EVIAN, France — Procter & Gamble could be looking for a few good beauty partners.
Speaking at the WWD Beauty CEO Summit in June, P&G chairman and chief executive officer A.G. Lafley said that currently nearly 90 percent of the company’s product innovation originates inside P&G. “We’d like a third or more of discovery and invention to come from outside — from external partnerships.” Lafley has identified beauty and health care as areas of growth within the company. Last fall, P&G snapped up Clairol for $4.95 billion, its largest acquisition ever.
Lafley said P&G is interested in pursuing collaborations that would improve the consumer shopping experience and also bring technological innovation to its products. He said the shopping experience and product usage experience are the keys to winning and retaining consumer loyalty.
As examples of new approaches in the industry, he pointed to Aura Science, a partnership between Victoria’s Secret Beauty and Shiseido, as well as a program between Sainsbury and Boots that tests beauty labs in select stores. For its part, he said P&G had teamed up with Wal-Mart and Target to design the retailers’ respective universal cosmetics fixtures.
In his presentation, Lafley envisioned a beauty industry where the introduction of new products and technologies could cut across established trade formats. “We are open to collaboration to create more meaningful beauty product breakthroughs and we are ready and willing to collaborate to diffuse breakthrough technologies from mass to prestige and specialty retailers.”
P&G’s vast beauty business already cuts across numerous categories, including mass color cosmetics with Cover Girl; prestige skin care with SK-II, and Internet beauty with Reflect.com.
Lafley stressed that “the consumer is the boss” and manufacturers must reach women where they are shopping. He said that some of P&G’s biggest beauty product breakthroughs have surprisingly low trial and purchase rates. Thus, “introducing product breakthroughs simultaneously, or even sequentially, across prestige, specialty and mass channels, should encourage faster consumer awareness and trial and could result in more incremental sales and profits,” said Lafley.
In the U.S., P&G’s Olay brand, sold exclusively in mass doors, has been heavily targeting department store shoppers, with ads comparing its effectiveness with some leading department store antiage moisturizers. A technology in an SK-II foundation has found its way into Cover Girl’s AquaSmooth. Another SK-II innovation is being introduced in Japan in September with Air Touch foundation, which uses an electrostatic device to transfer foundation to the face.
More collaboration, suggested Lafley, could drive beauty growth in several ways. Partnerships could leverage “unique capabilities and competencies” to create more commercially viable product breakthroughs and service innovations. There are also opportunities to expand new technologies into developing markets faster, said Lafley, “with significantly deeper household penetration, if we think of emerging mass markets as beauty care industry points of entry.”
The exposure to new product technology could also encourage consumers in developing markets like China, Mexico and Russia to “trade up from mass as they gain experience with beauty products and categories,” he said. Lafley also suggested that suppliers and manufacturers in these regions create a “local infrastructure” to support local innovation, design, manufacturing and distribution efforts.
And as the industry evolves, “shoppers want to be more involved in the shopping experience,” which Lafley believes is the “first moment of truth.” The “second moment of truth” is the “product usage experience.”
“Our individual and collective success will depend on how well we perform at the millions of ‘moments of truth’ that take place everyday around the world,” said Lafley.
At P&G, he noted: “We think a lot about brands and about loyalty — because brands are the company’s assets. Twelve $1 billion-plus brands account for more than half of our sales and profits.””