The Evolution of Personal Care Companies
What do Harry’s, The Honest Company, Dollar Shave Club (acquired by Unilever in July 2016), Native, Schmidt’s, Lola, Hello, Brandless, and Quip, have in common? They’re all upstart personal care companies that are disrupting traditional Consumer Packaged Goods (CPG) brands and upending the status quo, not only in e-Commerce shopping carts but on retail shelves as well. These new brands have gained rapid market share by launching savvy digital marketing campaigns, offering free trials, and enlisting consumers to subscription services.
Beyond these progressive marketing tactics, many of these upstart brands have also latched onto a key trend. Consumers are increasingly focused on ingredients, emphasizing the quality of ingredients is not just a trend in food and beverage. Consumers have voted with their wallets in the personal care category as well, seeking products with ingredients that are sustainable, fair trade, cruelty free, naturally derived, and recognizable. This “clean” approach to product development can make it difficult for established brands to maintain a product’s appeal or effectiveness after being reformulated.
In short, the rules are changing quickly in the CPG universe and smaller, nimble brands have recently proven to be better at adapting more rapidly than traditional CPG brands, which are struggling to keep up. The largest CPG brands are still able to lean on their relationships with retailers, where outspending others on slotting fees to dominate store shelves and sometimes gain category captaincy works in their favor. But as more private equity and venture capital groups inject substantial amounts of capital into upstart brands, that dynamic might change as well. Some of the recent, more aggressive investors in the space are able to wait years for companies to become profitable; think Brandless and The Honest Company.
It will be interesting to see how this dynamic evolves over time – will CPG companies adapt more quickly or will smaller brands continue to take larger bites of market share? Just as e-Commerce began to cannibalize sales in brick and mortar retail a decade ago, we may be on the verge of the status quo becoming permanently upended once again as smaller, upstart personal care companies disrupt major brands. Regardless of who emerges victorious from this David vs. Goliath struggle, consumers appear to be the ultimate winners with more choices, products with better ingredients, and more targeted and convenient shopping experiences.