NAICS: 32-5620 Toilet Preparation Manufacturing
SIC: 2844 Perfumes, Cosmetics, and Other Toilet Preparations Manufacturing
NAICS-Based Product Codes: 32-56207281, 32-56207291, 32-5620D121, 32-5620G1, 32-5620G111, 32-5620G121, 32-5620G131, 32-5620G3 through 32-5620G331, 32-5620G351, and 32-5620G3B1
A new class of products blurs the line between skin care and medicine. One element that unites this new class is that its products contain active ingredients that manufacturers claim perform some special anti-aging function upon the skin. The American Academy of Dermatology (AAD) calls these products cosmeceuticals, because they are formulated to be more than mere color cosmetics. Cosmeceuticals, the AAD proclaims, improve skin functioning and prevent premature aging. The most common active ingredient is an alpha hydroxy acid (AHA) known as glycolic acid. Its active function is to increase the rate of skin exfoliation; quicker cell turnover is said to make skin smoother and softer, give it a more even tone, and reduce age spots. Another common active ingredient is a beta hydroxy acid (BHA) known as salicylic acid.
The term cosmeceutical is apt because it reflects the blurred line between products classed as cosmetics (non-therapeutic) and products classed as drugs (therapeutic). The word implies that a product sold as a nontherapeutic cosmetic has some therapeutic or drug-like benefit.
The U.S. Food and Drug Administration, however, does not recognize the term cosmeceutical. The FDA oversees implementation of the Food, Drug, and Cosmetic Act (Act). That Act defines drugs as products with therapeutic benefits that are subject to FDA review and approval, and defines cosmetics as articles other than soap applied for cleansing, beautifying, promoting attractiveness, or altering the appearance. According to the FDA Center for Food Safety and Applied Nutrition, "a product can be a drug, a cosmetic, or a combination of both, but the term cosmeceutical has no meaning under the law." Examples of products that the FDA recognizes as being a combination of both—and thus subject to FDA oversight—are sunscreens, fluoride toothpastes, hormone creams, anti-perspirants, and anti-dandruff shampoos.
The $28 billion per year industry that makes and markets products for cleansing, beautifying, promoting attractiveness, or altering the appearance is commonly known as the cosmetics and toiletries industry. Cosmetics and toiletries—with the exception of those few listed above—are not subject to FDA approval. Their ingredients are not FDA approved. Manufacturers may use any ingredient or raw material (except for color additives and a few prohibited substances) to make products without government review or approval.
Companies are not required to substantiate anti-aging performance claims or conduct anti-aging safety testing. This lack of governmental oversight resulted in this new class of products being characterized as cosmePSEUDO-cals in a 2005 Harvard publication. Labeling regulations, however, do apply. The Fair Packaging and Labeling Act requires an ingredient declaration on all cosmetics and toiletries products, whether they are anti-aging or not. Ingredients must be listed in order of quantity.
Whatever they are called, this new class of products is considered to consist of classic nondurable consumer goods. Nondurable goods are purchased for immediate or almost immediate consumption and have a life span ranging from minutes to three years. Nondurable goods are destroyed by their use so consumers need to repeatedly replenish their supply throughout the year. Generally this equates to a large variety of products to tempt consumers. Nondurable goods are often products that are used every day, such as cosmetics, hair care including shampoo and conditioner, and creams and lotions.
This new class of products is embodied by the entire L'Oréal Paris Age Perfect line. Its 2007 ads featured actress Diane Keaton in print and TV supporting the line of face cosmetics and face creams. Procalcium is the name of the line's anti-sagging and anti-fragility moisturizer. It re-densifies and hydrates skin. In 2004 and 2005 L'Oréal spent between $10 to $20 million on U.S. advertising for its Age Perfect product line, according to ACNielsen Monitor-Plus. Money is spent because the market for these products is growing and profitable, whatever they are called, or however they are classified.
While beauty may be subjectively held in the eye of the beholder, the entire $28 billion per year U.S. cosmetics and toiletries market is objectively growing. Cosmetics International reported in January 2007 that demand for anti-aging products will fuel new product introductions and reformulations of existing products through 2010. The market research company Packaged Facts predicted double-digit growth of this new class of products with active ingredients that make anti-aging claims. According to the U.S. Census Bureau report "Toilet Preparation Manufacturing: 2002," the three major cosmetics and toiletries product divisions, from largest to smallest, are: cosmetics; hair care products; and creams and lotions, as depicted in Figure 71.
The Census Bureau classification system highlights growth of product classes within each of the major divisions that are potentially part of this new class of cosmeceuticals. However, defining the size of the anti-aging market is complicated. Each of the three major divisions depicted in the pie chart had product classes that experienced double-digit, triple-digit, and even quadruple-digit growth due in part to products that have been reformulated to incorporate active ingredients their makers claim fight aging.
Anti-aging products initially introduced were designed to target wrinkles and were primarily in the creams and lotions sector. Anti-aging products quickly extended to cosmetics and hair care, notable expansions to even larger industry sectors with more opportunity for growth and profits.
Successful advertising contributed to this trans-industry expansion. For instance, Olay (made by Procter & Gamble) used the seven signs of aging concept to support the introduction of new products designed to target more than just wrinkles. The seven signs of aging are: fine lines and wrinkles, rough skin texture, uneven skin tone, skin dullness, visible pores, blotches and age spots, and skin dryness. Thereafter, Olay's advertising instructed consumers that aging also causes skin dullness, discoloration, and brown spots—not just wrinkles. Products with active ingredients said to help brighten those areas can be purchased. Aging also causes hair dullness, fading, and thinning. Not surprisingly, in January 2007 newly reformulated hair care products with active ingredients said to address those problems became widely available.
Because active ingredients are added to many products across all three major divisions of the cosmetics and toiletries industry in order to create new anti-aging formulations, it is difficult to accurately track the growth of these products and measure the size of the market. The products covered in this essay had shipments of $10.8 billion in the United States during 2002, the last year for which detailed shipment data are available at the product level. Figure 72 demonstrates potential product classes affected, at least in part, by active ingredients that manufacturers claim perform some special anti-aging function. One caveat relates to the Census classification system used as a basis for this analysis of cosmeceutical products. Two Olay lines—Regenerist and Total Effects—announced in January 2007 that each had moisturizers available with a "touch of sunless tanner for a sun-kissed glow and younger looking skin." These newly reformulated products could be classed as moisturizers, self-tanners, active anti-aging products, or even all three. These hard to classify products contributed to double-digit, triple-digit, and even quadruple-digit growth depicted in Figure 72.
|The product classes covered here are a subset of those in the Census Bureau's creams, lotions and oils division of the Toilet Preparations Manufacturing industry. Figures are in thousands of dollars unless otherwise specified.
|Percent of Total
|Percent of Total
|Percentage Change 1997 to 2002
|Body Lotion, excluding bath lotions
|Facial Scrubs and Masks
Lip cosmetics experienced triple-digit growth
Shipments of lip cosmetics increased 157 percent between 1997 and 2002 from $1.0 billion to $2.7 billion, in part due to the introduction of reformulated products that helped the class exceed double-digit growth predictions. Growth occurred among lip stick, lip gloss, lip liners, and lip creams. Because lip skin is vulnerable to damage from aging, lipstick reformulations became more robust—functioning both as a color cosmetic and as a lip plumper that fights aging by creating a youthful pout.
According to Mintel's Global New Products Database (GNPD), 431 new lip plumpers were launched into the market in 2004. The pillar of skin care, Clinique (made by Estée Lauder) has a best selling lip cream called All About Lips. Its active ingredient is the common beta hydroxy acid salicylic acid. It exfoliates lips, minimizes fine lines, and attracts moisture to prevent lip color applied afterward from creeping into fine lines around lips.
Face powder and foundation creams were flat
In the five-year period between 1997 and 2002, shipment value remained steady, staying close to $925 million. This class had a tremendous amount of anti-aging product introductions, yet remained flat because it is a highly competitive area. Manufacturers tend to focus research and development on face powder and foundation creams because they not only have high margins but, for most women, these face products are a high loyalty category. America's Research Group reported that women have a penchant for buying brand name cosmetics; 35 percent reported they are very loyal to a face cosmetic brand. Once a woman commits to a face powder or foundation cream brand, she rarely wants to change. Makers count on this committed consumer for sales and profits.
Face powder shipment value grew 22 percent between 1997 and 2002 from $327 million to $400 million. Double-digit growth was due, in part, to the introduction of anti-aging product formulations. One example is Cover Girl (made by Procter & Gamble) Advanced Radiance Age-Defying Pressed Powder with skin brightening ingredients. Using it evens out skin tone to deal with signs of aging including rough skin texture, uneven skin tone, skin dullness, visible pores, and age spots. Supermodel Christie Brinkley, age 52, is the spokesmodel. Cover Girl Smoothers Pressed Powder is formulated with special light-reflecting ingredients (more than likely nano-sized titanium dioxide pigments) that help minimize the appearance of fine lines.
Foundation creams dropped 12 percent in the same period, from a shipment value of $597 million down to $527 million. New formulations include Bobbi Brown Luminous Moisturizing Foundation (an Estée Lauder brand). It fills in fine lines to effectively mask signs of aging. Its active ingredients eschew the commonly used AHAs and BHAs and focus instead on an all-natural blend of hexapeptides and milk thistle extract, alleged to be both collagen-boosting and skin-firming. It retails for $45 for 1 ounce. In October 2006 Bobbi Brown Luminous Moisturizing Foundation won the More Magazine Best Of Beauty award. More Magazine is dedicated to women over the age of 40 and has a growing circulation of affluent, educated, and accomplished women.
Cleansing creams experienced triple-digit growth
Growth of 444 percent is due in part to anti-aging products with active ingredients. The facial cleansing regimen now includes toners. As part of its two-step cleansing regimen, Biomedic/LaRoche-Posay (owned by L'Oréal) offers Conditioning Gel toner. It both tones skin and promotes healthy cell renewal by exfoliating the surface layer of skin. More important for fighting aging, its continued use can reduce hyper-pigmentation caused by age spots. Active ingredients include hydroquinone (a skin lightener), salicylic acid, and glycolic acid in a 5.6 percent solution. It is available only at a doctor's office and retails for $29 for 6 ounces.
Premoistened towelettes experienced double-digit growth
Growth of 72 percent between 1997 and 2002 from $647 million to $1.1 billion was due in large part to the introduction of new cleansing cloths, wet cloths, and self-foaming discs, such as Olay Total Effects Age Defying Cleansing Cloths and Age Defying Wet Cleansing Cloths. Double-digit growth was due, in part, to an ever-increasing array of anti-aging products. One example is the Olay Regenerist Eye Derma-Pod. It comes in single-use silver packets that include the eye cream and the sponge to use to massage the cream around the eyes. The sponge exfoliates, while the cream de-puffs and plumps.
Hand and body lotions experienced double-digit growth
Growth of 47 percent between 1997 and 2002 can be traced in part to the introduction of anti-aging products. A recent introduction from Dove Pro•Age promises luminous skin. Multi-functional Beauty Body Lotion is a moisturizer, an exfoliator, and a sunscreen. Its active ingredients include AHA (5% solution) to exfoliate to reduce age spots and wrinkles; glycerin (13% solution) to hydrate; olive oil (1% solution) to add nutrients; and SPF 5 to protect skin from sun damage. America's Research Group reported that women have a penchant for buying brand name cosmetics and beauty products, and that 30 percent reported they are very loyal to a hand and body lotion brand. Competition among manufacturers for this committed consumer who must repeatedly replenish her supply of body lotion is great.
Facial scrubs and masks experienced triple-digit growth
Growth of 103 percent between 1997 and 2002 was due in part to the introduction of anti-aging active products. Anti-aging facial scrubs benefit skin that is dull, rough, sallow, mottled, lined, and unevenly toned due to sun damage. Facial scrubs and masks increase exfoliation to remove damaged epidermal cells to reveal newer and healthier skin beneath. Peels not only retexturize skin via exfoliation but also rejuvenate skin by stimulating cell renewal. Neutrogena Advanced Solutions Facial Peel claims to deliver the results of a professional level 20 percent glycolic facial peel. Its active ingredients involve the naturally derived CelluZyme technology, which works with skin's pH to stimulate surface cell renewal, diminish fine lines, and restore vibrancy. It is modeled on the professional level 20 percent glycolic facial peel introduced by BioMedic/LaRoche-Possay in 1991. A 1.4 ounce container is sold for $11.99 and up.
Cosmetic oils experienced triple-digit growth
Growth of 144 percent between 1997 and 2002 was due in part to the introduction of anti-aging active products. Cosmetic oil serums target fine lines, wrinkles, discoloration, and loss of elasticity due to collagen breakdown, slower cell-turnover, and dryness. SkinCeuticals (owned by L'Oréal) offers a line of Corrective Products that repair, lighten, and exfoliate to restore a youthful appearance. Its Serum 20 AOX+ is an antioxidant alleged to neutralize the free radicals that contribute to cellular aging and cause skin cancer. It also reduces fine lines and wrinkles and stimulates collagen synthesis. The active ingredients in Serum 20 AOX+ are a 20 percent solution of L-ascorbic acid (a fancy name for Vitamin C) and ferulic acid (an antioxidant found in seeds and leaves of plants). It uses a Duke-patented technology that allows the skin to be as absorbent as possible. Once absorbed, the product cannot be washed or rubbed off, remaining effective for a minimum of 72 hours. It retails for approximately $120 for 1 ounce.
Shampoos experienced triple-digit growth
The growth of 324 percent can be traced in part due to reformulated products to deal with the effects of aging. The most recent example of anti-aging hair care is the Dove Pro•Age line launched in February 2007. Because hair can become thinner with age, Dove introduced shampoos that deliver fullness and protect against brittleness and breakage. Makers tend to focus on hair care products, because for most women it provokes high customer loyalty. America's Research Group reported that 35 percent of women reported that they are very loyal to their hair care brand.
Hair rinses experienced quadruple-digit growth
The growth of 2,120 percent can be traced in part to innova-tive products that are anti-aging. Because silicone coats the hair strand, newly reformulated conditioners and hair rinses form protective films on hair that provide shine. For example, John Frieda (made by Kao) has a Luminous Color Glaze that uses silicone hybrids to create a trademarked color-illuminating technology that boosts shine and adds a hint of color. These types of rinses are anti-aging because shine and color are affiliated with youth, as opposed to dullness and graying which is associated with aging.
Key producers run the gamut from high-end prestige makers like The Estée Lauder Company to low-end mass marketers Procter & Gamble and Unilever. In between sit Johnson & Johnson and L'Oréal. Key producers are profiled in alphabetical order.
The Estée Lauder Company
Estée Lauder began operations in 1946, primarily as a skin care company. Its portfolio consists of thousands of product across 26 brands, including Clinique, Bobbi Brown, and Origins. The Clinique franchise is a pillar of cosmetics and toiletries industry, so big it overshadows rival beauty brands. Clinique's Repairwear line includes Intensive Eye Cream with antioxidants and peptides, Day SPF 15 Intensive Cream, Intensive Night Cream, Deep Wrinkle Concentrate for Face and Eyes, and Extra Help Serum. The latter retails for $56 for one ounce. Bobbi Brown's anti-aging products entirely eschew AHAs or BHAs, relying instead on natural ingredients. Bobbi Brown consumers recognize that AHAs and BHAs cause exfoliation, which thins the skin, and thin skin is a sign of aging.
Two bestselling Bobbi Brown anti-aging products are Intensive Skin Supplement ($60 for 1 ounce) and Overnight Cream ($60 for 1.7 ounce), designed to work in unison. Active ingredients in the former include white birch extract, vitamins A, C, and E, green tea extract, and grape and mulberry extract. The latter includes protein activator milk thistle extract, cat's claw extract, almond, apricot, and avocado oil.
Estée Lauder's Origins Collection utilizes the alleged antioxidant properties of mushrooms in its Mega-Mushroom Face Serum and Face Cream. This line does not promise to erase wrinkles; it promotes healthy skin. Its marketers believe the desire of consumers for the look of vitality will eventually replace the desire to look youthful.
Johnson & Johnson
Headquartered in Racine, Wisconsin, Johnson & Johnson is one of the largest family-owned and family-managed companies in the United States. It manufactures and markets thousands of products in hundreds of categories, all related in some way to health and cleanliness. J&J formed in the 1880s as a pioneer of ready-to-use surgical dressings that provided antiseptic wound treatment. It is still in the pharmaceutical industry, and is able to utilize its pharmaceutical R&D to make anti-aging products. J&J grew in part by acquiring Neutrogena in 1994. It also makes Aveeno products, among others. Neutrogena is not only a top seller, it is also one of the most expensive mass market product lines. Some consumers equate price with quality.
As the pharmaceutical company that developed Retin-A and Renova, proven anti-wrinkle products that won FDA approval in 1996, J&J is an anti-aging industry leader. It not only sells anti-aging products; it also has products that are age-reversing. These include the Neutrogena Advanced Solutions Facial Peel earlier mentioned, Neutrogena Advanced Solutions Skin Transforming Complex, and Neutrogena Advanced Solutions Nightly Renewal Cream. Active ingredients in the latter are retinol, AHAs, and dimethylaminoethanol (DMAE). It works overnight with skin's natural, nightly repair cycle.
The L'Oréal Group
L'Oréal owns numerous companies. Two it gained through acquisitions specialize in anti-aging and are undisputed leaders in product advancements. These are BioMedic/LaRoche-Posey and SkinCeuticals. For L'Oréal, brand acquisition lets it penetrate new markets and reposition a well-respected brand to gain international audiences. BioMedic/LaRoche-Posey is the generally acknowledged grandfather of the serious cosmeceutical industry. La Roche-Posay originated as a pharmaceutical laboratory in France and BioMedic was founded in 1990 in Phoenix, Arizona. Its products were introduced to the American Society of Plastic and Reconstructive Surgeons in 1991, and became an overnight sensation.
In 1989 L'Oréal Group purchased BioMedic/LaRoche-Posey, which maintained its own formulation laboratory. Now more than 25,000 board-certified plastic surgeons and dermatologists endorse its MicroPeel product, available only through a physician. The line includes 18 products to address fine line and wrinkles, along with body products for those with very dry skin and facial products for dehydrated skin. In 2005 L'Oréal purchased SkinCeuticals.
Formed in 1997 in Dallas, Texas, SkinCeuticals was a relative latecomer to the serious cosmeceutical industry. It quickly differentiated itself by publishing clinical studies in respected medical journals usually reserved for pharmaceutical research. SkinCeuticals products contain high levels of active ingredients not generally available at mass merchandisers and are three time as expensive as BioMedic/LaRoche-Posey. The line includes products to prevent and correct aging, along with products to cleanse, tone, and moisturize. SkinCeuticals introduced the con-cept of products targeted at younger women who want to prevent aging instead of curing it later.
Procter & Gamble
Cincinnati-based Procter & Gamble has been a cosmetics and toiletries industry leader since its establishment in 1837. P&G has more than 100 brands available in nearly 130 countries. It has grown through acquisitions of brands such as Olay, Cover Girl, and most recently Doctor's Dermatologic Formula (DDF).
In 1985 P&G bought Oil of Olay. Olay began in the home of a chemist in the 1950s who created Oil of Olay Beauty Fluid, a face moisturizer that resembled fluids found in young skin. Within five years, it was phenomenally successful. In 2000 P&G shortened the brand name to Olay. It is a worldwide brand with over $1 billion in global sales. The Olay line has been expanded to include Olay Definity and Olay Regenerist. Definity features cleansing, moisturizing, and protecting products designed to work together to repair past skin damage and give luminous skin. Regenerist is the newest line; so far it consists of 15 products including a toner that reduces age spots, a lip treatment that diminishes vertical lines, an eye lifting serum that gives complete turnaround in 24 days, a cleanser that speeds the skin's natural regeneration process, and a night recovery moisturizing treatment that gives a mini-lift every night.
In January 2007 P&G acquired DDF. DDF was a pioneering brand in 1991 when it created one of the first dermatology-based skin care lines. The DDF line is sold only in department stores and spas. "The addition of DDF to our portfolio provides us with the opportunity to reach new consumers in new distribution channels," said the President of P&G Global Skincare regarding the 2007 acquisition.
Unilever is a behemoth. It is an international manufacturer of products in various industry sectors like food, home care, and personal care. In 2003 Unilever executed its largest ever North American launch, spending $110 million to promote a new line of Dove hair care products. It banked on consumer loyalty to its Dove cream bar, launched 50 years earlier and number one in North America—consistently capturing close to 50 percent of the bar soap market.
In January and February 2007 Unilever once again spent hundreds of millions on an even larger launch of Dove Pro•Age. Unilever turned anti-aging on its head with the tagline "This isn't anti-age, this is pro-age." In January 2007 Unilever kicked off the line's national advertising campaign. Advertisements boldly queried, "Too old to be in an anti-aging ad?" Images of four regular women (one black, one pudgy, one slender, and one grey-haired) are presented in sequence. The 2007 product rollout is aimed directly at women aged 45 and over, the fastest growing demographic group. The product offerings include body lotion, body cream oil, hand cream, neck and chest beauty serum, body wash, antiperspirant, shampoo, and conditioner.
As it did in 2003 with Dove hair care, Unilever is banking on the loyalty of the female consumer to the well-loved Dove brand name. Unilever doubled its U.S. business in the five years prior to 2006 and reports $1 billion yearly in U.S. retail brand sales.
MATERIALS & SUPPLY CHAIN LOGISTICS
This industry spends 70 percent on packaging, and 30 percent on ingredients that go into the product. Toiletries are frequently sold with extensive packaging to differentiate them from competitors' products.
The $28 billion per year toiletries industry as a whole spent $8.0 billion in 2002 on the total cost of materials needed to make all kinds of toiletries. Of this, $5.6 billion was spent on packaging and other materials, and $2.4 billion was spent on ingredients used in the production of the products themselves.
The primary categories of ingredients needed to make toiletries of all kinds according to data reported by the Census Bureau are, from largest to smallest in terms of industry-wide spending, as follows:
- Perfume oil mixtures and blends, essential oils (natural), and perfume materials (synthetic organic)
- Other synthetic organic chemicals
- Bulk surface active agents (surfactants)
The class of products known as cosmeceuticals is based entirely upon active ingredients alleged to perform some special function upon the skin or hair. The most common active ingredients are AHAs and BHAs. New active ingredients are frequently rolled out. Peptide copper complex repairs skin tissue while marine carotenoid astaxanthin is an antioxide that reverses photo damage. Important botanical active ingredients include mushrooms, milk thistle, green tea, soy, chamomile, aloe, pomegranate, and avocado.
Active ingredients have been heavily marketed by makers with almost evangelical promotions. Evangelicism often elicits skepticism. One Miami dermatologist told Body and Soul in November 2006, "A product's scent, packaging, price, or celebrity endorsement makes no difference to your wrinkles. It's the right active ingredients that do the work." The dermatologist beseeched consumers to read labels and make sure active ingredients are among the first three ingredients listed, since The Fair Packaging and Labeling Act requires ingredients to be listed in order of quantity.
The burden is on the consumer to conduct an intensive scrutiny of labels. A closer scrutiny of five commonly used active ingredients follows.
Alpha Hydroxyacid Acids (AHAs)
AHAs come from nature. They include malic acid from apples and citric acid from citrus fruit. The most commonly used AHA is glycolic acid, from sugar cane. It is generally regarded to be among the most effective active ingredient. It is proven to improve skin tone and texture, reduce skin discoloration and age spots, and lessen fine wrinkles.
Glycolic acid is the ingredient to look for when scrutinizing ingredients listings. It is effective because it has a small molecule which allows it to penetrate skin. Glycolic acid helps dissolve the substance that holds the keratinized skin cells together to increase cell exfoliation and eventual renewal. Because glycolic acid exfoliates, it thins the stratum corneum. This results in a healthy new glow: the dead cells of the stratum corneum no longer obscure the living cells of the epidermis beneath, so skin is tangibly radiant. With continued use, the epidermis eventually thickens, further restoring radiance since young skin is thicker than old skin.
With continued use over years, glycolic acid encourages skin to manufacture new collagen, elastin, and hyaluronic acid, and to renew itself. Skin is less dull, rough, sallow, mottled, lined, and unevenly toned due to years of sun damage and aging.
The pH level of a product is an independent factor that influences its effectiveness. A drop of 2 in pH level correlates to an increase of 30 percent in cell turnover rate. Typically, brands sold in stores have a pH of 6, while brands sold in doctors offices have a pH of 4. The doctor-dose will perform 30 percent better based solely on its slightly more acidic nature.
Beta Hydroxy acids (BHAs)
BHAs are commonly shown on ingredients lists as salicylic acid. They have a larger molecule than AHAs. The larger molecule keeps BHAs on the skin surface allowing it to better exfoliate. The larger molecule size of salicylic acid produces less irritation than AHAs so it is a good choice for those with sensitive skin.
Quite the rage, a peptide is a combination of amino acids; amino acids are protein units of structure essential to human metabolism. These small molecules can penetrate the epidermis to reach the skin layer (the dermis) beneath. Algae peptides produce rapid visible changes, such as tightening and the appearance of firming. When applied to the skin, such peptides are picked up by binding sites on the cell of the epidermis as well as the dermis. This increases the ingredients' range of activities, which includes cell turnover and collagen synthesis. Algae peptides can enhance hydration, smoothness, elasticity, and fullness of skin.
Antioxidants include alpha lipoic acid, beta-carotene, coenzyme Q10, green tea, idebenone, panthenol, and topical vitamins A, C, and E. Oxidation is a binary process that involves the union of oxygen with a radical. Free radicals are produced in cells as byproducts of normal biochemical processes, particularly the metabolism of sugars and fats. Once produced, free radicals can damage almost any biological structure they come into contact with. Free radicals contribute to cellular aging and increase the risk of skin cancer due to changes in the cellular structure.
By neutralizing free radicals, antioxidants may prevent both cellular aging and skin cancer. Vitamin C is perhaps the most effective and most common. However, it also oxides immediately when exposed to air, rendering it ineffective.
Retinoids are the only active ingredient that have established scientific backing. They have been tested and approved by the FDA. Retinoids are vitamin A derivatives that act as agents for anti-oxidizing, anti-pigmenting, and exfoliating. They also increase production of collagen and hyaluronic acid, which is how they help firm the skin.
The pharmaceutical company J&J developed Retin-A and Renova, the products that won FDA approval in 1996. Prescription retinoic acids include Avage, Differin, Retin-A, and Renova. Non-prescription retinol is available in a slew of products. Neutrogena offers an anti-wrinkle cream with retinol in its Healthy Skin line. But it does not disclose the percentage of retinol in the product. Lack of full disclosure is what makes some consumers prefer the rapidly growing doctor-dosing distribution channel.
Cosmeceutical products are distributed in three distinct channels. Within the industry these channels co-exist and are often referred to as prestige, masstige, and doctor-dosing. Prestige products are classified based primarily on the location where they are distributed, such as major department stores and specialty boutiques, and are generally higher-priced. Lower-priced products are known as masstige because they are distributed via the mass market. Doctor-dosing involves products made with a higher dosage of active ingredients and sold primarily at medical doctors offices.
The department store distribution channel for prestige products is a giant. This channel consistently repre-sents approximately 40 percent of sales of cosmeceuticals in North America. This channel underwent a shakeup when Federated Department Stores acquired May Department Store Company. At the time the deal was finalized in August 2005, Federated owned 458 stores nationwide, mostly known as Bloomingdale's and Macy's, while May operated 491 department stores nationwide under the names Lord & Taylor and Marshall Field's, among others. In September 2006, the May Department Store nameplates were formally changed to Macy's. All prestige companies—or 40 percent of the industry—had to deal with department store consolidations. An estimated 75 stores closed.
The mass market distribution channel is broadening in part because store loyalty is less prominent with masstige products than for prestige products. The broadened distribution channel for lower-priced masstige products includes a throng of outlets: drugs stores such as CVS, Rite Aid, and Walgreens; food stores including Whole Foods and health food stores; mass merchandisers including KMart, Target, and Wal-Mart; and nontraditional retailers including all Internet sites. The broadened channel also includes warehouse club stores such as Costco and Sam's Club.
The doctor-dosing distribution channel is growing. It is a distribution channel of choice for prestige manufacturers because of the intimate environment within the doctor's office (and sometimes spas and specialty stores). This distinctive channel distributes products made with a higher dosage of active ingredients. Some are twice the strength of active ingredients sold in stores.
Higher dosing is based on the assumption that purchase and use decisions will be influenced by doctors with intimate knowledge of patients' skincare needs and better placed to recommend appropriate products and ensure they will be properly used. Doctors can steer patients toward prescription products when appropriate, and steer patients away from dangerous product combinations. Internet Wire reported on U.S. demand for cosmeceuticals in January 2007 and suggested this channel of professional products will experience the fastest growth.
Manufacturers such as BioMedic/LaRoche-Posey and SkinCeuticals have sales representatives that go door-to-door to doctors' offices to convince them to stock products. When medical doctors agree to distribute the product, it is a very valuable product endorsement. This channel is more likely to use ingredients proven effective. To convince highly educated medical doctors who are generally skeptical of efficacy claims, makers in this channel use clinical studies published in respected medial journals usually reserved for pharmaceutical research.
Some manufacturers prefer the doctor-dosing channel because it provides geographic diversity and statistics show that sales increase when professionals are present to influence choices. The doctor-dosing distribution channel helps certain makers maintain their prestige reputation. For instance, SkinCeuticals lost some of its prestige after it was purchased by L'Oréal because L'Oréal failed to control the distribution channel and allowed SkinCeuticals products to be sold on almost any Internet site. Doctors then tended to disassociate with the line.
A popular product available only through the doctor-dosing distribution channel is the BioMedic/LaRoche-Posay MicroPeel 30 Plus. It costs approximately $95 and can only be performed under the direct supervision of a medical doctor who will also warn and educate the patient about the increased need for sunscreen and sun avoidance after using the product. In-office peels are more effective than store products because under the auspices of a medical doctor, peels with a pH of 1 or 2 are applied. The result is a dramatic improvement that lessens unevenness and roughness, and lightens darkened pigment (known as age spots). The active ingredient in MicroPeel Plus 30 is a 30 percent solution of salicylic acid. Such a high concentration of salicylic acid, administered at such a low pH level, sloughs off dead cells to stimulate the skin's natural renewal processes. For 7 to 10 days afterwards, skin continues the MicroPeel Plus 30 renewal process, shedding its dead outer layer and stimulating cell renewal.
Women of all ages purchase anti-aging products with active ingredients. Women are the primary users of anti-aging products according to a 2004 study conducted jointly by the National Consumers League and Harris Interactive. A reported 90 million Americans had used procedures or products in an effort to reduce the appearance of aging. Reportedly, 76 percent of women use these products compared to 18 percent of men.
Some women spend more money per ounce on anti-aging products with active ingredients than on the cost of gold, which is $600 per ounce. Cosmeceuticals are used for a variety of reasons including to improve the self, to attract the opposite sex, and to hide the effects of aging. Spending on cosmeceuticals may provide insight into the desires of the women who buy them. The real product being purchased is hope for a bright and luminous future.
Some believe that one good alternative to high priced anti-aging products is a healthy attitude about aging. According to one British Web site, the real seven signs of aging can include any of the following: emotional maturity, wisdom, self-confidence, self-esteem, owning a house, sense of perspective on life, sexual confidence, career development, and financial security. According to Citibank's March 24, 2007 advertisement in the New York Times, women really can get rid of wrinkles and worry lines, when they learn about saving money and making financial investments in their future. According to rationalists, no readily available cosmeceutical rivals the benefit of being born with good genes, and leveraging those genes through a lifelong program of adequate rest, balanced diet, mental stimulation, and exercise. According to Coco Chanel, "A woman's unhappiness is to rely on her youth. Youth must be replaced with mystery."
The sunscreen market both affects and is affected by cosmeceuticals. Any product reformulated with an SPF value could be considered an anti-aging product. Any product reformulated with AHAs and BHAs that temporarily thin skin via exfoliation should consistently be paired with a pure sunscreen product with a high SPF rating. The FDA recently published scientific evidence from studies it sponsored that suggest the use of AHAs and BHAs increases the risk of sunburn. As a result, consumers who use products with AHAs and BHAs must religiously use sunscreen products, and be encouraged to consistently avoid the sun. It is estimated that 80 percent of aging is caused by the sun's rays. Consumers purchase anti-aging products to protect against aging. Their use is oddly contradictory because they may cause age spots and wrinkles to occur more rapidly, if sunscreen and sun avoidance is not implemented properly.
Dermatologists, plastic surgeons and medical doctors
More and more consumers view dermatologists as having the skills and tools needed to reverse or halt the aging process. Consumers increasingly choose cosmetic procedures such as lasers to remove age spots. If a consumer wants absolutely to reverse the effects of aging, her medical doctor can prescribe drugs with proven ingredients. Well-known examples of prescription anti-aging products are Retin-A and Renova, products developed by Johnson & Johnson that won FDA approval in 1996. A Boston dermatologist reminded consumers that there is no such thing as a miracle in a jar, explaining that, "If it were a miracle, its use would flop over to a drug."
If a consumer wants absolutely to reverse the effects of aging, plastic surgery firms skin and removes wrinkles. It might be cumulatively less expensive to save the money from potential expenditures on products and apply the total amount to services that are guaranteed to firm skin and remove wrinkles. For instance, a consumer could potentially spend approximately $100 per month on prestige anti-aging products. Over ten years, the $12,000 of cumulative spending on these products would easily have been enough to pay for a surgical face-lift.
RESEARCH & DEVELOPMENT
The quest for sustained youth and beauty that sells cosmetics is age-old, although the ingredients used to achieve the desired outcome change. Typical R&D budgets increase approximately 1 to 2 percent per year. R&D budgets related to anti-aging products are predicted to increase 10 percent per year through 2010. One focus of R&D will be to meet consumer demand for multi-functional products. R&D will involve product reformulations to create combination products that can be moisturizers, self-tanners, active anti-aging products, sunscreen, or even all four. Other R&D will focus on ingredients.
Ingredients are rapidly changing and manufacturers are making even more efficacy claims. This increases the threat of FDA oversight, especially regarding labeling. AHAs and BHA have now been shown with FDA sponsored research to contribute to the increased risk of sunburn. Future R&D may well focus on replacements for AHAs and BHAs.
Although the FDA does not require warnings, it notified manufactures in 2005 that it would start enforcing a labeling requirement for "Warning—the safety of this product has not been determined." This was necessary because of the explosion of new products and new ingredients that had not been proven safe primarily because they could potentially be used in dangerous combinations or could contribute to the increased risk of sun sensitivity. Any additional labeling requirement is estimated to potentially cost the industry $35 million in the one year that would be required to implement it. Makers might find replacements for AHAs and BHAs, or choose to forego their use. Another approach might be to educate consumers about increased risks.
Future R&D may result in increased consumer education programs. Consumers who use products with AHAs and BHAs that exfoliate and temporarily thin the skin must use sunscreen. Sun avoidance is recommended. To deal with the fact that AHAs and BHAs are known to thin the skin, and that thin skin is a sign of aging, future R&D may result in products specifically formulated for different skin types. As the anti-aging field evolves, it will emerge that no one type of product or type of ingredient is appropriate for all skin types. Thin-skinned women usually have luminously thin skin when they are young. Women with thin skin and women with dry skin should avoid products with AHAs and BHAs that encourage exfoliation. Thick-skinned women tend to have more problems because thick skin is proven to be sluggish; skin like that benefits by an injection of AHAs and BHAs in any format to encourage the exfoliation and skin renewal process that follows.
In an October 2006 article titled "Cosmeceuticals to go Mass by 2008," Cosmetics International reported predictions that 40 percent of cosmetics and toiletries will use active ingredients to make some kind of efficacy claim by 2008. The rapid expansion of anti-aging ingredients into toiletries products represents a fundamental shift that transcends the entire $28 billion year industry.
Industry-wide emphasis on ingredients has created a consumer who is learning to be vigilant about reading the fine print. Some brands like SkinCeuticals have an entire glossy color catalog that explains the special function of each ingredient. Some brands—especially those within the doctor-dosing channel—offer more transparency about ingredients. They go beyond the letter of the Fair Packaging and Labeling Act to list the percentage of each ingredient, its solution and pH levels, and to explain its alleged function. Biomedic/La-Roche Posay evidences this trend towards more transparency in the doctor-dosing channel, and Dove Pro•Age evidences this trend in the mass market distribution channel.
In the future, the mass market distribution channel will begin to operate more closely on the doctor-dosing distribution channel model. The mass market will begin to substantiate efficacy claims with clinical studies published in respected medical journals usually reserved for pharmaceutical research. The mass market will take on more responsibility for warning and educating consumers about the increased need for sunscreen and sun avoidance.
Bobbi Brown may be ahead of the curve on one trend. The line entirely eschews all common anti-aging ingredients. The brand is marketed as AHA and BHA free. It relies on all natural ingredients like grape extract, white birch, and whey protein. Bobbi Brown may be presciently foreshadowing the future, since new science sponsored by the FDA suggests AHAs and BHAs increase the risk of sun damage, a key factor that contributes to aging. If the FDA follows through on its labeling threat, Bobbi Brown will save money by avoiding having to relabel even one product.
Manufacturers have introduced glycolic peels, and microdermabrasion kits that claim to offer gentler, at home versions of clinical procedures. Manufacturers can follow the classic razor-and-blade model in marketing these products, making more money on refills than on the initial kit.
Estée Lauder is also taking a new approach with the launch of its Perfectionist Power Correcting Patch. The new product is said to target deep eye lines and wrinkles and offers a glimpse into the future trends. It emits a tiny micro-current of energy (1.5 volts) that allegedly allows the formula to penetrate more effectively into the epidermis. The inspiration for the patch came from the medical community's use of an electrical current to deliver medication into body tissue.
TARGET MARKETS & SEGMENTATION
Manufacturers hope for double-digit, triple-digit, and even quadruple-digit growth in certain product classes. Manufacturers target growing product classes and growing demographic segments with money to spend. Manufacturers know that creams and lotions are the most lucrative cosmetics and toiletries division, and that many female consumers are loyal to much-loved brands. America's Research Group reported that women have a penchant for buying brand name cosmetics: 35 percent are very loyal to a face cosmetic brand, 35 percent are very loyal to a hair care brand, and 30 percent are very loyal to a hand and body lotion brand. Manufacturers target the high margin nondurable goods that loyal consumers need to repeatedly replenish their supply of throughout the year. Makers count on this committed consumer for sales and profits.
Significant opportunity involves the 78 million U.S. Baby Boomer generation (those born between 1945 and the early 1960s). Many are not happy about reaching middle age and want to retain a youthful look. Many retired with a large nest egg and expect to be active, look young, and maintain healthy for well into old age. They can afford products they hope will either mask, stave off, or reverse aging.
This large segment of consumers with disposable income is an important target market for cosmeceuticals. The aging population in the developed world puts a premium on youth. There is apparently no limit to what customers will pay to keep the years from showing. The targeted segment is women who can afford to buy anti-aging products and are willing to do anything to fight against the appearance of aging.
Many women devote income to products that promise to make them look and feel younger than their age. Reportedly, 76 percent of women use these products compared to 18 percent of men. Women over 40 represent the market. Revlon recently kicked off its biggest launch in more than a decade with Vital Radiance, aimed specifically at women age 50 and older. ACNielsen estimated that female heads of households over age 45 account for nearly 70 percent of mass retail cosmetics purchases. The tagline "This isn't anti-age, this is pro-age" was used in February 2007 to support the Dove Pro•Age product rollout. The phrase is aimed directly at women aged 45 and over.
RELATED ASSOCIATIONS & ORGANIZATIONS
American Academy of Dermatology, http://www.aad.org
Cosmetic, Toiletry and Fragrance Association, http: //www.ctfa.org
The European Cosmetic Toiletry and Perfumery Association, http://www.colipa.com
Research Institute for Fragrance Materials, http://www.rifm.org
Synthetic Organic Chemicals Manufacturers Association, http://www.socma.com
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