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The CPG personal care industry saw a dramatic year in 2016, with more disruption on the horizon. Fueling this movement is the increasing influence of multicultural populations, all-natural products, and direct-to-consumer online distribution models:
Evolving consumer preferences are creating a set of challenges and opportunities for the CPG personal care industry. In order to help our brand and agency partners strategize their way forward, we at Snipp have put together an industry guide into the some of the key trends that need watching.
#Trend 1: Consumer Advocacy for Non-Toxic Ingredients & Greater Transparency
Consumers are beginning to draw connections between toxic chemicals and health, and the personal care market is experiencing a realignment as a result. Organic products are gaining headway in response to consumers’ demand for safe ingredients and transparency in labeling.
‘Wellness’ oriented CPG products were strong sellers in 2016, especially within personal care categories. With consumers supporting their beliefs with their wallets, new product launches increasingly feature organic, natural ingredients, and demands for transparency are giving boosts to innovative startups like Lola, a 100-percent cotton tampon brand, that has taken a stand on never using additives, synthetics, chemicals, or dyes. Even brand behemoths like Johnson & Johnson and Kimberly-Clark are seeing their natural product lines contribute substantially to their bottom lines, with the successes of Aveeno Active Naturals and Huggies Nature Care diapers. With all the buzz around them, natural product lines are projected to continue growing at a compound annual rate of 7% to 9% through 2020—roughly double the expected growth rate for personal care products overall – and are expected to be worth $25 billion by 2025.
#Trend 2: Multicultural Millennials and their Multiplier Effect
Multicultural Millennials are becoming the most influential population segment in the U.S., with product categories and marketing initiatives striving to keep up with their wants and needs. Of the 75 million Millennials living in the U.S., close to half are multicultural: of African-American, Asian-American and Hispanic heritage. This subsection of an already powerful demographic is disproportionately influencing popular cultural trends and the buying habits of their families and peers, from both younger and older generations. The ‘multiplier effect’ of this group, straddling two key demographics — the 120 million strong multicultural population, which is the fastest growing in the country, and the all-important Millennials — gives them greater spending influence: $65 billion per year in spending influence, to be more precise, with an increasing majority of those dollars spent online. So what do we know about the spending habits of Multicultural Millennials? For one thing, they spend more than the average consumer on personal care products:
These Millennials value their cultural heritage, and seek brands that address their unique and individual characteristics – they are experimental in their search for these brand connections, responding more to online reviews and recommendations from social media, but the good news for marketers is that 95% consider themselves to be loyal to brands they like. They’re also more likely to choose premium, branded products and are willing to pay higher prices for quality, shared values, and a better customer experience.
#Trend 3: E-commerce and Online Direct-to-Consumer Models Are Expecting Growth
CPG brands are focusing on new ways to win over customers for multiple & repeat purchases. The success of niche, digital subscription services is creating a disturbance in the monolithic personal care industry, along with the promise of greater E-commerce activity spurred by Millennials.
The online universe can be a great leveler, allowing small startups to compete on a similar footing as established industry stalwarts. With the digital generation valuing customer reviews, user-generated content and the endorsements of influencers over traditional marketing, indie brands are being allowed increasing opportunities for break-out success. But traditional E-commerce has yet to gain ground in personal care, according to research by Tabs Analytics — It’s still only 3.1% of the total market. The upside is that although the share of E-commerce is still limited, it has grown — consumers were 37% more likely to buy personal care products, such as soap and shaving cream, on Amazon Prime in 2016 than they were in 2015. Small brands that effectively harness online channels to tell their stories and build deep, emotional connections with consumers are better equipped to disrupt the grip of large, legacy brands. Tapping into this concept are direct-to-consumer subscription services which not only offer consumers convenience, affordability and a more engaging shopping experience, but also a shared sense of community.In the razor market, Dollar Shave Club (now part of Unilever) and Harry’s have made huge inroads, sparking initiatives in other areas of personal care as well, such as Goby for electric toothbrushes.
Best Practices for CPG Personal Care
For CPG brands, growing and maintaining a relationship with consumers is critical in today’s market. These are some key ways:
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