Oral Care Products Opportunities Abound

April 24, 2008
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A focus on remedial products with more functionality and convenience is an objective for the category.

Although the oral care category is a mature, highly concentrated market dominated by three major players, there remains plenty of room for growth. Private label penetration is low in some segments and manufacturers who can provide innovative products to match new trends in the market will have an abundance of opportunities.

The oral care market is moving away from cosmetic issues and addressing health conditions with a new focus on remedial products as baby boomers age. The category also is seeing time-pressured and better-educated consumers seeking more functionality and convenience.

“The on-the-go category is extremely important,” says Joel Warady, principal of Joel Warady Group, Evanston, Ill. “Oral care has developed so it is not simply a category that lives in the bathroom.”

Additionally, more products are transitioning from the professional to the retail side of the business, according to Duff Lewis, director of marketing at Ranir LLC in Grand Rapids, Mich. “Consumers are becoming more savvy about oral health and its importance such as the link with heart-related issues. They are seeking out these products at retail as they look for more cost-effective solutions.”

“Consumers are more interested in the functionality of products, not only flavors,” says David Kerdoon, chief executive offer at 360 Labs/Sencha Naturals in Los Angeles.

Part of the reason for the shift in consumer preferences in the oral care category is that consumers today are more highly educated. “Now, they are buying private label not only because it is cheaper, but also because they recognize that they are getting the same quality as a national brand due to better standards,” says Tony Clark, vice president of sales at Dentacare Industries, Morrestown, Tenn.

Health vs. Cosmetics

Previously, the spotlight in the oral care category was on the vanity sale such as whiter teeth and fresher breath. Oral care was often considered as a beauty item. Today, however, the emphasis is back on health and wellness. “New products are more focused on problems such as bleeding gums or mouth sores than they were in the last few years,” Warady says. “We are beginning to see more store brands introduced that have to do with aging problems, including dry mouth remedies for people who are taking more medications, or mouth rinses for people who are oncology patients.” All of these items are meeting the needs of the older consumer demographic, looking for more than aesthetic benefits in oral care products.

However, the cosmetic side of the spectrum hasn’t faded. “The whole whitening area, specifically its increased convenience, is a prevalent trend right now,” says Arnie Margolis, director of sales at Tower Laboratories Ltd., Centerhook, Conn. “And this is requiring private label developers to have research and development capabilities that are on the same cutting-edge as the brands.”

What’s more, there is agreement in the industry that young adults continue to drive cosmetic sales in oral care. “Young adults continue to focus on vanity products,” Warady says.

Gregg Cevallos, owner of Premier Products, Alameda, Calif., also points out that “Whitening products still are very popular for teens and young people as well.”

A Closer Look

With the growing popularity of more cosmetic and medicinal oral care products, the old hygiene mainstays of the past have taken a hit in the category. Private label penetration is virtually nil in the mature toothpaste segment. Dollar sales were up 10.6 percent, but flat in unit sales as prices for private label toothpaste increased, reflecting higher quality and more innovative products.

“When private label toothpaste was first introduced, it was a very basic product with old flavors and a low price,” Clark explains. “Consumers just weren’t interested in an ordinary product.” As a result, retailers were burned and no longer carried private label toothpaste.

“What will move the consumer is private label toothpaste with the newest technological improvements,” Clark asserts. “Certain retailers now offer a full range of own-label, high-tech toothpastes in exotic new flavors, with high-quality testing standards, and, they are doing well.”

Natural and functional toothpastes moving from the specialty natural stores to mass market also command greater price elasticity. “Manufacturing costs for these specialty private label products are higher, translating to a 20 percent to 25 percent higher price point at retail,” Kerdoon notes.

In contrast, higher private label penetration in manual toothbrushes may be due to larger differences in price compared to the overall category offerings - $1.49 for private label vs. $2.61 for the segment - a 43 percent gap.

“Retailers want a higher percentage of private label in their stores, especially in under-represented categories,” Clark says. “Private label averages are currently in the 10 percent to 13 percent level in stores, but many retailers want to hit levels of 15 percent to 20 percent, but not at the expense of national brands.” Certain categories are underdeveloped, such as toothpaste. “There is a huge opportunity to introduce products not yet in the marketplace,” he adds.

As the leading oral care product, toothpaste pulls one-third of overall oral care dollar sales, but only ranks eighth in sales for private label. “There’s a huge disparity between toothpaste and toothbrush sales in private label,” Clark notes. “Promoting and selling them together is the key to getting people to try toothpastes.”

“[Toothbrushes] should be placed away from the oral care department in high-traffic areas,” Clark suggests. “You don’t run out of toothbrushes like you do toothpaste. Consumers tend to hold onto them for a long time. Dentists may recommend changing brushes every two to three months, “but the average is nine months, and it used to be a year,” Clark says.

Maybe consumers are holding on to their toothbrushes longer because, well, there’s just more to hold on to. “Toothbrushes that used to be 99 cents now are up into the $4 range with all the bells and whistles. Marketers are trying to provide products that feel good in the hand and mouth and that keep pushing the market higher and higher,” Clark says.

Lewis agrees: “Oral-B has come out with a range of new or improved manual toothbrushes, including Pulsar Pro-Health, Indicator Deep Clean, which is an upgrade over the current product, and Advantage Breath Refresh, which has a tongue scraper.”

But piggy-backing toothbrushes with toothpaste is a merchandising tactic used by many to increase toothbrush sales. Cross-couponing is one example. “Dentacare puts a 50-cent coupon for the retailer in toothbrushes for toothpastes and cross merchandises the brand group across multiple products. This drives sales across the retailer,” he adds.

New Products in the Pipeline

The focus of the oral care category has shifted, but there still lies potential for growth in all segments. Warady observes that international products are invigorating the category. “We are seeing quite a few trends coming from Europe and Asia, such as vitamin-enriched products and items with natural herbal remedies. All it takes is for a brave retailer who is ready to move away from the [national-brand-equivalent] mindset,” he says.

Kerdoon notes that 20 percent of oral care products in Asia contain green tea. “Research has shown that green tea is a natural antibacterial agent that prevents plaque better than fluoride,” he says. It provides both taste and a functional benefit since it benefits the teeth and gums, inhibiting oral bacteria to freshen breath naturally. “Mouthwashes containing alcohol dry up the mouth, but green tea naturally removes bacteria,” Kerdoon adds.

Crest seems to be joining the cause, or at least dipping a toe in the water. The company has just introduced Crest Nature’s Expressions Mint + Green Tea Extract toothpaste. “Crest is not jumping in with both feet however,” Kerdoon notes. “The marketing emphasis is still on whitening, with green tea as a flavor, while they test the market response to their new product.”

Lewis has noted new products that are multifunctional and convenient in many categories. “Tongue scraper brushes continue to grow in popularity. J&J Reach’s Clean Paste floss marries the concept of brushing and flossing at the same time with the addition of a paste-like coating to their floss. P&G is making the whitening experience more convenient by coming out with strips you wear for only five minutes a day.

“Listerine also is trying to offer more whitening convenience with their dissolvable whitening strips, which serve as a breath freshener, and Aquafresh now has a whitening tray design that is unique in the category,” Lewis adds.

The Topic of Quality

Recently, concerns about tainted toothpaste imported from China, and counterfeit Colgate containing a potentially poisonous chemical used in antifreeze, has prompted the FDA to issue a warning against certain oral care products.

“Problems with products leads to increased scrutiny, but it also levels out the competition,” Clark says. “There are tight restrictions imposed by the FDA and U.S. Customs. Sources are regulated, but some things slip through the cracks. The result has been a slowing of imports. This is an isolated situation and just a bump in the road. Although China is a huge trading partner, this could benefit domestic manufacturers and retailers through higher prices.”

Kerdoon also has noticed more customers demanding corporate governance. “Manufacturers now have to be more careful about marketing claims. Third-party testing by independent labs builds credibility.”

“Private label is being held to higher standards. Manufacturers and retailers want better quality products. There is more testing at the manufacturer level, and the bar has been raised to equal or better than national brands,” Clark adds. “This is a positive trend as consumers will trust private label more than ever before.”

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