Growth Opportunities

November 7, 2005

The baby boomlet has given way to teen power and for manufacturers of cosmetics and toiletries that means there's a whole new wave of consumers to entice with fragrances, color cosmetics and personal care products.

Growth Opportunities

By Tom Branna

The baby boomlet has given way to teen power and for manufacturers of cosmetics and toiletries that means there's a whole new wave of consumers to entice with fragrances, color cosmetics and personal care products.

They've already got their own phones, computers and CD players, why not their own brands of lipstick, eyeshadow and nail color? As the teen population has swelled, cosmetics companies are lining up in droves to meet their demands. For older teens, many of the lines feature more adult, sophisticated products just off-beat enough to set them apart from the established cosmetics brands. For pre-teens, there's a wealth of glitter-based cosmetics to help them stand out in the crowd.

...While most of the emphasis may be on 8 to 17 year-olds, a couple of companies are focusing their efforts on bringing up baby. For these tots, two new baby care lines have been introduced in the past month. One of them is a mid-priced line from Solar Cosmetic Labs under its popular No Ad brand and the other comes from fast-growing Bath & Body Works.

...However, many cosmetics marketers have their sights set on teens and preteens. One look at the population statistics makes it clear that kids should play an important role in marketers' plans for the next decade or so. The baby boomlet of 1977-94 produced 72 million children. The total compares favorably to the 77 million children born during the original boom of 1946-64. Just as important to marketers, however, is the fact that kids today have more money to spend on everything from designer fashions to fast food, with more than enough left over for cosmetics.

...According to estimates by Renaissance Cosmetics, preteens and teens annually spend $1.2-1.5 billion on cosmetics. "This group of teens is the most sophisticated ever," said Kristin Penta, creator of Fun Cosmetics, Hillside, NJ. "They have part-time jobs, beepers and cellular phones and their parents entrust them with the family money." 

...Last year, teen spending totaled $122 billion, according to Teen Research Unlimited, Northbrook, IL. On a weekly basis, teens spend about $80. Of that total, $53 is their own money and $27 is family money. What are they buying when it comes to cosmetics and other personal care products? According to the Zandl Group, a New York firm that tracks teenage attitudes, trends and brand preferences, fragrance has become very popular.

Tommy's at the Top

"Fragrance has become an integral part of the teen dating process for boys and girls. Tommy Hilfiger fragrances are as big as anything we've ever seen," said Richard Leonard, who is vice president of Zandl Group. "Even at its height, CK One wasn't as popular."

Mr. Leonard noted that men's fragrances continue to be popular with girls because they often smell cleaner than the women's scents. Furthermore, by using men's scents, girls feel a bit more like renegades. "We've found that more girls are using the men's version of Cool Water than the women's extension," he added.

...While teens may be willing to spend more for designer scents, they favor more value-priced products for some personal care items. "Nobody can tell what shampoo brand a kid's using, so cost becomes a factor," noted Mr. Leonard. "That's why Suave remains popular."

...At the same time, Clairol's Herbal Essences continues to build momentum. In a recent study by Zandl, 29% of girls said it was their favorite (see chart below). "The see-through package is a real departure from the mass market," said Mr. Leonard. "And the sweet-smelling fragrance is right on target for teens."

...When it comes to selling cosmetics to kids, the segment is fragmented with some lines aimed at girls 8-12 and other, more mature brands, targeted at teens.

..."By the time they're 12 or 13, most girls feel they've outgrown the typical teen lines such as Bonne Bell," said Mr. Leonard. Take a look at the chart below that lists teens' favorite personal care brands, and it's clear that teens gravitate toward adult lines. "It's a pattern that can be seen in everything from clothing to toys," continued Mr. Leonard. "In the past 10 years, kids have grown up faster. By the time a girl is 12, her orientation is toward adult brands."

Jane's Commitment

.A teen's heart may lean toward adult brands, but that hasn't stopped marketers from developing cosmetic lines geared directly at 13-19 year olds. Probably the best known of these brands is Jane, a line of cosmetics that was acquired last year by Estée Lauder. The acquisition gave instant credibility to the teen cosmetics category, which in turn has led to greater competition in the segment. Still, company president Don Petit maintains that Jane can stay on top in a growing category.

..."When we started the company (1994) we were the first to identify that teens would become a significant force in the next 10 years. That's become obvious to other companies and our success has created imitators," said Mr. Petit.

...Mr. Petit maintains that the acquisition by Estée Lauder has opened up a whole new avenue of growth for Jane. He said Lauder gives Jane access to new technology as well as the long-term support "that lets retailers and consumers know that we aren't a flash in the pan."

...Although he would not divulge specific plans, Mr. Petit said Estée Lauder's expertise in research and development has enabled Jane to develop innovative face and lip products that will go on sale in 1999. Furthermore, Lauder's strength outside the U.S. will give Jane access to international markets.

...In the U.S., Jane's distribution is increasing from 9,200 doors to 15,000. Much of that growth will come from expansion into key drug store chains such as Eckerd, CVS, Rite-Aid and Walgreen's. For fall, Jane has developed a Tag-Alongs promotion designed to increase trial usage. The pre-pack includes a full-size nail enamel with a free trial-size lipstick.

"Our objective is to be a real makeup brand that gets people into the category and gets them excited about makeup," said Mr. Petit. "It's a real task to develop products that have staying power because touching teens emotionally is difficult. You have to connect to what their real desires and concerns are."

...According to Mr. Petit, to reach today's stimulus-overloaded teens, packaging must be innovative and interesting with cool graphics and arresting displays. Jane's Lickety-Stix lip gloss package, according to Mr. Petit, makes lip gloss relevant to teens. "Every teen has a Bonne Bell lip gloss in her locker, but she doesn't want anybody to know it. Lickety-Stix makes lip gloss aspirational."

...Mr. Petit also singled out Jane's Hip Lips lipstick as an interesting and innovative package. "You try to develop a package that makes a teen say, 'Wow, somebody put a product out just for me!'"

...User-friendliness is also an important part of shelf literature, according to Mr. Petit. "Our booklets provide makeup advice-not rules-and they encourage teens to sit right down in the aisle and read the booklet."

...Even as Jane expands throughout the U.S., another major player is getting ready to enter the teen color cosmetics market. Next year Neutrogena will introduce a color cosmetics line that features an upscale look with gold and silver packaging.

...Another competitor to Jane's domain is Burlington Toiletries, Montreal. The private label manufacturer of bath products recently introduced JAC, a line that includes nail polish, roll-on lip gloss, body glitter, flavored lipsticks, glitter hair mascara, eye shadow pencils and scented body glitters. Like Jane, all JAC products carry the same price point. But at $2.29 each, JAC cosmetics cost 70 cents less than Jane.

...U.S.-based companies are also reaching for a slice of the teen cosmetics pie. For back-to-school Fun Cosmetics is rolling out six new shades of nail enamel all inspired by the resurgence of the denim jacket. "The jeans jacket was out of the loop for 20 years," noted Ms. Penta. "But now dark denim is the big fashion statement this fall. Helmut Lang and Calvin Klein are both doing a lot with denim." The new shades will retail for $2.99 each.

More Subtle Statement

...Fitting in while standing out may seem contradictory, but many cosmetic trends allow teens to do just that. Two years ago body glitter was popular. Last year Mehndi moved to the top of the must-have list, but for the remainder of 1998, Ms. Penta said body paints are in vogue. "In the spring we introduced Body Ink and it did so well we're offering it again this fall," noted Ms. Penta. The inks, available in bright reds and pinks as well as patterns such as paw prints, wash off easily with soap and water. For holiday 1998, the company is offering three scented body inks that will retail for $4.99.

...When it comes to adding a sparkle to skin, glitter is out and shimmer is in, according to Ms. Penta. "We've moved beyond disco-style, in-your face glitter. Now we're seeing a simple, beautiful shimmer around the eyes." To capitalize on the trend, Fun Cosmetics is promoting a four-pack of Glitter Sticks that will retail for $3.99.

...Thanks to the phenomenal success of Titanic, Fun Cosmetics is predicting that glamour will remain a big trend through the 1998 holiday selling season. Girls will want to enhance their beauty with jewelry and hair accessories. "Hollywood is very hot right now," explained Ms. Penta.

...Looking further ahead to spring 1999, teen color cosmetics will move toward lighter shades such as dusty corals and periwinkle blues, predicted Ms. Penta. "I've seen the fabrics for 1999 prom dresses and the fashions are moving toward softer hues with a lot of ethnic overtones."

A Renaissance of Sorts

...With three brands that target girls from as young as four all the way up to 19, Renaissance Cosmetics, Inc., New York, may offer the broadest array of cosmetics for young consumers. Fetish is for older girls ages 12 to 19, Love's is aimed at girls 9 to 12 and Tinkerbell's target audience is 4 to 9. "The youth market plays a significant role at Renaissance," said Nicholas Longano, group vice president, marketing. "We're committing a lot of advertising dollars behind these brands and we'll cross-promote them with some well-known companies such as Columbia, Paramount and MTV as well as teen magazines."

...Although interest is growing in youth-oriented cosmetics lines, Mr. Longano maintained that mass marketers and drug store chains have done a poor job of attracting and holding on to shoppers. In recent years, he said mass merchandisers and drug stores have lost a third of teen shoppers to alternative stores. The only way to get them back, he reasoned, is to offer them Fetish and other innovative lines.

..."Drug and mass merchandisers haven't catered to teens' needs," he continued. "They don't want a supermarket-type shopping experience. We're trying to create a pleasant atmosphere for them to shop in mass."

...Of course, offering the right products that provide a certain amount of fun and value is an important part of recapturing the teen market. Bath and body care products are a growing segment and Fetish recently introduced an entire line of bath and body care products and body mists. Although he wouldn't divulge 1999 new product plans, Mr. Longano predicted that eye color will be the main focus of new product activity next year in the teen segment. And while nail products will remain popular, Mr. Longano said the category is ready for the next big thing now that a wave of off-beat colors has saturated the market. Also in 1999, the Love's franchise will be expanded beyond the fragrance category.

...For younger girls, the company plans to market Tinkerbell more aggressively in an effort to get retailers and moms to think about the brand year-round. "We're trying to get permanent distribution," explained Mr. Longano. "Right now Tinkerbell is a promotional item that's put on the shelf at Christmas, but the line can generate sales throughout the year." The Tinkerbell line now features up-to-date products such as body glitter roll-ons, body stamps and hair color wands.

New Players in Baby Care

...Long before they're ready for sweet-smelling fragrances or bright-colored body stamps, little girls (and boys for that matter) are pampered with powders, lotions and oils. The baby care market continues to be dominated by Johnson & Johnson and Colgate-Palmolive's Mennen division. For example, in the $42 million baby lotion category, J&J has a 50.8% share, according to data from Information Resources, Inc., while Mennen held a 38.8% share for the 52 weeks ended May 24.

...But these huge shares are not deterring Bath & Body Works or Solar Cosmetic Labs from entering the category. Last month, Bath & Body Works launched Simple Goodness, a toiletries, toy and gift line. The fast-growing retailer also jumped into the girls' cosmetics market with the introduction of Art Stuff, a line of gels, body lotions and fragrances aimed at girls between the ages of 8 and 12.

...Meanwhile, Solar Cosmetic Labs is getting a good response from mass market retailers on the introduction of its No-Ad baby care line. No-Ad Babies is an eight-SKU line that includes shampoo, lotion, cleansing foam bath, baby wash, baby oil, baby oil gel, cornstarch powder and sun block. With the introduction, Solar Cosmetic Labs executives hope to add some life to the category. "It's been a pretty stagnant and stale category," said Bill Kinney, vice president, sales and marketing, Solar Cosmetic Labs. "But with the look of our bottles and packaging, we think we can add some excitement."

...No-Ad Babies will ship Sept. 1. The sun block will retail for $5.69 and all the other products will cost $2.99 each. The products are priced to fit between Johnson & Johnson and private label, according to Mr. Kinney. "The line has received a positive reception from retailers because we offer them margins that are closer to what they're making on private label," said Mr. Kinney. He conceded that some smaller retailers have reservations about devoting already limited shelf space to another baby care line. To overcome these concerns, No-Ad will go into these chains as a free-standing display.

...Mr. Kinney said the No-Ad brand appeals to the consumer who for one reason or another refuses to buy private label products, but who still wants a value alternative to national brands. "That's the customer who has made us successful in sun care."

...These regular users of No-Ad sun care products have encouraged the company to enter other personal care segments-and Solar Cosmetics Labs is happy to oblige them. "People told us they would be receptive to the No-Ad brand in other categories such as hair care, bath products and even home cleaning products," said Mr. Kinney. "We have other things in the works right now and there's a good chance for another launch before the end of the year." Although he would not guarantee it, Mr. Kinney said the hair care segment is probably the most likely segment for No-Ad introduction. But for now, the company's emphasis is on baby care.

..."We don't expect to be a major force right away in baby care, but we're committed to the line," said Mr. Kinney. "We're in it for the long haul."

...And a few years from now, when the members of Generation Y pull out their belly rings and start forming families of their own, Solar Cosmetic Labs and other personal care marketers plan to be ready and waiting with a full array of products.

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