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SCOTTSDALE, Ariz. — Where has the mass beauty consumer gone?
That was the refrain from cosmetics retailers and manufacturers attending the National Association of Chain Drug Stores’ Annual Meeting, held at The Phoenician here from April 25 through Tuesday. More than 2,000 people attended the 63rd edition of the meeting, including executives from about 30 beauty firms ranging from L’Oréal to Red Carpet Manicure.
“The beauty business is facing challenges,” said Mark Griffin, president and chief executive officer of Lewis Drugs Inc. But he added that won’t stop him from putting a focus on beauty in the 12 new stores his company will open this year.
Executives hammered out strategies to repair business, especially for the second half of the year. Incoming NACDS chairman John Standley, chairman and ceo of Rite Aid Corp., vowed his chain’s health and wellness initiatives will continue to respond to consumer needs with front-end partnerships. NACDS president and ceo Steven C. Anderson said the industry will seize the opportunities presented by the “to-do lists and the shopping lists on every refrigerator and on every smartphone in America.”
They had their work cut out for them. Suppliers shared industry data revealing that dollar sales of cosmetics were down more than 3 percent for the first quarter of 2014. The hardest hit are the major brands with the most square footage and therefore the most to lose from the traffic drought.
The confluence of three trends — shopper migration to other channels including online, a still-recovering economy and a lack of innovation — emerged as the major culprit for the downturn.
For the first time in six years, WSL Strategic Retail research revealed an increase in the number of women who say they’ve made purchases at specialty stores such as Bath & Body Works, Victoria’s Secret, Ulta and Sephora. Retailers also lamented a move by consumers to beauty bars or the curated beauty selections at department stores such as Macy’s. At the other end of the spectrum, the recession has left many shoppers willing to “switch, swap or trade,” deciding that products they traded down to in tough times are “good enough,” explained Wendy Liebmann, ceo at WSL.
Paul Murphy, president and general manager of SinfulColors/Pure Ice, agreed, adding people are under pressure that will be exacerbated by rising costs, especially food prices. He threw another wrench into the equation — a bitterly cold winter and late onset of spring, which further hamstrung beauty growth, especially in nail. “No category is impacted by weather as much as nail because you lose 10 canvasses,” said Murphy, referring to pedicures as well as the trend to update colors more frequently in spring and summer.
The color has drained out of last year’s rosy 20 percent category gains in nail. Nielsen data for the first quarter of 2014 revealed a nail-biting 14.2 percent falloff in sales of all nail products compared with the same period in 2013. “Nail couldn’t have continued at that pace,” said one retailer who noted that adjustments in his mix should help take the sting out of the loss of consumer consumption. Another retailer pointed out that only certain brands were dragging down the total gains.
Nail manufacturers took the opportunity to present their remedies. Kiss Products Inc. senior vice president of global sales Rick Price and senior director of sales for Wal-Mart Global Doug Kavulich portend a market rebound and showed focused and exciting promotions, stepped-up digital efforts, national sampling, as well as hints of a new innovation for 2015.
Sally Hansen treated NACDS attendees to manicures using its newest weapon, Miracle Gel, which gives a gellike look without the gel process. Launching in August, the 47 shades will retail for $9.99 each.
Taking on the challenge to reinvigorate Pacific World Cosmetics, new ceo Jim Colleran pledged to delve deeper into consumer research to launch nail products that will resonate better with shoppers.
While some questioned if there’s been enough innovation to whet shoppers’ appetites across all beauty categories, there were recent success stories. Target’s rollout of its new beauty department got thumbs up from many vendors, as did news that Walgreens will expand Boots’ beauty space by 10 feet in many stores. There’s a whiff of good news in fragrance with Wal-Mart showing positive growth and new items to encourage usage as well as increased celebrity products moving into mass.
“Celebrity fragrances continue to be an important part of the fragrance category with a 22 percent share of food, drug and mass,” said Tamara Steele, senior vice president, North American regional marketing at Elizabeth Arden Inc., citing the company’s leading share of celebrity fragrances with brands such as Britney Spears, Taylor Swift, Justin Bieber, Nicki Minaj and Mariah Carey. She said Arden will introduce offerings in the growing women’s body mist category next year. In men’s, Arden said Curve for Men is the number-one prestige brand in food, drug and mass with plans to extend into men’s grooming products. The company had no comment on LG Household & Health Care Ltd. or confirmation that Arden is one of several possible acquisition targets of the Seoul-based firm.
Small, well-priced cosmetics brands received praise from retailers on hand with more footage planned for E.l.f. Cosmetics and NYX. Shawn Haynes, vice president of sales at E.l.f., said the company’s model of Web sales and freestanding stores allows for testing of the brand’s 1,200 stockkeeping units, thus removing a great deal of the risk for chains. E.l.f.’s new president and ceo Tarang Amin and senior vice president and chief commercial officer Richard Baruch — both of whom have deep consumer product goods experience — were on hand to tell the E.l.f. story and how they’ll bring CPG knowledge to the creativity of the briskly growing brand.
Kao USA also took the opportunity to show its innovative streak with Ban Total Refresh Cooling Body Cloths, the first BB Body Cream and Bioré Deep Pore Charcoal Cleanser and Self-Heating Mask.
Procter & Gamble Co. demonstrated the efficacy of the Fekkai Blowout collection, offering mass merchants an avenue to compete with the blowout bars, along with a new Fekkai Hair Fragrance collection.
Cover Girl showed off innovation while giving makeovers to NACDS members. Cover Girl’s upcoming fall bundle has new products designed for every age range. Starting with Millennials, the beauty brand introduces the #instaGLAM Collection with products for face, eyes, lips and nails to help women be #selfie-ready 24/7. For women seeking an antiaging routine, Cover Girl and Olay joined forces to bring the power of a night cream to the daily makeup routine with Facelift Effect Firming Makeup, and relieve fatigued eyes with The De-Puffer Eye Concealer.
On the heels of phenomenal success with Curl Secret, Conair showed hip new accessories from Scunci that match the active fashion business, including hair ties that double as bracelets and Princess Roll headbands for “second-day hair.” A brushless hair dryer is rolling out at half the price of professional models and two hair-appliance licenses, namely Nexxus and TRESemmé, are new for the brand.
For some companies, innovation isn’t only from products, but digital exploration. Physicians Formula’s Get the PFacts app using Layar technology allows consumers to swipe ads or in-store displays and get in-depth information and how-tos about products. The company has 50 new items readied for 2015 and will quadruple its advertising spend to $20 million.
Paris Presents has invested heavily into consumer insights to develop items such as an Eco Tools hairbrush that dries hair 20 percent faster than traditional brushes. The company works with YouTube beauty experts Sam and Nic Chapman to build awareness through tutorials.
With CenterStage by Fergie hitting a high note, Markwins is planning its first television advertising campaign for September.
Retailers said they saw flashes of innovation from major beauty brands, when it comes to putting more education into shoppers’ hands via apps or in-store interactive tools.
Hope springs external in the retail business and just as the sun came out and warmed up Scottsdale after a chilly start, executives predict a stronger second half. “Markets have been choppy, but spring is coming and together we can win,” said Melanie Healey, group president North American customer business development at P&G.
Echoing that sentiment was Tom Vellios, cofounder and ceo of Five Below, who said his company is expanding and eyeing more beauty products that fit nicely with his young customers.
The numbers may be grim, but retailers left the power summit invigorated. “Once again, I was very impressed by this year’s NACDS meeting,” said Shannon Curtin, group vice president, beauty and personal care for Walgreens. “The lineup was full of great speakers, who shared some very interesting perspectives on industry happenings.”
Other notable happenings:
• Familiar faces Joe Magnacca and Steve Lubin, both formerly of Walgreens, stopped by the meeting, as did Mike Bloom, the former president and chief operating officer of Family Dollar and a long-time CVS executive. Magnacca’s presence prompted buzz that he could be looking to add health-care devices to Radio Shack’s mix. Missing, however, was Ulta on the heels of the departure of Barbara Zamudio, who was vice president of merchandising.
• Almay global brand ambassador Carrie Underwood dazzled at Revlon’s opening reception. “I’ve always loved Almay’s approach to beauty. It doesn’t have to be complicated. It doesn’t have to be expensive,” said Underwood. “Almay makes doing my makeup easy in my busy life!”
• Mergers and acquisitions are expected to heat up, particularly following TPG Growth’s majority stake in E.l.f. Several companies are said to be on the hunt for purchases.
• Target showcased a new campaign called Made to Matter, featuring brands such as Yes To and Seventh Generation. Target is also trying out a color line of cosmetics from Shea Moisture based on consumer demand.
• While many skin-care companies have branched into sun care, Sun & Skin Care Research is adding skin care to its sun-care offering including Ocean Potion Protect & Renew. The company aims to convince consumers to use sun care on a daily basis.