Innovation likely to continue brushing up oral care category
Oral hygiene experienced a brushing up in 2007 and emerged as one of the fastest-growing sectors in the U.S. cosmetics and toiletries industries thanks in large part to a strong surge of hot new products. However, 2008 looks to be more challenging for manufacturers as consumers tighten their wallets amid tough economic conditions. Given this, products with added benefits likely will remain key growth drivers.
“The sector, which relies on consumers’ willingness to pay extra for added convenience products, will find a thriftier consumer in 2008 as the U.S. economy continues to struggle,” stated research firm Euromonitor International in its most recent U.S. Oral Hygiene report.
Euromonitor International predicted that consumer expenditure growth in 2008 (in current prices) on personal care will slow to 2 percent—the lowest rate since 2001. This sluggish growth will spell challenges for the oral hygiene segment and manufacturers that hope to grow the segment with premium-priced value-added innovations.
If this proves to be the case, it will be a shift from the growth experienced in 2007. For example, toothpaste, which accounts for more than 35 percent of total sector growth, had its best performance since 2001, according to Euromonitor International. Fueling the growth was, in part, the continued success of Crest Pro-Health, launched in 2006, and Colgate Total’s successful marketing campaign.
Manual brushes with added benefits, such as Colgate’s 360 or Oral B’s Pulsar, which are priced four to six times higher than a generic manual toothbrush, helped drive growth of manual brushes by 2 percent—a category that tends to be flat, the research firm noted.
Furthermore, tooth whiteners experienced a rebound—growing by 10 percent in 2007, after declining by 27 percent between 2003 and 2006—as manufacturers looked to brighten the category with such innovative launches as Listerine Whitening Strips and Aquafresh White Trays.
Manufacturers, however, are hoping to continue the momentum as consumers continue to place value on the cosmetic aspects of proper oral health, such as whiter teeth and controlling bad breath.
For example, Procter & Gamble launched for 2008 its new Crest Whitestrips Daily Whitening Plus Tartar Protection, marking the first time that Crest Whitestrips has gone beyond whitening. The strips promise to protect against daily tartar buildup, whiten and protect from everyday stain buildup.
Earlier this year, Colgate announced that products planned for launch in first quarter 2008 included Colgate Total Advanced Whitening and Colgate Total Advanced Fresh toothpastes, Colgate 360 Degree Deep Clean manual toothbrush and Colgate 360 Degree Sonic Power battery toothbrush.
Dr. Fresh is looking to invigorate the mouthwash category with the launch of Dentyne Ice mouth rinse, which features the same flavors as Dentyne arctic chill and shiver mint chewing gum. The mouthwash is alcohol-free.
Meanwhile, SunTrust Robinson Humphrey analyst William Chappell is optimistic about Chattem’s ACT mouthwash brand, which it snapped up from Johnson & Johnson.
Sales forecast: Oral care 2012
Consumers will look for added-value products
|Total oral care||5,899.70||6,003.5|
“In our opinion, ACT is emerging as the real jewel of the five brands acquired from J&J. Recall, ACT had seen limited advertising and only one product extension in the five years before Chattem acquired it in early 2007,” stated Chappell in a recent research note. “Since the acquisition, Chattem has improved the packaging, added a 33-ounce bottle (expanding the addressable market by 40 percent) and stepped up advertising. As a result, the brand not only has grown in excess of 20 percent over the past year, it also has gained market share, the only brand in the category to do so during that time frame.”
He noted that ACT already has grown from a $40 million brand to a $60 million brand under Chattem’s ownership. He said it is likely ACT could grow to $100 million in the next two to three years.
“Moving to 2009, we expect the company to leverage its strengthened position with retailers to gain additional facings for new product extensions and more favorable shelf space at retail,” Chappell stated.
Skin moisturizers increase cancer risk in mice, according to study
NEW YORK A study by researchers at Rutgers University has found that skin moisturizers given to mice exposed to ultraviolet radiation increases the risk of cancer, according to HealthDay News.
The researchers, who published the study in the Aug. 14 issue of the Journal of Investigative Dermatology, emphasized that the study was done only on mice, and they didn’t know if studies on humans would yield similar results.
The study involved exposing hairless mice to UV radiation for extended periods, which caused skin cancer. After that, they applied four common brands of skin moisturizer on the mice over 17 weeks for five days a week. The mice that received the moisturizers had an increased rate of tumor formation.
Physicians Formula feels economic impact despite positive Q2 results
AZUSA, Calif. Beauty company Physicians Formula posted a second quarter boost of 3.6 percent, but is feeling the impact of the weak economy as sell-through of higher-priced kits were lower than expected. Given this, the company has revised its 2008 full year guidance.
Net sales for the second quarter of 2008 were $22.9 million, an increase of 3.6 percent from $22.1 million for the same period in 2007. Net loss per diluted common share for the second quarter of 2008 was 14 cents on approximately 14.1 million diluted common shares, and included a 3-cent per share non-cash charge for stock-based compensation, net of tax. For the second quarter of 2007, net loss per diluted common share was 4 cents, and included a 2-cent per share non-cash charge for stock-based compensation, net of tax, and 3-cent per share of secondary offering costs, net of tax.
The results for the second quarter of 2008 included a provision for anticipated returns in the second half of the year, especially relating to large kit programs, with an estimated impact on gross margin of $2.9 million. The company attributes the returns in part to increased weakening consumer demand for higher-priced promotional kits.
Stated “Our 2008 promotional strategy focused on higher-priced promotional kits that have worked very well for us in the past,” chief executive officer Ingrid Jackel stated, “Given consumers’ increasing price sensitivity, the sell-through on these higher-priced kits programs this year is lower than anticipated and we are already taking steps to revert to smaller and more traditional promotional events for 2009 which will enable us to minimize promotional returns as we have done historically.”
Having achieved 13.3 percent growth in net sales for the first half of 2008, Jackel stated she is generally satisfied with the business performance. Its three major new product initiatives have contributed to its 8 percent overall market share gain, with the new Mineral Wear extensions “solidifying our ranking despite numerous competitive entries in the mineral makeup category.”
The launch of Organic wear has been well received by the trade and has achieved distribution goals, according to Jackel. As the first complete line of natural cosmetics introduced into mass channels, Organic wear is still in the very beginning stage of the product’s lifecycle requiring continued consumer education in an especially tough environment.
Based on retail sales data provided by ACNielsen, the company’s approximate share of the masstige market, as defined by Physicians Formula, was 8.1 percent for the 52 weeks ended July 12, 2008, or a gain of 8 percent when compared to 7.5 percent for the same period in the prior year. Citing a weaker demand for higher-priced promotional kits, the company is revising its full year 2008 net sales outlook to between $120 million and $123 million, representing an increase between 8 percent and 10 percent over 2007. In addition, due to the aforementioned items, the company is revising its net income per diluted common share of between 52 cents and 57 cents based on 14.9 million diluted common shares, which included an 11-cent per diluted common share non-cash charge for stock based compensation, net of tax. Net income per diluted common share was 60 cents in 2007, which included a 13-cent per diluted common share non-cash charge for stock-based compensation, net of tax. The company’s previous 2008 outlook estimated net sales to be in the range of $123 million and $125 million and net income per diluted common share to be in the range of 65 cents and 69 cents, based on 14.9 million diluted common shares.