THE PERSONAL CARE PRODUCTS SEGMENT. (Cosmetics, Toiletries, and All Other Related Items)

Transcription

1 THE PERSONAL CARE PRODUCTS SEGMENT (Cosmetics, Toiletries, and All Other Related Items) The Segment Defined This market segment includes: manufacturers of health and beauty aids; fragrances and colognes; toilet preparations such as soaps, toothpaste, facial powders and creams, hair conditioners, etc. It also consists of producers of miscellaneous personal care products, e.g., bandages, cotton swabs, safety razors, shaving cream, combs and hair brushes, nail polish, shampoo, condoms, among others. Many of the products are classified under SIC 2844 Toilet Preparations. Solid Increase in Spending Planned for 2006 Manufacturers of personal care products plan to ramp up spending on packaging machinery for their U.S. plants by +10% to +12% in 2006 to an estimated $414 million (Figure PC-1). The projected increase, which marks the fifth in as many years for the market segment, reflects in large part, an intensity of competition among the industry s manufacturers, which is forcing packaging innovation and an influx of new product developments in order to win consumer dollars. As shown in Figure PC-2, 41 percent of the respondents plan to increase spending on packaging machinery during the year, 26 percent foresee a reduction, and another 33 percent plan to spend roughly the same amount as in Figure PC-3, which breaks down the increase-decrease ratios by plant size, reveals that a majority of the smaller plants (less than 100 employees) (57%) are planning a cut-back this year, but in each of the three larger size classifications the breadth is clearly favorable. Even Further Growth Possible With the understanding that budgets for capital expenditures are often subject to change, each respondent was asked a pair of questions dealing with the potential for revisions in their spending plans as the year progresses. The first asked them to rate on a scale of 1 to 10 how susceptible their packaging machinery budget is to adjustment either up or down in response to changing economic and/or market developments. A rating of 1 is to mean they feel their budget is set in stone and a rating of 10 means that it is very susceptible to change. As revealed in Figure PC-4, 19 percent of the respondents characterized their 121

2 budget as being absolutely set in stone whereas the other 81 percent said their spending plans have at least some potential to be adjusted as indicated by a rating between 2 and 10. Moreover, 41 percent gave a rating between 6 and 10, or fairly to very susceptible to change as the year progresses. FIGURE PC-1 HISTORICAL PROJECTED GROWTH OF U.S. DOMESTIC SPENDING FOR PACKAGING MACHINERY BY THE PERSONAL CARE PRODUCTS SEGMENT ACCORDING TO THE PMMI PURCHASING PLANS STUDIES (Percent Range of Projected Annual Growth) 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% High Point of Range Low Point of Range 122

3 FIGURE PC-2 PERCENT OF THE PERSONAL CARE PRODUCTS SEGMENT SAMPLE PROJECTING AN INCREASE, DECREASE, AND NO CHANGE IN PACKAGING MACHINERY EXPENDITURES COMPARISON 2006 VERSUS 2005 (Based on Conditions Existing As Of January/February 2006) Will Reduce Spending 26% Will Increase Spending 41% Will Spend About the Same 33% 123

4 FIGURE PC-3 PERCENT OF THE PERSONAL CARE PRODUCTS SEGMENT SAMPLE PROJECTING AN INCREASE, DECREASE, AND NO CHANGE IN PACKAGING MACHINERY EXPENDITURES 2006 VS 2005 COMPARISON BY COMPANIES' PLANT SIZE (Based on Conditions as of January/February 2006) 100% 90% 11% 25% 0% 80% 70% 60% 57% 22% 37% 67% Project Decrease for 2006 Project No Change for % 40% Project Increase for % 29% 67% 20% 38% 33% 10% 14% 0% Less than 100 Employees 100 to 499 Employees 500 to 999 Employees Employees Next, respondents were asked: If the budget were to be adjusted, which direction would you expect it to likely go up, down, or equally likely to be revised in either direction? The piechart of Figure PC-5 reveals that half of the respondents (50%) said it would most likely go higher, while just 10 percent said lower, and the remaining 40 percent characterized it as being equally likely to go up or down. 124

5 FIGURE PC-4 THE PERSONAL CARE SEGMENT SAMPLE S RATINGS REGARDING SUSCEPTIBILITY OF THEIR 2006 PACKAGING MACHINERY BUDGETS TO CHANGE FROM CURRENTLY PROJECTED LEVELS (Respondents rated their budget s susceptibility to change on a scale from 1 to 10 with 1 meaning the budget is set in stone and 10 meaning it is very changeable ) 70% 60% 50% 40% 40% 41% % of Responses 30% 20% 10% 0% 19% 1 2 to 5 6 to 10 Ratings 125

6 Reasons for Ordering Machinery in 2006 Of the respondents who indicated intentions to purchase packaging machinery in 2006, 76 percent attributed their decision to the need for higher productivity and/or efficiency on their existing packaging lines (Figure PC-6). Other reasons cited frequently include: to add capacity to their packaging operations (56%); to accommodate new product lines and/or new packaging designs (52%); to add flexibility and/or reduce downtime associated with changeovers (24%); and to reduce labor and/or maintenance costs (24%). FIGURE PC-5 THE SAMPLE'S ASSESSMENT: IF THEIR CURRENT 2006 PACKAGING MACHINERY BUDGETS DO GET ALTERED, WOULD THE REVISION MOST LIKELY BE HIGHER OR LOWER? (Based on Conditions Existing as of January/February 2006) More Likely Would Be Revised Higher 50% Equal Chance It Could Go Either Way 40% More Likely Would Be Revised Lower 10% Reasons for Reducing Spending in 2006 In 2005 the personal care segment increased spending for packaging machinery by a solid +7% to +9%, so it is not surprising that 38 percent of those intending to spend less in

7 cited heavy spending last year as the primary reason (Figure PC-7). And similarly reflecting the segment s heavy packaging line investment in recent years, another 25 percent said they will spend less because their existing machinery is adequate for their current needs. General budget cuts (25%) and management decisions to concentrate on other areas (12%) were also said to account for some of the planned reductions. Trends to Watch in 2006 While the respondents comments provide fairly general insight into their current budgetary considerations, the following specific market trends merit monitoring throughout the year. Factors Supporting the Favorable Outlook A. Further influx of new packaging designs/styles The concept of using packaging innovation as a vehicle for differentiation from a crowd of competitors and/or for creating convenience for consumers, will continue to resonate among personal care product manufacturers as much or more than in any market segment. According to the findings, nearly half (48%) of the respondents plan to change or modify at least some aspect of the packaging on their existing products in 2006, and almost as many (44%) said they have plans to introduce a new product in 2006 with different packaging. B. A steady stream of new product introductions associated with increase in segmentation of health and beauty care products Manufacturers of hair care, skin care, oral care, and hygiene products are increasingly gearing products to specific demographics by gender, ethnicity, and age. C. Continuation of solid demand for skin care and oral care products Teeth whitening products and mouth washes/dental rinses are showing growth in the oral care segment while the skin care segment is leveraging consumer demand for the health and therapeutic benefits of products with hydrating and exfoliating ingredients. D. Moderate growth in cosmetics for new packaging and products 127

8 Growth Limiting Factors A. Pockets of Weakness Certain markets within the segment, including nail care, bar soaps, and fragrances are seeing pockets of weakness in some cases due to market saturation and in others due to consumer demand trends. Still, major players within these sub-segments continue to remain active in their pursuit of packaging innovation. B. Negative cyclical effect from five consecutive years of increased spending FIGURE PC-6 THE UNDERLYING REASONS FOR ORDERING PACKAGING MACHINERY IN 2006 BY THE PERSONAL CARE PRODUCTS SEGMENT (For Respondents Who Indicated They Will Order Packaging Machinery in 2006) Accommodate New Product Lines/New Package Designs 52% Improve Efficiency/Prod. of Existing Packaging Ops. 76% Improve Ergonomics/Worker Safety 8% Add Flexibility/Reduce Downtime Reduce Labor/Maintenance Costs 24% 24% Adding Capacity to Existing Packaging Operations 56% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 128

9 FIGURE PC-7 THE UNDERLYING REASONS FOR REDUCING SPENDING ON PACKAGING MACHINERY IN 2006 BY THE PERSONAL CARE PRODUCTS SEGMENT (Of the RespondentsWho Indicated They Will Reduce Spending in 2006) Other Priorities 12% Budget Cuts 25% Existing Machinery is Adequate 25% Made Major Purchases in % 0% 5% 10% 15% 20% 25% 30% 35% 40% The Personal Care Products Sample The personal care products sample consisted of 29 respondents, of which two answered for their companies entire U.S. domestic packaging operations or an entire division. In all, the sample s response represented the 2006 purchasing plans of 43 plants. Ninety-seven percent of the 2006 sample participated in last year s study as well. 129