Sector Insight Facial skincare: Face value

An ageing population and the rise of 'mass prestige' products are driving the value of facial skincare. THE BACKGROUND - Today's consumer will go to extraordinary lengths to eliminate the natural signs of ageing from their face, blitzing laughter lines and laying siege to crow's feet with an ever-growing arsenal of facial skincare products. Analysts have described the Botox party as the Tupperware party of the 21st century. This, combined with an ageing and increasingly affluent population, means that the skincare sector is growing apace, but consumers are demanding both greater convenience - such as disposable cleansing wipes - and tangible breakthroughs in performance.

UK consumers will spend £531m on facial skincare this year, a 37% rise in real terms since 1999, according to Mintel. By 2009, that is forecast to reach £666m.

Fuelling demand is an ageing population. From 1999 to 2008, the proportion of 55- to 63-year-olds in the UK population will rise from 10.2% to 12.1%.

There are also increasing numbers of working women with more money to spend on their appearance. Facial skincare products form an important part of the quest to look younger, however it may be achieved.

The market has changed over the past decade. In the 90s, it was mostly categorised into moisturisers, cleansers and toners, but it is now fragmented into specialist targeted products, and manufacturers are raising their NPD efforts. L'Oreal, for example, invests 3% of its turnover in R&D - £480m in 2003.

Katey Korzenietz, assistant brand manager for Beiersdorf-owned Nivea Visage, observes: 'Women are ever-more demanding of performance; manufacturers are responding with ever-more sophisticated new products.'

L'Oreal, which alongside Boots and Procter & Gamble leads the category with an 18% value share, exemplifies the extensive ranges on the market.

Its stable includes the premium brands Helena Rubinstein and Lancome, as well as the pharmacy-only brand Vichy. L'Oreal Paris Dermo-Expertise is positioned at the premium end of the mass market, with five ranges targeting different age groups. According to IRI, this is the UK's fastest-growing skincare range. L'Oreal also has the Garnier Skin Naturals line, which has a more natural positioning.

Boots, the biggest retailer of own-label skincare, has an expansive range, with No.7, No.7 Positive Action and 17 at the premium end of the mass market, and mainstream products including Botanics, Natural Collection and the anti-ageing Time Delay range. Under pressure from the supermarkets, Boots grew its share of facial skincare products from 34% in 2001 to 35% in 2003.

Age management

The biggest growth has been in 'age management' products, which IRI says grew by 22% in the past year, compared with 7.4% for facial beauty products.

Nearly a third of all facial skincare products sold now have an age management function. Creams such as L'Oreal Paris Wrinkle De-Crease and P&G's Olay Regenerist are leading players, and Nivea Visage is also very active, with its Age Management range, including Beauty Boost for early signs of ageing and Q10 Plus for specific anti-wrinkle care.

The demand for highly functional products is blurring the lines between premium products such as Clarins and mass-market brands such as Olay.

Mintel analyst Maria Elustondo points to the emergence of a 'premium mass' niche. 'Before, you could buy a basic product for £5 or a premium for £40 and there was nothing between. Now mass brands are bridging that gap and getting women to trade up.' Olay Regenerist Serum is an example, priced in line with Clinique. With consumers better informed about functionality, 'self-select' premium-mass products can succeed.

However, premium brands are growing faster, at 14%, compared with 8% for mass lines. Says Elustondo: 'They're at the forefront of NPD and technology, and use that to justify higher prices.' Premium brands also bridge a gap, between consumer and salon products.

Performance lines such as Estee Lauder's Idealist Micro-D Deep Thermal Refinisher is an example, while Lancaster 365 Cellular Elixir Pure Intelligent Scrum claims to 'repair' the skin's DNA.

Such products are known as 'cosmeceuticals', positioned as alternatives to cosmetic treatments. But it's not just for the dearest brands: Nivea Visage Age Reversal Intense Rejuvenating Cream uses Vitamin C that is claimed to enhance 'collagen synthesis and iron metabolism'. As Korzenietz observes: 'Women want cosmetic surgery-like results, but don't want to go under the knife.'

Meanwhile, demand for traditional cleansers has fallen, while disposable wipes are surging ahead. In facial skincare they have rocketed from £8m in 1999 to £93m in 2004. Variants include two-in-one exfoliating/cleansing wipes and anti-ageing wipes. Sales of cleansers fell 8% over the same period and astringents, toners and fresheners plummeted by 36%. Nivea Visage, with wipes for normal/combination and dry/sensitive skin, is market leader.

Gels and mousses up

The drive for convenience and demand from younger women are boosting cleansing gels and mousses. Products include Lancome's LCM line, launched in 2003, and a cleansing mousse in the L'Oreal Paris Dermo-Expertise Visible Results moisturiser line. Mintel estimates that the gel and mousse segment will double in value by 2009 to £26m.

Although facial skincare products are booming, women are realistic about the role they play. In Mintel's survey, 65% of women regard drinking water and 54% a good diet as better for the skin than any skincare product, and 22% are sceptical of brands' scientific claims. As Elustondo says: 'Women aren't under any illusion that skincare products are enough on their own - they see them as a little extra help.'

MANUFACTURERS' SHARES OF UK MASS-MARKET FACIAL SKINCARE SECTOR

(ESTIMATED)

Manufacturer Brands 2003 2001 %

pounds m % pounds m % chnge

Boots Include No7, 17, 64 18 61 19 4.9

Ntural Collection,

Botanics

P&G Olay, Clearasil 64 18 58 18 10.3

L'Oreal Plenitude,

Synergie, Vichy 64 18 56 17 14.3

Avon Pure Care,

Solution, Anew 46 13 42 13 9.6

Beiersdorf Nivea Visage 28 8 24 7 16.7

Accantia Simple 21 6 19 6 10.5

J&J pH5.5, Neutrogena 14 4 13 4 7.7

Others* n/a 55 15 56 17 -1.8

Total n/a 356 100 329 100 8.2

Source: Mintel *including The Body Shop, Marks & Spencer, Ponds, etc

MANUFACTURERS' SHARES OF UK PREMIUM FACIAL SKINCARE SECTOR (ESTIMATED)

Manufacturer Brands 2003 2001 %

pounds m % pounds m % chnge

Lauder Group Estee Lauder, 54 35 47 35 14.9

Clinique Origins,

Prescriptives

Clarins Clarins 32 21 28 21 14.3

L'Oreal Lancome, Rubinstein 23 15 21 16 9.5

Elizabeth

Arden Elizabeth Arden 20 13 18 13 11.1

Others* 24 16 20 15 20.0

Total 153 100 134 100 14.2

Source: Mintel *including Lancaster, Dior, Guerlain, Givenchy, Chanel,

Shiseido

ADVERTISING EXPENDITURE ON FACIAL SKINCARE BY BRAND, 2003

Brand pounds m %

1 Olay 16.5 23.8

2 L'Oreal Paris Dermo-Expertise 10.8 15.6

3 Nivea 10.2 14.7

4 Synergie 6.3 9.1

5 RoC 5.4 7.8

6 Neutrogena 4.9 7.1

7 Clinique 1.6 2.3

8 Lancome 1.4 2.0

Total top eight 57.1 82.5

Others 12.1 17.5

Total 69.2 100

Source: Nielsen Media Research/Mintel

ANALYST COMMENT Rachel Fawcett, Account manager, TNS Care

Age defiance is one of the most important trends in skincare. Some 2.6m British women use products to slow the signs of ageing - an increase of 167,000 since 2001.

It starts at an early age. While older women want to slow down the signs of ageing, young teenage girls cannot wait to look older. Indeed, British teenage girls' use of make-up drives their use of other skincare products, and makes an interesting comparison with the rest of Europe.

Some 70% of British teenage girls wear make-up, beginning earlier than girls in France, Germany, Spain or Italy. In Spain, 38% of teenage girls wear make-up. French girls are more involved in the care of their skin, with 42% using medicated cleansers, compared with 15% of British girls.

The British market is driven by make-up, while French girls are taught to invest in their skin.

The contrast continues with age. Women in France are more aware of their skin type and the need for a skincare routine. Some 35% of women in France aged 55-64 see wrinkles as a problem, compared with 16% of British women of the same age. However, driven by increased choice and advertising, British women are using more anti-ageing products.

Consumption of anti-ageing products remains steady across the ages of 25-74. Washes, scrubs and cleansers decline from the age of 25-34, while night cream use increases to a peak in the 55-64 age group.

Although the hands always betray age earlier, British women become involved in anti-ageing skincare for the face first. Possibly this is linked to the huge teenage market for make-up in Britain. Women derive confidence from their appearance and this is where the investment of time and money is placed.

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