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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.

Three Key Drivers for Innovation in Beauty in 2015

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With the new year underway, it is time to reflect back on the most important innovation drivers which influenced the beauty market in 2014 and are expected to dominate new product development for the industry in the coming months; namely product customisation, internet-born brands and Asia’s impact on beauty innovation.

Customisation in beauty continues to drive innovation

Customisation has already been a prevailing trend for the industry during the last several years, driven by a greater demand for higher-efficacy alternatives and more personalised offerings; from completely bespoke skin care and foundation, to products that target specific consumer groups (men, children, over 60s) and those that promote specialised functions (for eyes or neck, for example) and concern-based solutions.

Multinational brands and niche players alike have fully embraced this customised approach in their innovation strategies, as some of the most notable launches in 2014 exemplify. Clinique’s Smart Custom-Repair Serum has perhaps achieved the biggest commercial success. The product was introduced in the US in July with a global release in autumn and the technology behind its formulation is protected by 37 patents. It claims to be “smart” enough to identify each consumer’s skin-specific needs and help address them. While it is early days to speak of precise sales figures, Estee Lauder expects Clinique Smart to become one of its pillar skin care products, comparable to the Even Better franchise.

The most “bespoke” of all innovations in 2014 was arguably Geneu, a British niche brand created by a professor of engineering Christofer Toumazou and a musician (Nick Rhodes of Duran Duran). While the brand is not the first in its kind to use DNA testing, the technology behind it, “Beautylab on a microchip”, won European Inventor of the year for Professor Toumazou. The brand uses a DNA test to create a targeted “Geneu U-Plus” profile which advises customers on the choice of specific serum brands which best suits their profile. The increasing availability of customised and even personalised skin care through questioners and DNA testing and photo analysis is indicating the length that skin care players – especially on the premium price spectrum – have to go through to gain competitive advantage. With anti-ageing expected to add over US$6 billion globally by 2018, consumers’ high expectations of skin care products’ efficacy and performance will only intensify, as will the trend for customised solutions.

Internet-born brands take on traditional beauty

While the internet has been the source of many developments in the beauty industry, including pure retailing,  product sampling (beauty boxes) and new ways of product marketing, it has also evolved as the birthplace of a new breed of beauty brands, including The Dollar Shave Club, Glossier and Beautycounter to name but a few. It is a movement that has been inspired by the fashion industry where companies like Warby Parker and Bonobos have pioneered in creating their brands and selling their offerings exclusively online, and it is most pronounced in the US where all these brands originate. The US, beauty’s largest market, is expected to bring revenues of over Tweet-ThisUS$75 billion in 2015, US$25 billion more than the fast-growing Chinese market, and thus remains the birthplace of many beauty trends from the nail polish craze to online-exclusive beauty brands.

The most innovative brand concept of 2014 was Glossier, which was created by Emily Weiss, founder of beauty blog Into the Gloss. The brand is unique, not only due to its Instagram launch and its exclusive online distribution from Glossier.com, but due to its philosophy. Glossier’s philosophy is that it is not a brand but a community. It has been created on the back of consumer feedback from Emily Weiss’s blog and consists of four product offerings only, which are a moisturiser, a balm, a facial mist and a foundation, and mainly sell as a set but can be bought individually too. New products will be introduced to the market every quarter. Furthermore, Emily Weiss has managed to raise US$8.4 million for her brand so far, indicating its strong commercial credentials. Brands with a strong story or emotive associations like the Glossier engage more closely with consumers which can help them differentiate themselves from competition. Such strategies are especially important for new and niche players that do not necessarily have the marketing budget to raise awareness for their brands in the traditional marketing channels.

The wider consumer reach online, the faster speed that news/marketing travel and the high degree of interaction both with and among consumers creates a favourable environment for beauty brands to build consumer engagement. While internet retailing in the US reached 6% of total beauty sales in 2013, it is still much lower than the 10% share of the total apparel market, indicating the high potential for online beauty.

Asianification of beauty boosts customisation

The rise in popularity and availability of Asian and more specifically South Korean beauty has helped innovation adopt a more complex approach. South Korean brands, such as Hera and Etute House are well-known for their multi-step skin care portfolios, which include a number of products such as cleansers, essence, pre-serum treatments, emulsions, and eye serums, all intended for individual application.

Both AmorePacific and LG Households & Homecare - South Korea’s top two leading players - have stepped up both their regional and international expansion. The backlash against Japanese brands in China favoured South Korean brands, with AmorePacific in particular more than doubling its share since 2008. While both companies are still currently out of the top 20 global beauty companies, they have already made the top 10 in Asia overtaking Amway, Kosé and Estée Lauder to become number seven and eight respectively.

The growing international availability of these brands, from Laneige in Target in the US to Dr Jart ++ in the UK through Boots, is expected to shake up the competitive field in these countries, as Western brands seek to keep their competitive lead over these niche brands. Innovation has already been majorly impacted by the popularity of South Korean beauty, a fact cemented not only by the adoption of BB creams since 2011 across most international brands but also by the addition of totally new concepts. As an example, La Prairie’s launch of an emulsion - La Prairie Anti-Ageing Emulsion SPF 30, is likely to be replicated by other international players in the foreseeable future.

Learn more in our Top 10 Global Consumer Trends of 2015 white paper

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