have generated sales in bodycare products, with sales in France in particular, up 12.8%.

Innovation brightens oral care

With innovation leading to the creation of new products to attract and entice the shopper, oral care has also thrived. Innovations including sensitive and whitening toothpaste variations have meant that this category has seen a sales growth of more than 12% in the last year. Sales in Germany and France have been driven by increases in mouthwash and a positive price development in electric yoothbrushes. In Italy, oral care is one of the most dynamic categories with mouthwash increasing both in value and unit sales, in contrast with toothpaste which demonstrated a negative trend in value, but an increase in unit sales due to high promotional activity, deeper price cuts, and fewer new launches. In the UK, however, there have been several new launches of premium products, so despite volume losses in toothpaste and toothbrushes, the value sales have increased.

Fragrance trends have seen losses across Europe, due, in part, to a lack of innovation in France and poor performance of gift packs in Germany. Fragrances have predominantly been impacted by changes to household disposable income, and changing spending habits due to inflated food prices for example.

As consumers react by deal hunting to save money, promotional sales are increasing in most European countries, as different channels offer important price cuts to combat the loss in unit sales. The challenges for personal care brands must be to keep up with fast-evolving trends and formidable competition for market share. While some shoppers may actively avoid walking down the beauty and health aisle, personal care products will always provide cash-strapped shoppers with an excuse to indulge. With frequent, complex innovations, products can have a short lifecycles, and the opportunity for growth, will be dependent on regularly updating and introducing new products, and monitoring consumer spending habits and needs in order to set themselves apart in what is a tough and crowded marketplace.