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As a follow-up to my “Brands Still Matter Part 1: Adapting to the Modern Consumer” post, presenters and panelists at Jefferies’ Brands Still Matter conference also discussed established and emerging brands’ strengths and weaknesses. Both emerging and established brands can learn from each other to better serve their customers.
The product development cycle tends to be quicker among emerging brands. Some emerging beauty brands can plan, develop and launch new products in as little as four to six months, whereas established beauty brands require between one to two years. There are several reasons for this.
Emerging beauty brands conduct business in the market they are born before expanding to other markets. As a result, they are required to comply with regulations of one or few markets. In contrast, established and global beauty brands have to comply with regulations in multiple markets, which could also result in different formulations and packaging requirements for an individual product. This variance contributes to longer lead time in new product launches.
Emerging beauty brands also tend to start out with fewer SKUs and heavily promote their “hero”, or best-selling, products before expanding to other categories. Some may choose not to expand to other categories and instead focus on categories they already play in. Emerging brands’ focus on fewer categories and SKUs helps streamline and expedite the product development cycle. However, product development cycles can vary between emerging brands.
In September 2017, e.l.f. Cosmetics launched a new product every day that month in an effort to impress customers with its on-trend, affordable products. On the other hand, Rihanna took two years to develop her Fenty Beauty line of foundations, illuminators and lip sticks. Despite the difference in product development cycles, both brands have experienced rapid growth and applause from receptive audiences. Overall, shorter product development cycles help beauty brands capitalise on changing consumer preferences. With beauty increasingly mimicking the fast fashion trend, established brands can find inspiration from the agility of emerging brands.
Emerging brands are able to easily gather direct feedback from consumers. Because they are relatively new to the industry, emerging brands tend to have fewer staff members than established brands, making it necessary for employees to juggle multiple duties. As a result, it is not uncommon for founders of emerging brands to converse directly with consumers through what established companies might consider informal means like social media.
For example, the Founder, CEO and Formulator of skin care brand Sunday Riley often tweets directly to her followers, asking casual questions, “What product is missing from our lineup that you wish you had?” (January 14, 2018), or responding to conversations, “I wear [Sunday Riley moisturizer] every night. So glad you are in love!” (December 26, 2017).
The start-up nature of emerging brands also underscores the intense focus that emerging brands have on audiences and continuous feedback. Established brands also gather feedback from consumers on social media, but their approach includes more structured interactions, such as focus groups, formal market research and surveys, which are overseen by various teams. However, some established brands recognise the need to interact digitally with consumers, whether through content creation or conversation on social media.
At Brands Still Matter, Lawrence Kurzius, the Chairman, President and CEO of McCormick & Co. emphasized the critical need for content. He stated that about 60% of McCormick & Co.’s marketing spend is on digital content and social media. As more consumers begin to think of brands as people and base their opinions of a brand through interactions beyond product usage, established companies can be motivated by the conversational and emotional style and emphasis on social media often practised by emerging brands.
Established brands have the marketing support and research force behind them. Many of the same reasons that hinder established companies from reacting quicker to changing consumer preferences or expediting product development cycles can also be its strengths. Full-fledged departments that are entirely dedicated to one or several aspects of the business have insight into local markets and various stages of the supply chain, giving established brands a competitive edge over emerging brands.
Brands Still Matter presenters from both Jefferies and Accenture said it best, “If you are a legacy brand, you have size and more means to invest. Most likely, you’ll have a strong and powerful DNA, but this genetic code needs to be interpreted differently and evolve.”
One of the ways established beauty brands have chosen to evolve is through acquiring or investing in emerging brands. Recent acquisitions and partnerships in the beauty world follow this trend: Unilever’s purchase of Sundial Brands, Hourglass and Schmidt’s Naturals; The Estée Lauder Companies’ investment in Deciem; Procter & Gamble’s purchase of natural deodorant brand Native; and Coty’s stake in direct selling brand Younique in 2017.
Newly-acquired emerging brands are not only able to tap into the size, scale and resources of their parent companies, but also benefit from the stability to fund operations and meet orders as well as the possibility of expansion to other channels and markets.
Brands Still Matter panelist Luis Marconi, Group VP, Grocery Products, of Hormel Foods also highlighted how established brands can learn from newly-acquired emerging brands by keeping the line of communication open between both entities. After Hormel Foods acquired Justin’s, a nut butter brand made popular through sales at farmers’ markets, in 2016, Marconi explained how important it was for Hormel Foods to be part of the Justin’s brand – a shift from the prevailing idea that a newly-acquired brand should be absorbed into the parent company. He also stressed the importance of leaning on the brand’s founder Justin Gold for ideas related to innovation, marketing and every day operations.
As barriers to entry in the beauty world lower and more emerging brands enter the beauty space, resulting in even more competition, emerging brands can partner with established brands or an outside source of funding for support and expansion.