Could beauty be the prescription to boost drugstore foot traffic?
That’s one topic on the agenda as brand and retail executives meet at the National Association of Chain Drug Stores Annual Meeting kicking off on April 27 at The Breakers Hotel in Palm Beach, Fla.
More than 50 retailers — including Walgreens, Target and Amazon — are registered along with beauty leaders from Coty, L’Oréal, Procter & Gamble and Unilever. Smaller companies like Raw Sugar and first-timer Onyx Brands are scheduled to meet with retailers in hopes of staking out a bigger slice of the $93 billion total beauty category, as tracked by Circana.
While pharmacy, which accounts for as much as 70 percent of sales in some drugstores, traditionally dominates chats during the show, beauty is expected to generate the buzz this year, especially since the category registered double-digit sales gains over the past three years.
That’s thanks to brands like L’Oréal, E.l.f., Milani and Coty, which have leveled up their products to court customers.
“Team Coty is eager to engage with our retail partners and showcase the impressive achievements we’ve made,” said Stefano Curti, Coty’s chief brand officer. “In February, we reported our 14th consecutive quarter of results in line to ahead of expectations. This reflects how we are delivering on our strategy in a profitable way.”
Curti pinpointed positive results from the revitalized Cover Girl brand, such a Simply Ageless Essence foundation. “It’s a prime example of our market leadership in ‘skinified’ makeup,” he said, “designed for high visibility on social media and strong influencer engagement.”
Herrish Patel, president of Unilever USA and chief executive officer of Unilever Personal Care North America, will talk about how that company is elevating its core brands with launches like Dove Body Seru and SheaMoisture deodorants.
“We’re seeing passion for mass brands that have high desirability and exceptional product performance — think Vaseline, Dove, SheaMoisture and TRESemmé,” Patel said.
While brands have upped their game, they’re looking to retailers to do the same, with easy-to-shop environments that reflects product innovation.
“The moment of truth is in the store,” said Nathalie Gerschtein, president of L’Oréal Consumer Products Division, North America. “We’re going to talk about products, but we are also going to discuss in-store elevation,” added Gerschtein, hoping her experience in Asia will be a model for upgrading U.S. stores. “People don’t shop for beauty the way they do groceries. We have to recognize that and keep elevating.”
L’Oréal’s playbook for “delighting customers” includes delivering innovation faster to market and seamlessly combining marketing and advertising with physical experiences. As an example, Gerschstein cited NYX Professional Makeup’s Super Bowl commercial starring Cardi B and Duck Plump Extreme Plumping Gloss that was tied to in-store activity for a 360-degree campaign.
Still, the sheer number of doors operated by mass retailers presents obstacles to implement upgrades. “The challenge is how to scale,” said Larissa Jensen, Circana’s senior vice president and beauty adviser. “But you still want to feel you are getting a good experience when buying at a drugstore or mass merchant.”
There are indications of a mass retail store renaissance — a much-needed boost to stores that have remained largely unchanged in decades. As an example, RPG partnered with CVS to reinvent its in-store experience. “A key driver of the design approach was to ensure CVS gets credit for its large assortment that is now displayed in a far more accessible, appealing fashion,” said Bruce E. Teitelbaum, CEO of RPG. Custom-designed gondolas offer flexibility in shelf application and are no longer confined to standard merchandising configurations. “This offers the consumer a completely fresh approach to drugstore shopping,” Teitelbaum said.
Walmart is remodeling 650 stores this year to reflect its Store of the Future with improved layouts, expanded product selections and technology to support the shopping experience. Beauty is one of the categories that is getting the biggest facelift. Meanwhile, Target is building out wellness destinations within stores that include personal care items.
Wellness products at Target.
Courtesy
With macroeconomic worries hanging around, some experts predict some shoppers are ready to pivot to lower-price point brands.
“For years, prestige beauty growth has outpaced mass, but we’re starting to see that change,” said Scott Kestenbaum, chief growth officer at Maesa. “According to Circana, masstige brands are outpacing growth of both prestige and mass right now. I see this trend continuing less as a function of consumers trading down, but more attributable to a subset of mass brands stepping up their game, closing the actual and perception gap between the two sides of the aisle.”
Kestenbaum added that mass brands borrowed strategies from prestige, offering stylish packaging and efficacious formulas at accessible prices that especially resonate with younger shoppers.
“Gen Z and Gen Alpha want the premiumization of beauty without the premium price tag. Some of the fastest-growing brands at mass, such as E.l.f., CeraVe, Bubble, Being Frenshe and Fine’ry are a testament to this shift,” Kestenbaum said.
While industry insiders remain bullish overall on beauty, rumblings about overall spending contracting could translate into greater mass volume.
“In our spring 2024 report, spending on beauty ranked among the lowest priorities across all categories, with a notable decrease to fall 2023,” said David Schneidman, senior director at Alvarez & Marsal’s Consumer and Retail Group, who added shoppers are prioritizing essential items such as food and personal care as opposed to nonessentials such as jewelry and beauty.
“Even though spend on beauty is decreasing,” he continued, “it could signal that mass beauty retailers are able to capture a larger share of the overall market as consumers search for less expensive alternatives and not to cut back all together.”
Matt Fishbein, senior vice president at BWG Strategy, said industry feedback during research sessions showed pickup in consumer interest in mass brands is driven by “increased consumer spending cautiousness and a focus on value.”
He also noted a a shift to established brands, which often occurs in uncertain economic times. “It’s fair to assume that we’ll see mass brands’ relative strength continue as long as consumer sentiment on the economic outlook remains volatile,” Fishbein said, “which is likely to be the case until sometime after the presidential election.”
The recently published WWD Beauty Inc’s Top 100 showed mass players, including L’Oréal’s Consumer Products Division, Beiersdorf and Unilever, registered their strongest gains in several years — perhaps a harbinger of what’s to come.
While Jensen isn’t convinced people are ready to give up a favorite lipstick or scent, data shows they have accepted popular-priced skin care, the only category in mass beauty to post unit growth rather than generated dollar gains via price increases, according to Circana. “If you look at the brands with the gains [in the Top 100], they all play in skin. This year is the season of skin care. You have older consumers looking for treatment and the emergence of younger consumers discovering beauty and entering through skin care,” she said, explaining consumers don’t feel they are trading down for mass, but buying the lower-priced brand because they know it works.
The drug channel, in particular, stands to benefit from beauty’s strength. According to NielsenIQ data, beauty sales in the drug channel rose 5.8 percent last year, lagging behind discounter gains of 10.3 percent and supermarket’s 7.6 percent increase. Drugstores don’t have the advantage of footfall generated in fellow mass merchandise stores by apparel and groceries.
“Discussions [at NACDS] will hinge on the relevance of the drug channel,” said Wendy Liebmann, CEO of WSL Strategic Retail. “The challenge that channel is facing is shopping trips and access. They’ve taken price increases and locked up merchandise — so how are they going to grow business if they don’t do something different and new?”
Retailers need to do more than discount. “In order for mass to do better, it isn’t just about price. It just can’t be an assumption people will trade down. What will get people to spend more in mass is quality and innovation,” Liebmann said. “Beauty — hair color, hair, healthy skin, fragrance, bath — are all categories that have a potential to be trip drivers, especially with younger shoppers.”
Milani is an example of a brand hitting the sweet spot. The indie is currently number seven in mass beauty and has posted 10 consecutive quarters of sales growth that has outpaced the category. “We’re seeing significant momentum,” said Mary van Praag, Milani’s CEO. “Our average price point is around $10, which represents an incredible value. You can fill up your makeup bag with Milani for $50, roughly the equivalent of one bottle of prestige foundation.”
The brand is one of a cadre benefiting from social content creators talking up dupes. One example is influencers comparing Milani’s Cheek Kiss Cream Bronzer to pricier brands like Makeup by Mario and Patrick Ta.
Retailers like Walgreens see demand for the alternatives. “We’ll continue to offer premium skin care swaps at accessible prices,” said Heather Hughes, group vice president and general merchandise manager for health, wellness, beauty and personal care.
Her other priorities include natural, safe and effective brands and products with environmental sustainability and affordability in mind. “At NACDS, Walgreens aims to underscore the importance of prioritizing consumer value, particularly in health and wellness, simplifying the customer experience and fostering engagement.”
Macroeconomic conditions also point to greater acceptance of private labels and value brands.
“Since 2017, the price of health and beauty products has increased by 17 percent, with grocery items even higher at 23 percent. This shift has not gone unnoticed by consumers, who are increasingly turning to more affordable options like store brands,” said Scott Emerson, president of The Emerson Group. “As shoppers remain price-conscious, the trend toward value-driven purchases will persist, resulting in sustained growth for budget-friendly brands like Dove and Suave.”
The growth of TikTok as a sales driver and a point of sale will also be on the front burner. “The launch of TikTok Shop in the U.S. has become a major retailer disruptor. In fact, as of February of this year, it is the number-nine health and beauty e-commerce retailer in the U.S,” said a spokesman for NielsenIQ.
