03.03.09
Fragrance Takes a Hit as Prestige Beauty Sales Fall
According to the NPD Group, the total U.S. prestige beauty industry showed a decline of 3.3% in dollar sales in 2008 vs. 2007. The findings were released by the Port Washington, NY-based market research company at its Hot off the Press event at the Rainbow Room in New York City. Of all the categories tracked by NPD in the U.S., fragrance experienced the biggest decline. Still, senior global industry analyst and vice president, beauty, Karen Grant believes there may be a silver lining.
Makeup also struggled in 2008. While most categories across makeup were in decline, overall growth in skin care remained flat in the U.S., according to NPD. In particular, anti-aging products continue to show promise.
On a global basis, other prestige beauty markets outpaced the U.S.’s performance in 2008. China reported impressive sales growth in the fragrance, makeup, and skin care categories, as did Mexico. Italy and France showed an increase in makeup sales, while skin care sales posted declines in both countries. Fragrance sales were flat in France and in Italy.
NPD reported that the U.S. food/drug/mass (FDM) channel was flat in 2008. By sector, fragrance sales dropped, however, makeup and skin care (excluding hair care) sales experienced growth.
More info: www.npd.com
Margin Pressures Continue for Personal Care Companies
The top marketers in the personal care industry spend approximately 29% of sales on cost of goods, 53% on marketing and 7% on other expenses including R&D and administration, leaving an operating margin of about 11%, according to new data compiled by research firm Kline & Company. High oil prices into 2008 drove production and distribution costs up significantly for personal care marketers. And while oil prices have decreased, which has helped to expand operating margins somewhat, declining consumer demand stemming from the global recession will likely offset any profitability gains. This, combined with the perpetual need to spend significantly on advertising and promotions in order to drive consumer awareness and demand, will continue to lead to margin pressures for personal care marketers, according to the Little Falls, NJ-based consultancy.
In addition, the recession is leading to greater levels of discounting and special pricing, which hurts gross margins. According to Kline, companies heavily focused on luxury products, such as Estée Lauder, will feel the sting of the recession more than those whose products are lower in price, such as Avon, Johnson & Johnson and Procter & Gamble. Overall, the recession will affect the ability of personal care marketers to increase retail prices, unless they highlight their product or brand’s unique benefits.
“Companies that continue to employ effective marketing, efficient operations, sustained R&D expenditures, and steady innovation are the ones that will remain profitable and hold market leadership positions in uncertain times,” noted Laura Mahecha, industry manager for Kline’s market research division.
Kline’s Personal Care: U.S. Competitor Cost Structures 2008 study presents information on the financial performance of 10 leading suppliers of cosmetics and toiletries in the U.S. Cost breakdowns are provided for each company’s overall personal care business as well as its leading product classes, including fragrances, hair care, makeup, oral care, skin care and other toiletries.
More info: www.KlineGroup.com
The State of Green Business
The second State of Green Business report shows a “mixed bag,” according Joel Makower and the editors of GreenBiz.com, producers of the publication that measures the environmental impacts of the growing green economy.
“On balance, despite a growing chorus of corporate commitments and actions, we’re less optimistic that these activities, in aggregate, are addressing planetary problems at sufficient scale and speed,” wrote Mr. Makower, who is executive editor with Greener World Media, Inc.
According to the report, a rise in green marketing efforts has been matched by a nearly equal rise in claims of greenwashing by activists, bloggers and others. Some of the largest consumer brands have entered the green marketplace, prodded by retailers such as Wal-Mart, which has been pushing suppliers to offer affordable green products.
The need for “green chemistry” is clear, according to the authors, who added that there continue to be “substantive gaps” in understanding the health and environmental effects for the great majority of the 83,000 chemical substances listed in the federal government’s inventory.
On the packaging side, the overall intensity of the U.S. packaging needs, as measured in thousands of tons of paper, plastic, and aluminum per billion dollars of gross domestic product dipped in 2007. In most of the categories tracked in the report, packaging use is down, however plastics increased between 2006 and 2007. Yet, according to data from the American Chemistry Council, the amount of plastics recovered and recycled year over year is steadily increasing.
The report highlighted SC Johnson, which has been gradually and systematically substituting safer chemicals for toxic ones as part of its Greenlist protocol, as well as Church & Dwight for its new line of cleaners that are shipped in empty and reusable 32-oz. spray bottles with smaller concentrated bottles of cleaner.
More info: www.GreenerWorldMedia.com
Which Firms Are Built To Last?
Is your company built for the long-haul?
Two firms—Innovest Strategic Value Advisors and Corporate Knights—have tracked which companies are doing the best in major sustainability-related areas, such as human capital, environmental risks and governance.
The list, which is published in Forbes, includes AAA-rated corporations that can be considered models of sustainability. The list is not ranked and companies on it are picked to cover a broad range of industries, according to the report in Forbes.
Which companies that make, supply or sell household and personal care products made the list? They are: Amazon.com, BASF, L’Oréal, Novozymes A/S, Procter & Gamble, Saint Gobain and Unilever.
More info: www.innovestgroup.com