On the 21st October the FT had an article with the intriguing title ‘skin care, science and the secret of eternal profit’. This is the link to FT but I fear that you might have to be a subscriber to see the thing.
The core premise of the article is that the combination of a high profile brand with the promise of ‘anti aging’ equals mega margins. The willing consumers for this proposition are the ageing baby-boomers (well at least those with deep pockets).
Three companies seem to be doing very well from our fear of aging- Beiersdorf (Nivea) - P&G (Olay) and L'Oréal. By combining a bit of science with a lot of marketing, they have taken traditional mass brands sufficiently up-market to be able to obtain premium prices, without incurring the distribution costs of older luxury names.
Millions of women - and increasingly men – are buying this stuff which makes anti-ageing products the largest product segment of the skin care market.
The article goes on to discuss how other brands have been able to move into the highly profitable category of ‘mass luxury’. BCG has researched this phenomenon. You can see a summary of the finding on their web site.
They argue that such brands obtain higher prices because they evoke an emotional response among middle-income households. A combination of population ageing and higher middle-class income has created this huge potential market. The market rests on the emotional need to stay young. "Paying £20 for a pot of moisturiser would have seemed ludicrous a decade ago, but not now," says Martin Hayward, chairman of the Henley Centre, the marketing consultancy.
Clearly there is money in those wrinkles!
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