Rising Inflation Creates a Rise in Opportunity for Private Label Beauty Innovation

It’s no secret that prices on everyday household goods have increased in recent months. The annual Consumer Price Index is at an all-time high, and the rate of inflation is the highest we’ve seen since 1981. Depressing, right? As brands and consumers grapple with the best way to respond to increased cost pressures, there is some silver lining in the high number of options available to consumers today. Economic swings have historically resulted in an increase in consumers ‘trading down’ in an effort to control spending. We’ll see consumers trade premium spirits for standard spirits, organic produce for conventional produce, and name brand products for private label, to name a few examples.

Private label food and beverage offerings became widely available in the U.S. during the 1980s. At that time, a significant gap in taste quality existed between brand-name goods and their private label, or generic, equivalents. For consumers, it felt like a true ‘trade down’ to swap a favorite condiment or beverage for a store brand equivalent. Fast forward to present day, and private label quality is much closer to that of big brands.  Retailers also offer exclusive flavors and product varieties under their own private label brands. Some of these brands, such as Costco’s Kirkland and Target’s Favorite Day, are popular and have cult-like followings.

The improved quality of private label products has led to higher penetration and favorability ratings with consumers. A report released by Numerator earlier this year suggests that more than half of U.S. consumers currently believe that price is a more significant factor in purchase decisions than brand names.

These opinions, interestingly, are shared across various income levels. 52.5% of low-income shoppers view private label brands favorably, and that number actually jumps to 55.2% and 59.6% when looking at data for middle- and high-income consumers, respectively.

The share of private label sales in the grocery sector has been creeping up for the last few decades, from an average of 14% in the 1990s to more than 17% in 2021. Dollar sales and unit sales in private label also continue to increase, boosting profits for their retailers. However, when looking at adjacent categories, penetration levels are much lower. As of 2018, private label brands in beauty and personal care represented only 4% of all retail products in the category. Sephora, Ulta, and Amazon have found success in the beauty and personal care sectors with private label brands, but the segments are still ripe for innovation opportunities with other big-name retailers. Category retailers should consider producing private label innovations, including consumer offerings in skin care, cosmetics, hair care, body care, hygiene, and fragrance.

Within the beauty and personal care segments, products are often compared on the basis of ingredients – i.e. the level of retinol in a serum, moisturizers in a cream, or the absence of sulfates in a shampoo. But other factors such as price, package, product feel, and fragrance drive initial and repeat purchase intent. In today’s private label market, offerings are frequently designed to meet the same product and ingredient claims as their brand equivalents, with quality that is at parity or higher.

Fragrance is an important, but sometimes overlooked, attribute of product quality. It sounds cheesy, but it’s been said that fragrance is the soundtrack of life. Remove the soundtrack from a film or tv show, and it feels hollow and incomplete. The viewer may not even notice the background music or sound effects, but they do notice when they are interrupted or removed. The same can be said for the role fragrance plays in products consumers use every day.

When designing private label products to compete against brand equivalents, matching fragrance, aroma, and intensity is key. Aromyx helps developers achieve this goal. Our olfactory and taste receptor technology can measure and quantify how a product smells. We use this technology in multiple ways to benefit the private label product development process. We match target fragrances, analyze entire product lines and categories, and identify white space opportunities.  We also help optimize fragrance based upon consumer geography, demographics, and preferences. Whether looking to create a me-too product that competes against a category brand equivalent or designing an innovative and unique skincare offering, Aromyx can be a great partner to support the development of new private label products.

Business Development or Partnership Inquiry

What can we help you with?

What is your role in your company ?

Your Message