A Cosmetics Spending Spree for the UK

Although the UK is not immune to economic troubles, the beauty industry is benefiting from the British culture of recreational shopping. And new brands on the scene are keen to exploit this, says Julia Wray

Although still in the midst of a slow if sustained recovery, the UK economy is in a position of relative strength. And for the most part the beauty and personal care market reflected this in 2012. Commenting on prestige beauty, Anna Lukic, Business Analyst – Beauty at information and advisory services provider The NPD Group, says: “The market is usually related to the economy of a country and compared with Spain or Italy the UK economy is relatively strong. The prestige beauty market in France is growing too, but unlike the UK this is largely through price inflation.”

Figures provided by Euromonitor International show the UK beauty and personal care market grew 2.8% year on year to reach nearly £10.6bn. While this is not exactly a stratospheric increase, it is worth noting that UK beauty and personal care growth statistics for 2012 have been impacted by the lack of a tax hike in 2012.

According to market analyst Mintel Group, both 2010 and 2011 saw VAT rises at the start of the year, which added a slight uplift to consumer spending in the beauty and personal care goods category, but “with no such effect in 2012, we expect annual growth to have been a little lower in value terms and for real terms growth to have been virtually zero”.

Upcoming British brand Concoction offers consumers bespoke hair care products

The category was split evenly between beauty (48%) and personal care (52%) in 2012, but Mintel expects the beauty sub-category to post stronger growth than personal care in coming months to reach 50% of overall beauty and personal care spending in 2014. “We think beauty categories – such as skin care and fragrances – where there is arguably greater tangible justification for buying quality will outperform toiletries categories where consumers may be more tempted to substitute cheaper products,” says the company.

Nail polish company eve snow exemplifies the trend towards make-up with added benefits

And within the beauty sub-category, prestige beauty is proving the most robust segment, says Mintel, adding that “this is likely to result in a relative underperformance by retailers with a strong skew to either mass market beauty... or a broader beauty and personal care offer, such as grocers or drugstores”.

“Prestige beauty is doing very well in the UK,” confirms NPD’s Lukic. “From January to May 2013, the UK prestige beauty market grew 6.3%. And on a further positive note this is being driven by unit growth... as opposed to price increases.”

The UK prestige beauty market’s current buoyancy is in part related to the British ‘culture of shopping’, whereby “young women will meet up and shop as a hobby, or a social event”, according to Lukic. “You would think that during tough economic periods consumers would trade down... [and] people are watching what they’re spending in the sense that they will hold off buying a Chanel or Burberry bag, but they can still buy into that brand with make-up or fragrance,” she adds.

However, simply being premium is not enough, argues Mintel, adding: “Brand owners and retailers need to be premium in the right categories, as faltering [bath and body brand] Molton Brown appears to have found.”

Retail tales

According to Lukic, the UK has also benefited from the fact that its luxury beauty retail environment remains centred around department stores, rather than specific beauty retailers like Sephora. “Women who are shopping for apparel might be tempted to purchase beauty products too,” she explains, noting: “At the moment British beauty halls are really benefiting from their proximity to fashion.”

Indeed, although polarisation in the market means that discount retailers like Poundland and Aldi are also faring well, British department stores have been the standout success story of beauty retail in 2012/13, with many reaping the benefits of recent investment in their beauty halls. Last year, for example, John Lewis unveiled the results of Project Olympia, a £7.8m revamp of its Oxford Street flagship, which included a new beauty hall based on the idea of a town square. The department now hosts 26 premium brands including – for the first time in John Lewis – Jo Malone, Burberry Beauty and Topshop Make-Up. In June, meanwhile, Debenhams announced that it was to invest £25m in refurbishing its flagship store, also located on London’s Oxford Street. According to Debenhams, a highlight will be a complete makeover of the store’s cosmetics department, which will boast a new aesthetic as well as offering brands new to Debenhams like philosophy and Tom Ford.

French brand Bioderma launched in the UK in 2013

Sara Stern, Divisional Trading Director for Cosmetics at Debenhams, tellsSPCthat the new Beauty Hall will be unrecognisable. “Customers can expect to see an improved feeling of space with wider walkways and a more considered approach to layout, all designed to give customers better vision of what’s on offer and allow key promotions to stand out,” she says.

A key feature will be a new self-service area, stocking niche brands including CK One Colour and Cargo. “We know that our customers like to try new things and this area will give them the opportunity to explore at their leisure,” adds Stern.

But British department stores are not only focusing on their flagships; John Lewis recently conducted research into what products sold best in branches across the UK, which John Lewis’ Head of Beauty Amanda Scott says “illustrates Cambridge’s penchant for concealer and Edinburgh’s embrace of the brow, among other local characteristics”.

Likewise, Mark Tranter, Fragrance & Beauty Buyer at Selfridges, adds that keeping abreast of local beauty retail trends is vital to the success of its stores in Manchester and Birmingham.

“You need to recognise that the customer – across all areas not just beauty – is very different,” he tellsSPC. “Products like sleep-in rollers are hugely popular in our Trafford [Manchester] store; the customer there is younger and very beauty aware. Exchange Square [also Manchester] has a very premium offer. This is the store that has Clive Christian, the world’s most expensive perfume. And Birmingham is similar to Trafford, but is much more service orientated. We are undergoing a re-haul in October and there will be a nail bar, blow dry bar and a beauty personal shopper.”

Selfridges also sweetened its e-commerce offer with the launch of Beauty Box, exclusive to the online store, offering customers the opportunity to trial a cross-section of Selfridges’ brands.

Indeed, the use of e-commerce and m-commerce in the UK continues to rise; a recent survey by Videology UK found 14% of UK consumers now purchase beauty online, while a poll conducted by The Premium Market Report and YouGov revealed that ‘showrooming’ – the practice of visiting a retail outlet and then going home and buying online – was spreading to the British beauty market. Both surveys indicate the need for multi-channel beauty retailers to capitalise on the synergies between in-store and online, which several well-known names are already achieving.

Last year, for example, Alliance Boots marked the 15th year of its Boots Advantage Card by adding a new function to its website that allows members to redeem their Advantage Card points online – taking the scheme multi-channel for the first time.

Business as usual

Meanwhile, financial activity has been dynamic with global companies keen to invest in UK based ones and local players flexing their muscles internationally. Last year, US drug store chain Walgreens purchased a 45% stake in the UK’s Alliance Boots, a partnership Alliance Boots’ Executive Chairman Stefano Pessina says puts the companies in a “unique position to become the clear world leader in both pharmacy and pharmaceutical wholesale”.

Another Brit-centric M&A saw London based private equity company Manzanita Capital, which owns retail chain Space.NK. purchase a majority stake in niche fragrance brand Byredo. The resources provided by Manzanita are expected to assist the Swedish fragrance house in its international development.

And Byredo isn’t the only brand set on international expansion. The last few months have witnessed several overseas success stories make their debut in the UK. French skin care brand Bioderma launched in the UK through the independent pharmacy channel with five ranges selected specifically for UK consumers, while Racinne, a Korean biotechnology based skin care brand, hopes to capitalise on British women’s perception of Korea as a leader in this field. And in February Brazilian nail care brand Kure Bazaar entered into the UK via Selfridges’ The Paint Shop nail bar.

Equally, there is no shortage of UK based brands eyeing opportunities overseas; British beauty brand and retailer The Organic Pharmacy, for example, is set to open three new stores in Abu Dhabi, South Korea and Moscow as part of its emerging market expansion plan.

Strength in skin care

The Bubbles & Butters Company and Hotel Chocolat’s Cocoajuvenate range tapped into the trend for foodie bath and body products

Breaking down the market into product segments, Euromonitor statistics show that skin care remained the largest category in 2012, raking in over £2.1bn. Moreover, 2013 witnessed the launch of several unique home grown facial skin care brands including Merumaya, the first skin care range from beauty industry executive Maleka Dattu, notable for its exceptionally high levels and concentrations of actives. And AS Watson launched B., a 160-sku skin care and make-up brand, which was developed to give UK women the experience and guidance associated with premium brands at mass market prices through AS Watson-owned retailer Superdrug.

In body care, meanwhile, the trend towards gourmand products continued, which supported the launch of new brands from Brit companies Hotel Chocolat and I Love Cosmetics. Hotel Chocolat’s eight-sku range was a “natural progression” from treatments offered at the company’s Cocoajuvenate Spa in Saint Lucia and products contain NanoCoco, a superfine emulsion of cocoa, claimed to de-stress, relax and soothe the skin. The Bubbles & Butters Company, meanwhile, is the newest brand in the I Love Cosmetics stable and includes body butters, lip butters, bath bubbles and shower bubbles in chocolate, strawberry and mango flavours. The foodie concept even extends to the ‘ice-cream tub’ packaging.

One market that continued to thrive was male grooming; the category soared 5.4% in 2012 and benefited from NPD from brands like Nip + Man, the younger brother of Maria Hatzistefanis’ Nip + Fab, which features products including Manotox Anti-Ageing Moisturiser and body care serum Power Workout Fix.

Sun care on the other hand suffered with sales down 2.5% on 2011. The sector is being hit hard by the increased use of UV protection in skin care and colour cosmetics and sun care risks becoming a holiday category – particularly in the less than tropical British Isles.

Colourful progress

Aside from skin care, colour cosmetics is the largest beauty and personal care sector in the UK at £1.6bn. And according to Lukic, make-up is also the most dynamic of the three luxury beauty segments in the UK, with growth currently outstripping that of prestige skin care and fragrance. “From a price point perspective, make-up is more affordable than fragrance and skin care; the average price of a piece of make-up is £21.23, while fragrance is £31.65. Essentially, consumers want to buy luxury products, but they will still buy the cheapest options available,” she explains.

The close relationship between make-up and fashion has also helped boost sales. “Sometimes after quick growth, we’d expect to see a sector either stabilise or decline. But this has not happened with make-up and I think this has a lot to do with fashion brands either entering into or extending their presence in this area,” says Lukic.

Moreover, hybrid make-up with skin care benefits, such as Benefit’s fakeup moisturising concealer and Lancôme’s anti-ageing Teint Visionnaire Foundation are doing a good job of piquing consumer interest.

Another brand promising more than just colour is nail polish newcomer eve snow London, the brainchild of Yvette Snowden. The eve snow brand, which launched in spring 2013, currently comprises top and base coats, and 22 colours (including three new summer shades), all of which contain a ‘3-added’ complex of gingko biloba leaf, to stimulate nail growth; argan oil to soften cuticles, hydrate nails and help with the longevity of the polish; and vitamin E, which makes nails resilient to cracking and splitting. In addition, the colours contain very high pigment percentage for greater colour ‘pop’.

“With so many nail polish brands in the current market focusing on what they were taking out of their nail polishes, my focus was definitely to go against the trend and see what we could add to the nail lacquer which is how we established our ‘3-added’ philosophy,” Snowden tellsSPC.

“We’re living in an era of the conscious consumer where people want to know what’s in the products they’re using and they also want to know where it’s made; which is why it was so important to me to ensure eve snow was made in the UK, so I could oversee the whole production process and ensure only the best packaging and formula were used in our products,” she adds.

Full of body

Hair care performed particularly well in the UK last year increasing 4.9% to reach £1.4bn and there has been a vogue for both oils and scalp health products, such as newcomer Swell, a silicone-free volumising line said to stimulate hair growth by 93% and reduce hair loss by up to 50%.

Innovation in hair care also continues to thrive with the trend towards personalisation creeping into the segment. Founded by British entrepreneur Alex Epstein alongside beauty industry veterans Millie Kendall and Will King, Concoction allows consumers to create a bespoke ‘ShampYou’ product by combining one of four 230ml fragranced Base Blends with two of eight Superserum shots, namely: Back to your Roots, Beautiful Brunette, Curl Me Up, Gimme More Moisture, High Definition Blonde, Ravishing Red, Thermo-Straight and Turn up the Volume.

The growing popularity of niche fragrance brands like Bex London is indicative of UK consumers demanding more bespoke beauty solutions in general

Commenting on the inspiration behind the brand, Epstein says: “As consumers we are increasingly demanding and have become very adept in customising products in our everyday lives. Years ago you would walk into a cafe and order a coffee… We now walk into a Starbucks and order a tall, skinny, decaff, triple caramel macchiato with soy milk and an extra espresso shot. So consumers are now very ready and receptive to other customisation opportunities.

“We have a limited, highly edited range of skus that allow hundreds of different luxury bespoke couture blends to be created. We are giving the consumer a completely unique experience.”

Concoction launches in Selfridges Oxford Street later this month – where customers will be able to have their £14 shampoo blended at the Concoction Mixology Bar – and online at www.concoction.com. “Even when ordering online, our customers get to enjoy the mixologist experience when blending, activating and shaking their Concoctions at home,” Epstein explains.

Refining fragrance

Likewise, the desire for bespoke scents is what’s currently driving the UK fragrance market, which topped £1.1bn in 2012. “Increasingly [UK] consumers are turning their backs on the conventional luxe perfume brands and are seeking out the more unusual brands in an attempt to own fragrance with more integrity, complexity and personality, made often from finer quality ingredients and with less marketing hype behind it,” says Rebecca Goswell, founder of niche luxury fragrance brand Bex London.

“Consumers are becoming more discerning and they are starting to subscribe to an element of exclusivity, enjoying the experience of hunting out rare brands”

Bex London debuted last year with a line-up comprising four London themed fragrances: EC2, SE1, W1X and N6. Based on the city’s financial hub, EC2 is inspired by gin and tonic and the tradition of the barber, while SE1 evokes the area’s historical importance as part of the spice industry. WIX, meanwhile, captures the elegance of Mayfair, reworking Victorian ingredients like violet, muguet, jasmine and iris into a more modern format. Finally, Highgate Village-inspired N6 is a modern chypre that replaces the traditional citrus top note with bergamot and English fruits.

“Arguably, no other global major city can compete [with London] in terms of its vibrancy, diverse character and culture,” says Goswell. “The idea of postcodes seems to touch a chord with the people I talk to – Londoners are very personally attached to their area of the capital.”

Goswell, who is currently working on a Knightsbridge-inspired fragrance, SW1X, with Francois Robertet and a Notting Hill variant, W11, with Azzi Glasser, says the growing preference for exclusivity among UK fragrance consumers will particularly benefit home grown brands. “The British as a race are tenacious, innovative and brave. We break rules and take risks where others would chose to embrace convention. It will be this determined vision and almost anarchistic attitude... that will slowly start to turn heads. The art of perfumery is very much alive and is increasingly about personal expression and individualism in a world where we can have everything at the touch of a button. Consumers are becoming more discerning and they are starting to subscribe to an element of exclusivity, enjoying the experience of hunting out rare brands.”

Indeed, moving forward, the UK beauty and personal care industry at large can expect to contend with a breed of consumer more focused on quality and value for money, and armed with a savvier approach to shopping than ever before. And for those brands that are rising to the challenge, the future is bright. After all, the British just love to spend, spend, spend.