Consumer Products Set to Rebound Next Year

2009-11-19 | 10:15

Kline analyst expects innovative companies will succeed.

With the U.S. GDP growing 3.5% in the third quarter, economy recovery is on the way for consumer products companies, according to Carrie Mellage, director, consumer products, Kline & Co. However, the gains won't come without pain.

Ms. Mellage noted that in recent months there have been store closings (including C.O. Bigelow, Crabtree & Evelyn and Ann Taylor), companies going out of business (Linens ‘N Things, Fortunoff and Illuminations) and, of course, discontinued brands (Max Factor has been pulled in the U.S. and Prescriptives is no more).

Still, there are signs of growth. Sales of natural personal care products in the U.S. have grown by about 8% in 2009, down from 15.3% in 2008, but still well ahead of the overall market. Consumer interest in naturals transcends national boundaries.

In the BRIC countries, the growth in naturals has been spectacular, with each market adopting its own unique perspective on this trend, according to Ms. Mellage. In Brazil, the naturals movement is about biodiversity and the rainforest connection; in Russia, the emphasis is on Siberian earth minerals; India’s surge is based on traditional Ayurvedic principles; and China’s long heritage of herbal medicine serves as a foundation in this high-growth market.

Meanwhile, value brands and value channels have weathered the storm quite well, albeit at the expense of luxury brands and retailers, as consumers look to cut costs at every opportunity. Perhaps the biggest indicator of this trend has been the incredible surge in sales of private-label products. In many product categories, private-label products registered double-digit gains—as much as 30% in laundry detergents and liquid soaps—while the product categories as a whole barely treaded water or even lost steam.

But to keep consumers' attention, marketers must remain focused on innovation, according to Ms. Mellage.

By invigorating the market with new formulations, novel delivery systems, and updated packaging, branded companies can differentiate themselves against the private-label surge. It may seem tempting to pull back brand support to trim costs, but marketers must continually re-invest to maintain a competitive edge and stave off pressure from private-label competitors.

At the same time, savvy marketers are using social media like YouTube to reach consumers in a totally new way. For example, Lancôme posted tutorials on how to use its new vibrating brush mascara, while Gillette introduced its provocative video "How to Shave Your..." on the site.

More info: www.klinegroup.com