Disruptive Concepts Rewriting the Rules in Beauty: Part I

Premium route in developed markets precedes rise of the niche segment

As BPC prospects increasingly favour the premium segment, the opportunity for niche brands is enhanced. Meanwhile, as mass brands feel the squeeze, it becomes imperative for brand owners to improve their price-value equation.

“Old” niche brands among industry growth drivers

Trendsetting niche brands were among the best performers over 2010-2015, fuelling M&A interest among key industry players. While their success can be attributed to a unique standing in the market, growth may falter unless these brands are reinvented, as new disruptive entrants move in.

High income linked to discretionary spending but education spawns interest in niche in the mass segment

Euromonitor International’s Beauty Survey gives evidence of greater demand for luxury labels among high-income earners. On the other hand, while this demand can be linked to educational attainment, low-income professionals seek authenticity in their products, opening prospects for mass niche brands.

Niche beauty thrives as they leverage a wave of factors driving the beauty industry

Small brands have been among the pioneers in spearheading evolution in the beauty industry manifested in product proliferation based around green and clean living, hybrids, wellbeing and multicultural influences among others. This is fuelling competitive pressures for legacy brands such as Johnson’s.

M&A by cash-rich beauty companies fuelling industry polarisation

L’Oréal, Estée Lauder and Unilever have been among the most active players in pursuing niche labels to profit from their novelty and high value generation, consolidating their industry position, as mid-sized rivals become more distant.

Concentrated markets hold potential for disruptive entrants

In markets where few brands hold a significant category share such as oral care in Western Europe, the potential for niche entrants is high. Conversely, in fragmented markets, growth by acquisition is a better suited strategy, while seeking growth through targeted customisation.