Richelieu Dennis is nothing if not persistent.
Founder and chief executive officer of Sundial Brands, Dennis spent 16 years convincing mass retailers that merchandising beauty products in a so-called “ethnic aisle” is as outdated as wearing bloomers under a bathing suit.
“There’s a broader market here that you’re missing,” he would tell them. “There’s a bigger opportunity here.”
Today, retailers and brands alike are finally starting to get the message, driven by significant demographic changes in the U.S. population and a rising tide of entrepreneurs—such as Dennis—who have emerged, eager to meet the needs of the changing face of America.
“We don’t think about our product as for the multicultural market or the general market,” says Dennis, whose brands include Shea Moisture and Nubian Heritage. “We think about it as the new general market that is inclusive of all consumers who make up this shift in population that we are seeing today.
“When you say general market versus multicultural or ethnic,” he continues, “you’re still putting people in boxes.”
U.S. Census figures show that the kinds of boxes Dennis is referring to, those commonly found on college applications and the like—such as Caucasian, African-American, Latina, Asian—are becoming obsolete. “The United States is quickly transforming from a melting pot into a mosaic,” says Kathy O’Brien, vice president of skin and marketing services of Unilever North America. “Consumers today are multiethnic, multifaceted and have lifestyles as diverse as their backgrounds. We know that in 2050, ‘other’ will be the largest projected ethnic group in the U.S.”
According to Census Bureau projections, by 2019, births in America will be less than 50 percent Caucasian. Projections show that Generation Z, those born from the late Nineties on, will probably be about 54 percent Caucasian, 24 percent Hispanic, 14 percent African-American, 4 percent Asian and 4 percent blended. Currently, the U.S. population is about 63 percent Caucasian, 17 percent Latina, 13 percent African-American, 5 percent Asian and 2 percent blended. A recent report from J. Walter Thompson Intelligence’s Innovation Group on Generation Z noted that by 2012, 47 percent of Americans under the age of 20 were from an ethnic minority, and that there are 7.7 million more minority young people now than in 2000, but 5.7 million fewer white children.
Already, the demographic composition of the U.S. has resulted in a multicultural beauty category that continues to outpace growth in the general market. According to Kline Group, 2014 sales were about $940 million in 2014, up 4 percent from last year. Of this, hair care represented 65 percent, makeup 24 percent and skin care the remaining 11 percent. These figures do not include multicultural consumer purchases from “general” market brands, also significant.
Clearly, non-Caucasian women overindex in beauty consumption. According to Nielsen, Asian-American women spend 70 percent more than the average American on skin care, while Latinas overindex in fragrance, hair care and makeup. “Multicultural women comprise one-third of the population, and account for 27 percent of the beauty spend in 12 of the top 20 markets,” says Desirée Rogers, ceo of Johnson Publishing Company, who also oversees the company’s Fashion Fair Cosmetics brand. “Beauty is very important to this group.”
Such statistics mean appealing to a multicultural consumer base is an imperative for marketers and retailers large and small. L’Oréal USA, which purchased Carol’s Daughter in October 2014 for an estimated $60 million to $70 million, created a new division for its 16 brands in the category to better take advantage of their potential. “The population is growing very fast and will be the general market of tomorrow,” says Nicole Fourgoux, the general manager of the Multi-Cultural Division at L’Oréal USA. “At the same time, multicultural customers are less satisfied with the offerings they are finding in stores. Our mission is to fulfill unsatisfied beauty needs and anticipate emerging needs.”
That’s no boilerplate goal. Fourgoux remarks that in the two decades she has spent in the beauty industry, she has rarely seen a category with such raw potential. “There is such an obvious opportunity with a consumer base that is very engaged and truly passionate about beauty,” Fourgoux says. “But it requires a total mind-set shift. It is no longer one size fits all—it is much more differentiated.”
For one thing, the sociocultural landscape has changed considerably, with an equally significant impact on the beauty category. Among African-American consumers, for instance, the number of women chemically relaxing their hair has plummeted in the past decade, drastically decreasing the numbers in that category, while simultaneously ushering in a new era of natural hair- and body-care brands.
Lisa Price, the founder of Carol’s Daughter, says the percentage of African-American women who chemically relax their hair has dropped from about 80 percent in 2010 to 36 percent today. “In the Sixties and Seventies, it was viewed as a militant act to wear an Afro, because it was so important for African-Americans to assimilate and blend in,” Price says. “So someone like my paternal grandmother had a hard time understanding that when I braided my hair, I did it for style, for fashion, for fun. She didn’t understand that for me, it was a creative expression.”
The decrease in chemical processing has given rise to an increased demand for natural products. In September, Time Inc.’s Essence partnered with Nielsen in a study with more than 10,000 participants. One of the key “aha” moments from the report for Michelle Ebanks, president of Essence, was that 75 percent of women agreed that pursuing good health was important. “The customer is focused on health and wellness,” Ebanks says. “They’re gravitating toward products with organic ingredients and fewer chemicals.” Sundial’s success is testament to this: According to data from IRI, the company’s market share has risen from .5 in 2010 to 15 points in 2015, and it’s not alone. The success of brands such as Carol’s Daughter, Mixed Chicks and Yes To all speak to the relevance of natural ingredients.
“Overall, where we’re seeing the most amount of growth is around consumers becoming more and more aware of the ingredients they are using, the functional benefits they are in need of and us aligning to the changing need states,” says Dennis. “That is driving the bulk of our growth.”
The increase in interracial marriages also has a significant impact on beauty. “The sheer volume of various skin colors is increasing,” says Rogers. “Women of color are getting sensitive to this idea of being the exception or just the add-on. They want to be, and believe they are, part of the mainstream.”
The supplier Mana Products has developed a new approach to address the increasing nuances of skin tones today. “We are becoming a more blended beauty community and this transition requires a lot of work in pigment development,” says the company’s founder, Nikos Mouyiaris. “We’re not talking anymore about a two-dimensional approach, where it was just light and dark tones, warm and cool. We have a much broader range, a three-dimensional shade development [approach]—the technology has advanced so much we have a much more refined way of defining shade and formula.”
While brands both big and small are aggressively addressing the evolving customer base, retailers have been slower to adapt. Many, such as Target, Wal-Mart, Walgreens and CVS, have eradicated the traditional “ethnic” section in favor of a “multicultural” assortment, but most agree it’s still slowgoing.
That’s starting to change. “Over the last several years we have taken an aggressive approach to expanding our assortment and establishing credibility in this space,” says Christina Hennington, senior vice president of merchandising, health and beauty, of Target. “While this focus has translated into a meaningful increase in sales and market share expansion, we believe there’s still opportunity for us to enhance our offerings and shopping experience. Looking ahead, we are especially focused on cosmetics as an area where multicultural guests don’t have a lot of great options.”
Price of Carol’s Daughter says she is beginning to see improvement. “I was at NACDS [National Association of Chain Drug Stores] this year for the first time, and it was encouraging to me to listen to retailers who were asking for assistance—‘How do we do this?’” she says. “It’s something they don’t fully understand and they don’t want to offend. They are used to catering to this customer in a certain way and they are not 100 percent sure what she wants.”
Product assortment is an area Price and others see as ripe for evolution. “If you’re looking at a brand with seven products, but only three are stars while others round out the assortment, retailers need to understand it’s necessary to have the breadth of the line. They should accommodate [the customer] so she doesn’t become frustrated and have to shop somewhere else.”
“The consumer is telling us today she has to shop in three or four different aisles to buy everything she needs for her family just for hair care,” agrees Fourgoux. “The artificial separation between the ethnic aisle and the general market aisle is seen as outdated. They very clearly want an integrated presentation.”
The lack of an integrated presentation has given rise to a boom in online beauty shopping. Ebanks says the Essence study showed that African-American women are overindexing in e-commerce. “This audience has always shopped across channels because they’ve always needed to look in different locations to find everything that works for them,” she says. “If you’re in mass, you have a broad selection, but the ability to try on colors or get expert help can be a source of frustration. In department stores, finding someone who is knowledgeable can be difficult.”
Dennis believes the answer lies in merchandising by consumer needs, rather than the color of her skin. “Shelf navigation should be based on need states and benefits, as opposed to segregation,” he says.
Such an approach is already successful in Brazil, according to Fourgoux, who notes that it, too, is a market with a large variety of hair textures and multiple needs, but one where the hair-care offering is presented in a very integrated way. “There are clear overarching hair-care needs, and then sub-segmentation depending on if you need more or less repair,” she says. “There is a lot of education on the shelf and a clear regimen story. This is what’s so inspiring,” she continues. “Hair care there is a true beauty ritual as opposed to just a replenishment category.”
The lack of such an experience prompted Jodie Patterson to launch Doobop.com, a prestige e-commerce site with a broad spectrum of brands including Caudalíe, Philosophy and Nuxe in skin care; Briogeo, Davines and DevaCurl in hair, and Dermablend and RGB in color cosmetics. Patterson became inspired to create the site not because of a lack of products, but because of the absence of information. “The woman I’m really trying to target is someone like me, who has a hard time finding an expert behind the counter who really understands the nuances of her hair and skin,” she says. “There are a ton of great products out there. I just don’t know how accessible they are. The gap I saw was that the conversation around beauty wasn’t smart enough for the women I was dealing with.”
Fourgoux couldn’t agree more. “It’s not just about a demographic shift. It’s a psychographic shift,” she says. “It’s how the brand thinks about interacting with the consumer and how differentiated the product offering is, if not on a one-on-one basis then very close.
“It is no longer one size fits all,” she declares. “This is a total mind-set shift.”