Once the growth engine of the beauty business, mass market skin care is showing signs of aging.
This story first appeared in the March 9, 2012 issue of WWD. Subscribe Today.
After hitting historical highs in 2007, the category managed to maintain momentum during the recession as value-conscious consumers traded down from the prestige market.
Now, however, luxury skin care companies have come roaring back with a wave of innovation that has
changed the face of the business.
“We have found a model to source people from mass,” says Fabrizio Freda, president and chief executive officer of the Estée Lauder Cos. The magic formula involves game-changing products like Clinique’s Even Better Clinical Dark Spot Corrector and Estée Lauder Idealist Even Skintone Illuminator. Combined with an increase in television and digital advertising by more than 60 percent in fiscal 2011, Estée Lauder’s brands have successfully drawn shoppers back to the prestige channel. “This has attracted new consumers to
the department store, who before were shopping in mass,” says Freda. “The old war” of prestige players fighting amongst each other for share has been replaced by a collective effort to trade up shoppers from the mass market, says Freda.
The mass market is feeling the heat.
Prestige skin care sales outpaced mass sales for the second year in a row, growing at a rate of 14 percent in 2011 and 8 percent the prior year, says the NPD Group’s senior global industry analyst Karen Grant. Mass market skin care sales, which like prestige include hair care and sun care, lagged behind with 3 percent growth.
“Prestige is feeling more like the innovation lab. Every brand is working well,” says Grant. “Consumers are concerned about price and if they’re spending it has to be worth it. They’ve come to recognize that there is some intrinsic value in prestige.”
Complicating matters for the mass business is that the category’s prices have rocketed upward and shelves are bursting with product, making it difficult for the consumer to shop, particularly without the help of a beauty adviser.
“Now mass retailers have to ask, ‘How do I sell a $60 product without all the bells and whistles of the department store experience?’” says Wendy Liebmann, chief executive officer of WSL Strategic Retail.
Liebmann likens mass skin care’s troubles to what ails the fragrance industry. “We know from fragrance that you can only add so many flankers before you cannibalize sales,” she says. “Retailers exacerbated the situation by allowing manufacturers to add new products, and then they did their own private label skin care.
“Retailers are now saying, ‘It’s too complicated,’” she continues. “Some of the shoppers brought to mass by the recession moved back to prestige, and the ones who stayed have found it more complicated.”
Joe Magnacca, president of daily living products and solutions at Walgreens, says that the master-brand strategy adopted by many brands, which presents a broad range of products, has put further intensity on stockkeeping-unit count. “It puts pressure on space and creates a really confusing set for consumers,” says Magnacca, who created Duane Reade’s Look Boutique concept. “We want our customers to trade up, but retailers have to start making choices in terms of sku intensity.”
Olay, the leader in mass skin care, has popularized the price-tiered approach with Olay Pro-X at the top followed by Regenerist and Total Effects, among others. Gina Drosos, group president, global female beauty, Procter & Gamble Co., says Olay has avoided sales cannibalization by introducing new product benefits that add to a woman’s existing regimen. She names Olay Pro-X Advanced Cleansing System, a vibrating skin cleansing brush that invites comparisons to Clairsonic in its ads, and the Olay Smooth Finish Facial Hair Removal Duo, as examples. Drosos says that the hair removal system occupied the number-one spot in mass skin care over the last six months, and the cleansing brush has brought more women to the brand. “It benchmarks very favorably against the professional version,” she says.
As for how Olay sells products nearing $70 in a drugstore setting, Drosos says, “In the past, the strongest consumer connection would be at the department store counter or door-to-door. It was more difficult at mass. The Internet changes all of that.” Olay now aggressively uses digital marketing and engagement through social networking sites to help women select the best product. “No matter where a woman buys her skin care the number-one question she has is, ‘What’s right for me?’”
Victoria Gustafson, principal of strategic insights at SymphonyIRI Group, says the mass business needs a fresh, more streamlined approach. “It’s very tired. It almost feels like we defined consumer segmentation five years ago and just keep pounding against it,” she says, listing the segments as antiaging, acne and what she terms “everything else,” which includes products with multiple benefits. “There’s really no innovation.”
Mass market facial skin care sales gained 2.2 percent to $2.13 billion last year, excluding Wal-Mart, notes Gustafson, and the category has been plodding along at a rate of 2 percent to 3 percent for the last three years.
That may change this year with Unilever’s introduction of Simple. “Simple is introducing a new dimension: sensitive skin,” says Gustafson. “Unilever is shaking the foundation of the three pillars and going across all of them with a different need. This is exactly what the industry needs.”
When brands take a targeted approach, sales follow, Gustafson says, pointing to cosmetics sales, which are growing at nearly four times the rate of facial skin care.
Garnier increased its facial skin care business by 12 percent last year with new innovation—most notably Skin Renew Clinical Dark Spot Corrector—backed by an aggressive communications campaign, says David Greenberg, president of Maybelline New York-Garnier-Essie. In February, it introduced the first BB cream to mass, and the brand also reorganized its products into key franchises and deleted underperformers. “It’s a helpful way to organize and segment and we haven’t over- proliferated the line at all,” says Greenberg.
Jeff Smith, president of U.S. skin care at Johnson & Johnson, says segments like sun care, facial cleansing and at-home dermatology treatments offer ample opportunity. J&J’s Neutrogena brand struck a chord with its Neutrogena Microdermabrasion System. “We’ve seen great growth, with sales up over 20 percent and units up over 50 percent,” says Smith. Neutrogena’s total sales gained nearly 12 percent last year, boosted by Neutrogena Naturals, Wet Skin sun care and Rapid Wrinkle Repair.
Smith says retailers have taken action to streamline the overall assortment by trimming their own private label items. “Some of the proliferation occurred when there was a strong interest in private label matching major brands sku for sku. Now retailers only introduce a private label version against the best-performing items on the shelves,” he notes.
Going forward, the outlook is rosy—if brands can truly deliver something new. “We have a captive consumer,” Gustafson says. “We just need to come to the table with innovation.”