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Eye On Innovation

9/1/2010

Sales of store brand skincare products are really taking off. But retailers that dare to be different from the national brands will further enhance sales here.

How does one age gracefully during an economic recession? By switching to store brands, apparently.

According to The Nielsen Co., New York, dollar and unit sales within the $4.8 billion total skincare preparation category fell 1.1 percent and 4.0 percent, respectively, during the 52 weeks ending June 12 (food, drug and mass merchandiser stores, including Walmart). But dollar and unit sales on the private label side grew an impressive 20.1 percent and 12.0 percent, respectively.

The store brand suntan preparation segment benefitted the most from consumers' thriftier shopping habits — growing 46.5 percent and 43.4 percent in dollar and unit sales, although still comprising only 11.9 percent of the segment (dollar share). And store brand face cream and lotions, hand cream and body lotions, and acne remedies also saw strong growth (see table, p. 44).

"Facial Skincare — US," a January 2010 report from Mintel International, points out that consumers are trading down to less-expensive products. In addition, the global market intelligence firm signals out opportunities for store brands in anti-aging products, all-natural items, facial cleansers and fading/ bleaching products, with baby boomers, teens and tweens, and ethnic groups driving growth in these segments.

Don't make lofty medicinal-related claims about skincare products — stick to reasonable claims.

'National brand-plus' approach

Overall demand for store brands is up, especially on the high-end skincare side, says Dennis Gurka, vice president of Calabasas, Calif.-based Garcoa Laboratories. He notes that private label manufacturers now are better able to formulate products to match the national brands' technologies.

"Typically, store brands cost 25 percent less than national brands, so there is an opportunity for consumers to try new items and stick with them, or then occasionally move on to national brands," he says.

Women in the prized 25-to-54 age group are the most interested in and loyal to anti-aging products, Mintel reports. That segment saw dollar sales climb 24.4 percent last year.

And super-premium anti-aging products represent an opportunity for store brand programs, Gurka says. Retailers could tap into this trend by promoting private label pre-packs (pre-packed small display/ counter units) and value-added products as part of a multi-product platform with a sophisticated marketing approach.

"Consumers are asking for results and benefits," he says. "Anti-aging and wrinkle prevention are always an issue. Retailers are meeting shoppers' needs by asking for a 'national brand-plus' approach: providing a benefit from a national brand, plus offering extra ingredients, sizes or an easy-to-use delivery system such as a spray or roll-on applicator."

Gurka notes that in the past, most retailers selected private label manufacturers based solely on price. But he says many of them now are looking for a company able to deliver all of their product, packaging and marketing needs.

Do tap into the trend for premium anti-aging by promoting private label pre-packs and value-added products as part of a multi-product platform with a sophisticated marketing approach.

Unique counts, too

And many retailers also want to differentiate their skincare products from the national brands — not just offer national-brand-equivalent formulations, according to Thomas Nichols, president and CEO, Pretika Corp., Laguna Hills, Calif. Fortunately for them, many of today's private label manufacturers offer unique, professional-quality skincare lines at reasonable price points.

Although the skincare category encompasses an abundance of products, Nichols says increased private label sales rarely cannibalize the national brands because the category is segmented into multiple needs across broad segments and categories.

"We see growth in the professional-quality skincare segment," he says. "National brands never put these products in mass retailers, but professional-quality store brands can be offered to mass and department store shoppers" (and lead to higher product margins).

Retailers also are exploring super-premium medically driven skincare products, says Frank Pena, owner of San-Mar Laboratories, Elmsford, N.Y., which currently is developing sunscreen products with vitamin D for added value.

"In the mass market, store brands' upscale lines have the same ingredients as those found in brands from doctors' offices but not in the same dosages," he says, noting that coenzyme Q10 (a naturally occurring compound, found in every cell in the body and known for its antioxidant properties) is a hot supplement in anti-aging lotions and creams, while its synthetic cousin Idebenone is currently limited to doctors' office products and Elizabeth Arden's Prevage anti-aging treatment.

But the rising number of medical claims coming out of the pharmaceutical and over-the-counter skincare product arena could cause the FDA to crack down on manufacturers, Euromonitor International's "Skincare — US" May 2010 report warns. The global market intelligence firm explains that FDA does not recognize cosmeceuticals as having medicinal or drug-like benefits. For now, manufacturers — and retailers — should limit themselves to making reasonable claims and maintaining a strong safety record to avoid tighter regulations, Euromonitor says.

Consumers also are shopping for affordable natural and/or organic skincare products they can trust, says Kayla Fioravanti, chief formulator and registered aroma therapist for Clackamas, Ore.-based Essential Labs.

"The best way for retailers to fill this need is to private-label their own unique natural and/or organic product lines," she says. "The biggest trends within the natural and organic industry are products for mature skin."

Although private label products tend to lag behind national trends somewhat, retailers should become even more aggressive in the skincare category as a result of the positive momentum from last year's category growth, predicts Karen Young, CEO of The Young Group, a New York and Paris-based marketing company.

"Consumers are demanding efficacy, clinical support for claims, simplicity — they're tired of long, unreadable ingredient lists — green and natural, and brands that talk with them, not at them," Young says, noting that Gen Y and Millennial shoppers don't have the same heart for national brands that previous generations had.

Do consider adding unique natural and/or organic product lines to your store brand lineup particularly formulations for mature skin.

Don't wait for the national brands to act on new consumer trends.

Prescription for success

Poor economic conditions have pushed more consumers into trying store brands, which presents retailers with a tangible opportunity to improve long-term sales. Retailers will have the most success here if they provide skincare products in as many platforms as possible, Gurka says, and promote, upgrade and display their products as unique offerings.

Retailers that fail here often fail to promote their skincare products and explain their benefits, Gurka stresses. Instead, they simply buy a product and put it on the shelf.

And Young points out that brand building takes time, and many retailers are impatient.

"Customers tend to trust the retailers where they shop, so if a store brand item is being promoted they will try it to see if they get any benefits from it," Gurka adds. "However, skincare needs education and promotion. Packaging has to educate consumers about the product, give a product guarantee, provide additional information in its display or header card, or offer an accompanying educational piece."

Moreover, retailers offering premium and super-premium skincare lines, which often carry medically driven claims, could benefit by making cosmeticians available to explain their products' features and benefits, as well as by increasing display space, Gurka says.

Keeping up appearances

On the packaging side, retailers still are debating whether to copy the national brands' exclusive appearance or to present a more minimalistic look with no extraneous packaging materials, Gurka says.

"High-end products are normally packaged in a box, which has a great shelf presence but takes up space on the shelf and later in landfills," he notes.

Packaging certainly is becoming more sophisticated, incorporating such things as airless vacuum technology, either as a marketing gimmick or to protect and support delicate ingredients that are air-and light-sensitive, Young says. She points to metered dosing as another trend that fits the "medical" nature of premium skincare products today.

Many retailers, however, are finding that upgraded packaging is too expensive in today's economy, Pena notes. "There just aren't many product re-launches today," he says. "Everyone is watching their nickels and dimes."

But other retailers are at least noting on the package which national brand formulation a store brand product matches, Nichols says, which is reassuring to first-time private label buyers seeking a national-brand-equivalent product.

For now, few food, drug and mass retailers' products stand out in the private label skincare category, Young says, because they have been hesitant to flex their creative muscle in terms of formulation.

"They are just copying national brands that have good sales track records, but I believe this will change," she says.

Woonsocket, R.I.-based CVS Corp., Pena notes, is known for having one of the strongest private label skincare programs around because it builds its own brands and is always looking for new technologies for them. That strategy allows the retailer to compete with expensive high-end national lines.

In the future, retailers will need to get ahead of the trends instead of copying and following, Young emphasizes.

"Given cutbacks and consolidations in the past several years, this will be challenging," she says.

Top 5 Markets for Store Brand Moisturizer

  1. Memphis, Tenn./Mississippi/Arkansas Metro
  2. Virginia Beach, Norfolk, Newport News, Va./North Carolina Metro
  3. Buffalo, Niagra Fall, N.Y., Metro
  4. Baton Rouge, La., Metro
  5. Cleveland, Elyria, Mentor, Ohio, Metro

Regions with the largest percentage of people with a tendency to buy store brand tomato paste/tomato sauce, reported by Core Based Statistical Areas (CBSA) defined by the U.S. Office of Management and Budget.

Source: Buxton Co., Fort Worth, Texas.

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