Private label – a league of its own

Private label is going beyond traditional products to offer the consumer a complete retail experience. Emma Reinhold looks at who is getting it right

In a world where value has become a key factor in any beauty purchase, private label is enjoying an enviable position. For the last few years the sector has upped the ante with product development, producing an increasingly sophisticated offer that caters beyond the traditional bath and body remit and in many cases rivals branded products.

“Private label is developing quite rapidly and its perception is changing,” notes Irina Barbalova, industry manager, beauty & personal care, Euromonitor International. “Some products are being compared to branded alternatives and certain media are coming up with direct comparisons with branded products. The main aim is to sell own brands as brands on their own.”

“There is a lot of confidence out there despite all the doom and gloom, particularly with high end skin and hair care,” adds Peter Kelly, commercial director at UK-based contract manufacturer Orean. “We are seeing tremendous export success at the moment with demand in the US for niche brands and with prestige retail chains in Europe.”

However the impact of the recession has not left the market free from reminders of the financial past. Kelly tells SPC that although confidence is returning both manufacturers and suppliers are still wary.

“We live in a risk averse world and over the last two years there has been a tightening up of credit terms and the world of pro forma,” he explains. “It’s still not unusual for manufacturers to ask for pro forma terms and for suppliers to ask us for this too.”

Consumers may be responding positively to private label’s potential yet the market still remains marginal compared to branded beauty products.

According to preliminary estimates from Euromonitor the global beauty and personal care private label market actually slowed in 2010, growing 5.7% to reach US$9.15bn. Growth in 2009 was put at 8.4% (US$8.66bn). Furthermore the global private label market represented just 2.5% of the overall beauty market in 2010, according to the analyst.

Despite its relatively low penetration globally there was a marked growth in a number of product sub-sectors and geographical regions, highlighting potential for future product development. Euromonitor’s figures show the global colour cosmetics market saw a 10.1% leap in sales for the same period, reaching US$565.9m, although market share remained the same as in 2009 at a tiny 1.2%. Men’s grooming also posted impressive gains, growing 9.9% to US$849.6m, while skin care, which has seen significant gains in product development grew 8.5% to US$2.09bn. Sun care too has made positive inroads into the global beauty market and now represents 5.4% of the overall sun care market.

Germany, which historically has a strong association with the private label market, posted double-digit growth of 10%, reaching US$2.25bn and a 12.8% share of the market. Similarly penetration was strong in Spain, reaching 9.9% of the overall beauty market, a growth in sales of 13.5% to US$1.01bn. However both figures are down on the previous year.

“Germany and Spain have been hit hard by the recession and there are high levels of unemployment so consumers are trading down to cheaper products such as private label,” explains Barbalova.

The UK also saw a considerable jump in growth, up 4% in 2010 from 0.7% in 2009. The UK’s private label now accounts for 9.9% of the total beauty market.

Sophisticated skin care

Strong product development activity from UK retailers such as Superdrug and Boots has helped boost private label sales in the country. “Superdrug in particular has made really big advances in private label with its budget colour line and apple stem cell skin care,” points out Barbalova.

The skin care line in question is Superdrug’s Optimum Swiss Apple stem cell range. The retailer initially launched an Overnight Renewal Serum containing Mibelle’s PhytoCellTech Malus Domestica, an active ingredient derived from the Uttwiler Spätlauber apple, and has now added a day cream, said to help reduce the appearance of lines and wrinkles, whilst protecting the skin against UV damage. Both products retail at £14.99 which is a fraction of the price of other branded products containing the same ingredient.

“Price is more important than ever so we are looking to bring innovation to the market but at an accessible price,” explains Superdrug category manager for own brand, Andrew Groom.

Stem cells have also been a focus for contract manufacturer CoValence, which has used apple stem cells in its new Lavish Lash and Brow Peptide Serum. The serum is claimed to thicken, lengthen, condition and darken eyelashes and brows, increasing length and thickness by 25% in two weeks. In addition to the Malus domestica (apple) fruit extract, the formula contains Myristoyl pentapeptide-17 to help stimulate keratin genes, promoting thicker and longer lash growth; and Tricholastyl, an anti-hair loss active.

And Boots has reformulated its Protect & Perfect and Protect & Perfect Intense day creams to include its five star rated UVA protection and SPF15. The retailer claims the products are the first skin care products to contain such a high level of UV protection in a daily moisturiser.

“Retailers are asking suppliers for innovation and new product concepts so they can expand their assortment,” says Brian Sharoff, president of the Private Label Manufacturers Association (PLMA). “Almost all major retailers have developed and refined excellent private label programmes.”

However using innovative ingredients is not enough, according to Barbalova. “Private label brands will come under pressure to prove the efficacy of their products, just as brands have had to,” she explains.

Value for money

One way retailers are adding a point of difference to their private label offer is through in-store innovation and a number of retailers have invested in creating animation at the point of sale.

“Connecting with the consumer is key,” says Barbalova. “Retailers are adopting an experience approach, reaching out to the consumer and exploring new channels.”

Supermarket giant Tesco has increased its beauty offer with the introduction of beauty salons at six of its stores. The walk-in salons offer hairdressing, waxing, manicures and eyebrow threading services with no appointment needed. Prices range from £10 for a leg wax to £20 for a cut and blow dry. Tesco says: “We know beauty treatments are very popular with many people these days and we feel the convenience of great value and quality services from manicures to full waxing and styling could be a success with customers. We are only at the testing stage currently and are keen to understand how our customers receive the service in store.”

Similarly Carrefour launched a new beauty concept at two of its hypermarkets in France. The dedicated beauty areas mix own brand products with brand names and also feature a t10 hairstyling service.

Superdrug has teamed up with celebrity nail technician Andrea Fulerton to launch an in-store nail bar that offers a range of manicure services and treatments using the duo’s recently launched Andrea Fulerton Nail Boutique products.

Social media is another area where retailers are adding value to their private label ranges. Sephora has launched an App which consumers can use to view and buy products, view past purchases, share information and reviews with fellow shoppers and scan product barcodes for additional product information and tutorials.

The retailer has also explored the non-store retail avenue, selling through Amazon in the US and putting products into vending machines on the Paris Metro.

Waitrose is also launching a social media campaign, which will include a Facebook App and a Waitrose Facebook fan page.

Eyeing new opportunity

While naturals and organics were the buzzwords of private label a few years ago, the market has slowed down with the effects of the recession.

There was a slowdown in sales in 2009, notes Barbalova, but the market is picking up again. She highlights the problem with certification in this area as a potential stumbling block for further growth however.

“The challenge meeting this sector now is certification. Whole Foods and Sephora now provide their own internal labels to show what is natural, whatever that means.”

Kelly believes the market is moving on from naturals into more niche areas of sustainability. “The market has gone from organic and natural to something uber select with fair trade. Fair trade can cause supply issues for some very niche ingredients but the marketing story and the reward benefit for the brand and the grower is great,” he explains.

Fragrance is another area where private label manufacturers are seeing demand, according to Kelly. French contract manufacturer Maesa worked with retailer AM.PM. to create a new range of home fragrances. The premium products include a candle, room spray and diffuser available in four different scents.

Colour cosmetics have also been an area of considerable launch activity for private label. Topshop continues to launch limited edition seasonal collections, in addition to its core line, and these now have waiting lists for products. Accessorize meanwhile made a move into colour, launching five themed colour lines. And budget clothing line Peacock’s made its debut into colour with Evie Glam.

Private label has shown it’s no longer the poor relation to branded beauty products and with more opportunities than ever to grow its market share, the sector must continue to innovate and stay responsive to consumers, according to Sharoff.

“Private label has tremendous opportunities in the years ahead in China and Asia and in more mature markets. Research has shown that consumer shopping behaviour will not retreat back to higher priced A-brands as recovery sets in,” he explains.

The opportunity is out there so the sector should be taking advantage.