Inside an industry: sitting pretty

Hannah Langworth gets under the skin of the beauty business

From Cleopatra's asses' milk baths to Calvin Klein's groundbreaking androgynous perfume cK One, the beauty business has long been innovative, compelling, and the subject of public debate. And its magnetism has generated massive revenues over the years - sales of Chanel Number 5 perfume rocketed when Marilyn Monroe revealed she wore nothing else to bed, while cult "miracle" products such as Crème de la Mer's fermented kelp moisturiser can retail at huge premiums - in the case of this particular product, at as much as an incredible £316.67 for 100ml.

Face the facts

The UK market for women's facial products alone is worth nearly £1 billion, and the signs are that men are gradually catching up - the European men's skincare market has increased by 45 per cent since 2005 (Mintel). The market is energetic and fiercely competitive, as anyone who's walked into a department store beauty hall will be able to testify. Cosmetics companies typically reformulate 25 per cent of their products every year and many products have a lifespan of less than five years as customers expect ever-increasing choice and effectiveness.

Like other sectors, the beauty industry has had to grapple with the severe economic trials of the past five years. But downturns arguably have less of an effect on sales of make-up and other beauty products than on other areas. In the midst of the recession of the early 2000s, Leonard Lauder, chairman of the board of global makeup and skincare giant Estée Lauder, even claimed that cosmetics sales rise during hard economic times as women treat themselves to small luxuries such as lipsticks in place of more expensive shoes, handbags or dresses. The statistics for the latest downturn suggest he may be correct - sales of women's skincare products have risen by 26 per cent since 2006 (Mintel).

The ongoing strength of cosmetics companies may, however, have more to do with growth in emerging markets, particularly Brazil and China, whose beauty industries are predicted to grow by $8 billion and $10 billion respectively by 2014 (Euromonitor). Outside the BRIC economies, Nigeria, Ukraine and Vietnam are among the countries tipped as potentially very profitable for cosmetics companies in the future.

Testing times

However, the economic outlook is not all rosy for this sector. A particularly significant issue for cosmetics companies over the past few years has been the rising cost of raw ingredients such as palm oil and cocoa butter. Palm oil, for example, which is used in many cosmetics products, from moisturiser to soap, is now nearly twice as expensive as it was five years ago, and reached record highs in 2011.

Another ongoing headache for the beauty industry is the extent of the regulation it faces. From the deadly white lead makeup used in Elizabethan times to the most recent craze - fish pedicures, its products and services have often had their safety questioned. It can take new products years to be approved and the regulatory climate is set to get even tougher. July 2013 will see the introduction of a new EU Cosmetics Directive. This directive will require every cosmetic product sold in the EU to have a designated "responsible person" who will be personally legally accountable for ensuring that the product complies with the host of rules in the regulation relating to product safety and the provision of product information. Product safety hit the headlines recently when French-made PIP breast implants were found to be substandard. The scandal prompted calls across Europe for government-funded removal, and looks set to lead to a string of legal actions.

The new directive will also make it illegal for cosmetics products tested on animals, or those which contain ingredients which have been, to be sold in the UK. However, as animal testing remains a much cheaper way of ensuring the safety of cosmetics than other methods, some companies in the industry are pushing for the incoming ban to be overturned, or at least delayed.

Eye contact

The beauty industry is also facing the prospect of further controls in a new area. Organisations such as Mumsnet and Girlguiding UK, and public figures including Liberal Democrat MP Jo Swinson and prominent psychotherapist Susie Orbach have been involved in an ongoing "campaign for body confidence" against the industry's use of unrealistic images in advertising, particularly those which have been artificially enhanced. They argue that such images are deceptive and can be psychologically damaging, in extreme cases even leading to eating disorders and other psychological conditions. A number of rulings have been made by the UK's Advertising Standards Authority in recent years against cosmetics companies ordering the removal from public display of advertising images deemed to be particularly misleading. Swinson and fellow MP equalities minister Lynne Featherstone have even called for all airbrushed images to include a "health warning", akin to those currently found on alcohol and tobacco products, indicating that the image has been technologically enhanced.

But as the eye of the beholder scrutinises the beauty industry ever more closely, even the negative reactions that its products and marketing campaigns can provoke are surely simply another sign of its power. Both the passion of debates about advertising or animal testing and the thrill of acquiring a new nail varnish or smelling a favourite perfume are signs of the deep connections we make between our bodies and our sense of identity. The beauty industry has long known how to exploit these connections, which will no doubt ensure it continues to generate some good-looking profits long into the future.

Montserrat Passolas

Marketing and Brands Director at PZ Cussons Beauty, the beauty division of PZ Cussons Plc, a leading producer of personal healthcare products, including Imperial Leather soap and Original Source haircare and shower products

What is it about PZ Cussons' business model or way or operating which has allowed it to continue to prosper in the current difficult economic climate?

Over and above business strategy, the company prides itself on hiring creative people who are tuned into future trends across popular culture. Our CEO Michelle Feeney has had great success in discovering and growing cult brands and the importance of this is upheld by the company and its staff.

Part of PZ Cussons' growth comes from the acquisition of new ranges of products, most recently the Fudge hair care brand. How does PZ Cussons Beauty decide which new ranges to acquire?

When we're looking at new ranges we conduct extensive market research that can point to the gaps not covered by current product propositions. Our social media networks provide us with a very rich direct dialogue with consumers ready to share their likes and dislikes, needs and dissatisfactions. In that form, we can learn and innovate.

Where does the inspiration for new products come from?

The inspiration for new products comes from different sources - there is very rarely only one specific source. Fashion shoots in magazines, trends across the globe, and completely different sectors like food, the automotive sector and architecture can often trigger an idea for a new product, new packaging or new usages. There is also of course the obvious source of inspiration - the consumers, who we love to engage with across all of our social media channels. Consumer feedback is vital and Facebook and Twitter have allowed us to engage directly with our customers.

What do you enjoy about working in the beauty sector?

I love working in the beauty sector! I've been working in the industry for 15 years and I'm still passionate about new formulaes that arrive from Research & Development. Textures, colours, packaging, fragrances - every part of a beauty product triggers an emotion. Beauty makes you look good and more importantly, feel good. It's that emotional factor and the happiness of our customers that keeps you going and aiming to do better.

The beauty industry can of course be very glamorous, but there's a lot of work behind the scenes to keep innovating and launching products so we can pass our brand message to consumers in a distinctive and relevant way. Creating a memory in the minds of our consumers is very rewarding indeed.

Mark Fenn

Marketing Manager at Faith in Nature, manufacturer of the award- winning natural beauty product range Faith in Nature and the household cleansing brand Clear Spring

How has Faith in Nature been able to continue to prosper in an industry where it faces competition from many much larger businesses?

The company has had the ability to manufacture, market and do all the ancillary work that's necessary to make products that people want. And the market for natural beauty products has grown enormously since the business was founded. Our share of the market has gone down, but if you have 10 per cent of a market worth £1 million you've got £100,000 of the business, while if you've got 2 per cent of a market worth £100 million, you've got a £2 million business, and that's very much what's happened to us.

Another reason that the company has been successful is that a part of the ethics of the company since it was set up has been that the products are affordable. We charge just over £5 for 400ml bottle of completely natural shampoo, whereas some of our competitors will charge £15 for a 200ml bottle. Because we provide an affordable alternative, the recession has been very good for us.

Where does the inspiration for new products come from?

It can come from customers, exhibitions - or market research. For instance, we'd been looking at developing a range of deodorants and the research was showing us that there's a very good market for roll-on deodorant. One of our packaging suppliers came up with a refillable roll-on deodorant and we thought it fitted with our eco credentials ideally - and that's how that new product came about.

Inspiration can also come from an ingredient. We've just launched a new pomegranate and rooibos range, as the research on the properties of pomegranate has become better and better.

What does Faith in Nature have planned for the future?

More Faith in Nature products, and we've just launched two new brands - a baby range called Humphrey's Corner (we have a licence from the owner and originator of the Humphrey's Corner characters) and a very large range of products under the World Wide Fund for Nature panda umbrella. The range shares all the ethical characteristics of the Faith in Nature range, but the intention is to sell it through retailers like large department stores. Faith in Nature is a range that's been developed for the health food trade who have been very loyal to the brand and understand the products.

What do you enjoy about working in the beauty sector?

It's a hugely complicated industry. You have to make sure the product works and does what the customer wants it to do, and you also have a legal obligation to make sure it doesn't harm anybody. Then once you've formulated the products, you need a colossal amount of knowledge to manufacture them in a way that's cost effective. On top of that, you've got to know how to ensure they keep in a bottle for up to two and a half years.

It's also an unusual industry. At Faith in Nature we use natural ingredients that have been around, in certain instances, for thousands of years and have been referred to in the Bible!