2023 Health & beauty innovation report
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2023 Health & beauty innovation report Celebrating innovation trends and outstanding product innovations from 2022 NielsenIQ Beauty Vertical + BASES April 2023 © 2023 Nielsen Consumer LLC. All Rights Reserved. © 2023 Nielsen Consumer LLC. All Rights Reserved.
Your presenters today Stephanie Jarosz Anna Mayo Director Vice President BASES Account Development NielsenIQ Beauty Vertical © 2023 Nielsen Consumer LLC. All Rights Reserved. 2
At NielsenIQ, we celebrate innovation At NielsenIQ, we know that innovation is crucial to brand success. In fact, 60% of top innovators strongly emphasize innovation as a critical corporate priority 1. However, we’d be remiss to not mention the constant state of crisis facing manufacturers in the past few years – COVID-19, supply chain challenges, inflationary pressures, and more. These market-wide headwinds challenged manufacturer processes, ultimately contributing to a 19% decline in new health & beauty care launches compared to 20192. Those who continued to prioritize innovation in the prior 3 years were primed for continued success – growing distribution on average by 9%. Those who pulled back lost an average of 7% 3. In the face of change, innovation endures. And companies who continue to prioritize innovation through a crisis come out stronger4. At NielsenIQ and BASES, our driving force is client success. We deliver the Full View, the world’s most complete and clear understanding of consumer buying behavior that reveals new pathways to growth. 1- Source: BASES Building a Modern Innovation Ecosystem, 2021 2,3 - Source: BASES Innovation Measurement; NielsenIQ Answers on Demand scan and panel data, Total US xAOC WE 1/1/2022 4- -Source: McKinsey & Company ‘Innovation: The Launchpad Out of Crisis”, 2022; © 2023 Nielsen Consumer LLC. All Rights Reserved.
The Full View of the Beauty Marketplace +90 Markets Measured Worldwide Uncover blind spots and stay ahead of emerging trends with a holistic view of beauty consumers Understand the purchase drivers within the full omnichannel marketplace with more coverage: Beauty Supply, Department Stores, Drug, Grocery, Dollar, Mass, Club, Specialty, Direct to Consumer..... Innovate to meet the ever-changing consumer demand from sustainability claims, search terms to pack sizes Win the digital shelf, improve sales performance and retailer collaboration through predictive analytics from cutting-edge profitability, assortment, supply chain AI solutions Our promise NielsenIQ delivers the Full View, Execute successful, data-driven strategies with access to the world’s most complete and global, beauty industry experts and thought leaders clear understanding of consumer buying behavior that reveals new pathways to growth. …. Beautopia is possible © 2023 Nielsen Consumer LLC. All Rights Reserved.
Health and beauty remains a growth category Health & beauty sales (B) Strong growth Solid growth Growth (> +10% ) (+5-10% ) (+0-5% ) Decline $195.7 +6.1% Upper respiratory Cosmetics & Pain relief +4.9% Sexual health -0.3% $184.4 +23.0% nail +9.1% Oral hygiene +4.9% Bath & Ear care +23.1% Feminine care +8.2% shower -0.4% $62.3 +12.4% Sleep aids $55.4 Fragrance +15.3% Facial skin & alertness +2.3% Itch relief -9.9% care +7.2% Deodorant +14.8% Foot care +1.7% First aid -12.9% +3.4% HBL +6.0% Sun care +11.4% Hair removal +0.3% Hair care +5.7% Adult incontinence $133.4 +11.1% Medical accessory +5 $129.0 .6% Vitamins & supplements +5.4% Eye care +5.3% 2021 2022 Beauty & Personal Care Categories GI care +5.2% Health Categories In-store Online Source: NielsenIQ Omnishopper Total Available Retailers Omni, In store, Online FY 2022 w eek ending 12/31/2022 © 2023 Nielsen Consumer LLC. All Rights Reserved.
Innovation Measurement helps to measure and manage new products introductions The Innovation Measurement tool uses artificial intelligence to automate and streamline the coding for millions of product characteristics. This allows us to intelligently identify and classify innovations in real time that combines with sales data for true, objective innovation measurement Apply Innovation Identify new SKUs – remove Limit to type characteristics graphics and small size and category SKUs achieving 1% changes national ACV characteristics © 2023 Nielsen Consumer LLC. All Rights Reserved.
10% of Health and Beauty sales attributed to innovation These new innovations set up brands for future success % of sales due to innovation % of sales due to innovation Remaining sales Manufacturers growing Bath & shower 12% innovation sales in 2022 were Hair care 12% 2.9X Cosmetics & nail 10% Facial skin care 10% Hair removal 7% Deodorant 6% Feminine care 6% more likely to grow overall sales Oral hygiene 5% Adult incontinence 2% compared to those with stagnant or declining innovation sales. (Personal Care) Source: NielsenIQ Innovation Management, Beauty & Health Categories, 2022 & BASES Innovating Out of Crisis Thought Leadership, 2022 © 2023 Nielsen Consumer LLC. All Rights Reserved. 8
Line extensions make up the majority of innovations But can pose a risk of cannibalization if incrementality potential is not prioritized Innovation by type Bath & shower 1 in 4 innovations may end Hair care up shrinking the brand Cosmetics & nail franchise Facial skin care Hair removal Only 1 in 5 FMCG Deodorant manufacturers use Feminine care incrementality as a firm stage Oral hygiene gate action standard – which Adult incontinence is critical to stave off Line extension Special collection New brand/brand extension New sub-brand cannibalization and drive growth Source: NielsenIQ Innovation Management, Beauty & Health Categories, 2022, BASES Thought Leadership How to Launch More Incremental Innovations, 2019 © 2023 Nielsen Consumer LLC. All Rights Reserved. 9
Not all line extensions are created equal Top manufacturers grow through product formulation and format type extensions 35% 64% Variety 32% Line Extension 76% 24% Size 20% 25% Special Collection Novel Combination 15% 16% 12% Product 6% New Brand/brand 7% Feature/formulation 13% Extension 7% 11% Pack Size 8% 3% New Sub-brand Product Type/form 5% 1% 9% 5% Package Form 5% Other MFRs 1% Subline MFRs growing both Total Sales & 1% Innovation Sales in 2022 vs 2021 Source: P3Y BASES Innov ation Measurement (US) January 2023 Total US xAOC + Conv NOTE: Data not currently av ailable f or specif ic categories © 2023 Nielsen Consumer LLC. All Rights Reserved. 10
Manufacturers have pulled back on their innovation agenda Despite the fact that innovation growth boosts overall growth US – Number of innovations ‘19 vs ‘21 Total CPG -19% Alcoholic Beverages -10% Baby Care 3% Confectionary and Snacks -22% Food -20% Homecare -34% Non-Alcoholic Beverages -19% Personal Care -19% Pet Care -5% Source: BASES Innov ation Measurement; NielsenIQ Answers on Demand scan and panel data, Total US xAOC WE 1/12022 Note: Manuf acturers included had a minimum 100 innov ations ov er the past 3 y ears © 2023 Nielsen Consumer LLC. All Rights Reserved.
Innovators grow distribution and command premium prices Now, more then ever, it is important to make innovation a priority Aggregate P3YR of Innovation Launches as of Jan 1, 2019 – Jan, 1 2022 Compare 2019 (“Pre-COVID”) vs 2020 vs 2021 (“Endemic-COVID”) Innovators Non-Innovators Positive % change innovation launches vs 2019 Negative % change innovation launches vs 2019 ▪ 94% increased TDPs (avg +9%) ▪ 41% lost TDPs (avg -7%) ▪ 88% grew $ Share (avg +9%) ▪ 38% lost $ Share (avg -11%) Takeaway: Innovators maintain relevance with retailers and shoppers Source: BASES Innov ation Measurement; NielsenIQ Answers on Demand scan and panel data, Total US xAOC WE 1/1/2022 Note: Manuf acturers included had a minimum 100 innov ations ov er the past 3 y ears (2019 – 2021) © 2023 Nielsen Consumer LLC. All Rights Reserved. 12
Health & beauty 2022 innovation trends © 2023 Nielsen Consumer LLC. All Rights Reserved.
Top innovation trends in health & beauty for 2022 Clean and sustainable Trusted representative Personalization and Ingredient focus inclusivity © 2023 Nielsen Consumer LLC. All Rights Reserved. 14
Our evaluation criteria In this report, we seek to highlight brands that represent meaningful category innovation and are representative of key trends that we are observing across health and beauty. This is only a snapshot of the innovations from 2022 and may not include some larger innovations if they do align with these trends. We considered innovations that... ■ Are selling in-store, in our XAOC measured market ■ Are part of the Health & Beauty department ■ Represent a new 'brand low’, ‘brand high’, SKU, or found success in a new category ■ Started selling in July 2021 or later (First month sales of $500k or greater) ■ Had sales that reached over $3 mm in year 1* Online sales are especially important to health & beauty, making up 32% of sales in 2022. To acknowledge this important channel, we considered brands that were new to selling online and experiencing rapid growth, whether through their own website or an e-commerce retailer This analysis only looks at year 1 sales and does not include any analysis of the out-year potential *Year 1 sales will not include a full 12 months of data for products that launched after January 2022 © 2023 Nielsen Consumer LLC. All Rights Reserved.
Innovation Trend #1: Clean and sustainable The trend towards clean and sustainable products continues across the entire CPG category. Consumers are showing increasing concern about climate change and the state of the environment and are evaluating their Total Health & Beauty $112B +5.5% choices and habits to identify their individual climate impacts. In a recent survey, we found that 70% of US consumers find it important to make $ L52 % CYA sustainable choices, and 27% of those have incorporated changes into Clean Label 482M 36.2% their daily lives. Consumers overwhelmingly tell us that the responsibility for sustainability progress lies with brands, retailers, and consumers Paraben Free 55.2B 9.5% themselves. Sulfate Free 45.7B 10.1% When it comes to beauty, clean and sustainable attributes continue to Free from Phthalates 39.1B 11.5% grow and out-pace the total category, even in a time of rising price inflation. Consumers continue to look for brands that are “free from”, cruelty free, vegan, plant based, reusable/refillable packaging, low carbon Recyclable* 31.6B 9.1% products, and more. Sustainable 7.9B 5.8% The clean and sustainable trend is one where we see enduring growth Cruelty Free* 7.6B 16.5% and interest, it is safe to say this will be a long-lasting trend. To stay on Sustainable Packaging 4.3B 3.9% top of this trend, brands should actively be evaluating their product packaging and formulations, as well as how they communicate their clean credentials and sustainability initiatives to consumers. Source: NIQ Discover RMS Total US xAOC FY 2022 WE 12/31/22. All attributes represent claims QUALIFIED unless indicated by an * sy mbol f or STATED NIQ 2023 Sustainability Report – Ranked on US vs Global © 2023 Nielsen Consumer LLC. All Rights Reserved.
Beauty brands capitalizing on the clean and sustainable trend Lottie color cosmetics Monat hand body lotion True Botanicals hair care Brand name Manufacturer Lottie London Monat Global True Botanicals Launch date April 2022 August 2021 June 2022 Launch channel In Store Online Online Y1 sales $5.4 mm $4.7 mm $3.8 mm Description 100% cruelty-free, paraben-free, Cruelty-free MLM brand that is Clean and sustainable skincare and vegan cosmetics brand that known for their haircare, skincare, products now extending into hair capitalizes on their social media and wellness products extending care presence into hand body lotion products © 2023 Nielsen Consumer LLC. All Rights Reserved.
Health brands capitalizing on the clean and sustainable trend Health by Habit vitamins & Physician’s Choice vitamins & Incognito feminine care supplements supplements Brand name Manufacturer Zuru PTE LTD JB7 LLC Fempro I INC Launch date July 2021 July 2021 December 2021 Launch channel In Store In Store In Store Y1 sales $12.6 mm $10.4 mm $9.3 mm Description Vitamins with no artificial colors, Vitamins containing high quality Feminine care brand that is made flavors, or sugars ingredients that are sustainably by women, free from irritants or dye sourced, scientifically backed, and third party tested © 2023 Nielsen Consumer LLC. All Rights Reserved.
Activation Inspiration - Clean and Sustainable Success Principles Call out sustainability Provide clear guidance on Reinforce additional Ensure sustainable benefits on front of pack pack when behavior benefits of sustainable packaging meets change is needed packs consumers needs • Simple and easy to process call • When a behavior change is • Help shoppers understand the personal • Sustainable packing needs to be benefit of the new forms/ packaging outs best resonate with shoppers needed, intuitive placement of effective packaging simple messaging is key • Sustainability drivers are 3x more likely to drive preference when associated with • “Impractical cap; I like the older other benefits system better”, "The cap isn't • “I like that it is a pocket format that is sturdy and breaks; Not to easy to transport, handle etc.”, "Product mention – leaking in my purse" size is compressed so it uses less space”, "Smaller size so lesser trash” © 2023 Nielsen Consumer LLC. All Rights Reserved.
Innovation Trend #2: Trusted Representative Leveraging a well known public figure to promote a brand or product Celebrity Doctor Influencer Celebrity owned brands or Doctor/physician owned, Social media influencers celebrity advertised created, or recommended promoting brands or launching brands their own • Celebrity beauty brands • Dermatologist tested: $4.6B overall growth rate: $538M + + 6.8% • The average US adult spent 40.1% 48 minutes a day on Tik Tok • Gynecologist in 2022 • 1.7% of cosmetics and nail recommended: $351M - grooming are coming from 5.1% • Influencer marketing spend celeb brands with Rare jumped 12.2% in the US in Beauty and Fenty Beauty as • Pediatrician recommended: 2022 top brands $209M + 22.1% Source: NielsenIQ Discover RMS Total US xAOC FY 2022 WE 12/31/22 NielsenIQ Omnishopper Panel | 12 months through 12/03/2022 | Health & Beauty Care Source: Statista 2023 ; Source: HubSpot 2023 © 2023 Nielsen Consumer LLC. All Rights Reserved. 22
Beauty brands capitalizing on the trusted representative trend Rodan + Fields hair care Lume body wash, wipes, and Fenty Beauty fragrance sets; and hand body lotion Brand name Manufacturer Rodan & Fields Lume Kendo Holdings Launch date October 2022 July 2021 August 2021 Launch channel Online Online Online Y1 sales $22.1 mm $18.7 mm $11.8 mm Description From the same creators as All body female deodorant, created Rihanna, after already successfully Proactiv, an MLM brand by an OBGYN, now offering body launching a cosmetics and skincare specializing in derm-inspired wipes line, now enters fragrance skincare products, expanding into hair care © 2023 Nielsen Consumer LLC. All Rights Reserved.
Health brands capitalizing on the trusted representative trend Proactiv, MD, SOLUTION, + facial skin care Mary Ruth’s vitamins & supplements Brand name Manufacturer The Proactiv Company SARL Mary Ruth’s Launch date August 2021 August 2022 Launch channel In Store In Store Y1 sales $17.3 mm $8.0 mm Description Dermatologist-tested approach to prevent and Created by MaryRuth Ghiyam, a certified health treat acne breakouts. Online to in store launch, educator, nutritional consultant, and culinary chef. now in Drug and Target. Online to in store launch, now in Food and Mass. © 2023 Nielsen Consumer LLC. All Rights Reserved.
Activation Inspiration – Trusted representative NIQ Breakthrough Innovation Winners that leveraged trusted representatives for growth 2022: Horizon Organic Growing Years 2021: Hello Bello Baby Care 2020: Lumify Eye Drops • Sought out experts to build the best nutritional • Co-founded with Kristen Bell & Dax Shepard • Fueled by new drug development with a bundle to deliver premium baby care at non-premium positioning that bridged the gap between eye prices care & beauty • Emphasized trusted pediatrician involvement in pack design • Leveraged the couple’s large audience and • Activated with sampling with makeup artists • Partnered with Baby Center and health care playful authenticity to connect with parents and influencer campaigns providers to further drive awareness among • Created a mission-based brand because of • Encouraged trial with eye care professionals influential/credible sources. Kristen & Dax’s vision to drive credibility Source: BASES Breakthrough Innovation Report 2020,2021,2022 © 2023 Nielsen Consumer LLC. All Rights Reserved. 25
Activation Inspiration – Trusted Representative Social media content impacts consumers from discovery to purchase Discovery Purchase Usage 54% of social media users browse social media to research products before making a buying decision Maybelline Lash Sensational Tarte Cosmetics, Sky High, US, 2022 2023 Sources: Clootrack.com, How does social media influence consumer behavior?, Available February, 2021. R&D conducted in September 2020 in the US, China, Mexico, and France. © 2023 Nielsen Consumer LLC. All Rights Reserved. 26 © 2023 Nielsen Consumer LLC. All Rights Reserved.
Innovation Trend #3: Personalization and Inclusivity Sexual Wellness Men’s • Sexual health: $1.9B +4.2% • Men’s focus #1 search term in Consumers are increasingly looking for brands • Sexual health supplements: $142M personal care online in 2022, up 14% and products that feel like they were made just +7.2% • #menskincare has over 849M views for them, and can solve their unique needs. on TikTok This trend is increasingly manifesting in the exploration of ‘taboo topics,’ include products providing solutions for menopause, aging, men’s cosmetics, acne acceptance, sexual health, mental health and more. Personalization and inclusivity are targeting Reframing Aging Mental Health the user, not the mass market. The new • Online searches “for aging”/anti-aging: - • Mood supplements: $151M, +5.6% products also provide openness and 8% • 25% of Americans report suffering comfortability on the products such as sexual • For Mature Women: +11% from depression, and 9% suffer from health as personal health, hair loss, mental ADD health. Source: NielsenIQ Discover RMS Total US xAOC FY 2022 WE 12/31/22 Source: Label Insights Emerging Attributes Jan 2022-Dec 2022 Source: NielsenIQ Annual Shopper Health Survey, 2022 © 2023 Nielsen Consumer LLC. All Rights Reserved.
Beauty brands capitalizing on the personalization and inclusivity trend No7 Lift & L’Oreal Men Expert Essential Design hair Gimme Clips hair Quiet & Roar bath & Luminate facial skin hair care care care shower care Brand name Manufacturer The Boots Company L’Oreal SA Design Essentials Durha, Enterprises P&G Launch date January 2022 March 2022 November 2021 June 2022 September 2021 Launch In Store In Store In Store In Store In Store channel Y1 sales $11.9 mm $9.0 mm $7.1 mm $4.1 mm $3.7 mm Description A No7 line specifically Offered in seven natural A black owned business, Hair accessories Bath & Shower scents for aging skin shades, works to its products aim to specifically designed to for an improved mental diminish the appearance provide healthy hair accommodate various health and state of mind of gray hairs styling products that hair types address specific hair needs © 2023 Nielsen Consumer LLC. All Rights Reserved.
Health brands capitalizing on the personalization and inclusivity trend Cake sexual health Emer’gen-C Kidz Fiore feminine care GNC Men’s* vitamins & vitamins & supplements supplements Brand name Manufacturer Hello Cake Haleon Ontex BV GNC Holdings Inc Launch date February 2022 December 2021 June 2022 June 2021 Launch In Store In Store In Store In Store channel Y1 sales $13.3 mm $6.9 mm $4.9 mm $3.5 mm Description Sexual health products Immune health formulated Feminine care brand Vitamins and supplements thoughtfully designed for for kids brought over from Mexico formulated for men that specific types of play contain specific ingredients to cater to their needs *GNC Men’s did not have a month that reached $500,00 © 2023 Nielsen Consumer LLC. All Rights Reserved.
Activation Inspiration – Personalization and Inclusivity How to find success among a targeted group: ● Satisfy unmet needs to bring in new customers (to the brand or banner) ● Bring an advantage that expands usage/elevates buying velocity among target ● Offer unique solutions that disrupt category buying ● Carry a premium price (justified by superior performance) Source: BASES Thought Leadership Do Not Miss the Target 2020 © 2023 Nielsen Consumer LLC. All Rights Reserved.
700% Trend #4: Ingredient 160% Niacinamide* 650% focused 140% 600% Consumers are so educated nowadays Vitamin C about the ingredients that go into their 120% 550% products. More and more we are seeing consumers search and shop in an 100% Hyaluronic Acid ‘ingredients first’ manner. Just as important Rose Oil as which ingredients a product contains, 80% Lavender Oil are what it leaves out, and replacing perceived bad ingredients with ‘better for $ % Chg vs 3 YA Alpha Hydroxy Acid 60% AHA you’ ingredients continues to be an Shea Nut Oil enduring trends for shoppers. Tea Tree Oil Coconut 40% Honey Vanilla Aloe Extract While the specific hot ingredients are 20% Salicylic Acid* Retinol constantly changing, the long standing Benzoy l Peroxide* Argan Oil trend is that the consumer is becoming 0% more educated on what to look for and 0 5,000 10,000 15,000 20,000 25,000 25,000 65,000 30,000 70,000 what their needs are. We see here the key ingredient terms that trended in 2022 and TDP Bubble size denotes total sales in L52 weeks their growth and distribution. Source: NIQ Discover RMS, NIQ Product Insight, Total US xAOC; 52 weeks WE 12/31/22 vs 3YA Label Insights Jan 2022-Dec 2022. Bubble size denotes total sales in L52 weeks. All attributes represent claims QUALIFIED unless indicated by an * symbol for STATED © 2023 Nielsen Consumer LLC. All Rights Reserved.
Beauty brands capitalizing on the ingredient focused trend Dr Squatch deodorant Olay Vitamin C + Dove Body Love bath & TruSkin facial skin care and bath & shower Peptide facial skin care shower Brand name Manufacturer Dr Squatch Inc P&G Unilever TruSkin Partners Inc Launch date November 2021 October 2021 March 2022 March 2022 Launch In Store In Store In Store In Store channel Y1 sales $44.2 mm $17.8 mm $16.2 mm $7.3 mm Description Personal care items with Formulated with Vitamin C, This shower collection Tested skin care that natural products and no Vitamin B3, and Peptides to features ingredients like provides plant-based harmful ingredients, brighten skin hyaluronic serum and formulas to benefit your skin specifically formulated for colloidal oatmeal, and is men naturally derived and sulfate and paraben-free © 2023 Nielsen Consumer LLC. All Rights Reserved.
Health brands capitalizing on the ingredient focused trend Burt’s Bees Kids upper respiratory Lolleez upper respiratory Brand name Manufacturer Perrigo MomeezChoice Launch date September 2021 October 2021 Launch channel In Store Online Y1 sales $5.5 mm $3.4 mm Description Child friendly immune and health support Lollipops specifically designed to soothe made with ingredients inspired by nature children’s throats, Non-GMO and organic, gluten, dairy, and nut free © 2023 Nielsen Consumer LLC. All Rights Reserved.
Activation Inspiration – Ingredient Focused Educated consumers look out for specific ingredients © 2023 Nielsen Consumer LLC. All Rights Reserved.
Innovation continues to be a growth driver for health and beauty, how does your brand fare? Innovation launches have declined in Attaching a trusted figure to a brand health & beauty, but those who can help break through the clutter continue to innovate see outsized and gain consumer trust more gains quickly While online continues to be a Savvy consumers are becoming growth driver in health & beauty, in more educated about what store remains important for product ingredients they do, and don’t want discovery and reach in their products Clean and Sustainable remains an Everyone wants to feel as if the enduring trend in health & beauty, products they use were made for with products continuing to see them in mind, focusing on niche success by putting health and planet solutions can be a way to delight first these shoppers © 2023 Nielsen Consumer LLC. All Rights Reserved. 35
Thank You! For more information, get in touch! Anna Mayo Stephanie Jarosz Anna.Mayo@nielseniq.com stephanie.jarosz@nielseniq.com https://www.linkedin.com/in/anna-mayo/ https://www.linkedin.com/in/stephanie-jarosz/ https://nielseniq.com/global/en/landing-page/beautys-inner-circle/ https://niq.com/beauty © 2023 Nielsen Consumer LLC. All Rights Reserved. 36
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