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- RESEARCH & AWARDS
Private label makes strides in the facial skin care segment - thanks to its increasing reliance on “exclusive” brands and value-added products.
According to a review of beauty industry trends by Leigh Ann Rowinski, former director of client solutions for Chicago-based Information Resources Inc. (IRI), the skin care category saw dollar sales expand 4.4 percent in 2007, outpacing gains by the beauty segment as whole, which saw sales edge up only 1.4 percent. However, Rowinski reports, skin care growth was driven primarily by the facial segment, where dollar sales jumped 7.7 percent last year to reach $202 million across formats.
Even better is the news that sales of private label facial skin care products shot up 25.7 percent in 2007 - the biggest gain among the top 10 “brands” - boosting private label’s share of the category to 5.8 percent and making it fifth among best-selling brands.
More recent sales figures indicate private label continued to outperform the skin care category as a whole through the first half of this year. IRI data for the 52 weeks ending July 13, 2008, reveal store brand skin care dollar sales jumped 14.9 percent in food, drug and mass merchandise outlets, excluding Wal-Mart, while sales for the category overall increased just 4.2 percent. Private label posted its most significant gains in the facial cleansers (+28.5 percent), acne treatments (+26.6 percent) and facial moisturizers (+6.9 percent) subcategories, but stumbled in the facial anti-aging subcategory (-2.6 percent). That’s unfortunate because, according to Rowinski’s analysis, anti-aging now represents both the largest and fastest-growing segment of the facial skin care category, registering a 10.3 percent dollar sales gain over the past 52 weeks to reach more than $655 million.
Part of the problem, says Senior Analyst Tim Dowd of Rockville, Md.-based Packaged Facts, was a huge advertising push by Olay earlier this year in support of its anti-aging products.
“For private label to have thrived in the face of that onslaught would have been supernatural,” he quips.
But store brand pricing probably played a role as well. Although the gap between branded and private label facial anti-aging products isn’t as great as it is in other skin care categories, even 15 to 20 percent might be sending the wrong message.
“High quality is key to success in this segment,” explains Katya Connor, marketing director for topical categories at Orangeburg, N.Y.-based Nice-Pak. “Consumers expect to pay more for benefits such as anti-aging. So if there’s too much of a price difference between the national brand and the private label, they’re going to assume the private label is lesser quality and pay more for the national brand instead. If there’s one thing we’ve learned from our consumer research, it’s that women will not put junk on the only face they’re ever going to have,” she adds.
Given consumers’ belief that you get what you pay for in facial care, Rowinski’s discovery that facial care products with the highest retail prices also posted the highest sales gains in 2007 comes as no surprise. In fact, her analysis also revealed that sales of facial anti-aging products and facial moisturizers priced below $10 actually declined. According to IRI figures for the 52 weeks ending July 13, 2008, retails for private label facial anti-aging products and facial moisturizers averaged $12.64 and $5.99, respectively (vs. $15.08 and $8.99 for those two categories as a whole), indicating that many store brands fell within the no-grow price zone. The gap was even wider in the facial cosmetics category, where the private label retails averaged less than half of those for the category as a whole ($3.44 vs. $7.00). Perhaps as a result, store brand sales in that segment edged up only 1.3 percent, thanks mostly to strong gains in makeup removers (+55.6 percent) and makeup remover implements (+6.9 percent).
“Chains seem to want to sell private label cheap, cheap, cheap,” confirms CEO Paul Lieber of Johns Island, S.C.-based Royal Labs Natural Cosmetics Inc. “But they don’t have to sell it so low. Savvy consumers are willing to spend more for quality, particularly in skin care.”
But what exactly constitutes quality in this segment?
Value-Added Key to Success
“’Me-too’ works to a degree” in some categories, says Jim Berkrot, vice president of sales and marketing at Elmsford, N.Y.-based San Mar Laboratories. “But if you really want to succeed in private label skin care, you’ve got to offer ‘me-too-plus.’”
Whether it’s a unique technology, ingredient or delivery system, you need a point of difference, Berkrot stresses, something “exclusive to your product that one-ups the national brand, that makes yours better.” For its retailer customers, he says, San Mar offers a patented preservative-free encapsulation technology called Zytrel that maximizes product efficacy by delivering beneficial ingredients deeper into the epidermis, while at the same time reducing skin irritation.
“We call that ‘national brand better’ or NBB,” Connor of Nice-Pak adds. Her company’s new private label versions of two hot-selling anti-aging cleansing cloths feature a reclosable lid that retains moisture better than the brands’ peel-back label. Nice-Pak also offers value-added Kleenex-type dispensing in the core facial aisle.
“Yes, you have to watch what the national brands are doing,” Connor comments, “but the ability to differentiate your private label offerings really helps.”
Even on the store brand side, she says, retailers have to innovate all the time. They then have to communicate those innovations to consumers by marketing like the national brands.
Although good packaging that calls out key product attributes is critical, retailers have to give consumers a compelling reason to look that closely in the first place. Offering a full line of private label products that includes something for everyone is the first step; merchandising those products all together to highlight that breadth is the second.
According to Lieber, placing store brand alternatives to the right of the national brand target diminishes the impact of a full-line offering and casts private label as the cheaper knockoff. So rather than integrating private label skin care SKUs onto the shelves, he says retailers should put them together in a separate display, just like they do with the national brands. If retailers treat their private label like a national brand, he adds, consumers will view it that way as well.
But national brand skin care products not only are merchandised separately, they also are supported by advertising, celebrity spokespeople, educational materials, special displays, frequent promotions, clinical studies and a whole host of other marketing tools.
“It takes a lot of work and a lot of resources not only to develop your own skin care line, but also to maintain it,” Berkrot confirms. “Putting it on the shelves is just the beginning.”
And not every retailer is up to the task, prompting many chains to seek exclusive U.S. distribution rights to an existing brand rather than marketing their own.
Although a few true national brand-type private label skin care and/or makeup programs are in place - the Quo collection at Shopper’s Drug Mart ranks as one of the best examples - CVS (Lumene), Walgreen’s (IsaDora), and Target (Boots Expert) are among those that have gone the exclusive brand route instead.
Other stores have taken more of a hybrid approach. For example, Coscto offers a complete line of skin care products and cosmetics under the Kirkland Signature by Borghese label, which gets the chain’s own brand on the package but borrows some cachet from an already well-established national brand. CVS takes a slightly different approach to its Skin Effects program, teaming with well-known dermatologist Dr. Jeffrey Dever to create a “pseudo” private label available only in its stores. Target did the same thing with its in-house cosmetics program, partnering with a famous makeup artist to create the Sonia Kashuk line.“It’s a great way to have your cake and eat it, too,” Lieber says. “You get the clout that goes along with a ‘national brand,’ but also some exclusivity.”
“With today’s faster-paced lifestyles,” Lieber says, “people just don’t have the time to use 10 different products a day.”
This reality is creating increased demand for multi-purpose products such as scrubs that moisturize as they exfoliate and foundations that even out skin tone, protect against sun damage and fight wrinkles - all at the same time. It’s also important to back up any assertions about performance with clinical studies.
“Consumers have become very savvy over the last several years,” Berkrot explains. “So the ability to substantiate product claims is key.”
Another trend that’s gathering steam is a shift toward products designed specifically for certain demographic groups: teens and ‘tweens, men, women of color, etc. Although recent growth in the men’s market appears to have stalled (sales expanded less than 1 percent in 2007 and were driven by gains in body wash only), the teen/’tween segment appears to have legs.
According to a December 2007 report from Packaged Facts, sales of skin care products purchased by teens and ‘tweens or purchased for them by adults were expected to top $3.2 billion by the end of 2007. Although the compound annual growth rate from 2003 to 2007 was only so-so (under 3 percent), the study’s authors say the segment merits retailers’ attention nonetheless because of its large dollar base and the under-19 crowd’s growing purchasing power.
Though few retailers have introduced private label products aimed specifically at teens and ‘tweens, they’ve been a bit more responsive to the needs of ethnic consumers. For example, Target just launched a new private label line of natural and organic skin care products for women of color called SheaMoisture.
Given the explosive growth of minority populations in the United States, Dowd thinks it’s very important to have a good section of ethnic-specific products. But since ethnic consumers typically spend even more on “general market HBC products,” he says, retailers might want to borrow a page from L’Oreal and simply expand the selection of colors and formulas within their mainstream private label skin care and cosmetics collections to include something for everyone.
The other big trend in skin care is escalating demand for natural and organic products.
“That’s where the growth is,” Lieber says. “Natural is hot, hot, hot. Anyone not seeking to add those types of raw materials isn’t following the market.”
Unfortunately, he continues, no governing body regulates the use of the terms “natural” or “organic” outside the food and beverage arena, leading to indiscriminate use of both terms by marketers anxious to cash in on the trend.
“Anyone can use either term, but most of what’s out there is junk,” Lieber reports. “They change a few ingredients and call it ‘natural.’ It’s really frustrating.”
Several different organizations have attempted to take the bull by the horns and develop their own guidelines for natural and organic in health and beauty care; however, there’s still no consensus. But that’s not keeping private label manufacturers from introducing natural products of their own.For example, Cathie Petak, reports marketing and communications manager for Sheboygan, Wis.-based Rockline Industries, says her company just added a 100 percent cotton wipe with natural botanicals to its line of facial cleansing cloths.
Promote to Generate Trial
“Offering a small travel pack of facial wipes with an 8-ounce jar of night cream, for example, is a great way to draw the attention of the consumer,” she says, and get that all-important first use.
On-pack coupons for complementary private label products is another simple strategy for generating trial, Yen says.
Although displays also can work wonders, proper placement on the shelves is critical, particularly for less-glamorous products related to cleansing and makeup removal.
“In some locations,” Petak says, “we’ve found private label facial wipes on the lower shelves, away from their branded targets. But for the consumer to gain confidence in store brand facial wipe products, they should be placed next to like national brand offerings.”
But secondary placement via clip strips or power wings in areas lacking a competitive national brand equivalent also can be effective.“We’ve found with private label, in particular, that secondary displays really work because [skin care products] are often an impulse purchase,” Connor explains. “They can attract consumers that aren’t going to the facial cleansers aisle. If they try it and like it, they’ll go back to the shelf to find it the next time.”