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THE BACKGROUND

L'Oreal's decision to sign up 68-year-old film star Jane Fonda to front its latest ad campaign illustrates a significant shift by facial skincare manufacturers toward targeting an older, as well as younger, demographic. Consumers' obsession with beauty and youthful appearance continues to drive the sector, which was worth £554m last year, while a sustained focus on innovation has led to the introduction of products offering advanced anti-aging properties, including those that position themselves as an alternative to cosmetic surgery.

Women of all ages aspire to youthful beauty, and there is a multitude of skincare products to help them in their quest; ranging from moisturisers and cleansers to wipes, toners and scrubs, they all promise healthier-looking skin.

Two-thirds of women use cleansing creams or wipes, while 92% use a moisturiser, according to TGI, fuelling the sector's growth by 20% since 2001. Women spent £554m on facial skincare products last year; by the end of this year, that figure is set to have risen to £567m, according to Mintel.

The biggest category in the sector is moisturisers, worth £327m in 2005, with sales up 18% since 2001. Cleansing wipes, which have won over consumers by being easy to use, are also on the rise having posted an increase in sales of more than 92% between 2001 and 2006 to reach an estimated £98m. This has hit traditional cleansers, which have seen sales drop 4% over the period, to £80m in 2005.

The facial skincare market falls into two main categories: mass-market and premium products. 'Masstige' products, which offer added-benefit brands at near-premium prices, sit in between the two. A super-premium category has also emerged, which includes products costing hundreds of pounds, such as Creme de la Mer.

With an aging population, it is not surprising that skincare products claiming to offer anti-aging properties are a key area of growth, as are those that offer protective benefits, such as creams that have an SPF (sun protection factor).

Teen appeal

Anti-aging benefits are not the only concern of those buying skincare products, though. One in 10 consumers in the UK is between 10 and 19-years-old. Their main priority is to have spot-free skin, so products offering this benefit are popular with this group. Brands aimed at this market include Nivea Young, a non-medicated skincare range, introduced last year.

Manufacturers are keen to establish brand loyalty among this group in the hope that it will translate into long-term allegiance, as their needs shift to more sophisticated skincare products.

But skincare firms are shifting their focus to 45- to 54-year-olds, as this demographic is predicted to show the highest rate of growth over the next four years, at 9%. By 2010 14% of the UK's female population will fall into this age group.

As a result, firms have begun to create products targeting this audience, backed by advertising featuring older women. Movie star Sharon Stone was chosen as the face of Dior, at 46, while actress Dayle Haddon is promoting L'Oreal's Age Perfect range at 57. More recently, Jane Fonda, aged 68, has been signed up by L'Oreal to advertise its Age Re-Perfect treatment designed for the skin of women over the age of 65.

Although more women are now willing to undergo cosmetic surgery - operations rose by almost 35% between 2004 and 2005, according to the British Association of Aesthetic Plastic Surgeons - and many have embraced non-surgical treatments, such as Botox injections, to lessen wrinkles, the majority cannot afford, or do not want, to undergo these procedures. This has led manufacturers to introduce product ranges that aim to replicate their effects.

This has been accompanied by a trend toward pharmaceutical-type products, described as 'cosmeceuticals', such as SkinCeuticals, which was recently bought by L'Oreal, and NV Perricone.

A growing number of consumers are also opting for natural, organic skincare products, leading to specialist brands such as Dr Hauschka, Weleda and REN gaining in popularity, as well as mass-market lines such as Neal's Yard Remedies and Green People.

The leading manufacturer in the facial skincare sector as a whole is L'Oreal, which has recently entered the natural products market through its acquisition of The Body Shop in March. Its mass-market brands include Dermo-Expertise and Skin Naturals, previously known as Plenitude and Synergie, respectively. Its top premium brands are Lancome, which offers products for all ages, and Biotherm, which targets younger women.

Procter & Gamble's Olay has been the leading skincare brand since the 50s. P&G also owns Clearasil and premium skincare treatment SKII, while Estee Lauder has a wide portfolio of premium brands including Clinique and Aveda. Other companies in this sector include Beiersdorf, which owns Nivea, and Accantia, which owns Simple. Boots' offers a range of mass-market own-label brands such as No7, while Johnson & Johnson's portfolio includes RoC and Neutrogena.

Innovation is vital in this market and all the leading brands are likely to continue investing heavily in research and development. Demand for anti-aging properties will remain high and alternative methods of delivery are being investigated, which could include innovations such as the use of patches to impart active ingredients to the user.

The aging population will help boost this market, which is expected to be worth £738m by 2011, according to Mintel. In real terms, this equates to growth of 19%.

Cleansing wipes will fare best, followed by masks and moisturisers. Facial scrubs, toners and fresheners are likely to suffer a decline, although this should not have a big impact on the sector as a whole, as they account for a relatively small part of the market.

FACIAL SKINCARE PRODUCT CATEGORIES BY SALES AND MARKET SHARE

2005 2001 01-05
pounds m % pounds m % % chng
1 Moisturisers 327 59 278 60 17.6
2 Cleansing wipes 98 18 51 11 92.2
3 Cleansers 80 14 83 18 -3.6
4 Scrubs/washes 23 4 23 5 0.0
5 Toners/fresheners 15 3 19 4 -21.1
6 Masks 11 2 9 2 22.2
Total 554 100 463 100 24.4

Source: Mintel



MASS-MARKET FACIAL SKINCARE MANUFACTURERS BY SALES AND MARKET SHARE

2005 2001 01-05
pounds m % pounds m % % chng
L'Oreal Dermo-Expertise, Skin, 74 19 56 17 32.1
Naturals, Vichy
Boots Brands include No7, 70 18 61 19 14.8
17, Natural Collection,
Botanics
Procter & Olay, Clearasil 70 18 58 18 20.7
Gamble
Avon Pure Care, Solution, 50 13 42 13 19.0
Anew
Beiersdorf Nivea Visage 31 8 24 7 29.2
Accantia Simple 27 7 19 6 42.1
Johnson & PH5.5, Neutrogena 16 4 13 4 23.1
Johnson
Others* 50 13 56 17 -10.7
Total 388 100 329 100 17.9

Source: Mintel *Includes The Body Shop, M&S and Pond's



PREMIUM FACIAL SKINCARE MANUFACTURERS BY SALES AND MARKET SHARE

2005 2001 01-05
pounds m % pounds m % % chng
Lauder Group Estee Lauder, 58 35 47 35 23.4
Clinique, Origins,
Aveda, Prescriptives
Clarins 37 22 28 21 32.1
L'Oreal Lancome, Helena 25 15 21 16 19.0
Rubinstein
Elizabeth 22 13 18 13 22.2
Arden
Other* 25 15 20 15 25.0
Total 166 100 134 100 23.9

Source: Mintel
*Includes Lancaster, Dior, Guerlain, Givenchy, Chanel and Shiseido

ANALYST COMMENT - LAUREN PRIESTLEY CLIENT EXECUTIVE, TNS WORLDPANEL

Facial skincare has demonstrated consistently healthy growth over the past three years. Moreover, despite already being the biggest category in the toiletries market, its importance continues to grow.

Both the facial moisturiser and cleanser categories are posting growth, although the former is outperforming the latter.

Traditionally, moisturisers have held greater importance for older generations, but younger consumers are now making a contribution to the market's value.

Anti-wrinkle and time-delay moisturisers are showing strong growth among the under-35s - suggesting that people are starting to buy into such moisturisers, and their anti-aging benefits, at an earlier stage in their lives.

Olay and L'Oreal Dermo-Expertise remain the dominant brands in the moisturiser category, with L'Oreal's Age Perfect range acting as the key driver behind the company's success in this market.

Although much smaller, the men's moisturiser category is also peforming strongly, with L'Oreal's Men Expertise range, and Nivea For Men, driving sales.

Facial wipes are fuelling the growth of the cleansing sector as a whole, with consumers proving highly responsive to promotional activity within the market.

This has attracted additional shoppers to the sector as well as encouraging consumers to purchase more of these products per shopping trip.

Own-label continues to account for the biggest share of the cleansing wipes category. However, both Johnson & Johnson and Simple have performed well in this area of the market, having moved ahead of key competitors in the past year.