Specialty Actives: Insights from the Mature Markets...

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© 2011 Kline & Company

Specialty Actives: Insights from the Mature Markets

Insights from the USA and Europe

Specialty Actives: Insights from the Mature Markets

Insights from the USA and Europe

Day 1, 14th December


Today’s presentation

What is the current situation of the global personal care market?

Which are the most important specialty actives used in personal care?

What are some important trends driving the personal care market?

What is the outlook for specialty actives?

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© 2011 Kline & Company 2

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Post recession, industry sales have rebounded, thanks to rising consumer confidence, aggressive promotional activity, technological advances, and social media

Consumers comfortable spending again

Social networking enables closer communication with customers

Advances in technology

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Europe remains the largest region, but is losing share to developing markets, in particular China and Brazil

0%

25%

50%

75%

100%

2005 2010

Europe AsiaNorth America Latin AmericaOther

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Manufacturers Sales, 2005 - 2010 Regional Growth 2010 - 2015

IndiaChina > 7 %

Latin AmericaC&E Europe

Middle East & Africa 4-5 %

North AmericaJapan

Western Europe< 2 %


Skin care is the largest and fastest growing product class globally

Skin Care Hair CareToiletries Make UpFragrance Oral Care

0 2 4 6

Fragrances

Toiletries

Make Up

Hair Care

Oral Care

Skin Care

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Global Personal Care Share by Category Global Product Category Growth (2010)


Development of the European and US Personal Care Market by Category, 2005 to 2010

Volume Growth, %

Skin care also outpaces growth in the USA and Europe


Skin care in particular is benefiting from strong growth drivers

Growing society pressures and stresses of modern living have made more men and women seek for “Looking good, Feeling good” experiences− Consumers are looking for result-oriented solutions, but at the same time solutions that

are not harmful to the skin

Simultaneously, customers have placed more attention on personal care and on the products they are using− They are willing to spend more money on personal care products− They have become more knowledgeable about their skin, various skin conditions, and on

product ingredients

Development of the professional arena increases awareness for specialty actives− The professional arena provides customers with a place that offers trust and comfort− Customers are provided guidance by skin specialists (e.g. estheticians, dermatologists)− Products are often being perceived as being of higher quality than with products for mass

brands− Professional outlets offer a place of relaxation and calm

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Marine Ingredients

Botanicals

Biotechnology Products

Proteins & Peptides

Enzymes & Coenzymes

The market for active ingredients in personal care consists of five major product categories

ActiveIngredients

• Unsubstantiated Extracts• Substantiated Actives

• Hyaluronic Acids• Ceramides• Others

• Substantiated Algae Extracts• Chitosan

• Botanical• Biological • Synthetic peptides

• Coenzyme Q10• Others


a- Excludes unsubstantiated extracts

b- Includes synthetic peptides

Market Breakdown by Product Category, 2010

Botanicals are the most important product category in both the USA and Europe, with sales over EUR 100 million in Europe

Europe USA


Skin whitening/lightening

Anti-aging

Anti-acne

Anti-inflammatory

Slimming

Sun protection

Specialty actives in personal care target a wide variety of performance benefits – although anti-ageing functionality dominates

ActiveIngredients

Anti-cellulite

Skin firming/lifting –Tensors

Moisturizing

Anti-oxidant

Anti-wrinkle

Anti-stress

Energizing

DNA protection


a- Excludes unsubstantiated extracts

b- Includes synthetic peptides

Market Breakdown by Functionality, 2010

Anti-ageing accounts for around 60% of specialty actives targeted functionality in Europe and the USA

Europe USA


Anti-ageing functionality focuses on ‘Age Spots, Anti-Wrinkle, Firming, Moisturizing, and Skin Radiance’

Active Type Supplier Trade Name

BOTANICALS SOLIANCE TEPHROLINE

INDENA XILOGEL

SEDERMA MOIST 24

BIOTECHNOLOGY PRODUCTS CPN/CONTIPRO HYACTIVE

MIBELLE PHYTOCELLTEC MALUS DOMESTICA

SILAB STEM-C-GUARD

PROTEINS/PEPTIDES LIPOTEC ADIFYLINE

SEDERMA MATRIXYL SYNTHE’6

ISP VINCIENCES COLLAXYL IS

MARINE INGREDIENTS BIOTECHMARINE ANTILEUKINE 6

CODIF PHYCOJUVENINE

ENZYMES / COENZYMES VARIOUS UBIQUINONE

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Specialty active suppliers usually use a combination of direct sales and distributors to reach personal care products marketers

From a market segment to another, the industry structure can be slightly different, however similarities exist

Suppliers of high volume, or pseudo-commodity products such as some protein hydrolyzates, use distributors more often than suppliers of highly specialized products which require more technical support to customers

Most of the leading suppliers of specialty actives are based in Europe

Industry Structure, 2010

Specialty Actives Suppliers

Consumers

Personal Care Products Marketers

Distributors


Green remains at the forefront of the industry

Companies are moving toward being “green” and shifting focus towards being sustainable and socially responsibility

Areas of focus include:− Raw material sourcing− Packaging− Review of manufacturing processes− Social responsibility

Leaders within sustainability include:

Naturals trend is inherently linked with sustainability

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Manufacturers need to explore other areas for growth

Innovation has slowed in some categories, as the industry waits for the next mega-trend:− Naturals− Home devices− Beauty from within− Men’s grooming

Efforts are directed towards improved product formulations and product packaging to drive sales

DermaPlus’ DermaLastyl-β Concentrated Skin Rejuvenation Formula

Incorporating technology developed for “wound healing on the battlefield”


What trends are occurring at the brand level?

The majority of focus in the skin care product class is directed towards maintaining a youthful appearance − Anti-aging and acne treatment products continue to be in vogue

EXAMPLE: Kinerase C8 Peptide Intensive Treatment

“Reduces the depth and appearance of wrinkles caused by repetitive facial expressions up to 34.9%”

Contains:− SNAP-8: a neuropeptide− Kinetin: antioxidant− Stabilized vitamin C− Green Tea Eco− Vitamin E− Beta-glucan− Hyaluronic acid


Example of a skin care product sold through the luxury channel

La Prairie Cellular Cream Platinum Rare

“Skin transforming formula that recharges the skin’s electrical balance with pure Platinum to ensure ageless performance, protects the skin’s DNA, and replenishes moisture continuously for a look of soft splendour”

Contains:− Nano-sized particles of negatively charged platinum

suspended in colloidal platinum water (reportedly serves as an electron donor to maintain a proper electrical balance in the skin)

− Active cocktail (peptides, vitamins, and antioxidants)− Controlled-release nano-sized heseperidin Smart Crystals to

protect DNA in the cell nucleus and act synergistically with Resveratrol for antioxidant protection and improve microcirculation in skin

− Climate-activated Moisture Matrix which adjusts to humidity and temperature

EUR 700 / 1.7 ml


Example of a skin care product sold through the masstige channel

Lumene’s Excellent Future line of anti-aging skin-care products

“Prevent and delay damage from surfacing, and help prevent the formation of wrinkles and to smooth the appearance of wrinkles that has already formed.”

Contains ApplexcellT an apple extract protecting skin’s stem cells.

EUR 25 / 50 ml


Example of a skin care product sold through the professional channel

Mary Cohr’s Crème Spécific Rides

“The ultra-comfortable fluid texture is specially designed to plump out wrinkles from the inside and to give the skin new elasticity. The skin is visibly younger.“

Contains:− Apricot Kernel Oil− Hydrolyzed wheat protein− Sodium hyaluronate− Ginkgo Biloba Leaf Extract− Hexapeptide-1

EUR 40 / 50 ml


Example of a skin care product sold through the direct channel

Oriflame’s Ecollagen 3D+ Anti-Wrinkle Day Cream

“Brings firmness back and re-pumpleswrinkles from within.”

Contains:− Tri-peptide complex− Hyaluronic acid

EUR 20 / 50 ml







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Ageing of population

Demand for sustainability could represent an issue for some of the products considered such

as botanicals or marine ingredients

Overall growth of the personal care

market

Increased demand for

product activity

Personal care market is reaching maturity in Europe and the USA

Increased demand for

proven product efficacy

Market Drivers and Constraints Influencing the Specialty Actives Market, 2010

Due to an increased demand for activity and efficacy, the specialty actives market is expected to grow faster than the personal care industry

REACH and other regulations may

represent a challenge for innovation

Demand for natural-inspired personal care

products boosts the consumption of suitable actives


The specialty active market in Europe is expected to grow at an average annual rate of 4.6% per year between 2011 and 2015

Value Growth by Product Category, 2011 to 2015

Value Growth Rate, %


Sun protection is forecast to develop at the fastest rate, whilst anti-aging actives will continue to take advantage of solid growth drivers

Value Growth by Functionality, 2011 to 2015

Value Growth Rate, %


Markets adjacent to specialty actives are also benefiting, for example delivery systems

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CAGR (2007-2010)

= 7%

Delivery Systems Market Growth, 2007-2010

Following growth of 7% since 2007, the European market for delivery systems in personal care is valued at Euro 81

0

20

40

60

80

100

2007 2010

Liposomes and Others Microcapsules Millicapsules Others


Men’s GroomingMen’s Grooming Skin CareSkin Care

NaturalsNaturals

TraditionalIngredients

Specialtyactives

Deliverysystems

Drug developmentDrug development

Synthetic peptides, stem cells, and other actives

FoodFood

Vitamins, antioxidants, actives

Chemical/polymerscience

Chemical/polymerscience

Fixative polymers,delivery systems

Opportunities for specialty actives will continue to come from a variety of sources


Today’s Presentation

Thank you for attending today’s presentation


Personal Care Value Chain

Consumer

Retail Finished Goods

Distributor

Direct

Direct

With over 40 years activity in this industry, our personal care domain expertise covers the whole value chain

AntimicrobialsConditioning polymersEmollientsFilm formersHair fixative polymersRheology control agentsSkin whitening agentsSpecialty activesSpecialty delivery systemsSpecialty and commodityUV absorbers

FragrancesHair careMakeupNail careOral careSkin careToiletries

Department storesDirect sales Drug outletsFood stores Mass merchandisers Pharmacies/perfumeriesSalonsSpas/beauty institutesSpecialty stores

Brand Owner

Direct

Direct

Contract Manufacture

PersonalCare RawMaterial

Distributor

Direct

PersonalCare Raw Material Supplier

Basic Chemical Supplier


Data in this presentation is sourced from:“Specialty Actives in Personal Care 2011”

Reports available in the series:

Specialty Actives in Personal 2011Europe USAJapanChinaBrazil

Data is also accessible via an interactive online database

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Americas____________

Asia ___________

Europe___________

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Kline is a worldwide consulting and research firm dedicated to providing the kind of insight and knowledge that helps companies find a clear path to success. The firm has served the management consulting and market research needs of organizations in the chemicals, materials, energy, life sciences, and consumer products industries for over 50 years. For more information, visit www.KlineGroup.com.

Anna IbbotsonIndustry Manager, Chemicals & MaterialsPhone: +44-1865-487-160E-mail: [email protected]

Pilar PardoSenior Account Manager+32-(2) 776-0737 [email protected]

Michelle KlementAccount [email protected]

Kristina ZableckeAccount Manager+32-(2)[email protected]

Kline & Company, Inc.35 Waterview Blvd.Suite 305Parsippany, NJ 07054Phone: +1-973-435-6262Fax: +1-973-435-6291

www.KlineGroup.com

Specialty Actives: Insights from the Mature Markets...

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