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CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL
BEAUTY
Comment Positioned for growth Inside 2 Retail insights Travel retail 3 Tech bytes Netwatch 4 Trending Companies to watch
6 Interview The Body Shop head of global travel retail Alexandru Mihaila
7 Zoom in on Estée Lauder Companies
10 In case you missed it
INSIGHT
There has been a string of negative geo-political and economic news in recent months. Analysts warn that a recession is looming, worries over the impact of the US-China
trade dispute continue to deepen, South Korea and Japan are busy with their own trade war, economic news from Germany is bleak, the prospect of a no-deal Brexit looks to be nearing a reality, US retail data is far from rosy, the political and economic crisis has taken a turn for the worse in Argentina, protests in Hong Kong are set to deal a blow to the economy in the region…and the list goes on. However, despite this cocktail of turmoil and tension, the beauty industry is showing
itself to be resistant. Estée Lauder Companies reported a 9% increase in sales in its fiscal fourth quarter ending June 30. It added that even factoring in the litany of geo-political and economic uncertainty, it still expects to report sales growth of between 7% and 8% for fiscal 2020—at the high end of its targets—and forecasts that the global prestige beauty industry will grow at a rate of 6% to 7% in the next fiscal year. L’Oréal may have seen its second-quarter sales come in slightly below analysts’ expectations, primarily due to a tough market in the US and the slowdown in make-up, but like-for-like sales still rose by 6.8%. And the group underlined that it reported its strongest first half like-for-like growth in more than a decade, with sales up 7.3% to €14.81bn. LVMH too, said sales at its perfumes and cosmetics division rose 10% on an organic basis for the second quarter of the year. The industry’s major players add that the China slowdown and trade battle with the
US has so far had no impact on their business and that the market there continues to see strong double-digit growth. Indeed, most say that China and Chinese travelers will continue to fuel the market, and that this growth is sustainable given an expanding middle class with higher disposable incomes. By extension this means that beauty’s other two key drivers—skincare and travel retail—are also likely to see continued growth. The market’s prospects could be a lot worse.
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The leading publication on the international beauty industry
Oonagh PhillipsEditor in [email protected]
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Comment Retail insights & Travel retail
Tech bytes & Netwatch
Trending & Companies to watch
Interview Zoom in on In case you missed it
Retail insights• US department-store group Kohl’s will partner with Facebook to highlight emerging brands and offer Page followers access to their products. The “Curated by Kohl’s initiative” launches in October and will see Facebook help identify new brands and advertising partners for Kohl’s and its audience. Brands can apply for consideration through the program, potentially allowing niche and direct-to-consumer companies to expand their audience and increase brand recognition.
• Amazon launched a personal-shopper service for Prime members that offers personalized style recommendations and advice. Personal Shopper by Prime Wardrobe includes over a half a million apparel items from thousands of brands. Customers fill out a survey about style preferences before being matched with members of Amazon Fashion’s stylist team. Shoppers can preview a list of specially selected items, then opt to purchase and ship those that interest them.
• Alibaba Group is upgrading its Weitao micro-blogging feature on its Taobao and Tmall sites in a bid to help brands and merchants engage with their most loyal customers. The Weitao layout will also be updated to feature more personalized experiences, modeled after Alibaba’s Flagship Store 2.0 platform. Fans with high engagement scores will be able to access perks and special deals. Customers can also bookmark soon-to-launch items for later purchase.
Travel retail
Horizon Consumer Science president Ian Cesa on key shopper segments among beauty duty-free buyers
“Some 64% of travelers who buy beauty in airport duty-free shops fall into only three of seven international traveler shopping segments, as defined by Horizon. Trend Shoppers, those who want to buy the latest styles and designs, are only 14% of all airport duty-free buyers, but 21% of beauty buyers in airports. Brand Buyers, who are focused on buying products from famous brands, not necessarily the latest styles and designs, are only 16% of all airport duty-free buyers, but 23% of beauty buyers in airport duty free. Bargain Shoppers, who are looking for discounts compared to what they might buy at home, are the most populous segment among airport duty-free buyers at 17%, but they make up 20% of beauty buyers in airport duty free. Airport duty free is growing for beauty because the category is doing a good job of
catering to all three of these segments and not focusing on those consumer segments that are poor drivers of sales in duty free—Cultural Explorers, Destination Shoppers, Memento Shoppers and Trip Needs Buyers.”
For more information: www.horizonconsumerscience.com. Contact Ian Cesa at [email protected]
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Comment Retail insights & Travel retail
Tech bytes & Netwatch
Trending & Companies to watch
Interview Zoom in on In case you missed it
San Francisco-based Tribe Dynamics shares exclusive data about beauty trends and brands making waves on social media
YSL Beauty’s Dua Lipa effectIn June, YSL Beauty named singer Dua Lipa as the face of its new women’s fragrance set to be launched in September 2019. Lipa announced the partnership on Instagram, and shared effusive content from her trip to Paris with the brand. The singer emerged as YSL Beauty’s highest-earning ambassador by a wide margin, netting $731.8k in
earned media value (EMV) across seven pieces of content. In all, YSL Beauty closed June with $2.2m EMV, ranking outside of the Top-10 in the UK, but powering a solid 43% month-over-month growth.
Tribe Dynamics is a San Francisco-based software company that helps beauty, fashion and lifestyle brands drive and measure digital earned media at scale. For more stories and rankings of top brands and products in international beauty, check out Tribe Dynamics’ June Tribe Top 10 report for the UK here.
Tech bytes
• Facebook has rolled out its custom face filter Spark AR Studio to all Instagram users, allowing anyone to create and upload augmented-reality filters on the social platform. Introduced in 2018, the beta version has until now been restricted to select artists, who users must follow in order to access their filters. Will beauty companies create and promote their own conceptual filters?
• Singapore-based tech company Trax’s analytics tool measures and interprets how products perform on shelves. Trax Retail Execution allows brands and retailers real-time views of stores and lets them monitor the performance of specific skus across retail channels. They can also track performance for competing products. Trax, which works with companies including Germany-based Henkel, is valued at some $1.1bn.
• China-based WeChat Pay and Alipay partner QFPay have raised $20m to jointly develop digital payment tools and solutions, including QR-code payment options for consumers. QFPay, launched in 2012, develops products including online and offline mobile payment tools, as well as customer loyalty programs. It is present across Asia and in the UAE and claims to have completed over one billion consumer transactions.
• Beauty subscription start-up Scentbird has expanded its fragrance sub-brand Confessions of a Rebel, drawing on AI and consumer data to develop two new unisex scents. The four fragrances were created by leveraging millions of data points drawn from the site’s some 300,000 subscribers.
Netwatch
Comment Retail insights & Travel retail
Tech bytes & Netwatch
Trending & Companies to watch
Interview Zoom in on In case you missed it
www.bwconfidential.com - Beauty Insight - August 27-September 23, 2019 #194 - Page 3
Trending
Companies to watch
Act of Being. This Los Angeles-based start-up claims to be the first vegan, high-end skincare brand for men, filling what it says is a competitive gap in the market. The skincare and grooming line is formulated with baobab, coconut, red algae and a proprietary “made smart” clean complex for men. Products are also said to protect skin from pollution.
Subtlbeauty. This US-based brand aims to meet consumer demand for practical, portable and multifunctional products with its line of stackable make-up products. Small enough to fit in the palm of the hand, the brand’s cosmetics—from highlighters to a lip and cheek duo—come in a customizable stack that consumers build online. The direct-to-consumer company also offers an affiliate program for influencers.
By Sarah London. This UK-based brand aims to disrupt beauty manufacturing by listing all product ingredients on its skincare labels. Claiming to be the only UK beauty brand to offer full transparency, the company founded by Sarah Murrell and her sister Lauren offers a line of facial oils and other products formulated with organic and natural ingredients. They are also free from synthetic industrial fillers.
#Bronzeeyes are trending on Instagram and on beauty blogs for
autumn. In the place of paler highlights and in a nod to “power” looks from the 1980s, influencers are touting the
glamour of bronzed tones over the brow bones. Both glittery and matte shades, from deep sand to taupe and
mustard, are trending.
Women’s sexual wellness and grooming products are losing taboo
status among manufacturers and retailers. Retailers including Ulta and
Target are giving feminine hygiene and grooming products more prominent shelf space, while the acquisition of
brands such as Sustain Natural show how the women’s sexual wellness— or “femtech”—category is gaining
momentum.
Flavored lip balms and glosses are making a comeback with adults. Companies including Glossier and Elf Beauty have launched fruit-infused lip-care that target a broader consumer base. Elf’s Jelly Pop Juicy Gloss line is flavored with watermelon and banks
on childhood nostalgia without catering specifically to children. Products with
high shine and “jammy” shades are popular.
Comment Retail insights & Travel retail
Tech bytes & Netwatch
Trending & Companies to watch
Interview Zoom in on In case you missed it
www.bwconfidential.com - Beauty Insight - August 27-September 23, 2019 #194 - Page 4
What is your focus for travel retail and what has been the impact of the acquisition by Natura? Our family comprises these three brands (Natura, Aesop, The Body Shop) [the interview was prior to Natura’s announcement that it would acquire Avon] with a unified vision, which is to be a purpose-driven business focused on people, the environment and on providing a quality product. Our focus since 2017 has been on rejuvenation of the brand at a global level. That means we’re going back to our roots—you will see more communication around community trade, activism, and sustainability.
What are your priorities for Asian travel retail?In Asia in travel retail we want to communicate as much as possible around the activities that we are doing in our local markets. In Asia we are seeing good growth, which is predominantly driven by closer relationships with our partners. We’ve launched a lot of new products, specifically limited editions. Last year we launched our new assortment of travel-retail exclusives. We also initiated an ambitious plan of renovating our furniture.
What is your focus in terms of digital?We are still in the development stage of digital. We are using it in different stages in local markets. We do a lot of work with vloggers and bloggers who share our values. We are not doing any advertising on TV, and in terms of media in airports, it’s still in development. We have our own e-commerce sites in key markets and we also have partnerships in some markets with third parties. The e-commerce sites are seeing growth that is similar to the market. For travel retail we are also working with our retail partners to see how we can further develop our presence on their e-commerce sites.
Do you have specific strategies to attract more Chinese travelers?We are not present in China and we have a strong stance on that in regard to animal testing. The government is having conversations that there might be some changes, but at the moment we are not going to enter China. We are looking at ways of attracting Chinese consumers. In those key locations where they are traveling, we are implementing dual language assets and tailoring our product assortment to cater to their needs. Our tea tree range and the ginger shampoo are very popular with them—the ginger shampoo is also our number-one selling product globally. We recognize the opportunity of the Chinese, and we are seeing specifically an increase in Chinese travelers in northern Europe.
What is the potential of accessibly priced brands in travel retail?Travel retail has been dominated by luxury brands, but we are seeing a lot of the increase of passengers coming from the middle class, who are not always looking for luxury brands. One of the biggest challenges is conversion in travel retail. As a more accessible brand, I think it’s more about how to differentiate and how to cater to the needs of the passengers. We have quite a unique proposition in terms of our products and the work that we are doing for the environment. The potential is there for more accessible brands. n
”The Body Shop head of global travel retail Alexandru Mihaila
We are not present in China and we have a strong stance on that in regard to animal testing. We are looking at ways of attracting Chinese consumers. In those key locations where they are traveling, we are implementing dual language assets and are also tailoring our product assortment to cater to their needs
“
Interview The Body Shop head of global travel retail Alexandru Mihaila
Alexandru Mihaila tells BW Confidential how he sees the brand’s development in the travel-retail channel
Comment Retail insights & Travel retail
Tech bytes & Netwatch
Trending & Companies to watch
Interview Zoom in on In case you missed it
www.bwconfidential.com - Beauty Insight - August 27-September 23, 2019 #194 - Page 6
Zoom in on: Estée Lauder Companies
PerformanceThe company’s full-year sales reached $14.86bn, a 9% increase on last year, while net profit rose 61% to $1.79bn. ELC outlined that since 2009, sales have more
than doubled from $7bn to nearly $15bn, rising an average 8% a year. It said its share of the global prestige beauty market reached 15.3%, up 2.3 points, which it claims makes it the leader worldwide. ELC president and ceo Fabrizio Freda attributed this performance to a strategy built on multiple engines of growth, improved data analytics, product innovation and digital marketing. He added: “We further diversified our business and built a more flexible financial model.” Key drivers for the company include China, digital, travel retail and skincare. The group admitted however, that the US continues to be soft due in part to the tough retail situation.
The market ELC foresees continued healthy growth for the prestige beauty market boosted by a growing middle class with increasing disposable incomes—especially in emerging markets—and the continued shift from mass to prestige. It expects growth in the global prestige beauty market to be in the range of 6% to 7% over the next few years.
ChinaDespite jitters over a slowdown in China and the impact of the US-China trade war, ELC described its growth in the country as “outstanding”. The company underlined that it did not see any slowdown in the fourth quarter and that all categories, channels and almost all its brands posted strong double-digit gains in China. It added that the introduction of Tom Ford Beauty on Tmall was its biggest launch to date on the platform, and that the productivity of its stores in China is the best globally. ELC expects China’s growth to remain strong, although it forecasts some deceleration in the very rapid pace of growth seen in the past two years. Freda emphasized that the fundamentals for long-term, sustainable growth in China are strong: An increasing middle class, a high spend on beauty from young consumers and untapped opportunity in tier-three and tier-four cities.
Travel retail The group said it saw double-digit growth in the channel and that during calendar 2018 it became number one in prestige beauty in travel retail worldwide. Travel retail now accounts for 23% of the group’s business. ELC said its travel-retail business is growing due to market share growth in same-store doors, the addition of new distribution and increased conversion of travelers into buyers. ELC highlighted that pre-orders, where passengers can order products online and pick
them up at the airport upon their departure or return, have taken off strongly. It added that while this is centered on Asia for now, it is expected to grow worldwide. Freda said that this will be a key driver of conversion, as will advertising in airports .However, while travel retail is expected to continue to be a growth driver, the group said
Estée Lauder Companies (ELC) delivered what it called an outstanding performance in fiscal 2019, with sales reaching nearly $15bn. BW Confidential zeros in on the key factors driving the group’s performance
s ELC president and ceo Fabrizio Freda
Comment Retail insights & Travel retail
Tech bytes & Netwatch
Trending & Companies to watch
Interview Zoom in on In case you missed it
www.bwconfidential.com - Beauty Insight - August 27-September 23, 2019 #194 - Page 7
it anticipates the channel’s growth rate to moderate. “China and travel retail are expected to still grow double-digit, just not as strong a double-digit as they’ve grown in the last couple of years,” commented Freda.
Digital The company saw double-digit growth in online and said that this channel accounts for 15% of sales. The priority for online is for the group’s three largest markets: The US, China and the UK. ELC said it sees its brand sites as media properties in addition to a platform to sell products, and that collectively these sites attracted more than 400 million visits. Digital now accounts for 75% of the group’s media spend. The company added that data and consumer insights have resulted in better product innovation.
Skincare Skincare led product category growth, with sales up 17% in fiscal 2019 and strong increases from the Estée Lauder and La Mer brands globally. ELC is looking to reach a wider range of consumers through skincare, and said its Clinique iD range attracted a younger consumer. It added that the luxury segment is the fastest growing, which is one of the reasons it is launching a skincare collection for the Tom Ford brand. Freda added: “The growth of skincare in Asia is here to stay for the long term […] Asian consumers are very heavy users of skincare. They are very interested in high-quality products, and most importantly, the Asian consumer using skincare is much younger, and so each consumer you conquer in skincare in Asia has much higher life value than in other markets.” n
Zoom in on: Estée Lauder Companies
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In case you missed it
Dufry opens first duty-free border shop in Brazil
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Givaudan acquires UK-based Fragrance Oils
Morphe gets major new investor, plots expansion
Revlon could be up for sale
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Prestige beauty sales in US up 2% in second quarter 2019
Barneys files for bankruptcy
Douglas takes stake in online retailer Niche Beauty
Kanebo to launch Freeplus in Thailand ahead of Asian rollout
Celine to launch haute parfumerie fragrance line this fall
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www.bwconfidential.com N°38 May-June 2019
InterviewL’Oréal chief digital officerLubomira Rochet
Market watch: ChinaTmall and beyond,KOLs & pricing
Travel retail: South KoreaData, daigou &operator strategies
PackagingThe latest trends inturnkey solutions
Insight: SkincareClean beauty, personalization & social media
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The next issue of BW Confidential’s Beauty Insight out on September 24, 2019 • The latest retail and tech news • Interview • Travel retail data • Beauty trends • Social media insights
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