Emily Mayer, IRI11.10.14
It has been a tough few years and the retail industry has borne the brunt of it. Retailers have witnessed more changes in the past couple of years than in the last two decades.
The personal care category has been more heavily impacted since the financial crisis than any other FMCG category with volumes declining in most European countries. A recent report from IRI on personal care showed that overall value sales growth across Europe fell by -0.2% last year to just below 28 billion euros ($35.2 billion at current exchange rates), while volume sales were flat.
To try to re-energize flat volume sales, promotional activity on personal care products are at an all-time high, but it seems that deals are just not exciting consumers enough to drive increased volumes. It’s clear that shopping habits have changed and that consumers remain cautious even as the economic situation starts to improve.
With promotions not working as well as they could do, retailers and manufacturers must rethink their promotional strategies to halt a declining market.
Promotions Are Less Effective
On average every third product in personal care is sold on deal, with levels increasing in most countries, except Spain and the US. Deodorants and sun preps are the most heavily promoted products, with more than 43% volume on deal in Europe and 57% in the US for sun preps. Interestingly, color cosmetics remain the least promoted across all countries.
The UK market still sells the highest volume on deal at over 56%, because retailers see promotions as the most effective weapon to attract shoppers, even though the figures suggest otherwise. In other countries, like Italy and the Netherlands, promotional growth has been more about retailers fighting to protect what sales they have. While in Greece, big brands like Nivea and Dove, have survived the downturn by increasing the level of promotion with more multi-buy deals and deep price cuts. Plus, the rise of e-pharmacies has played a role, offering big discounts, which are popular with cash-strapped customers.
So while manufacturers continue to spend on trade promotions, which are no longer having the desired effect, this means less money in the pot for R&D. On the other hand, promotions are essential to launch new innovations. So how do manufacturers balance the need to innovate and promote, while halting declining sales?
Can Innovation Fuel Growth?
New product innovation is key and one of the key drivers for success in personal care. It is the lifeblood of any category, but in personal care new products that excite consumers drive sales and boost margins for retailers and manufacturers. Across Europe, innovation has enabled retailers and suppliers to raise prices, particularly in France and the UK, as many new ranges are at the premium end of the spectrum. In fact, the industry has been pretty active in developing new products, with more than 1,000 innovations in personal care in France alone last year, including sub brands and new pack sizes.
But innovation must be tempered with caution. Consumers are loyal when it comes to personal care brands, which often evoke emotional responses and retain customers year after year. They are also wary of products they put on their face and inside their body, which is why own label ranges do not fair as well as national brands. In fact, shoppers are more attached to national brands than in any other FMCG category. They are also sensitive to change, especially to products they know and love.
According to our personal care report, while shoppers stay loyal to certain brands, they are also demanding on other ways—they want more convenience with multi-purpose products that offer 2 in 1 or 3 in 1 benefits like moisturizers that offer anti-aging and sun protection properties. They also want more organic cosmetic ranges and those associated with natural ingredients, as well as salon-quality products, like gel nail kits, hair colorants and high-end hair products, they can take home and use.
The challenge for manufacturers and retailers is two-fold. First, how can they keep consumers excited about personal care products they have purchased for many years? Second, how can manufacturers continue to innovate and come up with exciting new products, which is essential to drive growth in this category, while delivering them at affordable prices?
We could start to see more product innovation, rather than deep deals during the rest of this year, which will provide a much-needed boost to the sector. But retailers and manufacturers should also look at developing interesting and promotional initiatives to work in tandem, such as:
· Promotion for smart category management. Given the current trend for facial hair, which has seen sales of male grooming products fall across Europe, use clever marketing on shaving products for gels and foams, but also on items like oils and beard trimmers as the hipster trend for the fuller beard evolves into a more groomed look.
· Promotion events. Retailers need to make the shopping experience more than just a chore, and adopt strategies to get people in-store and excited about what they are buying. In France, for example, high-profile beauty promotion events have boosted sales of skin and hair products with deals responsible for all of the year-on-year sales gain.
· Promotion for market share gain. As price dropped due to strong trade promotion activity, volumes rose in Germany where consumers always look carefully at deals. This is a powerful short-term tactic that can be used for a specific need, such as competing with a new entrant into the market, but in the long-term can harm the brand’s image and lessen the impact of this type of promotion.
The fact is that promotions are here to stay. But to be successful, promotion activity must be innovative and not only focus on price. Countries need to apply caution and avoid trade promotions reaching a point which is too hard to sustain—a point which arguably in the UK we have already reached. Promotions risk eroding the premium value that manufactures have worked so hard to create. Brands must decide whether to remain premium or provide shoppers with lower price options to maintain sales.
In personal care, the strength of the brand is extremely powerful and should not be underestimated. National brands can use this to their advantage to boost sales, while retailers can do more to promote the quality of their private label and change negative perceptions about quality and efficacy.
The long-term future for personal care is not clear, as growth remains fragile and changing shopper behavior is having an effect. Retailers and manufacturers must work together to ensure they follow the formula for growth, as consumers begin to fund more money in their pockets—with meaningful innovation, effective promotions, relevant products and fair pricing.
The personal care category has been more heavily impacted since the financial crisis than any other FMCG category with volumes declining in most European countries. A recent report from IRI on personal care showed that overall value sales growth across Europe fell by -0.2% last year to just below 28 billion euros ($35.2 billion at current exchange rates), while volume sales were flat.
To try to re-energize flat volume sales, promotional activity on personal care products are at an all-time high, but it seems that deals are just not exciting consumers enough to drive increased volumes. It’s clear that shopping habits have changed and that consumers remain cautious even as the economic situation starts to improve.
With promotions not working as well as they could do, retailers and manufacturers must rethink their promotional strategies to halt a declining market.
Promotions Are Less Effective
On average every third product in personal care is sold on deal, with levels increasing in most countries, except Spain and the US. Deodorants and sun preps are the most heavily promoted products, with more than 43% volume on deal in Europe and 57% in the US for sun preps. Interestingly, color cosmetics remain the least promoted across all countries.
The UK market still sells the highest volume on deal at over 56%, because retailers see promotions as the most effective weapon to attract shoppers, even though the figures suggest otherwise. In other countries, like Italy and the Netherlands, promotional growth has been more about retailers fighting to protect what sales they have. While in Greece, big brands like Nivea and Dove, have survived the downturn by increasing the level of promotion with more multi-buy deals and deep price cuts. Plus, the rise of e-pharmacies has played a role, offering big discounts, which are popular with cash-strapped customers.
So while manufacturers continue to spend on trade promotions, which are no longer having the desired effect, this means less money in the pot for R&D. On the other hand, promotions are essential to launch new innovations. So how do manufacturers balance the need to innovate and promote, while halting declining sales?
Can Innovation Fuel Growth?
New product innovation is key and one of the key drivers for success in personal care. It is the lifeblood of any category, but in personal care new products that excite consumers drive sales and boost margins for retailers and manufacturers. Across Europe, innovation has enabled retailers and suppliers to raise prices, particularly in France and the UK, as many new ranges are at the premium end of the spectrum. In fact, the industry has been pretty active in developing new products, with more than 1,000 innovations in personal care in France alone last year, including sub brands and new pack sizes.
But innovation must be tempered with caution. Consumers are loyal when it comes to personal care brands, which often evoke emotional responses and retain customers year after year. They are also wary of products they put on their face and inside their body, which is why own label ranges do not fair as well as national brands. In fact, shoppers are more attached to national brands than in any other FMCG category. They are also sensitive to change, especially to products they know and love.
According to our personal care report, while shoppers stay loyal to certain brands, they are also demanding on other ways—they want more convenience with multi-purpose products that offer 2 in 1 or 3 in 1 benefits like moisturizers that offer anti-aging and sun protection properties. They also want more organic cosmetic ranges and those associated with natural ingredients, as well as salon-quality products, like gel nail kits, hair colorants and high-end hair products, they can take home and use.
The challenge for manufacturers and retailers is two-fold. First, how can they keep consumers excited about personal care products they have purchased for many years? Second, how can manufacturers continue to innovate and come up with exciting new products, which is essential to drive growth in this category, while delivering them at affordable prices?
We could start to see more product innovation, rather than deep deals during the rest of this year, which will provide a much-needed boost to the sector. But retailers and manufacturers should also look at developing interesting and promotional initiatives to work in tandem, such as:
· Promotion for smart category management. Given the current trend for facial hair, which has seen sales of male grooming products fall across Europe, use clever marketing on shaving products for gels and foams, but also on items like oils and beard trimmers as the hipster trend for the fuller beard evolves into a more groomed look.
· Promotion events. Retailers need to make the shopping experience more than just a chore, and adopt strategies to get people in-store and excited about what they are buying. In France, for example, high-profile beauty promotion events have boosted sales of skin and hair products with deals responsible for all of the year-on-year sales gain.
· Promotion for market share gain. As price dropped due to strong trade promotion activity, volumes rose in Germany where consumers always look carefully at deals. This is a powerful short-term tactic that can be used for a specific need, such as competing with a new entrant into the market, but in the long-term can harm the brand’s image and lessen the impact of this type of promotion.
The fact is that promotions are here to stay. But to be successful, promotion activity must be innovative and not only focus on price. Countries need to apply caution and avoid trade promotions reaching a point which is too hard to sustain—a point which arguably in the UK we have already reached. Promotions risk eroding the premium value that manufactures have worked so hard to create. Brands must decide whether to remain premium or provide shoppers with lower price options to maintain sales.
In personal care, the strength of the brand is extremely powerful and should not be underestimated. National brands can use this to their advantage to boost sales, while retailers can do more to promote the quality of their private label and change negative perceptions about quality and efficacy.
The long-term future for personal care is not clear, as growth remains fragile and changing shopper behavior is having an effect. Retailers and manufacturers must work together to ensure they follow the formula for growth, as consumers begin to fund more money in their pockets—with meaningful innovation, effective promotions, relevant products and fair pricing.