b book 2009
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What\'s new with NPD Beauty - direct from the experts themselves.TRANSCRIPT
the beauty book
REBUILD: BEAUTY’S NEW CALL TO ACTION
RETHINK:CONNECTING INSIGHTS, INNOVATION, AND VALUE
january 2010www.npd.com
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Welcome to the fourth edition of the B Book.
We find ourselves in one of the most interest-
ing, although challenging, times, particularly
for the beauty industry. The tried-and-true
solutions aren’t having the same impact
with consumers, driving growth as we have
previously experienced. Collectively we are on a quest to
rebuild the foundations of the business by reinvigorating
the relevance and value of beauty to the consumer.
At this year’s HOP, we explore the current scenario and
offer strategies to adapt to the new realities that we find
ourselves in today. NPD’s latest tools help provide our
clients with the ability to do this: The Beauty Cross
Channel Monitor taps POS data from both IRI and NPD,
delivering insights into the volatile prestige and mass arena.
Retail tracking for the fine department store sub-channel
focuses on the nuances of the specialty market. Our
Market View Current Conditions Report and Store Level
capabilities help companies analyze business performance,
pricing strategies, and product assortment at a more
granular level, in order to make better informed strategic
and tactical moves in the marketplace. And we remain
committed to listening to your needs for relevant consumer-
based topical reports and expanded consumer insights.
In this year’s B Book you’ll find the kinds of insights and
analyses you’ve come to rely on from NPD, but in a different
package. Look for Karen Grant’s comments on the state
of the industry, Claude Charbit’s perspective on NPD’s
global expansion, and more detail on our new Market
View tools to sharpen your view of the marketplace and
give you a competitive edge.
As anyone who has ever re-modeled a kitchen or bathroom
will attest, rebuilding on any scale is not easy. It takes
time, energy, and resources – but the end result can be
stunning and, well, amazing. My team and I look forward to
working with you as we undertake the challenges ahead,
seeking to understand how the changes in the marketplace
are affecting consumers' attitudes and behaviors and
redefining the value proposition to meet their needs.
Diane NicholsonPresident, BeautyThe NPD Group
Best wishes,
GREETINGS
Many thanks to the sponsors who have helpedmake this year’s event successful.
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the beauty book
Claude CharbitGlobal President, Beauty
Diane NicholsonPresident, Beauty
Karen GrantSenior Global Industry Analyst and Vice President, Beauty
Lori MonacoVice President, Client and Business Development
Elise MarshallSenior Account Manager, Business Development
ContributorsJulie Stewart, Vice President, Custom ServicesSusan Crescenti, Executive Director, Marketing
Joanne McNaboe, Senior Category Specialist, SkincareDenise Squicciarini, Senior Manager, Custom Research
Nicole Wollack, Specialist, Product Management
Client Development TeamSusan O’Donnell, DirectorJudy Sone, Senior Account ManagerCarolyn Glassberg, Account ManagerChristine Banno, Associate Account ManagerLindsay Beyert, Associate Account Manager
OfficesHeadquarters, 900 West Shore Road, Port Washington, NY 11050, 516.625.0700
New York City, 250 Park Avenue South, 7th Floor, New York, NY 10003, 866.444.1411Milan, Viale Edoardo Jenner, 53, 20159 Milano, Italy, 39.02.855.006.1
Paris, Tour Franklin - 29ème étage, 100/101 Terrasse Boieldieu, La Défense 8, 92042 Paris La Défense CEDEX, France 01.41.97.25.00Beijing, Room 616, Building B, NanXinCang Business World, Jia 22, Dong Si Shi Tiao, DongCheng, Beijing, China, 100007, 86.10.6409.6603
Madrid, Sucursal en España, C/Pedro Teixeira 8 - 1st Floor, Madrid, 28020, Spain, 34.91.4.119.445
To subscribe to NPD’s email newsletter, NPD Insights, visit www.npdinsights.com.For information about NPD products and services, contact Charles Camaroto at 866-444-1411 ([email protected]).
Public RelationsDora Brunette, 516.382.6190
Lucy Boccadifuoco, 516.625.6103
6%6%
7%7%$ Share of
Prestige
Beauty
% Population
4%4%
7%7%
$ Share of
PrestigeBeauty
11%11%
12%12%
$ Share ofPrestigeBeauty
% Population
4%4%
6%6%
$ Share ofPrestigeBeauty
% Population 20%20%19%19%
$ Share ofPrestigeBeauty% Population
11%11%
16%16%
$ Share ofPrestigeBeauty
17%17%
13%13%
4%4%5%5%
$ Share ofPrestigeBeauty% Population
% Population
% Population
$ Share of
PrestigeBeauty
% Population
Consumers face more choices than ever, yet their spending
decisions are much more considered. At the same time,
retailers are evolving in ways that can make it harder for a
brand to stand out from its competition. The need to do
more with less is a continuing theme, but one that offers the
opportunity to reinvent, innovate, and focus our resources.
Going beyond the national view of NPD’s Beauty Trends®
POS data can help manufacturers and our retail partners
manage and deploy precious resources. Every market has
different triggers that drive category and brand dynamics. We
know that no two doors or consumers behave alike. Analyzing
business performance, pricing strategies, and product as-
sortment at a more granular level can help you make better
informed strategic and tactical moves in the marketplace.
Store Level capabilities for the beauty industry have arrived –
now you can dig deeper to answer your business questions.
With the newMarket View Current Conditions Report, which
presents detailed, Store Level data, you’ll have the more
granular view of product and brand sales performance that
you need for developing fact-based distribution strategies.
Our Store Level information addresses business questions
like these:
� Can NPD help me quantify and track how my change in
spending or shift in dollars for fragrances influences my
own business and competition? Should I add incremental
staff or support dollars to a specific sales territory, and
what kind of impact might I expect?
� How do I compare to my competition in just the doors
I am selling in?
� In which market might a new product launch be most
productive for mascara or a new foundation?
� Can you help me understand which are the most
important markets/DMAs for skincare and how my
brands compare?
� Is there greater sensitivity to my promotions in certain
regions or markets?
� What effect will changing price on certain items have
on my sales? Does this differ by region?
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REINVENT, INNOVATE, AND FOCUSYOUR RESOURCES
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Lori Monaco
by Lori Monaco
If all markets, sales territories, and regions performed
the same, our jobs would be easy. Understanding what the
dollar sales potential is by expanding a brand’s penetration
in specific geographies will help maximize revenue.
Knowing whichmarkets will get you there fastest is valuable.
Understanding whether you have maximized within a
category, segment, or sub-segment can help you refine
strategies and tactics.
In this example, we see that Brand A’s skincare market
share on a national level is 14%. But as we go more
deeply into the data, we learn that this brand’s skincare
market share and ranking differ by region – the East
North Central, Pacific, and New England regions are
below the average. If Brand A could achieve its national
market share in these regions it would achieve an incremental
$16.75M annually for this segment.
Dollars per store selling shows you how your brand is
doing relative to competition based on the universe of
stores each brand is selling in. This is an effective way to
measure how productive your brand is relative to competition
or across geographies and how this has changed over
time. Brand F becomes the number-two ranked U.S.
makeup brand on a dollars per store selling basis!
Interestingly, Brand A is only distributed in 25 percent of
the U.S., while Brands B and C are in about 80 percent
distribution, suggesting that Brand A is in more valuable
makeup doors.
To learn more about NPD’s Store Level capabilities and
the new Market View Current Conditions Report, please
contact your account manager or Charles Camaroto at
866-444-1411 ([email protected]).
Dollar Sales vs. Dollar/Store Selling Ranking
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25%
79% 82%
Brand A Brand B Brand C
RegionalBrand Share
12.016.415.115.613.612.215.117.815.4
Region
East North CentralEast South Central
Middle AtlanticMountain
New EnglandPacific
South AtlanticWest North CentralWest South Central
ShareGap2.00.00.00.00.41.80.00.00.0
Value of 1Share Point
$676M$291M
$1,029M$393M$285M
$1,514M$1,203M$280M$697M
OpportunityGap
$1,352M$0$0$0
$114M$2,725M
$0$0$0
$4,192M
$16,765M
Opportunity AnalysisNational Brand A Skincare Share: 14%
Pacific region is the most important skincare market
Source: The NPD Group/Market View Current Conditions Report
Distribution (% Store Selling)
Source: The NPD Group/Market View Current Conditions Report
Ranked on $/Store SellingSource: The NPD Group/Market View Current Conditions Report
Brand A Total Opportunity Three Months
Brand A Annualized Opporunity
U.S. DollarRank
16237
Makeup
Brand ABrand FBrand BBrand CBrand G
U.S. $/Store Selling
$32,208$22,004$15,479$14,837$12,177
$/StoreSelling Rank
12345
the beauty book
STATE OF THEINDUSTRY 2009by Karen GrantSenior Global Industry Analyst and Vice President, Beauty
Karen Grant
6 www.npd.com
What did we gain in 2009? As we entered the year, we
knew it would be a challenging one. Little did we know just
how difficult it would be. Every major economic indicator
sputtered, and prestige beauty was not immune. Heading
into the holiday period, all prestige categories were posting
declines at record levels. Consumers were shopping less
– less frequently and for less product. That was and is
the reality of our time. Yet while this reality is sobering,
it is in no way a time for despair or to pause.
In the 2009 results and manifestations
of consumer choice, there is clear, loud,
and unmistakable direction
to help us understand
what we must learn and
what is our call to action.
Beyond the economy,
prestige beauty –
and, in fact, the entire
beauty industry, across
channels – is at a moment
in time when consumers are
re-evaluating the relevance and
purpose of beauty in their lives. Before the economic
downturn, NPD began to report a trend of fewer women
using beauty products. That trend has continued. In just
the past year, an additional estimated 2.3 million women,
ages 18 to 64, did not use beauty products. For years,
the focus of this trend has been on the fragrance category.
Now, this trend is in evidence across all three major
categories: fragrance, makeup, and skincare. This shift
away from beauty is absolutely the most important factor
the beauty industry must address.
Where do we begin? As we “seek first to understand,”
we see that consumers are telling us the role of beauty
must be more than something to attract a mate, play
dress up, or fix a problem. Beauty is most relevant to
our consumers when it makes them feel better about
themselves, more confident in their lives, more attractive,
and positive. The products we offer are merely the vehicles
to get them to that destination. The innovation and service
we offer is the bridge that builds their trust and relationship
with us. And the value we represent, and can thereby
ask them to spend with us, is fundamentally based on
the meaning we contribute to their lives. Today, it is vital
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that we distinguish ourselves on these fronts or we give
consumers the incentive to choose value based primarily
on savings and price.
How do we begin? Look at what is working. Then, instead
of copying, adapt and translate those insights into our
individual brands, categories, and retail environments.
� In fragrance during the course of the year, growth was at
both ends of the price spectrum. At either end, the points
of difference were the appeals of novelty, functionality,
specialty, and aspiration. Sales of premium-priced fra-
grances above $100 were positive going into the holiday
period, while the overall category posted double-digit
declines. At the other end of the price spectrum,
smaller size women’s fragrances, one ounce and
under, grew both in share of market and sales volume.
� In makeup, capitalizing on increased consumer interest
in having a more natural look, new products that com-
plemented this trend experienced outstanding success.
While the makeup category entered the holiday period
in decline, new foundation and concealer products
sales rose more than 30 percent, and new eyeliner and
multipurpose eye products sales more than tripled. In
color, where brands supported these categories with
new novelty items, captivating packaging, and/or limited
editions, some top brands doubled new product sales
in even the challenging lip category.
� In skincare, going where the consumer needs are was
a successful tactic, even while the overall category
struggled. A focus on the key skin concern of aging,
as well as more specialized issues such as acne and
redness, helped sets gain in both dollar and unit
sales. As fewer consumers say they are shopping for
beauty items in salons and spas, a focus on hair care –
protection and treatment products – helped prestige
hair sales rise. And among new products offered by
top brands, there were leaders who posted gains in
excess of 30 to 50 percent.
Now as we head into 2010, the reality is that business
will still be challenging. The other absolute reality is that
we know consumers do still love beauty. Like any great
love affair, if we want them to fall in love and stay in love
with us, we will have to continue to “bring our best game.”
In addition to a focus on product, we have to look at every
way we can be in our consumers’ consideration set and
be at the top of their minds. We have to be where they
are spending their time. We have to talk to them where
they will listen. Our consumers will try, they will stay, they
will buy – where they see the value. It is our call to action
to bring them our very best.
In the 2009 results and manifestations of consumer choice,there is clear, loud, and unmistakable direction to help us
understand what we must learn and what is our call to action.
How did NPD’s prestige beauty service meet the needs ofclients in Europe in the past year? Despite global economicdifficulties, we have not slowed our efforts to improve onour approach to meet clients’ needs, and indeed, we aredoing so by using a two-pronged approach: by enhancingand upgrading our services in the countries where weoperate now, and by expanding our tracking into newcountries. For example, in Italy, we enhanced our POSsample to all 1,400 retail stores, compared to the 900stores in 2008. This provided an accurate and more robustview of the marketplace.
We also have expanded our tracking to include Spain. Toovercome challenges related to our work in Spain, webuilt a step-by-step plan to build coverage. We launchedour retail tracking service in Spain with two years of backdata, exceeding our clients’ expectations.
What is the future vision for NPD’s global prestige beauty?In 2009, we started to look at new countries for expansion.The most important decision was to enter the U.K.,which resulted in a focused effort and reflected inputfrom our clients. Using a leader panel of key retailers,including Boots, Debenhams, and Harrods, we willdeliver retail tracking data in January 2010.
What was the highlight last year? It was last year's successfulcompletion of a full assessment of our service in China. Theongoing commitment to a high degree of collaboration withour clients resulted in a relaunch of the service in January2010, following a successful user conference in Shanghaiattended by the major prestige beauty brands. Many follow-up meetings took place with the objective of translatingsuch interest into cooperation.
In Europe, we are committed to delivering more in-depthanalyses and insights into the key reasons consumersare not buying. We are considering consumer tracking tocomplete the picture. In addition, we are working with ourU.S. colleagues to bring to the European market someconsumer-based services that have been valuable toclients in the U.S. These may include topical reports forthe beauty industry, FragranceTrack, and Skincare Track.
Our global expansion continues on a country-by-countrybasis. While we share our clients’ ambitions to have retailtracking in place in all 15 countries in which NPD operates,amore prudent strategic business expansion plan is requiredto ensure our collective success. We are thrilled that our
clients view us as the benchmark for information in thisindustry. Our goal is to maintain this status
and credibility no matter where weoperate around the globe.
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Interview with Claude CharbitGOING GLOBALClaude Charbit oversees NPD’s products and services for the prestige beauty market. His career has included leadership
roles with ACNielsen, the EURORSCG French Advertising Group, and more recently, IRI. He joined NPD in 2003.ClaudeCharbit
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WORLD OF BEAUTY
Point-of-Sale (POS) Tracking ServicesBeauty Cross Channel MonitorBeautyTrends®
BeautyTrends® National Chain
Fragrance POS Tracking ServiceWeekly Fragrance
Fine Department Store Sub-ChannelMarket View Current Conditions Report
Consumer Tracking ServicesFragranceTrack®
Proprietary Research CapabilitiesAd Hoc StudiesBlind Scent TestingAdvanced Store Level Analytics
Topical ReportsWomen’s Skincare In-DepthConsumer Report (Special Focus:Facial Skincare)
Makeup In-Depth Consumer Report
Snapshot Report: Beauty Consumers’Reaction to the Economy
Insight into the Youth BeautyMarket Report
Emerging Channels SeriesSpecialty StoresInternet ChannelHome Shopping
BeautyTrends U.S.Department Store ParticipantsBelkBloomingdale’sBon-TonBoscov’sDillard’sLord & TaylorMacy’sNordstromParisianPeeblesSaks Fifth AvenueSephora
BeautyTrends NationalChain ParticipantsJCPenneyKohl’sSearsStage Stores
BeautyTrends France ParticipantsBeauty SuccessDouglasGaleries LafayetteMarionnaud ParfumeriesNocibéPassion BeautéPrintempsSephora+ Traditional Independents
BeautyTrends Italy ParticipantsBeauty PointBeauty StarcoinDelle PianeDouglasGarboGocciaGruppo EthosLa GardeniaLa RinascenteLimoniMarionnaud ParfumeriesOlympia BeautéPieffeProfumerie PinalliSephoraUnix Profumerie+ Traditional Independents
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Hierarchy of 80+ Categories Allows Detailed Analysis
Women’s & Men’s Skincare
Face SkincareAcne Treatment, Age Specialists,
Cleansers, Eye, Exfoliators,Lip, Toners/Clarifiers, MakeupRemover, Masks, Moisturizers,
Oil/Shine Control, Shave
Body SkincareCleansers, Exfoliators,
Firming/Cellulite, Moisturizers, Shave
Sun SkincareAfter Sun, In Sun, Self Tanners
HairShampoos, Conditioners, Hair Spray,
Hair Styling
Sets and Kits
Makeup
EyeMascara, Liner, Shadow, Brow,
Eye Applicator
FaceFoundation, Powder, Blush, Concealer,
Face Applicator
LipColor, Liner, Gloss, Lip Applicator
NailColor Enamel, Top/Base Coat, Nail Care
Gift Sets
Total Prestige Fragrances
Women’s & Men’s FragrancesJuices, Ancillary Products, Gift Sets
Men’s FragrancesJuices, Ancillary Products, Gift Sets
BeautyTrends Spain ParticipantsSephoraDouglasJulia PerfumeriaAromas PerfumeriasOriental PerfumeriasGotta Perfumerias Perfumerias deConfianzaPrimorArenal PerfumeriasAtalaya PerfumeriasPoppy ShopDe la Uz Perfumeria & CosmeticaGilgo PerfumeriasDisperfum PerfumeriasSR Perfumeries San RemoAlohaPerfumerias AvenidaAnaMarviMundo PerfumeriasJe Suis Chic PerfumeriAlberto PerfumeriasPassion BeauteElla Yel Tot PerfumeriaRegiaLirainVigilManachOyarzabal PerfumeriaBide OneraGalle
JoanneMcNaboe
The ego boost is important. Almostseven in 10 prestige shoppers(vs. 46 percent of non-prestigeshoppers) say that even in these
tough economic times, they will stillbuy beauty products because they
make them feel better about themselves.1
Anti-aging opportunity abounds.Among women who think anti-aging benefits are extremely/veryimportant, 21percent currently arenot using anti-aging moisturizers
or serums.2
Teen boys who shop most oftenin apparel specialty stores for theirfragrances said the number-onereason they shop there is because
there are no pushy/overbearingsalespeople.3
Sixty-nine percent of womenwho do not wear fragrance arelapsed users. Health issues arethe top two reasons cited for
walking away from the category.4
Seven in 10 women spent lessthan $200 on beauty productsthis past year.5
Top specialty store converters: 90percent of consumers who walkinto Bath & Body Works or Ultawill make a purchase.5
The number-one reason that womentune into home shopping networksor infomercials but do not purchaseis they are just watching to relieveboredom (45 percent).5
Safety first! Over half of makeupconsumers “look for makeupproducts that are safe to use”(top box).6
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1 A Snapshot Report On BeautyConsumers' Reactions To TheEconomy, May 2009
2 Women's Skincare In-DepthConsumer Report (Special Focus:Facial Skincare), Sept. 2009
3 Men’s Fragrance Track 2009
4 Women’s Fragrance Track 2009
5 Emerging Channels Series:Beauty Care Products (Special
Focus: TV Shopping Networks &Infomercials/Paid Programming)– Feb. 2009Emerging Channels Series:Beauty Care Products (SpecialFocus: The Internet), March 2009Emerging Channels Series: BeautyCare Products (Special Focus:Specialty Stores), April 2009
6 Makeup In-Depth ConsumerReport, April 2008
DID YOU KNOW?A Look at the U.S. Beauty Consumer
ABOUT THE NPD GROUP, INC.
The NPD Group is the leading provider of reliable and comprehensive consumer and retail information
for a wide range of industries. Today, more than 1,700 manufacturers, retailers, and service companies
rely on NPD to help them drive critical business decisions at the global, national, and local market
levels. NPD helps our clients to identify new business opportunities and guide product development,
marketing, sales, merchandising, and other functions. Information is available for the following industry
sectors: automotive, beauty, commercial technology, consumer technology, entertainment, fashion,
food and beverage, foodservice, home, office supplies, software, sports, toys, and wireless. For
more information, visit www.npd.com.
For more information, contact your NPD account manager or Charles Camaroto at 866-444-1411