MASS BEAUTY SPURRED BY RECESSION
Byline: Andrea M. Grossman / Laura Klepacki / Faye Brookman
NEW YORK — How does the mass beauty market respond to a recession? By pulling out all the stops.
From cosmetics to fragrance to hair care, industry executives said they are increasing advertising budgets and going full force with product launches. Consumers are looking for bargains, but they also want brands they trust and that offer value. So manufacturers want to be ready — with the right product mix at the right price.
It is a time, they say, to be opportunistic. And the cosmetics sector, for one, could use a little boost. Face makeup, the largest piece of the business, slid 1 percent, to $1.1 billion, for the 52 weeks ended Nov. 4, according to Information Resources Inc. Eye makeup grew a modest 2 percent, to $947.9 million, and nail polish leveled off with a 0.7 percent decline, to $439 million. Only lip color showed dollar gains at 6 percent, to $836.3 million, although unit sales eased 0.2 percent, as shoppers tried new, more expensive offerings from Cover Girl and Max Factor.
Carol Hamilton, senior vice president and general manager of L’Oreal Consumer Products, said L’Oreal is pushing ahead aggressively in 2002. “We have a strong new product lineup across all categories.” There will be news in color, skin care and hair care. “We are definitely spending more in advertising. We think we can gain some market share.”
At Coty Beauty, new president John Galantic said: “We are going full steam ahead with our planned program, which calls for double-digit media increases.” He said all the launches for next year are going forward as planned, starting in March with Club Med, a new bath-and-body collection, and My Ocean, an accompanying fragrance. “If anything, we are looking at the current situation as an opportunity for us to increase share of voice.”
Meanwhile, the White Rain Company, maker of one of hair care’s most recognizable value brands, is banking on its value appeal to drive sales in 2002. According to the company’s chief executive officer, Bruce Travis, uncertain economic times move customers to seek more value opportunities. “In the last couple of months, we have seen a pickup in business,” Travis said. “It is unfortunate that we are living in uncertain times, but now people are looking for a simpler life. Brands like White Rain will benefit from that.” Revlon president Jeffrey Nugent wants to get Revlon off to a stronger start next year.
“All of our plans are pointing that way,” said Nugent. New product introductions are heavier than originally planned, he said. “In a flat to down economy, studies show that beauty categories cosmetics, skin care and hair color are the three most robust,” said Nugent. “And we are clearly well positioned to try to take sales from prestige.”
He said there will be more advertising from Revlon, but part of that is due to decreased media rates. Product news includes extensions to the Skinlights franchise and a major lip color launch in the second half; and Almay is expanding its Kinetin skin care into foundation.
Sandy Cataldo, president of Jane Cosmetics, agreed, saying: “Lots of consumers are looking for greater value.” Cataldo said some chains are doing brisk business in beauty right now, such as Wal-Mart, Target and Walgreens.
In the first half of the year, Jane will become more aggressive to take advantage of the softer economy, Cataldo noted. The brand will expand its product development program and pad its advertising budget. “Last year, we had put money behind the new carded program, now we are going to redirect our funds to do more advertising.”
Beginning in February, there will be an emphasis on lip and eye products. In the latter half of the year, Jane will likely play more heavily in holiday promotions. “We have traditionally not participated in holiday. In the future, we will do more.”
Marc Pritchard, vice president and general manager, Procter & Gamble Cosmetics, is another executive who’s predicting that value will drive sales in the first half. On a recent P&G shopping trip with consumers, Pritchard witnessed women looking for products worth their price.
Going forward, said Pritchard, “we are going to keep working with retail partners. We want to build the mass market and it is a good time to focus on that now.” Cover Girl Outlast will continue to get support and will be expanded with new shades and possibly line extensions. Under CG Smoothers, a new foundation is being introduced — Aqua Smooth. And Max Factor will build on the success of Lipfinity with other long-wearing items — Facefinity foundation and Lashfinity mascara. Also, Max Factor is winning some space back. According to Pritchard, 8,000 additional linear feet will be given back to the brand next year.
Pritchard added: “We are also looking at store environments and ways to keep stores in stock. That includes testing different layouts.”
Pritchard said the overall market has been “a little flat, although it has been coming up a little bit.” Looking ahead, “it is dangerous to predict what turn the business will take, but in a recessionary environment, it actually bodes well for the mass market,” he said.
Pritchard said the company’s two cosmetics brands, Cover Girl and Max Factor, have grown in 2001. Speaking in early December, he said that over the past three months, “Cover Girl is up almost a full share point, marking 17 months in a row of share growth. And Max Factor is up a little over a share point.” Pritchard said the introduction of Cover Girl Outlast lip color six months ago pushed its lip share up five points.
In addition, L’Oreal’s Hamilton said the company’s business has been “very strong in the last quarter and we expect it to remain quite strong.”
She added that L’Oreal has recently paid more attention to the intricacies of its operations. “We’ve put a little bit more financial analysis into our plans, so we understand more thoroughly what our inventory and financial situation is.”
Product news will include a new lash-building mascara, which already has created a buzz among retailers, as well as a lip color item. Under its Vive hair line, it is introducing a “universal treatment” product that offers multiple benefits targeting younger consumers.
For the general market: “I think things are looking relatively good,” Hamilton said. “The major challenge to both manufacturers and retailers is we have to continue to invent innovative new products to make retailer space and offerings more interesting, so that they don’t go into alternative channels.” That includes, “a focus on creating the right environment with their merchandising concepts.”
Last year, L’Oreal unveiled a new store look and the design has helped the brand gain space and better placement in cosmetics departments. L’Oreal already has taken over the lead-in position in CVS stores this year, replacing Ultima II.
Coty’s Galantic noted: “Our focus will continue to be on big brands, such as Adidas and Stetson and Jovan. We are also going to play on brand names like Club Med that are well-liked and trusted.” Coty had begun forging licensing agreements, such as the partnership with lollipop-maker Chupa.
“I think, on the consumer side, consumers seem to be looking for what provides comfort and for what is trusted,” said Galantic. “That means older, established brands are in pretty good shape.” From Coty’s perspective, he said, “Club Med is one of those well-known brands. It also provides some fun and some escape.”
Galantic also is expecting good things from the company’s new The Healing Garden Waters fragrances. “In the last share period, we were already the number-two brand in the mass market, including prestige scents.”
Retailers seem to be holding steady in commitment to space for fragrance, noted Galantic. “It is clear that the specialty stores have taken some fragrance sales away from retailers and they have to be more competitive to take some of them back, and clearly, with exciting product news, we aim to get that business back.”
Hair care companies are interpreting the economic downturn as a possible driving force for either value or higher-priced commodity items. Procter & Gamble’s $4.8 billion hair care business is counting on consumers’ desire for high-quality products to drive sales in the first half of 2002. According to Jeremy Cage, North America hair care marketing director for P&G, consumers are defining value by performance and price, not just price. “If you look at dollar sales in the category, they are increasing at a faster pace than volume sales, which are down slightly.” P&G looks to build market share in 2002 by staying on plan with new launches backed by aggressive advertising campaigns and continued support of its premium brands, Pantene and Physique.
“We always believe that during [an economic downturn] you have the opportunity to market even stronger.”
P&G pays more attention to building its leading brands than building on brands that may fall into a certain price category, Cage explained. “Our corporate strategy is to build the leading brands and partner with the leading customers in the leading markets.”
The company remains committed to a 2 to 4 percent overall sales increase for its fiscal year. As P&G continues to learn about Clairol, which they acquired last month, it expects to realize increases from that business, too.
With the average retail price of its shampoo and conditioner at a modest $1.49, White Rain’s Travis is bullish about the company’s performance in 2002, based on recent performance. “We outpaced overall category growth 2 to 1 in the third quarter,” Travis said, referring to AC Nielsen data, which tracked a 7 percent increase in sales of hair care products in the third quarter.
James Marino, group vice president, hair care North America for Alberto-Culver, sees the current retail slowdown continuing at least through the beginning of the first half of the new year, which will have a number of implications on the hair care category. Traditionally, in tougher economic times, Marino said, the market migrates to value “with increased buying at both ends of the spectrum — an increased attention to value and an increased attention to high efficacy, higher price point products — with a squeeze coming on those products in the middle.”
Alberto-Culver, maker of value to midpriced hair care brands, views economic slowdowns as a time when it is important to advertise and promote aggressively to the consumer. “We plan to somewhat expand our spending in each of these categories over the next six months,” Marino said. “New products are essential to success in the category, so we believe there will be aggressive extensions of existing lines.”
Michael Tanguy, senior vice president of marketing at L’Oreal consumer products division, said the company’s hair color business will remain aggressive in 2002 in order to keep L’Oreal at the helm of the hair color category. Investing at least $20 million per key brand — Feria, Preference, Excellence and Open — in media advertising will remain consistent next year to keep up with 2001 performance levels. Tanguy expects, “to end 2001 with 9 to 10 percent sales gains.”
Hair color, Tanguy explained, sells even in difficult economic times and even captures a rush of new customers. “I think we are recruiting consumers from salons as well as the dual users — women who buy at mass and the salon but now are choosing to do their hair color at home.”
Meanwhile, Unilever expects to stay on track in the first half of 2002. Diggi Thomson, North America brand manager for Salon Selectives, said the company’s value brand, Suave, will be in the limelight next year as it launches a hair care line targeting tweens, called Vibe. Advertising and promotional plans will remain aggressive, Thomson confirmed, adding that “spending against our priority brands,” such as Suave and ThermaSilk, is key.
But next year, Unilever will focus more on retailer partnerships than ever before. “It is true to say we are spending differently for next year. A trend we are seeing is partnering more with retailers. They truly understand the consumers’ purchasing behavior in relation to product categories.” An economic downturn, Thomson continued, parlays into several different types of consumer behavior. For one, some consumers choose to cut back in spending and therefore may prefer low-priced Suave, while others may choose to spend more on commodities since they will be making cutbacks in other parts of their spending routine.
“When you look at tough economic times,” Thomson said, “consumers begin to look for the little luxuries in life. Lipstick sales are up 13 percent.”
Maybelline is counting on that, too, as the company expects to stay on plan with its core franchises such as Wet Shine and Smooth Results. “We also look forward to introducing a breakthrough new product, launching in the first half of 2002,” said Karen Fondu, Maybelline-Garnier’s deputy general manager. “Currently, we at Maybelline are optimistic for the new year. We believe the marketplace will rebound and companies will continue to provide new innovations to meet consumers’ needs.”
Neutrogena president Michael McNamara sees growth opportunities at Neutrogena, as well, especially for Visibly Firm, a collection of skin care and foundation products featuring a copper peptide formula. He said he’s optimistic about 2002, as new stockkeeping units are added to the franchise. The other major news, according to McNamara, is the success of Moisture Shine lip.
At AM Cosmetics, acting president Steve Heit is also optimistic about 2002.
“We have some new distribution in our traditional mass and chain drug trade and there are some very exciting things on schedule for next year.” Namely, he said, the company is moving forward with a packaging conversion for Wet ‘n’ Wild, already under way. And there will be more promotions offered from Wet ‘n’ Wild, the company’s core brand.
Heit believes AM is well-positioned to fill market demands. “Not only are retailers interested in budget [lines], but they are also showing more interest in ethnic lines.” As a result, AM expects Black Radiance and Tropez to have strong sales next year. The Black Radiance line is expanding its promotional business and Tropez is adding 11 new items. Also, Lord and Berry is being outfitted with a new display unit.
Furthermore, said Heit, AM is well-positioned “not just because of the economy and price points, but because we are doing a lot of new things and offering innovative products.”
Meanwhile, Del Laboratories has had exceptionally strong sales in 2001 and expects that to continue into 2002. “The market is kind of flat, but it has been a great year for us — one of our best ever,” said William McMenemy, executive vice president, marketing. According to AC Nielsen data, the Sally Hansen business is up 15 percent for the year, he noted.
“We haven’t changed any of our plans since Sept 11. We are going forward with our plans and we will increase our ad spending.
“For next year, we are projecting the market to be flat to slightly up,” said McMenemy. “It might even accelerate a little bit if consumers start trading down from prestige into mass.”