Hair Care Boom Poised for Bust Next Year

Launches Tailing Off in $8 Billion Category, Signaling Spending Slowdown

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CINCINNATI (AdAge.com) -- The mass-market hair-care category is enjoying faster growth than at any time in more than a decade, thanks to a blockbuster $1 billion in spending to support new brands and major restages this year. But relatively lackluster plans for 2007 have retailers and some industry executives doubting that pace can continue.
Some retail buyers and category managers -- whose pay is determined in part by the hair-care category growth -- are concerned 2006 will be a hard act to follow, particularly as 2007 marketing plans look relatively light.
Some retail buyers and category managers -- whose pay is determined in part by the hair-care category growth -- are concerned 2006 will be a hard act to follow, particularly as 2007 marketing plans look relatively light.

$8 billion
The category, estimated at $8 billion if unmeasured channels are counted, has seen close to double-digit growth in its key shampoo and conditioner segments in the past two months alone. The growth most likely tops 10% if Wal-Mart, club and dollar channels are included.

The biggest hits so far among new products include Alberto-Culver Co.'s mass conversion of salon brand Nexxus and Unilever's U.S. launch of global hair-care powerhouse Sunsilk, supported by $100 million and $200 million marketing budgets respectively. Those two lines lead marketing spending on hair initiatives, which is expected to top $1 billion this year.

Unlike 2003
All that money is actually growing the overall business, unlike 2003, the last time a similar barrage hit the market. Then, the category actually shrunk more than 1% as measured by Information Resources Inc. and grew only about 1.5% in all channels, according to Unilever, less than a quarter the growth rate so far in 2006.

"We call 2006 the year of the hair war," said Sarah Jensen, marketing director for U.S. hair care at Unilever. "I think we're just seeing an emergence of innovation that's bigger, better and adding more value for consumers."

But some retail buyers and category managers -- whose pay is determined in part by category growth -- are concerned 2006 will be a hard act to follow, particularly as 2007 marketing plans look relatively light.

P&G's Pantene
A major restage of Procter & Gamble Co.'s category-leading Pantene, which P&G executives privately have been touting since early this year and had been expected to launch in early 2007, now won't come until midyear. Still, it looks to be the biggest event in the category next year, said Luis Delgado, CEO of the Samy hair-care brand.

An executive for a Midwest drug chain, however, believes the next-biggest initiative for 2007 is a winter restage of P&G's Aussie. Executives familiar with industry plans said P&G also appears to be developing a restage of Clairol hair color, including transparent packaging. A P&G spokesman declined to comment.

While growth is picking up in other segments, the $1 billion to $2 billion hair-color segment remains a laggard, with sales up only 0.7% for the 52 weeks ended Aug. 16.

Clairol losing share
Clairol, which had shown signs of a turnaround fueled by its Nice 'n Easy Root Touch-Up kit, has resumed its multiyear streak of losing share. But segment leader L'Oreal has also seen its superpremium Couleur Experte sales fall more than 20% in the latest eight weeks, according to IRI.

That's led to speculation among some retailers that the line will be yanked next year, which a L'Oreal spokeswoman denied.

Overall, however, L'Oreal is gaining share both in color and other hair segments, thanks mainly to Garnier. The latter's Fructis brand has seen sales growth accelerate north of 20% in the past eight weeks, according to IRI.

This year's wave of hair-care initiatives also has brought unprecedented promotion intensity to the category -- marked by previously unheard-of $1 and $2 coupons and buy-one-get-one-free deals on shampoo and conditioner, with restaged L'Oreal Vive the most aggressive of the pack. That, too, potentially could start taking dollars out of the category.
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