Natural products bring new customers — and risks

Chain Drug Review/June 17, 2013
31
MERCHANDISING/BEAUTY CARE
Natural products bring new customers — and risks
By David Powell, Andrew
Walberer, Paul Schroder &
Saurabh Tejwani
The move to naturals — organic or naturally sourced ingredients in beauty products — is
driving substantial growth in
the beauty and personal care
segment. Indeed, the Natural
Products Association reports
a 50% year-over-year increase
in Natural Seal certifications,
with a total of 1,200 product and
ingredient certifications as of
March. In general, this growth
represents good news for both
retailers and their suppliers. But
it also involves risks.
To take full advantage of consumers’ increasing interest in
natural-based products, drug
retailers should understand the
risks ranging from product availability to quality to reputation.
Furthermore, their goal should
not merely be to mitigate those
risks but to collaborate across
the value chain to create advantage in the ­marketplace.
Let’s start on the shelf. Every
retailer wants to avoid out-ofstocks, especially for fast-selling
new products such as naturals.
Yet availability of these products can be constrained because
natural ingredients tend to have
a shorter shelf life, which means
leaner inventory levels. For example, the synthetic moisturizer
squalane has a shelf life of more
than two years, but its natural
cousin squalene has to be refrigerated to last even 12 months.
Furthermore, natural raw materials will vary in a number
of ways unlike synthetics. For
example, they may be hard to
consistently harvest in the required quantities. Thus some
natural-based products will be
challenged to achieve uniformity and, in turn, the claims by
which they are sold. Others may
be adulterated for economic reasons, such as the past instances
where eucalyptol (used in fragrances and cosmetics) was
adulterated with cineole from
camphor seeds (far cheaper but
with more problematic effects).
Either way, not meeting quality standards poses risks to
reputations. Furthermore, harvesting natural ingredients on a
large scale can sometimes have
alarming social and environmental impacts. Yet because naturals depend on consumers’ environmental mind-sets and social
consciousness, reputations are
paramount. If the product does
not meet its “natural” claims, or
if the manufacturer is deemed
otherwise environmentally or
socially irresponsible, the names
of both the manufacturer and retailer may be tarnished.
In some cases reputational
risks can extend to the legal
realm, especially for products
that claim to be completely natural or organic. For example, one
2011 lawsuit targeted over two
dozen cosmetics companies for
improper labeling of organics.
Many of these risk outcomes
arise from the inherent complexity of natural products. For
example, the proliferation of
“everything natural” may chal-
Concerns include
shelf life, quality
and availability.
lenge your assortment strategy
and force trade-offs on valuable
shelf space. This complexity
may require more from category
managers, to profitably maintain
the proper mix and ­availability.
In addition, the use of naturals generally results in a complex supply chain, which may
also tax a manufacturer’s capabilities. More complex supply chains usu have less visibility and reliability, which means
greater supply risk exposure.
For example, the use of child
labor to harvest cocoa in Ivory
Coast became a surprise public
relations issue for several consumer packaged goods (CPG)
and personal care goods companies. Complex supply chains
also increase risks of supply
disruptions or shortage-induced
high prices, such as the 2011
crop failures that nearly doubled
the global prices of jojoba oil.
Indeed, at the ingredient level,
limited crop cycles create a need
for much longer forecasting on
the part of manufacturers. And
when variations occur, options
may be limited. Furthermore,
because natural ingredients
are often sourced globally, lead
times can be particularly long.
The risks from naturals aren’t
necessarily any worse than for
any other products, just different. And managing risks is not a
new capability. Retailers should
thus address the risks associated with naturals as a part of an
overall risk management strategy. In our experience, most robust risk management processes include four steps:
• Assess. From a category perspective, evaluate the unique
risk dimensions and drivers for
naturals, their probability and
impact. Examples of best assessment practices include use of
scenario planning to model macro forces impacting natural supply/demand balance; predictive
analytics to better understand
consumer reactions to events;
regular, structured supplier
health reviews; and joint planning with strategic ­suppliers.
• Prioritize. Use your company’s
situation — its needs, costs, impact severities, etc. — to identify
the risk priorities you want to
focus on and the gaps in your
preparedness. The key is to establish consistent risk tolerance
guidelines linked to business objectives and to implement them
with firm governance across
functions and business units.
If naturals will be a growing
part of your category, and especially the category’s profitability, shouldn’t closing these gaps
also be a high priority?
• Take action. Bridge gaps in
preparedness and seize potential opportunities. Actions
may include implementation of
business continuity planning,
new governance structures
with roles and responsibilities
centered on risk, or building
risk management into performance evaluations.
• Monitor. Evaluate your progress against your plan and take
corrective measures; incorporate tools for continuous improvement. Examples of successful monitoring include risk
dashboards and supplier scorecards that monitor risk profiles.
At the very least, additional indicators of naturals risks should
be included as part of a category
management dashboard.
As that list shows, elevated
risk management capabilities
generally involve improved collaboration between retailers
and CPG providers, which can
be accomplished as part of traditional category management
activities. After all, retailers
have long managed categories
for profitability, and there is no
greater threat to profitability
than risks associated with quality or availability. And collaboration leads to transparency,
which is the best way to understand the impact of events.
What do those collaborative
vices that can analyze a person’s
skin and recommend a treatment regimen, the digital age
will have a significant impact
on how the beauty business
evolves over the next few years.
The three-part presentation
— “Beauty in a Digital World”
— was delivered by the 21 students who graduated from the
FIT Masters degree program
this year. The event was sponsored by Beiersdorf Inc.
Over the course of an hour the
graduating students explained
how the ongoing rise in digital
technology will impact analytics, marketing and commerce.
For instance, they noted, by
2020 there will be 31 billion connected devices in use around
the globe, making it essential
for beauty suppliers to have a
strong digital presence.
The information these suppliers provide, the students noted,
will have to be broader in scope
and delivered much faster.
Continued on page 34
Body lotion segment
builds momentum
NEW YORK — The skin care
market has seen dramatic gains
of late in the body antiaging
segment, while facial products
have been flat.
Consumer needs go beyond
daily moisturizing in the hand
and body segment, say suppliers. They seek remedies for
many types of dry skin conditions including itchy, oily or
cracked skin; ashy or flaky skin;
and the problems associated
with eczema and keratosis pilaris (KP). They look to drug
stores for convenience and a
wide variety of items.
To sustain the category’s momentum, Upsher-Smith Laboratories Inc. has launched AmLactin Cerapeutic Restoring Body
Lotion, formulated with skin
Digital technology refashions beauty marketing
NEW YORK — The ongoing
proliferation of technology will
continue to alter the relationship between beauty care marketers and consumers, a panel
of graduating students from the
Fashion Institute of Technology
(FIT) said during an elaborate
presentation at the school earlier this month.
From more personalized marketing efforts delivered through
social media sites, instant messages and e-mails to in-home de-
activities look like? They will
vary by retailer, supplier and category, but they may include:
• Collaborative planning between retailers and manufacturers to ensure availability
during a crisis.
• Longer planning horizons to
account for complexities.
• Sharing inventory data and
forecasting to reduce inventories across the value chain.
• Broadened, shared commodity market monitoring to include not only potential price
variations but also geopolitical
From a marketing standpoint,
the graduating students noted
that as marketers continue to
gather more and more consumer
data, they will be able to individualize their messages and better
anticipate shoppers’ needs.
And, finally, the graduates
noted, the digital revolution
will change how many retailers
operate, with the blending of ecommerce and brick-and-mortar retailing leading to smaller
stores that cater to local needs.
care’s newest “power couple”
— alpha-hydroxy acids (AHAs)
and essential ceramides. The
product, which debuted at
selected Walgreen Co. and
Walmart stores, contains the
intensely hydrating, patented
Ultraplex formula for gentle exfoliation, and three ceramides
that work together to quickly
strengthen skin’s protective
moisture barrier for noticeably
softer, more resilient skin.
“Ceramides are naturally
found in the skin’s outer layer
and help to retain moisture,”
said cosmetic dermatologist Dr.
Doris Day. “The skin loses ceramides for a variety of reasons,
such as too much time in water or exposure to harsh soaps.
When ceramide levels are low,
skin becomes vulnerable to
environmental conditions and
other irritants.”
For its part, eb5, the top-seller
in J.C. Penney Co.’s beauty department for 20 years, is being
extended with two skin care
serums: vitamin C and collagen.
The serums add versatility and
innovation to the brand, while
maintaining the affordable pricing that has kept eb5 users returning to Penney.
In selected CVS and Walgreens stores the line matches
or surpasses the sales of much
larger skin care brands, notes
eb5 Corp. director of marketing
Carrie Scott.
34
Chain Drug Review/June 17, 2013
MERCHANDISING/BEAUTY CARE
Nail polish brands expand palette of colors
NEW YORK — The nail care
category has slowed of late, but
treatments still posted commendable growth of 6% in the
quarter ended April 21.
A number of suppliers are doing their part to restore the momentum of the nail polish segment, which is more than triple
the size of the treatment market.
Markwins Beauty Products,
for one, introduced the Fergie
CenterStage Collection by wet
n wild — a collaboration between the fast-growing beauty
brand and the music star —
with a tailored nail color line,
with each product influenced
by Fergie’s love of nail color.
Some suppliers say that making a bold statement this sea-
son can be a matter of returning
to the basics with natural tones
such as nudes and light pinks.
People are going back to traditional colors, according to Nadine Ferber, co-owner of Manhattan’s Tenoverten nail salon.
The stripped-down look feels
fresh, she said.
Red Carpet Manicure, the first
at-home LED gel manicure system, has a nude/pink to match
any skin tone. Besides being
made for home use, the system
is enjoyed by celebrities. Jennifer Hudson wore the slate “It’s
Not a Taupe” to VH1’s Diva
Celebrate Soul show, while
Jennifer Lopez has worn “Fake
Bake” accented with “Glitteratzzi.” And for a more natural
BATH FRAGRANCES/BUBBLE BATH
TOTAL DOLLAR SALES* $35.4 mil. (+4.4%)
DRUG STORES $ 5.5 mil. (+6.3%)
LEADING BRANDS**
Private Label
Dr. Teal’s
Mr. Bubble
Calgon
Village Naturals Bath Shoppe
Kneipp
Shea Moisture
Johnson’s
Alpha Keri
Village Naturals Therapy
Market
share
Dollar sales
(000)
Dollar sales
% change
$1,428
1,052
442
280
248
245
185
181
180
148
- 7.1%
+ 92.3%
- 0.9%
+ 62.2%
- 25.4%
+140.7%
—
- 13.9%
- 19.0%
+ 35.1%
26.1%
19.2%
8.1%
5.1%
4.5%
4.5%
3.4%
3.3%
3.3%
2.7%
TOTAL UNIT SALES* 10.6 mil. (-2%)
DRUG STORES 1.1 mil. (+1%)
LEADING BRANDS**
Private Label
Dr. Teal’s
Mr. Bubble
Calgon
Village Naturals Bath Shoppe
Johnson’s
Batherapy
Sesame Street
Shea Moisture
Village Naturals Therapy
Avg. price
per unit
$4.64
6.10
3.59
3.39
4.87
4.08
2.12
3.00
8.12
6.80
Unit sales
(000)
308
172
123
83
51
44
30
24
23
22
Unit sales
% change
-
+
+
+
-
-
-
+
3.6%
78.8%
0.4%
44.9%
30.4%
16.9%
14.6%
23.5%
—
+ 14.4%
* Total of drug stores, supermarkets, discount stores, military commissaries and selected club and dollar stores.
**In drug stores only.
Source: IRI
For the 12 weeks ended April 21, 2013.
Natural products
Continued from page 31
and other risk factors.
• Collaborating on research and
development to decrease the cycle time for introductions of new
natural products.
Risk management is often a
matter of adapting a risk mindset. And with naturals as an increasing share of the business,
retailers need to make sure that
naturals category managers
incorporate that mind-set —
sometimes with actions as simple as adding risk as an agenda
item to regular category management meetings.
By building capabilities and
installing best practices, some
retailers find that they can go
beyond limiting risk exposure,
beyond “recovering” from a
risky event. These ambitious
leaders find beauty in risk: new
ways to act on risk to create advantage in an uncertain world.
David Powell ([email protected]) is a partner in the
health practice at A.T. Kearney,
a global management consulting firm. Andrew Walberer ([email protected])
is a partner at A.T. Kearney. Paul
Schroder (paul.schroder­@atkearney.com) is a principal of A.T. Kearney. Saurabh Tejwani is a manager at A.T. Kearney.
look, Glenn Close opted to just
layer the base coat and top coat
on her nails at the Emmys.
For toenails, CCA Industries
Inc. has launched the Walk on
the Wild Side pedicure collection for summer. As part of the
Gel Perfect line of polishes, the
collection features a new patented pedicure technology to
dry color in five minutes. “It’s
the only polish that can make
the five-minute promise,” says
a company spokeswoman. “The
best part: No bulky UV lights are
needed and the polish is easily
removed with CCA’s Nutra Nail
No-Mess Express, so polish colors can be changed as easily as
you change your swimsuit.”
The collection comprises six
colors named after the season’s
most popular shoe styles: peeptoe, sandal, sling back, slipper,
spectator and stiletto.
Each Walk on the Wild Side kit
contains toe separators and a
mini foot file, and has a suggested retail price of $11.99. The
collection is available through
August at CVS/pharmacy, Walgreen Co. and Rite Aid Corp.
Rite Aid is also propelling
the nail category with a digital
campaign to celebrate one of
the beauty industry’s hottest
trends — nail art. In its second
year, the chain’s “Nail Extravaganza” is based on the “Search
for the Rite Aid Nail Enthusi-
ast,” a two-round contest that
gives beauty amateurs and
aficionados alike the chance
to win 20 different prizes by
submitting nail designs at
www.riteaidnails.com.
After the success of the 2012
contest, it was an easy decision
to bring it back, said vice president of marketing Craig Riner.
Consumers seek out moisturizers
NEW YORK — The bath and
lotion categories generated
solid gains in the 12 weeks
ending in mid-spring.
In the bath fragrances/bubble
bath market, sales of Dr. Teal’s
from Advanced Beauty Systems Inc. almost doubled and
dollar volume of Calgon from
Ilex Consumer Products Group
skyrocketed 62%, while Sundial
Brands’ SheaMoisture posted
sales of $185,000, good for sixth
place.
The hand and body lotion
segment also saw strong gainers, including Kao USA Inc.’s
Jergens Natural Glow, Chattem Inc.’s Gold Bond and Unilever’s Vaseline Total Moisture.
HAND & BODY LOTION
TOTAL DOLLAR SALES* $ 453.9 mil. (+9.3%)
DRUG STORES $ 127.2 mil. (+6.7%)
LEADING BRANDS**
Private Label
CeraVe
Jergens Natural Glow
Gold Bond Ultimate
Aveeno Actv Natrls Dly Moisturzng
Cetaphil
Vaseline Total Moisture
Eucerin Plus
Eucerin
Lubriderm Daily Moisture
Market
share
9.9%
6.2%
6.0%
4.3%
4.0%
3.2%
3.0%
2.5%
2.2%
2.1%
Dollar sales
(000)
$12,611
7,861
7,648
5,492
5,121
4,113
3,755
3,205
2,817
2,725
Dollar sales
% change
-
+
+
+
-
+
+
+
+
-
10.1%
37.4%
16.5%
26.8%
0.1%
6.5%
21.8%
26.8%
15.8%
0.4%
TOTAL UNIT SALES* 87.5 mil. (+4.9%)
DRUG STORES 20.6 mil. (+0.4%)
LEADING BRANDS**
Private Label Hand & Body Lotion
Jergens Natural Glow
Gold Bond Ultimate
Aveeno Actv Natrls Dly Moisturzng
Vaseline Total Moisture
Jergens Ultra Healing
CeraVe
Nivea
Eucerin Calming
Lubriderm Daily Moisture
Avg. price
per unit
Unit sales
(000)
$3.76
8.26
6.06
5.87
4.86
3.33
15.08
2.37
4.23
5.59
3,353
926
906
873
773
646
521
501
496
487
Unit sales
% change
-
+
+
-
+
-
+
-
+
-
12.6%
7.2%
25.3%
2.6%
9.7%
1.4%
37.1%
24.5%
14.0%
3.5%
* Total of drug stores, supermarkets, discount stores, military commissaries and selected club and dollar stores.
**In drug stores only.
Source: IRI
For the 12 weeks ended April 21, 2013.
The appeal of traditional lotions notwithstanding, new
moisturizing and powder body
sprays are attracting people
who complain that lotions require too much time to apply
and ­absorb.
Unilever is winning converts
with Vaseline Spray & Go Moisturizer, promoted as the first
body lotion spray from a major
brand.
Available in aloe vera, total
moisture and coconut radiant versions, the products are
being promoted as providing women with the ability to
“put their clothes right on after
moisturizing and get on with
their day.”
And Gold Bond has been extended with what Chattem
(Sanofi U.S.’ consumer health
care division) describes as a
no-mess powder spray that delivers odor and wetness protection that provides triple-action
relief, cools on contact, and
absorbs moisture and soothes
skin. The product’s packaging
features an easy-to-hold spray
can.
According to Unilever, 80
million women in the United
States have lotion in their home
but do not use it on a daily basis, and over half of these light
lotion users claim “lack of time
for themselves” as being the
biggest barrier to use. Many
of these women recognize that
they should be using body lotion every day but skip it because it takes too long to apply and absorb, slowing down
their morning routine.
Dawn Hedgepeth, Unilever
U.S. skin director, calls Vaseline Spray & Go Moisturizer “a
breakthrough innovation.”