U.K.’s Premium Personal Care Sales Wash Out

Consumer purchasing and usage of personal care products are showing surprising shifts in the United Kingdom, according to Datamonitor. Siddika Jaffer, director of consulting for EMEA Consumer Markets, added that the lipstick theory has been debunked during this recession in the United Kingdom, with a similar pattern emerging in the United States.

The lipstick index was developed by Leonard Lauder, the chairman of Estée Lauder, in the 2001 recession. Sales of lipstick in the United States rose by 11 percent in 2001, and cosmetic sales were reported to have increased 25 percent during the Depression in the 1930s.

In contrast, current sales of lipstick in the United Kingdom are reported to have fallen around 5 percent vs. last year, while foundation sales are up significantly compared with last year.

“The underlying principle behind the lipstick index is the notion that consumers treat themselves to little luxuries during a recession, as they cannot afford to spend on the bigger luxuries such as holidays and cars, or indeed on going out,” noted Jaffer.

So, while spending seems to have shifted from lipstick to foundation within the personal care category, the notion of affordable luxury still seems to stand unchallenged.

Research from the Datamonitor Recession and Recovery May 2009 survey shows that definitions of what constitute affordable luxury are being rewritten. Some of the observations on how consumer behaviors are changing in the United Kingdom include:

--81 percent of respondents are trading down to cheaper and less premium brands, with 18 percnt buying cheaper brands all the time and 32 percent most of the time
--82 percent are cutting back on treats, with 18 percent having cut them out completely and 34 percent cutting back most of the time
--49 percent of respondents in the United Kingdom said that they buy private label all or most of the time to save money, and a further 37 percent said that they bought private label occasionally, with a similar picture emerging in the United States and Canada

In addition, when respondents were asked about their intentions for spending on premium fragrances and cosmetics during the next three months, only 2 percent of the sample group said that they intended to increase expenditure, while 19 percent said that they would maintain expenditure at previous levels, and a huge 55 percent said that they would significantly cut back on expenditure or not buy at all. This seems to suggest that, for most consumers, affordable luxury doesn’t extend to the premium fragrance and cosmetic market.

Looking at mass market brands such as L’Oreal, the aforementioned Datamonitor survey asked respondents in the United Kingdom whether they used the brand and how their recent consumption of the brand had changed. The survey revealed that 12.5 percent of respondents who used the L’Oreal brand have substituted it with private label offers and a further 8.7 percent were switching to other branded offers, while 14 percent said that they were still loyal to the brand but only bought it on offer.

Private label penetration in the personal care category stood at 17.1 percent in the United Kingdom in 2007, compared to a 40 percent average for grocery overall, suggesting that the personal care category was relatively well insulated from the growing share of private label sales in the United Kingdom. Recent consumer survey results outlined above indicate an acceleration in the shift to private label in personal care.

Another cause for concern for branded players is the apparent shift to the discounter channel for purchases of personal care products. While 61 percent of all consumers used supermarkets and hypermarkets as their main shopping channel for personal care products, 8 percent of respondents used discounters as their main channel, which was the second-highest category penetration score for this channel. In addition, channel-switching intentions for personal care products were fairly high, at 14 percent, with 25.5 percent of switchers showing an intention to migrate to the discounters as their main channel.

Jaffer said, “It seems, then, that the notion of affordable luxuries when it comes to personal care products, have the firm emphasis on affordable, in this recession at least.”

Branded players in the personal care market are clearly doing all they can to hold on to their levels of penetration and market share. However, it remains to be seen how long they will be able to continue to sell products on promotion and how ready they are for consumers migrating to discount channels.
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