A Strategic Point Of View

The Hunt for White Space

By Colin Hession, Colin Hession Consulting | July 8, 2010

We touched on the idea of so-called “white space” back in May (see Happi, May 2010), when discussing the growth aspirations of L’Oréal. By white space, we mean areas where a manufacturer is under represented or not present at all. This month, we thought it might be interesting to extend the analysis to cover some of the other heavy hitters in cosmetics and toiletries, and add some tentative speculation as to where they might go next.

The concept of white space can be segmented by product category or by geography. Both approaches can be of interest strategically because they can provide a heads-up as to where companies are likely to look for growth and, by the same token, where others can expect more competition. For this exercise, we will focus on white space by category, and leave a geographical perspective for another day.

So, what tentative speculation can be made from our table?

P&G: Not much white space left in the largest categories, the company is covering most of the bases already, although sun and baby could offer new growth opportunities, albeit both have drawbacks. Sun can be a nightmare in terms of seasonality and trade take-backs, while baby needs lots of reputation and trust with Mums—something that takes considerable time and money.

Deodorants, on the other hand, are somewhat more straightforward and could offer P&G serious growth potential. The company knows the category well, but has failed to establish Secret internationally in the woman's sector, and has yet to drive Gillette hard in terms of deo share.

Depilatories, though a small category, could offer a relatively clear run, with perhaps softer(?) competition in the form of incumbents, Reckitt Benckiser and Church & Dwight. Given the category’s need for ease of use, and less risk (of ending up with red, blotchy legs) depilatories could also offer potential for a classic P&G problem/solution approach.

L’Oréal: As discussed in May, the company is already tackling Unilever’s global leadership in deodorants head on, with both Garnier and Men Expert. L’Oréal could also extend its domestic expertise in personal wash, to take on Unilever in bath and shower internationally, although margin would be a potential problem.

Baby could be another area, although it would probably need a better name than Mixa Bebe, the curious one L’Oréal uses in its domestic market.

Unilever: Will it go back into hair color? These things tend to go in cycles, and Unilever once competed with brands such as Harmony. Although it would risk a bloody nose by stepping in between L'Oréal and P&G, margins are good and Unilever need something to lift its flagging hair care business. Now with Toni and Guy to provide professional know-how, it's surely a possibility.

Colgate: It’s not easy to see where Colgate could go in terms of white space, given that its Palmolive name is unlikely to be able to command the sort of premium necessary to drive further into either skin care or hair care. Acquisition, maybe?

J&J: Increasingly doing good things in personal wash, as an adjunct to its strong position in skin care, under the powerful J&J name itself—an obvious candidate for more of the same. Oral care fits J&J’s medical heritage, but will the company want to take Colgate and GSK head-on by extending Reach? While hair care seems a far cry, J&J has been experimenting with both Neutrogena and Aveeno in the U.S.—so never say never.

Beiersdorf: Although the company has done interesting things with Nivea hair care in European markets, signs are that Beiersdorf is going to concentrate on its core categories of skin, sun, baby and deo.

Henkel: Hair care and hair color seem obvious choices for international growth, given its European success in these categories. But the battle in the North American hair care category amounts to nuclear war, as it does in U.S. skin care. And Right Guard deos don’t seem to be setting the world on fire, so all in all, some difficult choices ahead.

European Salon Consolidation

Is consolidation coming to European hair salons?

The European professional hair care scene has far fewer salon chains than in North America. Add to this some of the woes of the past couple of years—less frequent salon visits, less expensive services per visit, more do-it-yourself hair coloring at home—and the sector seems ready for a dose of consolidation.

So it was interesting to see recently the Dessange salon chain in France acquired by French OFI Private Equity Capital. The strategic point to note is that although not large by U.S. standards, with sales of €53 million in 2009 and a brand franchising deal with L'Oréal, the Dessange chain could become a leading player in Europe, where few hairdresser names are known beyond their own national borders.

Another chain to watch is Germany's Essanelle (see Happi, May 2010). Although it has suffered by having some salons embedded within loss-making department stores Herti & Kardstadt, the chain is prudently managed and well poised to swallow up some of their smaller, less fortunate competitors.

P&G Distributes Serum 7

Much has been made by some European retail commentators concerning Boots recent agreement with P&G. Under terms of the agreement, P&G will distribute Boots new Serum 7 skin care range in pharmacies in Italy and Spain. Opinion seems to be that from Boots’ point of view, it is a clever move and shows Boots’ determination to develop its branded side, while capitalizing on the pharmacy chain’s improving bottom line, etc.—all of which is true, of course, but our attention has been more drawn to P&G’s side of the deal.

Why distribute someone else’s brand, when you’ve got lines of your own still waiting for a home? Family first, surely? What about DDF, for example, the dermatology brand which P&G acquired three years ago and which seemed ripe for expansion into the European pharmacy channel…or indeed Olay Professional? At first sight, perhaps, it doesn’t seem a very joined up approach.

Walmart vs. Tesco: No Contest

Leading Retailers’ 2009 Results
(Europe vs. U.S.)
CountryChainSales (€)EBIT (€)
Holland Ahold28bn1.3bn

Source: Lebensmittel Zeitung
Any comparison between international retailers is inevitably fraught with methodological difficulties. Often one finds oneself comparing apples and pears, what with diverse balance-sheet rules, exchange rates and diverging businessyears.

So it is particularly interesting to see the table below from the leading German grocery trade journal, Lebensmittel Zeitung.

Two things stand out from the most cursory of glances:
1. In terms of comparing Walmart versus Tesco, it's still no contest. Walmart is just “soooooooo” big.
2. But comparing Tesco versus its German and French rivals, the UK retailer evidently knows a thing or two about running profitable stores.

Colin Hession is managing director of Colin Hession Consulting, a specialist consultancy that focuses exclusively on personal care in Europe, in terms of commercial and marketing development.

Tel: +44-1202-710377
Fax: +44-1202-710399
web site www.hessioncosmetics.com