Private label and cheaper brands win out as recession bites

A total of 81 per cent of UK consumers are trading down to cheaper products and reducing spend on premium products, according to the Datamonitor Recession and Recovery May 2008 survery.

“The notion of affordable luxuries when it comes to personal care products has the firm emphasis on affordable, in this recession at least,”​ said Siddika Jaffer, director for consulting for EMEA Consumer Markets, Datamonitor.

Downturn totally changing consumer spending​

That consumers are making the switch to cheaper products has been well documented, but the fact that such a high percentage of consumers are making the switch reflects what a massive impact the downturn is having on spending power.

The survey also revealed that 82 per cent of consumers are cutting back on treats or pampering products, an area that has shown considerable growth for cosmetics players in recent years, while 18 per cent have cut out pampering totally.

Reflecting the hard times that premium fragrance and cosmetics players such as Estee Lauder, Revlon, Parlux and Inter Parfum are having right now, the survey also showed that only 2 per cent of consumers said they intended to increase spend in this category.

Cutting back on mass market brands​

But it is not only the premium end that is being hit, survey respondents said that they are also cutting back on big mass market brands and switching to private label in order to save extra money.

The survey specifically enquired about L’Oreal products, asking UK consumers if their spending patterns on this particular brand had been affected by the economic crisis.

The results revealed that 12.5 percent of respondents who used L’Oreal products said they have substituted the brand for private label, whereas 8.7 percent were switching spend according to the best offers from other brand suppliers.

Shift towards discount retailers​

Branded cosmetic players are also being hit by a consumer shift from supermarkets and hypermarkets to discount retailers as their main choice of shopping channel, with 25 per cent stating that they intended to switch to discounters.

This switch towards discounters is also reflected in the switch to private label cosmetics, with 14 per cent saying they would be willing to make the change in line with their change of shopping channel.

Although branded personal care players have been managing to hold on to market share by providing significant discounts, Siddika points out that the future of the UK personal care landscape depends on how long they can sustain these discounts and whether or not the swing towards discount retailers continues apace.