Mass cosmetics is on a roll.
This story first appeared in the February 4, 2011 issue of WWD. Subscribe Today.
On the heels of 4 percent sales increases for 2010, retailers and manufacturers are confident the category is poised for another year of growth, possibly even outpacing last year. They cite expansion into global markets and heightened consumer confidence as the main drivers.
Carmen Bauza, vice president of beauty for Wal-Mart Stores Inc., said, “The customers are feeling enough is enough. We’ve dealt with this [recession] for two years and they’ve been able to manage through this environment. Customers have learned to manage their finances and to manage their priorities.”
Bauza speaks from experience. She and other Wal-Mart employees are expected to live on a budget for a period of time so they know how far a dollar actually stretches.
“It is tough for a family of four to live on $60 to $70 a month for consumables like soap, diapers, detergent. I reset my priorities in the cycle. Like if I needed a mascara, I used the same tube and elongated the use, or I added water to the shampoo bottle to make it last longer….It’s not so bad.”
A sampling of manufacturers — from premium- to mid- to value-priced brands — agree that customers have taught themselves how to beat the recession and that the worst is indeed over. Each had different experiences over the past two years, but all seem optimistic about 2011.
Physicians Formula Holdings Inc. chief executive officer, Ingrid Jackel, said midtier brands like Sally Hansen saw the most growth in 2010 because price point was a key driver of consumer behavior. Subsequently, “premium brands didn’t do as well, and we are still struggling, which is understandable because of the recession.”
But already Jackel sees signs of change. This year Jackel believes consumers are feeling more comfortable spending on new products. “In the recession, she didn’t try new items. She was finishing what she had in her makeup drawer. That was pretty new for this industry. Historically, mass cosmetics never really got hurt, and this time it was exceptional and drastic,” she said. “I think she is now reloading her pantry or makeup drawer, and that is something we haven’t seen in 18 months,” adding that 35 percent to 40 percent of sales typically come from new items.
Retailers are letting down the steel walls that came up during the recession, too. For example, Physicians Formula is making headway at Walgreens, where it was discontinued in 2009 as a result of sku rationalization, with the launch of 45 makeup items on the retailer’s Web site in the next few weeks. It will also begin shipping a new line for Wal-Mart in June, which is speculated to be in the skin care segment. And for the first time in mass beauty, a March print ad campaign will put Physicians’ prices front and center. “With a product that looks like it [can be sold in] Sephora, we need to make sure we say something that tells [the beauty consumer] she can afford this product,” she said. “It is really, finally, the translation of our class-to-mass strategy in advertising in a straightforward way.”
Despite women becoming more savvy shoppers, sales grew in 2010, mainly due to fewer promotions by Maybelline and L’Oréal, both of which discontinued buy-one-get-one-free offers and 50 percent off tactics. Revlon’s general manager for the U.S., John Collier, said that by abandoning such strategies, mass cosmetics saw its largest growth in 10 years, with 7 percent sales increases for the time period, excluding Wal-Mart, according to AC Nielsen data. That number dips to 4 percent when Wal-Mart is included. Revlon’s growth, Collier said, surpassed the category for the fourth quarter, which was 6 percent, excluding Wal-Mart. Revlon’s Grow Luscious mascara, he said, which made its debut in 2010 and became Revlon’s most successful mascara launch based on consumption in the first eight months in the marketplace, helped drive sales.
Innovation will help Revlon in 2011, as it gains space in nail planograms thanks to the brand’s new Top Speed quick-drying nail enamel. Revlon said U.S. retailers will be placing it in more than 10,000 nail trays — representing incremental space.
Collier stressed that Revlon is taking advantage of global opportunities, too, “since that’s where the growth is.” Revlon, which is sold in 121 countries around the world, has 50 percent of business generated outside of the U.S. markets, including Asia, “which is a region of particularly high economic growth,” said Julia Goldin, Revlon’s new chief marketing officer.
Revlon is also approaching the market more aggressively this year with “high-impact, blanket” marketing, where over a 24-hour period messages are sent via print, TV and digital avenues. Global artistic director for the brand, Gucci Westman, said more online tutorials that show the everyday woman how to apply makeup is the brand’s future direction online, as opposed to featuring models, which is easy, she said.
And value brands, thanks to the recession, experienced “some of the best years we ever had,” said Robert Wallner, vice president of sales at Milani. He anticipates double-digit growth this year. “During that period of time, people’s purchasing habits significantly changed. They traded down in all aspects of their purchasing, and cosmetics was no exception.” Going forward, he added, “We feel very comfortable that the customers we picked up over the last two years are going to remain Milani customers.”