Private Label Beauty Packaging Poised for Growth

The economic downturn and popular trends like social media and reality television help build private label brands and spur sales.

Liquid Liner3, from Lady Burd Cosmetics, undergoes extensive packaging testing during development.
No doubt about it: The recent recession has spurred growth in the private label beauty market segment, say industry analysts. Private label players agree the economy is showing signs of a rebound, and they are optimistic that private label brands are gaining traction in the brand beauty market.

“Overall, private labels have done really well during the economic downturn,” says John Wright, head of retailing research at Euromonitor International. “Consumers have looked to save money as much as possible, and retailers have reacted to this by promoting their private label ranges.”

He adds that retailers often provide a three-tier range of pricing offerings, such as value-entry level, mid-priced and premium.

“Private labels tend to do very well in areas like oral care, hair care, and bath and shower. [Consumers] feel they can trade down to private label products without having a difference in quality,” says Carrie Lennard, beauty and personal care industry analyst, at Euromonitor International. “During the recession last year, private label saw the highest growth globally that it has seen in the last five years, but despite this, private label only had a 2% share of total global beauty and personal care sales in 2009, so it is still very low.”

Some private label brands, such as retail brands from Target, are making the transition to being viewed as premium brands. These retailers are paying close attention to product quality and consumer experience, price, promotions, and placement in the store, says Tom Custer, director of client development, Interbrand, a global brand design firm located in Cincinnati. “Retailers are putting a lot of emphasis on personal care and beauty products and are offering extensive lines. We will see growth in this competitive category,” he says. “However, there is a lot of confusion in the category because there are a lot of offerings, for example, in the personal care and hair care categories.”

He notes retailers take advantage of that confusion because they own the destination. “If they can create some impact with package design and placement at the shelf amongst all the confusion, that will benefit them, their private brand and their profits.”

New Brand Opportunities

Popular trends like social media and reality television are overflowing into the private label area and making way for new branding opportunities. “We are experiencing an increase in business activity this year compared to 2009,” says Julie Scudder Feldman, vice president, sales and marketing, of Anisa, Atlanta, GA. “We are seeing the power of the consumer when it comes to driving trends and expectations for new development. The emergence of social media, blogging, and reality television has created this new business category where almost anyone with a following can become a brand.That was not always the case.”

Anisa, Lighthouse Beauty and Kim Kardashian worked together to develop a line of beauty products to extend her beauty brand.
Anisa recently joined with Lighthouse Beauty for the E! Entertainment reality star Kim Kardashian’s brand. “This example shows the validity of this growing segment of reality star/household name to global beauty brand,” she says.

Private label companies carefully monitor today’s continuing trends, such as environmentally friendly products, as well as emerging ones. “We are also seeing an interest in eco-friendly options. Our customers are focusing on ways to reduce their packaging footprint as well, without jeopardizing quality,” says Scudder Feldman, who notes the company monitors beauty blogs, twitter, and social media channels to keep current.

“We are reading reviews for products to hear firsthand what the consumer is drawn to. It has been quite informative. We are not discounting the validity of brands that come to us to launch beauty tools or packaging that are outside the traditional mold.We see that the playing field is evolving,” she says.

Innovation Pays Off

With the recent improvements to the economy, more new clients are looking to create their own brands and existing clients are beginning the process of rebuilding their inventories, according to Allan Burd, president, Lady Burd Cosmetics, Farmingdale, NY. “Our clients are always looking for a way to differentiate themselves from the competition and the way to do that is through great products with innovative packaging.”

Constant communication with packaging vendors is essential to meet this goal. “We are always keeping an eye out for something new.Over the last year during the economic downturn, many of our clients were looking for inexpensive packaging.Now that things are improving a little, clients are cautiously exploring returning to more upscale packaging designs.With uncertainty about the future, costs are still very much a concern,” Burd explains.

While the times and tastes are always changing, private label companies are wary of being too trendy. “We keep ourselves lean and flexible with a sharp eye and ear to the future,” he adds.

Private label companies help solve clients’ most vexing packaging challenges.Without the proper synergy between product and packaging or the right delivery system, even the greatest product won’t be a success. Lady Burd recently launched Liquid Liner3, a waterproof, lash enhancing, and long-lasting liner product. “Waterproof liner is very hard to find the right package for.Many brush materials do not agree with the formula.We had to test many packages over a long period of time.In the end, it was worth the effort because we found the perfect package to make this product a success,” Burd says. “The best way to ensure customer loyalty is to have an excellent, wisely packaged product.The synergy between the product and package is what makes it great.”

The Beauty Company, Toronto, Canada, has also seen growth primarily coming from the category of new products.“Retailers have been in somewhat of a hiatus in the past few years and there is definitely a yearning for new and different,” says managing director Diana Pitsolis.

She notes an upcoming trend is “less is more,” which focuses on simplicity and purchases based on considered decision rather than impulse.“A trend is something that leads the way and is not necessarily representative of current behavior, which we feel will follow in the next few years,” she explains, adding that today, she believes the new business equation is Purchase Decision Tree—Performance+Longevity @Price=Quality. “The approach of anything for cheap and lots of it has largely passed.”

Market changes continue and challenges include the proliferation of products and claims, loss of discretionary income and a greater focus on simple solutions. “We monitor today’s consumer and the market as a whole, and change our assortment in line with customer expectations.We believe there’s always a way of reinventing ourselves and our products to be more relevant and beneficial to the end user,” Pitsolis says.

One new line from The Beauty Company, Pure & Pro, uses a clear acetate pillow pack concept and features cosmetic sponges, applicators and exfoliators. Another new product, Aromatherapy CelloMask, is packaged in an organza pouch.“The packaging style went through extensive testing to determine which method met the product’s strategy and elicited the most favorable consumer feedback.It is currently being test marketed at retail in Canada,” Pitsolis says.

Focus on Quality, Increased Demands

According to Bill Hunt, president, Surefil LLC, Grand Rapids, MI, private label growth continues to be very strong with an emphasis on efficiency and selection. “Consumers are pulling the increased value they demand in the private label products through the retail channels.Retailers are responding by becoming more skilled in their private label sourcing.The move to buy ‘factory direct’ is increasing dramatically,” he says.

Delivering to the retail trade cost-efficiently is not always easy. “Brand companies have gotten so big that they can optimize their freight and logistics by combining many products on one truck delivery.Private label products have bigger challenges making the logistics work economically.So, the private label producers typically require large minimum orders versus the branded products.This is sometimes a challenge for retailers,” he says.

The Beauty Company’s Aromatherapy CelloMask is packaged in an organza pouch.
New products allow the clients to have their choice of selection. “We are commercializing new products at a very strong rate. We are averaging 12 new product introductions a month.This is a healthy rate for us and higher than previous years,” Hunt explains.

Recently, Surefil provided a new package for CVS shampoos and conditioners.“CVS was looking for a custom bottle that provided extra value over a 15-oz., standard hair care product. We designed, developed, and commissioned a new package that is an 18-oz. custom bottle to meet the need.The product, marketed under the Advanced Healthcare name, is the best value product in the market,” he says. “The acceptance of private label products in the HBC area has been encouraging, especially in the area of hand sanitizer. While GermX is the brand leader, private label products are expanding rapidly.”

Tom Raffy, president, GAR Labs Inc., Riverside, CA, has also noticed the upswing. “We have had the most business we have ever had in the last 18 months, which surprised us until we figured out that many Americans who were no longer spending money on ‘hard assets’ like cars and housing increased their spending on ‘soft assets’ like hair and skin care products, which made them look and feel better for a whole lot less money,” he explains, adding that they have seen a growing trend in baby and teen skin care products as well.

As a result, GAR Labs is heavily investing in manufacturing and automated inventory control so that it can more quickly manufacture a product and more precisely keep track of it components. “We have been rediscovering domestic suppliers that, although they have a slightly higher price point than Chinese manufacturers, are quicker to market and have much higher quality. Basically, my customers are getting tired of the low quality coming out of China,” Raffy notes.

Private label products no longer have the reputation they used to as no-frills and generic. Now these well-placed, expertly designed, high-quality products are poised to take an even bigger bite out of the beauty market.