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Skin care, science and the secret of eternal profit Financial
Times Who needs Botox when you can have Boswelox?
Instead of having chemicals injected into your forehead to smooth
wrinkles, simply apply L'Oréal Paris Wrinkle De-Crease with Boswelox, and
watch your face rejuvenate. Wake up, you men who thought that moisturiser
was just oil-in-water emulsion with some added scent! Moisturiser has
matured into anti-ageing cream, complete with active ingredients,
molecules and enzymes developed in laboratories. The ageing baby-boomer
may not be able to turn back time but here is a way to slow down its
effects. Who could resist that brand promise? Not the
millions of women - and increasingly men - who have ensured that
anti-ageing products now make up more than half the skin care market. And
not Procter & Gamble, which would like to get hold of one of the
world's biggest skin care brands: Nivea, owned by Beiersdorf of Hamburg. Beiersdorf may not have discovered the secret
of eternal life but it and L'Oréal have done something else. By combining
a bit of science with a lot of marketing, they have taken traditional mass
brands sufficiently upmarket to be able to obtain premium prices, without
incurring the distribution costs of older luxury names. Five years ago, Beiersdorf came up with an
anti-ageing enzyme called Q10 and used it to remodel Nivea. You can buy
Nivea Visage Coenzyme Q10 plus Wrinkle Control Day Crème at the chemist;
even at four times the price of a blue pot of plain Nivea Crème, it is
cheap by comparison with many potions in department stores. That explains the tussle that has broken out
in The growth of mass-market anti-ageing skin
creams reflects a wider phenomenon in consumer markets - that of mass
luxury. In their new book Trading Up: The Transforming Power of New
Luxury, Michael Silverstein and Neil Fiske identify a range of
brands, from Samuel Adams beer to Diesel clothes, that have made a similar
shift. They argue that such brands obtain higher
prices because they evoke an emotional response among the 47m
middle-income households in the Their market rests on one of the biggest
emotional needs of all: to stay young. And the baby-boomers lack the
self-consciousness of previous generations, which were reluctant to spend
money to do so. "Paying £20 for a pot of moisturiser would have
seemed ludicrous a decade ago, but not now," says Martin Hayward,
chairman of the Henley Centre, the marketing consultancy. This has transformed skin care into the
biggest growth area for cosmetics companies, outstripping make-up or
fragrances. Goldman Sachs says that skin care sales are growing at 9 per
cent a year, with margins of 20 per cent; the bank estimates the value of
Beiersdorf's cosmetics division, dominated by Nivea, at €7.6bn (£5.3bn). Not every cosmetics group has gained equally
from this shift. Older luxury brands such as Estée Lauder and Clarins,
which rely on elite distribution - such as dedicated stands in department
stores - have been squeezed from below by L'Oréal and from above by
"cosmeceutical" brands endorsed by dermatologists. A recent issue of 1oz bottle of Z Bigatti Re-Storation Deep
Repair Serum, one of a range devised by Jennifer Biglow, a But only a small proportion of the world's
fortysomething women live on the There are two advantages to staying in the
middle. One is the lower cost of distribution: Michael Silverstein, a
partner at Boston Consulting Group, estimates that department stores take
a margin of 52 per cent, against 23 per cent for high-street stores -
before the cost of employing sales assistants. Even the stores are
recognising that the benefits of dedicated service may have been
overplayed: Au Printemps of The second advantage of the middle market is
that companies can contain their research costs as a proportion of
revenue. "You have to remember that these companies spend 3 per cent
of sales on research and 25-30 per cent on marketing and
advertising," says Jacques-Franck Dossin, analyst at Goldman Sachs.
Anti-ageing creams do contain proprietary versions of ingredients, such as
vitamin A to stimulate collagen production and alpha-hydroxy acids to peel
skin. L'Oréal makes much of the 500 patents that it registered last year,
and the €470m it spends annually on research. But these companies have
no reason to become scientific institutes. Pharmaceuticals companies, by
contrast, spend 18 per cent of sales on research, then have to go through
rigorous procedures to gain approval for new drugs from the FDA. Enzymes
that will be used only in cosmetics do not need approval. There is a lesson here for other consumer
goods groups. By using just enough science, and plenty of marketing, the
cosmetics companies have moved into a sweet spot in the market. Their
products have gained mystique and emotional appeal and the companies have
not had to invest in expensive sales methods. Of course, we all know L'Oréal's Boswelox is not Botox. We might even suspect soap and moisturiser would be just as effective. Still, for a few dollars more, here is a product that may turn back the years without breaking the bank. Who could say No to that?
Copyright
© 2002 Global Action on Aging |
