The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.Learn More
There are many ways companies in the beauty and personal care industry compete strategically. Three examples are the growing number of sustainability growth initiatives, tackling challenges on the horizon and uneven competitive landscapes. A host of technological, environmental and economic changes are driving demand for more naturally derived ingredients, as well as adding multiple new angles to this still undefined category of green beauty.
Some major challenges industry players are facing include the rapid rise of local competition in the most attractive growth markets and the increasing number of disruptors with alternative business models. Internal challenges lie with the complexities of integrating large-scale new assets and finding the right balance between brand repositioning along major trends versus launching brand new labels. Lastly, one of the defining challenges in recent years has been the increasing competition international players and heritage brands face from local and regional companies, niche labels and alternative business concepts.
The complexity of the competitive landscape and the wide range of strategies, strengths and weaknesses of the industry participants makes global beauty a vibrant market environment. One of the defining challenges in recent years has been the increasing competition that international players and heritage brands face from local and regional companies, niche, alternative business concepts and startups. Most significantly, South Korean beauty players have stepped up to the global stage; both AmorePacific Corp and LG Household and Health became top 20 global players between 2011 and 2016. They have benefited from consumers’ appetite for the rich innovation pipeline they are able to sustain and make relevant to a global audience, exporting longer beauty routines and driving more frequent product usage.
A range of new beauty concepts are also challenging the competitive status quo. Technological advancements enable more direct to consumer brands to reach their target audience via subscription boxes, social selling models or beauty-communities-turned-online marketplaces. Direct selling remains the largest non-store retail channel in beauty, but extrapolating the current growth rates, internet retailing is expected to overtake in the next few years. Although in the current digital age direct sellers are adapting their business models to incorporate many aspects of social selling, it is difficult for them to find a new digital footing and still maintain their core, their hierarchies of representatives.
Regional players have also started to gain presence in international markets via the purchase of new assets with exposure to developed markets. In light of Natura Cosméticos’s ailing prospects in Brazil, having lost BPC market share to Unilever in recent years, the announcement that Natura had acquired The Body Shop from L’Oréal suggests the company is looking to spread its risk, much like it did with the acquisition of Aesop. The prospect of Natura integrating The Body Shop makes sense in the context of their existing portfolios and their shared values.
Upon purchasing Aesop in 2012, Natura facilitated the sustained growth of the brand’s best-in-class, mono-brand retail strategy. Building on this experience, Natura opened its first own physical store in São Paulo in 2016, a radical move given that direct selling has historically strongly underpinned the company’s DNA. This was a clear signal of the change in retail track for the company, which is why the acquisition does not come as a surprise. After the integration of The Body Shop, Natura establishes a strong foothold in Europe and in the highly desirable Asian skin care market, where the brand posted a 3% CAGR over 2011-2016. The Body Shop, as a pioneer of ethical sourcing and social responsibility in the beauty industry, is a perfect match for Natura’s plant-based heritage. This comes at a crucial time when many consumers are redefining their priorities and ethical consumption is topping agendas in all markets. Sustainability leadership is becoming a strategic priority for companies in the beauty industry.
A host of technological, environmental and economic changes are driving demand for more naturally derived ingredients, as well as adding multiple new angles to this still undefined category of green beauty. Consumers are enabled by digital and social developments to get more engaged not just with the health aspects of ingredients but also with their origin, processing and environmental footprint.
Source: Euromonitor International
Beauty players are increasingly focusing on stronger digital engagement to reinforce transparency and provide consumers with access to additional ingredient and processing information. Unilever announced that in 2017 it will begin to expand its SmartLabel technology to its personal care products. SmartLabel is a digital tool being used by Unilever and a growing number of fmcg companies in the US to give consumers access to product information beyond what is on the product’s label. As technology enables consumers to access information instantly at the point of purchase, it will put pressure on beauty players to be transparent about their green claims, ingredients and processes.