Consumer preference for natural, organic boosts sales growth
Move over nature-inspired products. Consumer demand for products with truly natural ingredients is heating up — fast.
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While products formulated with a high proportion of synthetic ingredients dominate the global natural personal care market — accounting for nearly 75% of the total market share in 2014 — truly natural positioning is gaining importance with consumers, manufacturers and retailers, according to global consulting and research firm Kline & Co.
Sales of the global natural personal care market increased by nearly 10% in 2014, Kline & Co. noted.
Responding to the trend, suppliers have increasingly been reformulating with a higher proportion of truly natural ingredients in their products. They also are becoming more transparent in their communication about the quality level of ingredients, certification and the company’s values.
“These reformulations are the next natural step for companies aiming to establish strong natural concepts with high importance given to the trust between the brand and the consumers. Moving upward in the natural ratings is a great way for natural brands to gain acceptance from a larger consumer base in the mid-to long-term,” said Agnieszka Saintemarie, project manager, consumer products at Kline & Co., when announcing the findings.
Meanwhile, James Russo, Nielsen’s SVP global consumer insights, stated during the recent “The Beauty of Creativity” webinar that natural and organic beauty products have experienced a four-year compound average growth rate of 24%. That’s pretty impressive when you compare it with total U.S. beauty, which posted a four-year compound average growth rate of just 2.7%.
And that this isn’t just a beauty dynamic — it’s a consumer dynamic that is playing out across all categories.
Further underscoring the point, Target executives stated during the company’s fourth-quarter conference call in February that nearly every household that shops at Target buys natural and organic products, and more than half of them indicate that they’d prefer to purchase natural and organic products when available. While overall sales in the natural and organic space are rapidly growing, Target executives said that in-store sales of such products are growing even faster — outpacing the industry by 50% in 2014.
Executives said that its “Made to Matter — Handpicked by Target” collection of natural, organic and sustainable brands remains one of the greatest examples of Target’s focus on wellness. In 2014, sales of the brands within the Made to Matter collection grew twice as fast at Target compared with elsewhere in the market, according to executives. Looking to 2015, Target will unveil a refreshed “Made to Matter — Handpicked by Target” collection, which will double in size compared with last year to offer more than 200 new and exclusive products from 31 brands.
While natural and organic products are often pricier, consumers are proving they are willing to invest, according to Kline & Co. — if the products deliver effective results.
Beauty trips to mass channels increase
Beauty. It’s a $48 billion mega category that is battling only moderate growth — especially within the mass channel — because of a shift in consumer attitudes, increased competition and a lack of effective advertising. The question then becomes, “How can suppliers overcome such challenges and break through the clutter?”
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While the scale remains within the mass market, coming in at about $22.1 billion, sales growth was relatively flat at 0.4% for the 52 weeks ended Jan. 5. Meanwhile, prestige and department beauty sales, which total only $11.2 billion, climbed 3.4% during that period, according to Nielsen during its recent webinar, “The Beauty of Creativity.”
Looking to take a deeper dive to better understand the mass channel, Nielsen examined shopper beauty trips and found that consumers are taking less trips to stores — a dynamic playing out across the CPG landscape for such reasons as online growth.
“But what I don’t want to dismiss here is the growth that we are seeing within mass [merchandisers] and grocery — the two mainstream mass channels that are actually showing growth in shopper trips for beauty, which represents a very significant opportunity for retailers in that space, who are trying to drive growth in to store and increase transaction size,” James Russo, SVP global consumer insights at Nielsen, told webinar attendees.
The good news is that, according to Russo, there are steps that suppliers can take to help reverse the slowdown.
- Align to the larger consumer trends of health-and-wellness, multicultural and men to drive sales growth. “Health-and-wellness … does matter within beauty. Sometimes you don’t think it does, but it does. Multicultural consumers, specifically Hispanic consumers, you need to win with Hispanics. … And the importance of men — that men are becoming increasingly focused on beauty,” Russo said
- Reverse industrywide underperforming ad effectiveness by developing ads that have a strong storyline and appeal to key sub-demographics. “Do not treat all millennials the same, … female empowerment being a role. This is a roadmap to creativity to address this sea of sameness,” Russo said.
- Shift online campaigns to those generating higher brand lift, which are search and entertainment sites. “When you think about your online play, … where are we getting the greatest bang for our buck? … It’s in areas such as search and entertainment, which are generating the highest lifts and are also reaching very important consumer segments,” Russo said.
- Breakthrough on shelf with package designs and terminology, which not only resonate with consumers but generate strong sales. “This is a balance strategy of in-store and online. When we talk about in-store we want to make sure that our packaging communicates the personality that is important not only to the brand but is important to consumers,” Russo told webinar attendees.
Cosmetics see shift in market performance
For the past 52 weeks, cosmetics were a $7.1 billion industry, and the eye, facial and lip subcategories accounted for $4.7 billion of those sales. Within the drug store channel alone, cosmetics experienced $2.7 billion in sales, and the eye, face and lip subcategories saw $1.8 billion. DSN has partnered with Competitive Promotion Report (CPR) and IRI to create a series of exclusive reports, and this article examines the market performance of top brands within those subcategories for the past 27 months. The top four brands overall in the cosmetics category were L’Oréal, Maybelline, CoverGirl and Revlon.
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With $759 million in sales for the drug channel, the eye category experienced the highest dollar sales in cosmetics during the last 27 months. The top two subcategories for sales were mascara and eye liner with $330 million and $245 million, respectively. For the mascara market, Revlon was not a significant player, though Almay performed much better. However, eye liner saw high amounts of sales for all of the four top brands. For eye liners, the Revlon ColorStay and CoverGirl Perfect Point brands decreased the average percentage of discount for the past year compared with the previous year, while L’Oréal Infallible and Maybelline Unstoppable increased the average percentage of discount. CoverGirl Perfect Point Eye Liner remained the most discounted brand of the four, and Revlon ColorStay Eye Liner had the highest share of the eye liner market.
In the cosmetics facial category, the foundations subcategory experienced the highest dollar sales ($362 million) for the past 27 months. In this category, the retail margin percentages remained fairly constant for the past two years, with CoverGirl TruBlend seeing the highest change with a nearly 6% increase. Maybelline Dream Liquid consistently saw the highest retail margin percentages for both years, and L’Oréal True Match had the highest share of the foundation market.
With $245 million, lipsticks had the highest dollar sales by far in the cosmetic lip category. Despite the fact that Revlon’s Super Lustrous and Maybelline’s Color Sensational lipsticks had very similar retail and list prices, Revlon maintained the highest average share of the lipstick market. Maybelline did have a high average retail margin percentage of 45.9% for the two-year period, while Revlon saw a much lower, 35.3%, average retail margin.