[Market Trends]

Capitalizing on the Cosmeceutical Market

Consumer expectations of cosmeceutical products are critical to developing effective products and marketing strategies. In this industry overview, provided by independent market analyst Datamonitor plc, supplyside takes you through the state of the industry and provides action points to maximize product development and strategic business initiatives.

The market for cosmeceuticals (cosmetics and toiletries containing at least one bio-active ingredient) will be an important growth area over the next five years. The increasing desire of consumers to look good, coupled with an aging population and the growing availability of high-performance cosmetics, will drive this. Older consumers in particular, who are no longer willing to accept the inevitability of the onset of the visible effects of aging, will drive growth in this area by increasing demand for anti-aging products. Women over the age of 50 are prepared to use cosmeceuticals more than any other demographic. These female consumers are the main target group for cosmeceutical manufacturers, and in order to capitalize on consumers’ growing interest in these products, personal care players must gain a detailed understanding of consumer trends driving the market and gain consumers’ trust.

The potential for companies that market effectively is great. The U.S. cosmeceuticals market is expected to grow from a value of US$2.7 billion in 2004 to US$3.6 billion in 2009, with a compound annual growth rate of 6.3 percent (see chart). During the same period, the European cosmeceuticals market will grow by only 4.8 percent a year; however, the European market should remain much larger than the U.S. market, projected to grow by US$929 million to a total value of US$4.4 billion in 2009.

Datamonitor has uncovered several important trends that may influence market success of cosmeceutical products.

First, cosmeceuticals specifically designed for individual body parts have grown most in popularity over the past year, with 33.7 percent of survey respondents claiming to have used them more over the past 12 months. Facial treatments have grown equally in popularity. Both types of products have become a regular part of consumers’ beauty routines, with 28 percent of respondents claiming to have used specific body part products as much as in the previous year, and 37.6 percent in the case of facial treatments. Manufacturers will obtain the greatest returns by ensuring their cosmeceutical brands become a part of consumers’ regular product portfolios.

Next, age, not gender, is the main influence on consumers’ attitudes toward cosmeceuticals. While on average, women are more willing than men to pay a premium for cosmeceuticals tailored to their specific requirements—51 percent agreed they would, compared to only 45.5 percent of men—it is striking that there is such a small difference in readiness to spend between the genders. Traditionally, men are less willing than women to spend time and money on their appearance; but, this pattern of behavior does not apply as clearly to cosmeceuticals. The main reason for this is that male consumers tend to consider proven functionality to be the main attribute they look for in a grooming product. In a 2004 Datamonitor consumer survey, 67 percent of male respondents claimed this was the product attribute they considered most important. With active cosmetics, this becomes a much more important factor for women.

Finally, it appears a lack of trust may inhibit consumer uptake of cosmeceuticals. These products exist in a regulatory vacuum and, as a result, are often promoted using questionable or ambiguous claims such as “improves the appearance of fine wrinkles”. Claims such as these do not always encourage consumers to trust the manufacturers, as for many consumers they often lack a clear meaning. Indeed, some of these doubts may be vindicated. In August 2005, L’Oréal withdrew its television advertising campaign for its Anti-Wrinkle De-Crease, and for its Perfect Slim product in the United Kingdom after the Advertising Standards Authority found the company could not back up its claims satisfactorily.

Issues like this underscore why more than three-quarters of consumers have some degree of skepticism regarding the validity of manufacturers’ claims. A further 34.1 percent of consumers claim to simply not trust the products, whereas 36.6 percent express the more moderate view that they are unsure what the benefits might be. For such consumers, buying a cosmeceutical seems to be a gamble. However, manufacturers should also note having had an actual bad experience of cosmeceutical usage is the least frequently cited reason for not using them, with only 20 percent quoting this as a reason for eschewing cosmeceuticals.

With this in mind, there are several recommendations that may enable marketers to capitalize on the growing cosmeceutical market.

• develop products that target specific needs;
• develop skin care products targeted at specific body parts;
• offer consumers the means to fight the signs of aging;
• explain the product’s benefits clearly and back up claims;
• communicate the benefits of products clearly to build trust;
• avoid making “objectionable” product claims;
• leverage the use of natural ingredients;
• seek the endorsements of reputable scientific institutions;
• work with professional institutions;
• highlight medical connections of high-end brands;
• develop more convenient formats;
• highlight the use of innovative active ingredients;
• exploit R&D joint ventures;
• develop products to suit men’s attitudes; and
• focus marketing on functionality.