Big Players Discuss Today's Consumer, China Challenges, At Council Meeting

At the Personal Care Products Council's annual meeting in Palm Beach, Fla., beauty leaders reflected on China and offered perspective on the challenges they face in an industry where communication on a global scale has never been easier and consumers are leading the conversation.

"You no longer need to be a global or multinational company to compete around the world and to talk to consumers around the world," noted Elizabeth Arden President and CEO E. Scott Beattie during the March 1 CEO panel.

Already, based on Euromonitor data, the worldwide beauty market is considerably fragmented, with just 20% of it owned by the 10 top international brands, and new entrants face low barriers to entry, Beattie said.

"There has to be a way to pull digital, pull traditional, and place them together in a package and allocate it to markets that are growing most quickly," said Elizabeth Arden CEO E. Scott Beattie, maintaining that "U.S.-based media companies [must] become much more global in the way that they operate."

"People can invent products very cheaply and efficiently and bring them to market through digital communications much more cheaply than ever. They can outsource production, outsource manufacturing, outsource public relations and become a virtual company [growing] quite large quite quickly," the exec observed, adding: "It’s an unprecedented time for us in the beauty industry."

"Getting China Right"

Following a keynote speech delivered by Joshua Cooper Ramo, managing director of strategic advisory firm Kissinger Associates and "one of China's leading foreign-born scholars," at a conference promoted with the tagline "Know Where You Are Going," the panelists focused much of their discussion on China.

Thia Breen, president, North America, The Estee Lauder Companies, acknowledged that "there's a lot [of talk] about getting China right today."

She said that while Estee Lauder has solidified its No. 1 ranking in prestige beauty in the region, there has been very little promotional activity attached to the brand.

The Chinese consumer is "buying it as an aspirational brand," said Breen. "We also know that will begin to change over time. It’s not going to be enough for Lauder to be a Western brand and win in China."

Market research firm RNCOS has tracked the rise of domestic brands and says there is still ample room for new players in the China personal-care market, which it estimates reached $20.2 billion in 2009 and will top $31 billion by 2013 (Also see "China’s Booming Cosmetics Market Still Offers “Plenty of Room” For Entrants" - HBW Insight, 28 Feb, 2011.).

Stefano Curti, president of beauty care at Johnson & Johnson, also acknowledged that the power of a company's name will take it only so far in China. "We need to understand local consumer insights, fine-tune our marketing model and drastically adapt our products," he said.

Curti noted that such an approach has become common practice for J&J, though "there was a time when we thought every acquisition was global. We'd buy something and globalize it," he said.

"Now that's not the case – we have more of a balance of global brands and local brands. We go after growth with global strategies and then locally relevant solutions," the exec explained.

Engaging The Tech-Empowered Consumer

The panelists agreed that advancements in technology and the evolution of social media have made for a more empowered consumer who must be engaged on new grounds.

More consumers – upwards of 50% in Asia – are influenced by the Internet when making purchasing decisions, with an increasing number using their mobile phones to compare products and prices, Curti of J&J pointed out.

With so much information at consumers' fingertips, traditional advertising has lost some of its clout, Arden's Beattie said. "No longer can we just have a pretty picture of a celebrity with a product and some benefits. The consumer is looking through that. They're looking for an entry point into the conversation."

Breen had a similar outlook. "We used to be able to manage the message. We could do it at the counter. Today she creates her own messages."

The Lauder exec pointed to the consumer-generated videos that have proliferated on YouTube.

"The other day I saw one on how you could make the most of your MAC eyeshadow. How you could pop it out and get more. Hundreds and thousands of consumers were watching this," she said.

In the era of texting and instant messaging, consumers have come to expect instant gratification and immediate feedback from the brands they buy. Breen relayed Lauder's experience when it elected to discontinue its Prescriptives brand ("Lauder Closes Shop For Prescriptives," "The Rose Sheet" Sept. 21, 2009, In Brief).

"We made that announcement after the market closed on a Thursday afternoon. On Monday morning, someone came into my office and said we had thousands of people on Facebook saying, 'Bring back my Prescriptives!' and asking, 'Is anyone listening to us?' ... We realized we needed someone to answer this right now," Breen said.

Innovation Needed From Media Partners

Rather than counting on beauty advisors at store counters to convince shoppers to buy products or attempting to mobilize a global training initiative for a direct-selling operation, it can be more efficient targeting information to consumers directly through digital channels, Beattie said.

There is still value in traditional advertising media, the exec added, assuming that it can be deployed to the same global audience that digital media nets.

For example, Arden aims to launch a new Taylor Swift fragrance in September. Beattie noted that the country crooner "has been created in a digital world," with 18 million Facebook friends and five million Twitter followers.

"We [intend] to tap that built-in customer base ... with traditional advertising – TV, print and other things – but it has to be done on a global basis because her Facebook friends and her Twitter are global," he said.

According to Beattie, Arden "work[s] extensively with consulting firms and media buying groups and ad agencies on the ability to put together a global campaign." Still, the firm's partners often have been unable to deliver due to licensing issues around the world.

"There has to be a way to pull digital, pull traditional, and place them together in a package and allocate it to markets that are growing most quickly," the exec said.

"The excuse that the business model doesn’t accommodate it – guess what. That needs to change. ... Unless the U.S.-based media companies become much more global in the way that they operate, they're going to continue to see their business fragment," Beattie concluded.

By Suzanne Blecher