Unilever and L’Oréal both posted double-digit growth in their recent financial results, putting them in the top tier of beauty and personal care performers. Estée Lauder was slightly below at 6 percent, whilst P&G reported negative growth of minus 2 percent.
Euromonitor data for 2012 also suggests that L’Oreal and Unilever have recorded a better performance than that of P&G in terms of market share.
Obviously L’Oréal and Unilever are both in different categories, with the former being a beauty and cosmetics manufacturer, whilst the latter, like P&G, is more of a personal care player.
Manufacturers of beauty and personal care are gradually developing their own unique methods of operations. For example, L’Oréal stated that it intends to expand in deodorants, but the growth has been limited. On the other hand, Unilever made a conscious decision to divest its beauty to Coty.
“The emergence of unique operating methods leads us to believe that we will be seeing more and more clear distinction between these two types of players. Manufacturers need to develop a clearly defined market segment in the industry to help drive strong growth,” states Oru Mohiuddin, Senior Company Analyst at Euromonitor.
“P&G, however, is an anomaly in the industry, as it is present in beauty and personal care as well as in home care. It can be said that P&G’s resources for innovation in the beauty categories is more diluted than its competitors. This, no doubt, is contributing to P&G’s recent trends and results.”
Margins and investment
According to Mohiuddin, the top performers have been proactive in determining market opportunities, but it is becoming increasingly clear that different manufacturers aim for different types of opportunities.
Manufacturers with a more concentrated beauty presence such as L’Oreal and Estee Lauder, tend to focus on cutting edge innovation and development, whilst personal care manufacturers such as Unilever have been seen to pursue growth in wider spread coverage.
Price margin has also had a big role to play, as personal care categories have a lower margin than beauty.
“Consumers are seldom willing to pay a high price for these ranges of products; hence, manufacturers in personal care tend to place a strong focus on price and retail coverage,” continues Mohiuddin. “However, this is not to say we have not witnessed innovation in the personal care category at all.”
Core beauty categories such as skin care, color cosmetics and fragrances, have a higher pricing margin, and consumer demand is driven by product sophistication.
“Manufacturers therefore need to invest in R&D, allowing them to extend category boundaries to help develop more in-depth presence in the market,” adds the Euromonitor expert.