Biggest beauty companies lose out to smaller brands

OC&C's annual study in FMCG highlights industry change

The world's top 50 FMCG brands are losing out to smaller companies, according to the latest annual report from business consultancy OC&C. Brands losing their grip on the market included top beauty company Unilever, which saw a 2.7% decline in sales since 2013.

OC&C's latest Annual Study on the Global 50 Champions in FMCG ranks the biggest-selling FMCG brands across the world in 2014. The best-performing names in personal care and cosmetics included P&G in second place and Unilever at number 4 – both companies retained their position from the previous year. Elsewhere, L'Oréal moved up one place to number 11, whilst Colgate Palmolive, Reckitt Benckiser and LVMH all stayed in the same ranking at 23, 29 and 44 respectively.

Cosmetics companies taking a larger share of the market included Estée Lauder, which moved an impressive six places from 46 to 40, while the list's authors predicted that Japanese company Shiseido, currently at number 59, would enter the top 50 within the next two to three years if it maintains its current growth rate. Henkel was the only German company to make it in to the ranking, sitting at number 41 – an improvement of one place on the year before.

Meanwhile, troubled Avon dropped out of the ranking to number 51, down four places from 47 the previous year. OC&C said the company had suffered a decrease in net sales of 12% compared to the previous period.

Overall, the report stated that sales growth across all brands in the top 50 had decelerated, slowing to 1.7% in 2014 compared to 2.9% in the previous year. While some of this decline can be attributed to currency volatility, OC&C said that organic growth is stalling even at constant exchange rates, and that it is at its lowest rate for 10 years, excluding the economic crisis year of 2009.

Global companies lost 0.6% of their market share to local brands in Brazil and Russia, 0.3% in India and 1.3% in China. Large FMCG companies also lost 1% of their market share in the US and failed to grow in the UK. Will Hayllar, Partner at OC&C Strategy Consultants, said: "This year's research has shown that in the FMCG sector, bigger isn't always better, with scale no longer giving companies the edge it once did. Many of the 'Goliaths' in our Global 50 ranking are encumbered by their heavy institutional structures, leading to sluggish decision-making and slower innovation. This has given smaller local players – the 'Davids' – an opportunity to seize market share across the board."

Several cosmetics brands were highlighted for their success in the past year. OC&C praised Estée Lauder's understanding of the Indian market, adding a lip bar to Bobbi Brown counters in the country, where lip colour is particularly important. The brand suggests the best shades for Indian women and capitalises on the company's wedding culture with Bobbi Brown Bridal boxes.

Burt's Bees was also praised for its "guerilla tactics" such as using alternative retail channels, including Starbucks, and heavy online engagement to market its products in direct competition with bigger brands. Scandinavian brand Lumene also showed impressive growth by successfully linking its brand to the natural Arctic ingredients used in its products. OC&C said: "In this way they leverage Lumene's location and expertise in a way that is almost impossible for others to replicate."

The company suggested a number of steps large beauty brands could take to turn around their fortunes. Hayllar said: "Firstly, they need to look closely at what the consumers in their category are doing and identify the sectors in which customer needs are fragmenting and a more diverse range of offerings is necessary. Secondly, firms need to examine the structural barriers within the business which may be hampering their ability to address these consumer needs – whether that’s a constant drive for consistency which is killing off new ideas, or lengthy sign-off procedures which are slowing down innovation cycles.”

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