It’s Not Lonely at the Top: P&G’s Category-leading Brands Hit the Hardest in 2012

The latest market data just released by Kline on the U.S. beauty industry illustrates thPGat although the market grew by 3.4% in 2012, there were varying levels of success where some of the key players fared better than others.

Procter & Gamble (P&G) remains the clear leader in the U.S. personal care market, which Kline defines to include fragrances, hair care products, makeup, oral care products, skin care products, and other toiletries, such as deodorants and soaps. Via both acquisition and organic growth, this leadership has solidified over the last decade. However, 2012 has proven to be one of the most challenging years to date, as P&G’s category-leading brands have lost footing in several categories including shampoos, toothpastes, and color cosmetics.

Looking at specific categories, such as facial treatments, P&G’s Olay remains the largest mass brand, accounting for just over one-quarter of mass facial treatment sales. However, in 2012, sales of Olay declined for the second year in a row. A number of factors contributed to Olay’s softness, including increased competition at multiple price points, extensive marketing campaigns from competing brands, consumers trading up to luxury products, mass private label that mimics Olay’s product lines, and a change in retailer planograms. P&G has lost out to competitors such as L’Oréal and Estée Lauder. While most of the prestige brands, such as Clinique and Estée Lauder, launched BB creams, and then many mass brands followed, Olay did not take advantage of this major trend of hybrid makeup/skin care creams until late 2012 when it released a color correction (CC) cream. While Olay has recently taken other innovative steps, these efforts did not have great impact on its 2012 sales.

In toothpastes and shampoos, P&G’s Crest and Pantene Pro-V were likewise challenged. In toothpastes, Crest retained its #1 ranking, but Colgate eroded its share – aided by the success of Colgate 360° Optic White and Colgate 360° Sensitive Pro-Relief. In shampoos, P&G faced intense competition from both Unilever and L’Oréal, although its own Head & Shoulders did perform well. Kline notes that P&G’s traceable media expenditures (TME)* declined in both oral care and hair care in 2012, whereas its chief competitors increased their TME support. P&G’s lack of new products further contributed to share losses in these product classes.

For similar reasons, P&G’s Cover Girl took a hit in color cosmetics. In face makeup, Cover Girl suffered territory encroachment from competitive new launches, including L’Oréal True Match Super-Blendable Makeup, Revlon Photoready Airbrush mousse makeup, and Maybelline Dream Nude Airfoam makeup. Despite having an impressive cast of megastar spokes models including Taylor Swift and Pink, Cover Girl simply did not have comparable new product launches to promote in 2012. However, the company appears to be rectifying the situation with new products already released in early 2013.

Looking at the bigger picture, there are a number of factors causing P&G to lose ground to its major competitors in the United States. The main reason appears to be the company’s $10 billion cost saving plan – announced in February 2012 – which has left some of its brands lacking necessary marketing support, particularly in light of its competitors increasing their own promotional activities. Furthermore, P&G’s cost cutting from R&D may have put a damper on its rate of new product introductions and ability to keep up with the rapidly changing marketplace. P&G’s current plight dramatically exemplifies how critical both innovation and proper marketing support are to be successful in the beauty industry.

For further insights into P&G’s performance and that of other market leaders, please refer to Kline’s Cosmetics & Toiletries USA report.

* SOURCE: Kantar Media.

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