Double digit sales drop for P&G, Coty buys digital firm to target millennials, Brown Brothers focuses on young women, and travel retail stumbles on China slowdown.
Double digit sales drop for P&G
P&G's out-going president and chairman, A.G.Lafley, remains confident that the giant multinational is on the road to recovery. But all of its categories experienced a double-digit drop in sales in the first financial quarter of 2016. Grooming, which includes power brands and , saw the biggest slide of 14 per cent. The second worst performer was beauty where sales slipped 12 per cent.
The strong US dollar seriously dented P&G's performance because over 65 per cent of its sales come from outside the US. The shaving sector experienced weaker demand for blades and razors and more intense competition from cheaper brands in major markets.
Volume was also a serious concern in beauty as P&G's skin and personal care brands also battled stronger competition from less expensive brands. The bright spots for both categories came from innovation and the marketing strategies of premium brands, notably Braun and .
P&G's net sales for the quarter were US$16.5 billion, a downturn of 12 per cent in contrast to the same period last year. But A.G. Lafley is right to be positive say analysts. Organic sales fell only 1 per cent and sales declines are likely to slow to "high single digits" as the multiinational focuses on more profitable brands in the aftermath of the Coty sell-off. P&G's continued program of cost-cutting also cheered the market and its shares rose 2 per cent.
Coty buys digital firm to target Millennials
Coty's buying spree continues. Only this time the acquisition isn't one of the world's best known fragrance or make-up brands. The expanding multinational has inked a deal to buy Beamly, a digital marketing firm with offices in New York and London. "The acquisition of Beamly will address the accelerating consumer shift in time spent from traditional media to real time digital and social media channels" says Camillo Pane, Executive Vice President, Category Development for Coty.
Beamly's key appeal for Coty is its successful track record in driving audience growth and engagement for consumer brands across digital, including online video. Targeting Millennials through social media and accelerating Coty's e-commerce business are also core capabilities that made Beamly a prime buy-out target.
Strengths that will be needed even more urgently once Coty integrates the brands it has acquired from P&G. Beamly will continue to work for other clients but will also work closely with Coty's in-house marketing and digital teams on social data benchmarking, content optimisation and consumer engagement to maximise brand strategies. The London team will remain in their current HQ but the New York team will move to Coty's US head office.
Moscato mani - Brown Brothers focuses on young women
Over the past seven years, sales of moscato have surged strongly, thanks to the light-bodied wine's appeal to young women. There's also been a tidal wave of growth in the cider market because Millennial femmes prefer easy-drinking styles. Major players such as Banrock Station and Brown Brothers, one of the great heritage names of the Australian wine industry, have carved out a big market attracting 20-something women, especially during summer and the racing season.
Most wine companies in Australia and the US have chased the young female market before, mainly with twee names and graphics. But Brown Brothers, the market leader in moscato in Australia, have come up with a more sophisticated approach. The company commissioned five custom-made nail polishes from Aussie brand - Say It With Polish (sayitwithpolish.com.au) - Wine & Shine, Savvy Blue, Fruity Fling, Classic Vintage and Spring Rosas.
Nail fanciers don't even have to buy wine to enter a competition to win the range. All they have to do is to take a photo of their perfect mani holding a wine glass, use the hashtags #makeitmoscatomoment and #moscatomani and then follow @brownbrothers to enter. The lucky winners not only get the nail polishes, they also receive a seasonal supply of Brown Brothers four moscato varietals priced at $16.50 each - Moscato, Moscato & Sauvignon Blanc, Moscato Rosa and Moscato & Chardonnay. A terrific beauty promotion that could spawn a string of copycats.
Travel retail stumbles on China slowdown
Conflicting reports about the effect of the slowdown in China's economy have become par for the course. Last week, the number of billionaires in China overtook the US for the first time. The People's Republic now has 596 billionaires, says the Shanghai luxury publisher Hurun Report, in contrast to 537 in the US. Wang Jianlin, the real estate and entertainment mogul, has knocked off Jack Ma, the founder of e-commerce mammoth Alibaba, as China's richest person. Wang's personal fortune increased by 50 per cent last year to US$34.4 billion.
China's mega-wealthy may have sailed through the country's flatlining finances but global travel retail hasn't defied gravity. Global travel retail sales topped US$63.5 billion in 2014, an increase of 5.8 percent on 2013. With Chinese shoppers still ranked as the number one spenders, the Asia-Pacific region reported the strongest growth of 9.9 per cent.
According to Erik Juul-Mortensen, President of the Tax Free World Association, the double digit growth generated in travel retail by the Chinese is over for the foreseeable future. "China's economy will grow by only 7 percent next year. The slowdown of the Chinese economy will continue and be accompanied by a continuous decrease in the appetite for premium and luxury goods. This means travel retail cannot rely on chasing sales to the Chinese market".
The Russians and the Brazilians have also curtailed their spending in global travel retail because of economic downturns in their respective countries. Even through overall worldwide sales look good productivity is patchy, considering how much money has been invested in airports to improve the category worldwide says Juul-Mortensen. "Some airports manage to attract two-thirds of passenger traffic in their stores. Others only reach 33 per cent. The quality of the retail environment needs to be sensational to be effective".
Snippets from the wires
- L'Oréal Luxe launched the first Martin Margiela fragrance - Untitled - in Australia in 2010. Overseas, the prestige fashion brand has released a string of fragrances linked to its Replica label, including this year's launch Lipstick On. John Galliano signed on as Martin Margiela's creative director last year and sales have increased by 30 per cent, in spite of his well-publicised exit from Dior. Owned by Only The Brave, the parent company of Diesel founder Renzo Rosso, Martin Margiela will launch in menswear next year and a global release fragrance is planned for 2017 in collaboration with L'Oréal.
- Showing yet again that K-Beauty brands are going global with a vengeance, LG's VDL makeup brand has hired Coco Rocha as its international face. The supermodel will help publicise the chic brand aimed at women 25-plus in all overseas markets.
- Alibaba, the multi-billion dollar Chinese e-commerce giant, is still looking to expand. The company will open "embassies" in Italy, France and Germany to help European brands enter the Chinese market.
- Gucci, the largest brand owned by luxury goods group Kering, is still struggling. But Saint Laurent, helmed by Hedi Slimane, has become one of the fashion world's fastest-growing brands and the athleisure trend is powering Puma's profits. Both brands exceeded estimates for the third quarter to push Kering's revenues to 2.9 billion euros (AUD$4.42 billion) for the period.
- It seems like only yesterday since Unilever relaunched Impulse body sprays but it's time for another push. The multinational has hired New York ad agency Droga5 to create a campaign for another global re-work to debut in 2017 in Europe, Australia and Argentina.
- Future Market Insights is even more optimistic than other leading researchers about the potential of the organic/natural cosmetics market. In a new report, the company's analysts expect the sector to reach US$66.1 billion by 2020.
