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Welcome to our very occasional look at offbeat stories and issues we saw doing our competitive intelligence, innovation support and trends work |
- IS LOOP A LIFELINE FOR CPGS?
- BOOST INNOVATION, COMPETE BETTER, SAVE TIME...
- CPGS SUDDENLY VULNERABLE TO PLASTIC RELIANCE
- UNILEVER AT THE PIVOT POINT?
- INSIDE L’OREAL’S ACQUISITION GROWTH ENGINE
- CBD IS COMING. READY FOR RELAXING HAM?.
- MEMBERSHIP CLUBS GO SUPER CHEAP, GUT MARGINS
- BEAUTY TECH MUST DO MORE THAN BEGUILE
- BOOST GROWTH WITH ENGAGING CONTENT
Big News No One Is Talking About
At the World Economic Forum in January 2019, TerraCycle unveiled Loop, a circular reusable packaging platform for consumer packaged goods companies. TerraCycle says it's a “disruptive ecosystem for CPGs” that aims to eliminate waste entirely.
The core idea is simple. Loop seeks to be a modern day milkman, shipping products via UPS in a reusable padded container for them to be returned when empty for cleaning and reuse. Products are dispensed from reusable metal and plastic containers that CPG companies have redesigned for this purpose. It says it will initially focus on homes but ultimately work with retail stores and their e-commerce platforms.
TerraCycle aims to launch May 2019 in New York and Paris and has secured a range of high-profile CPG partners, including P&G, Unilever, Nestlé, KFC and Coca-Cola. These companies have redesigned packaging of some brands to work with Loop. For example, Nestlé Haagen-Dazs developed a stainless-steel ice cream container, while P&G’s Crest Platinum will be available in a refillable glass bottle with a stainless-steel cap, all protected by a silicone sleeve.
As part of our newsletter, Plastics – The Corporate Response, we have looked at TerraCycle's checkered past and wondered why the world’s leading CPG companies are unreserved with their praise and all so keen to partner with a company so small (2016 revenues ~$20 million). It’s also peculiar that just as Loop is getting going TerraCycle starts to divest of its core US business, 70% of total sales. The rights issue started January 30, 2019, six days after Loop was announced at WEC.
So what’s really up?
A strategic sleight of hand
We suspect TerraCycle has offered partnering CPGs options in Loop. Sure, the CPGs are attracted by shifting at least part of their sales to a zero-waste model: it looks good, shows they’re trying and will make for great PR.
But a more attractive objective for them would be to create an entirely new channel, and what a channel it would be. It’d be beyond the reach of retailers and Amazon and would allow the CPGs to build direct links with consumers, a long-cherished goal. And it would lock them in. Containers would tie consumers to specific brands with possibly high switching costs.
This strategic goal hasn’t been mentioned in any of the company documents, press or commentary we have seen but it would explain how such a small company could persuade so many leading CPGs to join an unproven venture. It makes sense for them to play this down right now, but in a year or two, if things look promising and they exercise their options it could look like a masterstroke. They’ll be proud owners in a new, exciting and entirely sustainable business model. Watch out! [Image Credit: © Business360]
At the World Economic Forum in January 2019, TerraCycle unveiled Loop, a circular reusable packaging platform for consumer packaged goods companies. TerraCycle says it's a “disruptive ecosystem for CPGs” that aims to eliminate waste entirely.The core idea is simple. Loop seeks to be a modern day milkman, shipping products via UPS in a reusable padded container for them to be returned when empty for cleaning and reuse. Products are dispensed from reusable metal and plastic containers that CPG companies have redesigned for this purpose. It says it will initially focus on homes but ultimately work with retail stores and their e-commerce platforms.
TerraCycle aims to launch May 2019 in New York and Paris and has secured a range of high-profile CPG partners, including P&G, Unilever, Nestlé, KFC and Coca-Cola. These companies have redesigned packaging of some brands to work with Loop. For example, Nestlé Haagen-Dazs developed a stainless-steel ice cream container, while P&G’s Crest Platinum will be available in a refillable glass bottle with a stainless-steel cap, all protected by a silicone sleeve.
As part of our newsletter, Plastics – The Corporate Response, we have looked at TerraCycle's checkered past and wondered why the world’s leading CPG companies are unreserved with their praise and all so keen to partner with a company so small (2016 revenues ~$20 million). It’s also peculiar that just as Loop is getting going TerraCycle starts to divest of its core US business, 70% of total sales. The rights issue started January 30, 2019, six days after Loop was announced at WEC.
So what’s really up?
A strategic sleight of hand
We suspect TerraCycle has offered partnering CPGs options in Loop. Sure, the CPGs are attracted by shifting at least part of their sales to a zero-waste model: it looks good, shows they’re trying and will make for great PR.
But a more attractive objective for them would be to create an entirely new channel, and what a channel it would be. It’d be beyond the reach of retailers and Amazon and would allow the CPGs to build direct links with consumers, a long-cherished goal. And it would lock them in. Containers would tie consumers to specific brands with possibly high switching costs.
This strategic goal hasn’t been mentioned in any of the company documents, press or commentary we have seen but it would explain how such a small company could persuade so many leading CPGs to join an unproven venture. It makes sense for them to play this down right now, but in a year or two, if things look promising and they exercise their options it could look like a masterstroke. They’ll be proud owners in a new, exciting and entirely sustainable business model. Watch out! [Image Credit: © Business360]
Relevant Information Delivered To The Right People Will Grow Your Business
For over a decade we’ve delivered highly targeted newsletters to individuals, teams and companies that wish to track very particular information. Some deliver news concisely, others are like investigative journalism for your business.
Most are proprietary but here are some you can look at:.
We cover pretty much any topic, so if there's something specific you want, just say. You can have any format you want and even the option of editing material before it goes out to your team or clients, Contact us for more…[Image Credit: © Business360]
For over a decade we’ve delivered highly targeted newsletters to individuals, teams and companies that wish to track very particular information. Some deliver news concisely, others are like investigative journalism for your business.
Most are proprietary but here are some you can look at:.
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Corporations Remarkably Unprepared For Longstanding Issue Of Plastic Use
A few years back single-use plastics was seen as a niche concern for granola eating environmentalists. No longer. Driven by disparate pressures, including governments, campaigns and TV programs like War on Waste in Australia and the BBC’s Blue Planet II in the UK, the rise in concern has been rapid. Kantar Worldpanel found that 44% of respondents are now more worried about single-use plastic than they were, and 70% aim to adopt more sustainable alternatives.
A few years back single-use plastics was seen as a niche concern for granola eating environmentalists. No longer. Driven by disparate pressures, including governments, campaigns and TV programs like War on Waste in Australia and the BBC’s Blue Planet II in the UK, the rise in concern has been rapid. Kantar Worldpanel found that 44% of respondents are now more worried about single-use plastic than they were, and 70% aim to adopt more sustainable alternatives. Greenpeace USA found a branded Coca-Cola plastic bottle in the Great Pacific Garbage Patch during the Arctic Sunrise ship's expedition in October of 2018, and used it to create some adverse publicity for the company.
It’s harder for brands and companies to hide these days and responsibility is being forced on them. Campaign organizations provide a steady stream of shaming commentary that gets wide distribution on social media. Campaigns quickly put brands and corporations on the defensive, such as this Greenpeace instruction:
Here’s what you can do. Whenever you see a piece of plastic where it doesn’t belong, pick it up, take a photo, and share it on social media using #IsThisYours. Don’t forget to tag the brand!
Looking from the sidelines, it’s remarkable that corporations were caught so flat footed. It’s an issue that has been building for a while and it’s hard to believe it wasn’t on their radar, but it seems not. Plastics and the corporate response is a concern we’ve been tracking for a fair while and you’re welcome to subscribe to our newsletter.
A bigger question is what’s next… Water? Waste disposal? Carbon content? Deforestation? GMOs? Monocultures?... A sizable advantage comes from being better informed than your competitors and being ahead of the game. Let us know if there’s anything you’d like tracked to keep you and your teams informed. It's what we do. [Image Credit: © Greenpeace]
Unilever Was Once Synonymous With Boring And Predictable. No Longer
Two years since the failed Kraft Heinz bid, Unilever is trying to reassert its identity and it’s anything but clear where it will head. 18 months ago, we wrote a short paper on what we thought Unilever should do. Surprise surprise, Unilever took a different view!
Two years since the failed Kraft Heinz bid, Unilever is trying to reassert its identity and it’s anything but clear where it will head. 18 months ago, we wrote a short paper on what we thought Unilever should do. Surprise surprise, Unilever took a different view!
Undeterred and ready to be ignored again, we took another look.
To us, Unilever doesn’t look strategically aligned and its post-bid actions feel incomplete. Active in such disparate businesses and still carrying a conglomerate discount, its strategic options are numerous but often contradictory: does prestige beauty really fit with bleach, detergent and bouillon cubes? We think it should focus tighter.
We also think it needs to review its sustainability ethos. More than most corporations, Unilever tied itself to doing the right thing as articulated eight years ago in its Unilever Sustainable Living Plan (USLP). Some analyst say the USLP took the joy out of the company’s marketing, tied its hands when looking for acquisitions,and held it back as it countered the KHC bid.
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With the departure of CEO Paul Polman, its Sustainability Advocate In Chief, and CMO Keith Weed, who was key in designing the USLP, now may be the pivot point it needs. Reassessing this strategic question will be front and center for new CEO Alan Jope. Expect at least a dilution of the sustainability commitment.
We also think it needs to review its sustainability ethos. More than most corporations, Unilever tied itself to doing the right thing as articulated eight years ago in its Unilever Sustainable Living Plan (USLP). Some analyst say the USLP took the joy out of the company’s marketing, tied its hands when looking for acquisitions,and held it back as it countered the KHC bid.
With the departure of CEO Paul Polman, its Sustainability Advocate In Chief, and CMO Keith Weed, who was key in designing the USLP, now may be the pivot point it needs. Reassessing this strategic question will be front and center for new CEO Alan Jope. Expect at least a dilution of the sustainability commitment.
Unilever is right now reviewing its strategic options. Secure in the knowledge we will (again) be ignored, here are our thoughts on what it should do now...
We think Unilever needs to both streamline and bulk up. It should exit Foods and Refreshment, which would provide the funds for something truly radical. But what and how? Unilever has made great strides in building the foundations for a powerful Beauty business, but we don’t see it being able to compete with pure-play beauty giants (or startups). Its beauty business needs to be on its own, away from bleach and detergent.
We think it should use the funds from the sale of Foods & Refreshment for a transformative Beauty acquisition, such as Estée Lauder Companies, Beiersdorf, Coty or Shiseido – or even Avon - then spin off the consolidated business once it's found its feet as a global beauty player. Proceeds from this move would fund a bold and transformational HPC play by buying Colgate-Palmolive, Henkel or even Reckitt Benckiser, consolidating its position in categories it has known for decades.
We think this is logical, value-adding and transformative strategy. We are also confident it will be thoroughly ignored! [Image Credit: © Business360]
L’Oréal Is Increasingly An Acquisition Machine
Rank the top beauty and personal care companies by R&D spend and L’Oréal stands head and shoulders above them all, so it’s striking how heavily it relies on acquisitions for growth, effectively outsourcing a good portion of its NDP to the marketplace.
Rank the top beauty and personal care companies by R&D spend and L’Oréal stands head and shoulders above them all, so it’s striking how heavily it relies on acquisitions for growth, effectively outsourcing a good portion of its NDP to the marketplace.
A few years back we looked at how L’Oréal manages its acquisitions, talking to former employees and other knowledgeable professionals about how they did it, as well as poring over the numbers. It’s increasingly an acquisition machine, taking promising, on-trend brands from one country and folding them into its global distribution system. It’s done this across different categories with brands such as La Roche-Posay (about 30 years ago), Urban Decay, Kiehl’s, NYX Cosmetics, Carol’s Daughter, Mizani, SkinCeuticals, essie… – and continues to add niche brands to its portfolio.
CeraVe is a live example. Shrewdly snapped up from the debt-burdened and troubled Valeant Pharmaceuticals in 2017, L’Oréal paid $1.3billion for CeraVe and two other skincare brands - AcneFree and Ambi – that had annualized combined revenue of around $168 million.
CeraVe had revenues of $136 million and was growing at a 23% CAGR. At the time, we laid out our expectations for L’Oréal’s plans, from packing redesign, to business model tweaks and projected global rollout. The process is now well underway with the branding rolling into many countries this last year.
And growth is very strong. L’Oréal rarely gives brand growth rates but in its latest conference call it described CeraVe as ‘an excellent acquisition” and said it’s growing at a 45% clip. On even moderate projections it’s easy to see how in 6-8 years CeraVe could be a billion dollar brand.
Interviews with former L’Oréal employees reveal the importance of the company’s ‘integration manual’ and how it manages to fairly consistently successfully plug culturally distinct brands into its corporate machinery.
With its truly global scope, L’Oréal is exceptionally well-placed to execute this strategy – other top beauty MNCs do not have the geographic distribution and scale that allows them to get the same returns from a similar strategy. Expect L’Oréal to press this advantage in coming years. [Image Credit: © Business360]
With its truly global scope, L’Oréal is exceptionally well-placed to execute this strategy – other top beauty MNCs do not have the geographic distribution and scale that allows them to get the same returns from a similar strategy. Expect L’Oréal to press this advantage in coming years. [Image Credit: © Business360]
The Coming Land Grab Will Be Messy And Costly
It’s rare for a multi-billion dollar CPG category to be created out of thin air, but that’s just what’s happening with CBD oil, the cannabis extract. 2017 US sales were well below $500 million yet are projected to reach $22 billion in four years.
Legal and regulatory restrictions remain, but as and when they resolve, expect an unsightly land grab as brands and companies jockey for position. Despite its smoking heritage, combustibles will likely be a small component of CBD sales. Instead, most CBD will be consumed via vapes and sprays, and more typical CPG products, such as lotions and creams, or ingested from snacks or tablets or drunk.
A helpful way to assess how it will play out is to focus on the benefits it brings, which are strongly centered on stress and pain relief, and relaxation generally. Numerous products will add CBD and claim they ease stress or pain and enhance relaxation. For some products this will work well, but we’re already seeing examples where it’s a stretch.
How about some full spectrum extract for your pet, just $34.97 “to keep fur shiny and tails wagging”. Or, if your pet is anxious or has arthritis, why not try some NatulabUSA Hemp Oil. Nikki, from Portland, Oregon, uses it for her 13 pound ‘furbaby’ and she swears by it – “He used to pace the house when he heard something that scared him but when he gets the oil, he just lays on the couch”. Praise, however, is not universal, with 12% of reviewers on Amazon giving it a 1-star rating.
For humans, KANA offers a nice Lavender Hemp Sleeping Mask (only $55) that has Cannabis Sativa (Hemp) Seed Extract and “alleviates inflammation of acne and healing of skin”.
And for a little indulgence, how about some High CBD Limited Edition All Natural Sigurberry Gumdrops from Lord Jones and Sigur Rós, a snip at $60. Or maybe you’d prefer some Limited Edition Cannabis Marshmallows? A box is a mere £15.00 for which you’ll get six high strength help marshmallows that have been “whipped up with fresh grapefruits and pink peppercorns to give it a citrus lift and a touch of spice- complementing the botanical notes of the cannabis.” Yum.
There’s more! So much more. From Advance Bright Eye Repair Serum (“to keep you looking beautiful”) to Full Spectrum Organic Hemp Infused Gummy Bears (for “Relaxing, Pain, Stress & Anxiety Relief”). However you look at it, CBD is coming and will be a widely used additive.
It’s rare for a multi-billion dollar CPG category to be created out of thin air, but that’s just what’s happening with CBD oil, the cannabis extract. 2017 US sales were well below $500 million yet are projected to reach $22 billion in four years.
Legal and regulatory restrictions remain, but as and when they resolve, expect an unsightly land grab as brands and companies jockey for position. Despite its smoking heritage, combustibles will likely be a small component of CBD sales. Instead, most CBD will be consumed via vapes and sprays, and more typical CPG products, such as lotions and creams, or ingested from snacks or tablets or drunk.
A helpful way to assess how it will play out is to focus on the benefits it brings, which are strongly centered on stress and pain relief, and relaxation generally. Numerous products will add CBD and claim they ease stress or pain and enhance relaxation. For some products this will work well, but we’re already seeing examples where it’s a stretch.
How about some full spectrum extract for your pet, just $34.97 “to keep fur shiny and tails wagging”. Or, if your pet is anxious or has arthritis, why not try some NatulabUSA Hemp Oil. Nikki, from Portland, Oregon, uses it for her 13 pound ‘furbaby’ and she swears by it – “He used to pace the house when he heard something that scared him but when he gets the oil, he just lays on the couch”. Praise, however, is not universal, with 12% of reviewers on Amazon giving it a 1-star rating.
For humans, KANA offers a nice Lavender Hemp Sleeping Mask (only $55) that has Cannabis Sativa (Hemp) Seed Extract and “alleviates inflammation of acne and healing of skin”.
And for a little indulgence, how about some High CBD Limited Edition All Natural Sigurberry Gumdrops from Lord Jones and Sigur Rós, a snip at $60. Or maybe you’d prefer some Limited Edition Cannabis Marshmallows? A box is a mere £15.00 for which you’ll get six high strength help marshmallows that have been “whipped up with fresh grapefruits and pink peppercorns to give it a citrus lift and a touch of spice- complementing the botanical notes of the cannabis.” Yum.
There’s more! So much more. From Advance Bright Eye Repair Serum (“to keep you looking beautiful”) to Full Spectrum Organic Hemp Infused Gummy Bears (for “Relaxing, Pain, Stress & Anxiety Relief”). However you look at it, CBD is coming and will be a widely used additive.
A useful analog for seeing how it will be used lies at the other end of the benefits spectrum – energy. Energy drinks sales alone in the US now exceed $10 billion, with Red Bull ($4.6 billion) and Monster ($4.1 billion) globally recognized brands.Beyond beverages there’s a long tail of ‘energy’ products, from bars and snacks to beverages and even lotions and vapes.
And yes, even ham*.
We expect CBD to play through consumer products in much the same way, with it used as an additive bringing key benefits. Relaxing ham anyone?
* Disappointingly, this is actually a hoax, just a digitally manipulated image by Adam Padilla. But it does nicely underline the point that all additives have their limits [Image Credit: © Adam Padilla]
New Competitors Targeting Margins Set To Threaten Premium Beauty
Membership clubs aren't new, (there's Costco, Sam’s Club, Birchbox...), but the arrival of online direct-to-consumer clubs that offer huge discounts on own brand beauty products is a new threat.
This is the model used by Beauty Pie, in the UK, the latest startup from serial entrepreneur Marcia Kilgore. Her four earlier ventures include Bliss, in which LVMH now has a majority stake; Soap & Glory, acquired by UK retailer, Boots; FitFlop and Soaper Duper.
Membership clubs aren't new, (there's Costco, Sam’s Club, Birchbox...), but the arrival of online direct-to-consumer clubs that offer huge discounts on own brand beauty products is a new threat.
This is the model used by Beauty Pie, in the UK, the latest startup from serial entrepreneur Marcia Kilgore. Her four earlier ventures include Bliss, in which LVMH now has a majority stake; Soap & Glory, acquired by UK retailer, Boots; FitFlop and Soaper Duper.
Beauty Pie members pay a monthly or annual fee for discounts of up to 85% on Beauty Pie products.Each membership option has a monthly spending limit – £5 per month, for example, has a £50 a month limit – and unused spending can roll over to the next month.
Non-members can also buy the products, but at full price. Everyone has to pay the shipping charge. Products include makeup, skin care items, fragrances, candles and gifts.
Kilgore argues that the consumers’ best interests are lost as soon as brands try to squeeze a bit more margin from each transaction. At Beauty Pie, prices paid by members cover the cost of the product and packaging, shipping to the Beauty Pie warehouse, plus the cost of warehousing, safety and testing. The monthly charge is expected to cover other costs and margin.
Kilgore is not a fan of the various on-costs typically passed on to the consumer, such as celebrity endorsements and middlemen, and the brand claims the products come from “around 20 of the world’s leading labs, who manufacture their very best formulations (from makeup to moisturizers) for Beauty Pie members.”
Beauty Pie is a notable and potentially disruptive departure. It could be a business model that forces beauty products to be more reflective of cost, with traditionally high premiums limited to those products that deliver a genuine point of difference, a prospect that should give beauty execs reason to reach for some (discount) anti-frown serums. [Image Credit: © Angeleses]
Marketers Risk Overstating Beauty Tech's Abilities
Beauty and tech seem a match made in heaven and many commentators say beauty dominated CES 2018. Both advance relentlessly as science and new understandings unlock new possibilities. And both play to deep human needs – one to be beautiful (or at least not lose what beauty you have) and the other to the endless draw of cool.
Consumers mostly see beauty tech, and especially AI, in diagnostic, application and effectiveness monitoring tools. Brands use it to draw people in, lowering risk of purchase, and there's a constant stream of ‘innovations’ to better inform consumers:
Beauty and tech seem a match made in heaven and many commentators say beauty dominated CES 2018. Both advance relentlessly as science and new understandings unlock new possibilities. And both play to deep human needs – one to be beautiful (or at least not lose what beauty you have) and the other to the endless draw of cool.
Consumers mostly see beauty tech, and especially AI, in diagnostic, application and effectiveness monitoring tools. Brands use it to draw people in, lowering risk of purchase, and there's a constant stream of ‘innovations’ to better inform consumers:
- A new feature for the Olay Skin Advisor platform, Olay Future You Simulation, shows users how their skin might look in the future based on different assumptions, often with unwelcome results
- Olay Smart Wand applies targeted electromagnetic treatments, working with an accompanying app (review)
- L'Oréal’s My Skin Track pH is a wearable adhesive skin pH sensor, to help people with conditions like eczema and acne
- Neutrogena’s MaskiD includes a 3D-printed mask to which skin treatments are added
AI is exciting, but too often marketers get overtaken by the glitz. Brands are keen to use AI but rarely deliver a great consumer experience. It’s too clunky, too slow, insufficiently intuitive and usually too limited - brands, for example, launch diagnostics that look only at their products or the conditions its products address.
We believe the market will go to those innovations that deliver genuine and measurable benefits or that answer real questions that consumers ask – "Given my skin condition, what is the most cost-effective anti-aging product?”
Beauty tech and AI are on a race to either deliver better solutions or honest answers. But until we get there, they just beguile. [Image Credit: © Proctor & Gamble]
We believe the market will go to those innovations that deliver genuine and measurable benefits or that answer real questions that consumers ask – "Given my skin condition, what is the most cost-effective anti-aging product?”
Beauty tech and AI are on a race to either deliver better solutions or honest answers. But until we get there, they just beguile. [Image Credit: © Proctor & Gamble]
KomuniKay Will Grow Your Business By Engaging Senior Decision Makers
Effectively engaging key decision makers is getting harder. All the usual clichés apply – information overload, declining attention, and growing distractions – only serving to underline the value of useful and curated insights.
Effectively engaging key decision makers is getting harder. All the usual clichés apply – information overload, declining attention, and growing distractions – only serving to underline the value of useful and curated insights.
Our new service helps senior management engage with key decision makers, leveraging our research and newsletter platform to deliver relevant, useful and trusted content.
No other email marketing solution does what Komunikay can provide you with:
No other email marketing solution does what Komunikay can provide you with:
- ready-to-go, professionally written content on topics you specify
- output in a format you choose with your corporate logo and colors
- full editorial control before you click Approve & Send
It’s pretty simple. Clients tell us what they want covered, specifying the focus, frequency and ‘voice’, along with the format and template. We build search strategies and a writer team to prepare the targeted newsletter. At the relevant date, you get a fully-prepared draft that’s ready-to-go, which you can fully edit it in a browser. When you’re happy with it, click Approve & Send and we manage the distribution with the newsletter even coming from @yourdomain if you want.
A leading global beverage company uses it to keep its innovation teams informed about important competitor developments, a leading beauty corporation challenges its managers with news and insights about the convergence of beauty and technology, and a top food manufacturer is using it to engage influential food developers. Let us know if you want to know more. [Image Credit: © Business360]
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