The world’s population is becoming wealthier and more urbanized, which has created excellent opportunities for growth in the global beauty industry. However, while beauty and personal care products are thriving, sales of nutricosmetics remain largely concentrated in Japan and China. Euromonitor International analyses have uncovered the main reasons behind the regional disparity, the impact of regulations and the key lessons that can be learned from the failure of past product launches.
The Promise & Potential for Beauty-from-Within
As life expectancy continues to rise, the aging of the global population is having a significant impact on consumer health. The cost of treating ailments and diseases in old age is high and a huge burden, not only to state healthcare systems, but also to consumers. A strong health and wellness trend is pushing sales of organic, fortified/functional and naturally healthy foods and beverages ahead of consumer health products, affecting the dietary supplement category.
Numerous health practitioners and government-sponsored health campaigns are pushing people toward healthy foods and beverages. Consumer interest in wellness is no longer just about looking good and exercising, but also about holistic and preventative health. With aging being one of the defining macro trends in 2011, brands have much to gain by catering to aging consumers around the world.
Aspects of self-care include the use of self-medication as a preventative measure and general health maintenance through healthy eating. Although many consumers are aware of the link between eating healthily and delaying the aging process, many struggle to eat the recommended amount of fruits and vegetables needed to achieve this. Nutricosmetics, therefore, are designed to help fill this gap.
While there have been more high-profile launches in beauty foods and drinks, beauty supplements account for the vast majority of nutricosmetic sales. Supplements also increased their already sizeable lead between 2006 and 2010. The main reason for this is that supplements represent a far more established format for treating specific problems—for example, taking vitamin D to help maintain bone health. As a result, consumers are more familiar and comfortable with the concept of beauty supplements than beauty foods.
Skin Care & Nutricosmetics
Skin care is by far the largest category in beauty and personal care, accounting for a 23% value share of the global market in 2010, with sales of $88 billion. Nourishers/anti-agers are set to post by far the strongest compound annual growth rate (CAGR) in skin care of more than 5% between 2010 and 2015. This rise in nourisher/anti-ager sales and the strong position of skin care within beauty and personal care highlights the existing demand for effective anti-aging treatments and shows the potential for nutricosmetics that offer skin benefits, especially anti-aging.
Skin care products include sophisticated ingredients, and a key role of anti-agers is familiarizing consumers with these ingredients. Collagen and zinc, for example, are ingredients that have been used in skin care for many years.
Skin care products are also becoming increasingly segmented according to the type of problem they treat, as well as targeting different parts of the body. This trend is starting to proliferate in nutricosmetics, with products offering similar targeted benefits.
Japan Dominates Nutricosmetics
With sales of $1.3 billion in 2010, Japan remains the largest market globally for nutricosmetics. Unlike its ailing beauty industry, which is set to see declines in many areas through 2015, its nutricosmetics industry is thriving. Beauty supplements accounted for 18% of dietary supplement sales in 2006, and this figure rose to 19% in 2010.
Many ingredient trends and product innovations originate in Japan. The trend for adding collagen to everyday foods and drinks, such as Nescafé with Collagen from Nestlé, has caught on in other Asian countries, with products such as Vitagen Collagen drink hitting the Malaysian market recently.
Beauty foods and drinks in Japan enjoyed retail value sales of $777 million in 2010. The main reason for Japan’s strong lead in global nutricosmetic sales is the country’s sophisticated legislation (FOSHU or “Foods for Specific Health Use”) system, which governs the sale of many nutricosmetic products. The Japanese Ministry of Health and Welfare assesses the quality of products and only issues the FOSHU seal of approval if they meet its stringent standards. The popularity of nutricosmetics in Japan is undoubtedly largely due to their widespread availability—specialist retailers also lend credence to the industry.
China: The Next Major Nutricosmetic Market
China’s nutricosmetic sales of $813 million in 2010 look set to rise dramatically in the future. China saw the strongest growth of its beauty supplements industry between 2006 and 2010, with an increase of $270 million. As a result, there have been new entrants to the Chinese market, such as Innéov.
The concept of beauty from within sits well with traditional Chinese medicine. Traditional herbal dietary supplements such as E Jiao, Lingzhi and Aweto are widely recognized by consumers in rural areas as traditional Chinese products benefiting overall well-being.
As consumers in China become more affluent, they are in a better position to afford nutricosmetics for the first time. Annual per capita disposable income in China doubled from $800 in 2003 to $1600 in 2008, and is set to rise again to $2500 by 2013.
Dietary supplements registered current value growth of 9% in 2010, up from just 5% in 2009, thanks to growing consumer awareness, more diversified new product innovation targeting different consumer groups and heavier investment in marketing to help promote sales.
Growing Sales in the BRIC Countries
In order to grow, nutricosmetic producers must tap into these four markets (Brazil, Russia, India and China) because together they are set to account for 54% of global beauty and personal care value growth between 2010 and 2015. There are strong opportunities for nutricosmetic sales to be driven by the growing middle-classes in the beauty industry’s up-and-coming new markets, where disposable incomes are rising rapidly.
While uptake in China is already strong, there is a long way to go to win over consumers in Brazil, which will be by far the biggest beauty market by 2015. In 2010, Brazilian expenditure on beauty supplements was just $13 million, despite its dietary supplement industry being worth more than $400 million.
India is characterized by sales of very basic beauty and personal care products and at present has very low overall sales of dietary supplements. As a result, nutricosmetics are not likely to take off in this market anytime soon. Over the long term, consumer education will be the key to success for nutricosmetics in the BRIC countries.
Sales Falling in U.S.
The nutricosmetics industry is still relatively underdeveloped in many countries and heavily concentrated in Japan and China. However, despite clear evidence that consumers are willing to pay a premium for their looks, and skin in particular, consumers in North America and Western Europe on the whole do not seem to be buying into the concept of nutricosmetics.
Due to stringent regulations, the U.S. market is lagging behind, accounting for only 2% of total global beauty supplement sales. In 2010, sales of beauty supplements in the U.S. totalled only $60 million, meaning the U.S. market is only 5% the size of the Japanese market, despite having a far larger dietary supplement industry (almost $11 billion in 2010) than Japan (nearly $7 billion). Clearly, then, it is not an aversion to supplements in general that is the issue for U.S. consumers, but rather a particular problem with beauty supplements, as beauty pills accounted for less than 1% of all dietary supplement sales in 2010.
To make matters worse, sales of beauty supplements are on the wane in the U.S., having fallen to their current value size, and down from $85 million in 2006. This suggests that consumers initially gave them a try and then stopped purchasing them. Sales increased marginally at the height of the recession in 2009, suggesting that the overall decline in sales was not a result of the economic crisis in the country. Recent launches such as Borba’s nutricosmetics range (which it has dubbed the “inside out beauty solution”) on sale at U.S. retail chain Walgreens may help to drive sales.
Formatting for Success
While beauty pill formats are gaining acceptance from consumers, it seems that certain beauty foods are finding it harder to win over consumers. The much-hyped Dove Vitalize (dark chocolate enriched with B vitamins) and Dove Beautiful (containing vitamins C and E, biotin and zinc) chocolate ranges were launched by packaged food giant Mars in the U.S. a few years ago. Industry insiders feted the advent of beauty chocolate as something consumers would pick up on.
However, despite significant investment in product promotion, including association with New York Fashion Week and ample financial backing of the parent company, the high hopes largely failed to materialize, and the product was withdrawn after just a few months. U.S. consumers did not buy into the concept because, in general, they doubted the health benefits of chocolate, viewing it primarily as an indulgence, and one that should be limited in order to maintain a healthy diet.
The beauty foods that perform best tend to be those consumers perceive as being naturally healthy, such as flavored water, juices and yogurts. This is demonstrated by the fact that bottled water is by far the best-selling format in beauty-from-within foods and drinks. With sales of $737 million globally in 2010, the category has increased its already sizeable lead from $718 million in 2006. The second largest beauty food and drink category is dairy, with global sales of $119 million in 2010. Of this figure, the vast majority is accounted for by yogurt.
In some areas of the world, particularly the EU, product format may heavily depend on market regulations. The October 2010 launch of Nestlé’s Nesfluid functional beverage highlights the direct impact that European Food Safety Authority’s (EFSA) decisions are having on new product launches in nutricosmetics. Selenium, zinc and vitamins C and D are all ingredients that have recently been approved by EFSA for use in fortified and functional foods and drinks with specific health claims.
Nestlé based its product range around these ingredients and also incorporated others that are more widely recognized by the public as offering health benefits, such as green tea. Its price tag of €1.65 per bottle compares favorably with other bottled beauty drinks such as Glowelle ($7 per bottle), which seems to have gone in Nesfluid’s favor. The product recently increased its penetration as it began selling and advertising on flat screen televisions in bakeries. Part of this transition is undoubtedly due to Nestlé’s sizeable spending power, yet it is clearly a step in the right direction if nutricosmetics are to reach the mainstream.
Indeed, targeting the right groups is key to future success in the nutricosmetics market. Currently, growth in nutricosmetics is being generated by two consumer groups that were not previously targeted—men and young women. Until recently, 30- to 60-year-old women represented the prime target audience for nutricosmetic manufacturers. However, men are beginning to catch on to the trend. There are now numerous nutricosmetic products available for men, with most focusing on the issue of male hair loss, such as Wellman Tricologic. This category is likely to see further growth, as remedies for hair loss are far more limited than those available for anti-aging, for example.
Younger women in Western markets are also trying nutricosmetics at an increasingly early age. In fact, it is not uncommon for women in their 20s and late teens to be taking them, primarily as a measure to stave off the signs of aging.
Perfectil, a supplement for skin, hair and nails is one such product attracting younger consumers because it is also recommended to treat acne. Similarly, Help: Clear Skin is a new range specifically developed to help blemished teen skin and could help drive sales among the lucrative teen market, further diversifying the nutricosmetics consumer base.
Nutricosmetics are also expanding in terms of the benefits offered to consumers. In terms of skin benefits, anti-cellulite properties feature in new launches in Western markets, while skin whitening is prevalent in Asia.
Learning from Past Failures
Despite the backing of large multinational companies and their generous marketing budgets, a sizeable proportion of nutricosmetic launches have been taken off the market. Two such examples are Essensis from Danone and Glowelle from Nestlé.
Key factors that can have a negative impact on sales are high prices, lack of consumer education, selling in the wrong channel or flawed placement within a store. One of the main issues with Essensis was that it was sold alongside many other yogurts all claiming health benefits, but priced at a much higher price point. As a result, consumers compared the price of Essensis with standard yogurts.
Nestlé’s Glowelle remained on sale for around three years, from its launch in 2008 until its withdrawal in February 2011. The first major reason for it being pulled from the market was the price. At $7 per bottle, the product seemed expensive to consumers in comparison with other functional beverages.
The second issue for Glowelle was its distribution. In its key U.S. market, the product was primarily sold in department stores. Although this channel has seen some recovery in the U.S. since the recession, posting value growth of 3% in 2010, it is still making up for stagnant or negative growth since 2006.
Another key reason for the withdrawal of both Glowelle and Essensis was the key target markets in which both products were sold. Consumers in both France and the U.S. simply did not buy into the concept of nutricosmetics, unlike their Chinese and Japanese counterparts. It is unclear how well these brands would have fared in these Asian markets, but invariably competition from well-established brands there would have been stronger.
On the Horizon
While sales of nutricosmetics look set to increase by 2015 in some key emerging markets like Mexico and Brazil, the industry will very likely continue to be driven overwhelmingly by Japan and China. The main change is that by 2015 China will start to show signs of replacing Japan as the world’s biggest nutricosmetic market.
As disposable incomes rise in the BRIC markets and grooming regimens become more sophisticated, interest in nutricosmetics should begin to increase, which manufacturers should realize now and invest heavily in these key markets.
About the author: Carrie Lennard is a beauty and personal care analyst at Euromonitor International, Chicago, IL. She can be reached at firstname.lastname@example.org.
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