Health and Beauty We examine the trends underlying the growth of the global marketplace in health, beauty and hygiene. Our analysts will point the way forward by highlighting critical innovations and behaviours that are driving industry evolution.

Breakthrough Innovations and Emerging Markets Give Hair Care a Boost

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Hair care globally experienced a slight slowdown in 2013, with growth weakening from 5.5% in 2012 to 4.9%, in line with the decelerated pace of growth in the overall beauty industry. However, hair care remained comparatively more robust than skin care and colour cosmetics, which posted even stronger slowdowns. A surge in innovation has helped hair care to better withstand current market challenges.

Innovation has the Greatest Impact in Conditioners

Thanks to certain breakthrough innovations, hair care has been gradually evolving from a regular personal care staple to include more sophisticated products targeting specific hair care issues. The conditioners category has benefited significantly from these innovations, seeing the introduction of leave-in conditioners on a wider scale in various types of formats, including serums and masks. Hair oil is now moving beyond conditioners to colourants. Garnier’s hair colourant brand Olia is based on an ‘Oil Delivery System’, using oil for the penetration of pigments rather than ammonia, which is believed to have a harsher effect on hair. These novelties helped colourants to record the second strongest growth in percentage terms, after conditioners, at a little over 30%. In absolute terms, however, it is shampoos which led growth in hair care. While shampoos benefited from innovations, growth was mainly driven by increasing penetration in emerging markets. Nearly 90% of the global growth in shampoos in 2013 derived from emerging markets.

Emerging Markets Drive Growth of Shampoos

The usual markets of China, Brazil and India contributed to the growth of shampoos in 2013, but new frontier markets such as Turkey, Indonesia and Iran also recorded strong gains. In Turkey, Indonesia and Iran, consumers have been trading up to more premium and sophisticated Western brands on account of rising disposable incomes as well as the wider availability of foreign brands. India is an interesting case as growth has been propelled by the increasing penetration of shampoos in rural areas, which account for two-thirds of India’s one billion plus population. Consumers in rural India are gradually warming to Western-style hair care regimes, replacing soap with shampoo. A gradual uptick in this large untapped consumer base is translating into significant gains in absolute terms. In fact, India is projected to climb up the rankings from its current 10th position to fifth place in the global hair care market by 2018. Despite these developments, Brazil is the key focal point.

Brazil the Key Focal Point for Future Growth

Brazil accounted for 20% of global hair care growth in 2013, this being the largest contribution of any market. It is also projected to overtake the US as the largest hair care market in nominal terms by 2017. Consequently, Brazil remains a key focal point for leading hair care players, including Unilever, L’Oréal and Procter & Gamble. However, they are currently facing competitive challenges from local players which have been gradually developing greater sophistication across all hair care categories. Furthermore, a Brazilian preference for local brands, combined with these brands’ competitive pricing at a time of rising macro-economic challenges, has been providing local players with the necessary competitive edge. Multinationals could address these challenges by introducing more advanced and sophisticated products from their portfolios in Western markets. Of particular benefit would be keratin shampoos and conditioners, which claim to straighten hair.

Developed Markets Continue to be Important in Hair Care

Although Brazil is a focal point for future growth, developed economies also play a key role in hair care as these markets account for 50% of the global category. The issue, however, is that Western markets have reached a high level of maturity and growth can only be induced by means of breakthrough innovations. Manufacturers have aimed to drive growth by introducing products inspired by other beauty categories, mainly skin care and colour cosmetics. Hair care has become more performance-driven, motivated by efficacy claims in skin care. Some hair care launches have also aimed to emulate the excitement of colour cosmetics. For example, hair chalks, a form of hair colourant that comes in various shades, are designed to allow consumers to change their hair colour more frequently, allowing them the option to match hair colour with their nail polish, lipstick and accessories. The increasing level of sophistication in hair care has led to a gradual premiumisation of the category. However, in spite of this, hair care is predominantly characterised by mass products, with mass hair care accounting for nearly 90% of global category sales. This is because hair care is still viewed as a staple category and consumers so far have been unwilling to pay too high a price, regardless of the level of product sophistication.

Further Segmentation Anticipated

An important question going forward is what level of sophistication are these markets likely to witness. While hair care has been successful in better targeting specific hair care needs, there remain some untapped areas. For example, products for grey hair remains a largely unexplored area and even though there have been launches to address hair loss, this also continues to be an underdeveloped category. Going forward, innovation is expected to be driven by increasing segmentation, targeting less explored hair care concerns with even stronger scientific claims.

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