Market analysis: private label cosmetics 2014

by Patricia Mansfield-Devine

[Published in: SPC magazine]

spcOver the past few years, economic conditions have continued to play a large role in the private label cosmetics market, as purse strings remained tight on discretionary spending in most of Europe, including for cosmetics and toiletries.

But in 2014, this could mean a higher market share for private label, believes market researcher SurveyLab, which in 2013 undertook a report, ‘Today’s European Shopper’, on behalf of the Private Label Manufacturers Association (PLMA).

The survey looked at 14 countries and found that nearly half of those questioned said they purchased private label products “frequently”. And in the year ahead, said one in four, they would buy more own brands than currently.

The economy was a much-cited reason. Two-thirds of shoppers said that recent economic conditions had forced them to make changes in how they shopped, and 80 per cent said they expected the economy to either stay the same or get worse in the year ahead. (Countries included in the survey were Belgium, Czech Republic, Denmark, Finland, France, Germany, Hungary, Italy, the Netherlands, Norway, Poland, Spain, Sweden and Great Britain. )

“The study shows that private label plays a fundamental role in the lives of shoppers across Europe,” said PLMA president Brian Sharoff, “and market share will continue to expand.”

Loyalty to private label outside of recession remains a concern, said the survey, but respondents said that even when the economy got better, they would stick with private label, with eight out of ten saying that after the economy improved they would not stop purchasing own brands.

This may be good news for manufacturers, but they clearly cannot afford to let standards slip. When consumers cited certain important factors that would encourage them to buy a larger number of own brands in the year ahead, these included overall satisfaction with own brand products in the past (mentioned by 57 per cent), better quality products (49 per cent), more special offers on own brands (46 per cent) and more variety (43 per cent).

Shoppers are also ripe to be persuaded, found the survey, with eight out of ten shoppers preparing a shopping list before heading to the store, but less than a quarter selecting the products on their list without hesitation. Shoppers are inclined to look for alternatives or more information before they make a final selection, say the researchers. This means that investment in shelf appeal and attractive packaging might be worthwhile.

“The chief issue in the current market is how consumers will receive retailer brands in beauty products and cosmetics,” says Brian Sharoff.

“The trend has been building for several years and all signs point to a major realignment of shopper loyalty in these categories.”

The market has definitely improved over the 2009 and 2010 period when many consumers were frightened by economic conditions, says Sharoff.

“This was true in the US as well as across Europe,” he says, “and was particularly significant among younger consumers, where unemployment was higher than the population in general.”

The years 2011 and 2012 softened the impact of the recession on the economy, believes Sharoff, and 2013 continued that trend.

A number of major retailers created their own ranges in 2013, he says. “Co-op Italy expanded the Vivi Verde range to a natural health and beauty range, while in the UK Tesco created a premium health & beauty range from called Pro Formula, and Sainsbury’s is believed to be planning its own cosmetic line, Boutique.

“Meanwhile new partnerships have also arisen, especially in the US, where Sephora and Pantone Universe, or Kohl’s and Vera Wang are working together.”

A number of ranges have also undergone relaunches, says Sharoff, as firms continually adapt and expand. “For instance, Boots No 7 has been given a more global look this year,” he says.

 

Flatlining

However, some analysts do not see the private label situation as quite so optimistic. Market research firm Euromonitor feels that the market is holding steady at best and here and there, is actually retreating. Its adjusted figures for 2011 show private label in Europe holding 6.8 per cent of the market, with the figure for 2012 at 6.9. Meanwhile, worldwide the percentage has fallen slightly, from 2.7 per cent to 2.6, with most countries holding fairly steady and only Spain increasing in any significant way, from 12.0 to 13.3 per cent, possibly due to the ongoing economic crisis.

“There is certainly not much innovation in the UK,” says Euromonitor’s global head of beauty and personal care research, Irina Barbalova.

“In the mid-price market, there is a lot of segmentation of ranges and diversification. The accessible luxury area is now quite competitive and private label finds it hard to compete on that kind of level.”

L’Oréal Paris, for instance, she points out, can input huge investment into promoting its anti-ageing skincare ranges and developing in terms of high technology, as can other large firms.

“Private label finds it hard to compete in the skincare arena as it has less money to invest in R&D,” she says.

“There are not many national launches or dynamic activity. The top premium brands are now offering more accessible lines, so we will probably see more diversification into the premium position and premium lines on part of retailers. And into naturals too, because they naturally have a more premium image because of their market position.”

Certainly one manufacturer that now advises its private label clients to go high end is US-based CoValence Labs.

“The cost of ingredients is continuing to rise,” says Melinda Wochner, the firm’s COO and vice-president of marketing.

“This has made it difficult for us as a developer to create out-of-the-box products with a competitive price as we did in the past.

“The changes with ingredient companies and their constant price increases have been a challenge for us to deal with on an almost daily basis, though it was one that we successfully tackled in 2013.”

However, in general, she believes that in spite of the difficulties, 2013 saw more new start-ups in the market than since the beginning of what the US terms the Great Recession.

“It is incredibly refreshing to see that more brands are finding success in their unique niches,”she says.

“Clients are wanting to make sure they add in next-generation naturals as well as IP ingredients and complexes to call their own.”

For the smaller firms in particular, it pays to go high end, she believes.

“Of course, our clients tend to be on the efficacious medium-to-high-end of things,” she admits.

“The mass-market brands have a pretty good hold on the watered-down bargains but in 2014 we will be focusing our marketing efforts on next-generation naturals and Stem99(™) to help our clients move ahead of the competition.”

The PLMA’s Sharoff agrees that private label ranges are definitely becoming higher end as shoppers respond to upmarket retailers, but he does not feel all is lost at the lower price points.

“The marketplace is not only composed of those at the higher end,” he says.

“There are other consumers who are price-conscious and seek bargains, and other retailers may prefer to cater to that demographic group. Also, offerings may vary by country. Consumers in the Ukraine, for example, have different needs than consumers in Sweden or the UK.”

 

Naturals

A growing trend in all lines of cosmetics is that of naturals, with many mainstream brands climbing on the bandwagon by either buying smaller naturals labels or morphing their own offerings into more natural brands as consumer perceptions and health regulations tighten worldwide.

But the major issue affecting natural and organic cosmetic private labels in 2012-2013 has been competition, says Tina Gill, marketing manager of Organic Monitor.

“Competition has become intense in the European natural and organic cosmetics market as growth rates have slowed,” she says.

“For about five years, the natural & organic cosmetics market in Europe was expanding by 15-20 per cent a year but since 2011, we are seeing growth more in the region of 4-8 per cent. Also, the market has had a large influx of new entrants, raising the competitive stakes.”

In 2009-2010, many retailers launched private label ranges, says Gill, but there have been few new launches since then.

“Two notable launches were Vivi Verde by the Italian supermarket Co-op Italia and Pure Skincare by M&S in 2012,” she says.

“What we are seeing, however, is relaunches. An example is Co-op Switzerland relaunching its Naturaplan private label for natural and organic cosmetics in spring 2013.”

As for private-label organic ranges becoming higher end, this really depends on the retailers, says Gill.

“The private labels of beauty retailers like Sephora and Marionnaud are positioned high-end,” she says, “whereas private label ranges of supermarkets like Co-op Switzerland and Waitrose are more value-positioned.”

 

France

France is one European country firmly in the doldrums economically, which is perhaps why 2013 saw three major moves in the private label market.

The first was from Marionnaud, which launched its Nature bodycare and toiletries label at the end of March 2013 – the firm’s sixth private-label launch in five years. The range has 15 SKUs, with prices ranging from 4.90 euros to 14.90 euros and including cleansing gel, body butter, facial scrub, shower gel and makeup remover.

“Sixty per cent of the French never push open the door of a perfumery,” said Fabrice Obenans, marketing director of the brand, at the time of the launch.

“We have launched our own-name ranges to democratise access to care products.”

The firm already had skincare and toiletries ranges covering organic, men’s and the Swiss Apple Formula brand, and in summer it also announced a small makeup range of 13 SKUs, which has since expanded to around 34.

Another move in the market came from Nocibé, France’s third-largest perfumery chain, which in December 2013 opened Les Bellista by Nocibé, its first store featuring primarily its own brand, in Leers, near the Belgian border.

Nearly all the products on offer are Nocibé’s private label, including makeup, toiletries, skincare and accessories, though there are also a few other brands on offer. None are premium, however, and the stated aim from the firm is that it wanted to attract a younger clientele (it had managed to reduce the average age of its customer, but only from 44 years to 41).

The store also offers added services, including walk-in treatment salons, and makeup, hair and nail bars. Nocibé now intends to open another Les Bellistas store in Paris in the spring.

The third major happening was the launch of a colour cosmetics range from the French supermarket chain Intermarché. Labell Paris accompanies the firm’s existing fantasy brand Labell, a toiletries and hygiene range that has been on the market since 1982.

Intermarché, France’s second-biggest supermarket chain, has a reputation for modest prices and a close relationship with its customers. It retains its own fishing fleet and produces its own milk, and its strong background in own-label food produce fitted it to create an own-label makeup range, believes the firm’s head of own brands, Maryline Barbier.

It was convinced to do it, however, by a survey conducted by market researcher BVA.

“BVA found that most French women do not have a high budget for makeup,” says Barbier.

“Most spend no more than 30 euros per month, and the average spend is even lower, at 5-20 euros. And one in four women buys makeup at the supermarket.”

Intermarché already stocked Gemey Maybelline, France’s best-selling makeup brand, which accounted for 40 per cent of its makeup sales, alongside L’Oréal Paris and Bourjois with 20 per cent each. The remainder was taken up by smaller budget brands such as Miss Den, Miss Cop, Miss Europe and Berencé. This budget customer is the buyer the firm targeted with its own label.

“The BVA survey found that price was important for female consumers,” says Barbier, “with 55 per cent saying it was THE most important criterion in making a purchase.

“This was good news for us, as it ties in with our theme of quality items at a low price.”

Working with an English formulator, Intermarché created an 82-SKU range, most of which are made in the UK, with a few others manufactured in Italy.

Prices range from 2.90 euros to 7.80 euros, putting the brand on a par with brands such as Yves Rocher, which sells through its chain of own-name stores, and US brand EyesLipsFace, which sells through a dedicated French website.

The black packaging chosen for Labell Paris deliberately evokes the high-end professional brands such as Makeup For Ever and MAC, which are available in France through outlets such as Sephora, and also “to look pretty in a makeup bag”, says Barbier.

The new brand was launched in May and has grown rapidly, with the basic black mascara (4 euros) being by far the best seller. The range is set to be boosted in April this year, and again in the autumn, by more than 40 new SKUs.

For a supermarket chain to balance sales of its existing brands with its own brands is always tricky and Barbier admits that its leading makeup brands were ‘annoyed’ at the arrival of Labell Paris, but she says they are “not angry yet”. ‘MDDs’ as own-labels are known in France (marques de distributeur) are usually around 30 per cent cheaper than brands and Intermarché believes it is competing more with Yves Rocher than with Maybelline. In-store, the range is positioned alongside the major brands.

“In the past five years MDD has developed enormously and very well,” says Barbier.

“People used to fear using these products on their skin but now it’s normal. MDD is an accepted part of the market.”

Although Labell Paris is firmly a budget offering, the battle between brands and private label will no longer be based on price or quality, she believes, but on image. The big brands have their celebrity ‘ambassadors’ in the shape of actresses and models, and Intermarché has gone down the same route by signing a deal with makeup artist Elisabeth Touboul – familiar to French TV viewers from her appearances on the France 2 television channel – who now provides looks and tutorials online using Intermarché products.

 

Blurred lines

Intermarché notably did not brand its new range with its own name, but in tests, says Barbier, 63 per cent of customers know that ‘Labell’ was an Intermarché brand.

Sharoff of the PLMA is one of many who believe the boundaries between brands and private label are becoming more blurred.

“I think it is generally agreed that brands are very important in the beauty and cosmetics categories,” he says.

“They have their loyal following and for many years have defined the market. What retailers are doing is creating brands of their own, which over time will blur the distinction between manufacturer-owned brands and retailer-owned brands.

“As for which one is doing better in a category at any given time, only market share statistics can tell us that.”