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June 1 2006 DFNIBeauty report • cosmeceuticals

For years many women have believed that so-called “miracle creams” will bring salvation

from wrinkles and crow’s feet. In their search foreternal youth many have turned to plastic sur-gery. For those without the time, money orinclination to go under a surgeon’s knife, scien-tific advances in skincare have allowed thedevelopment of “cosmeceuticals”—the half-pharmaceutical, half-cosmetic skincarebrands of the future.

Many cosmeceutical brands havebroad consumer appeal because theyoffer anti-ageing benefits without theneed to undergo invasive proceduressuch as surgery, Botox or collageninjections.Creams are easy to apply andpromise a wide range of results, includ-ing anti-wrinkle and plumping effects,smoother skin and collagen repair toname only a few.

The medical fraternity is at theforefront of the latest advancements incosmeceuticals.As many as 24 derm-atologists and plastic surgeons havecreated their own skincare lines orendorsed others, addressing legitimatemedical needs with their products.Drug companies have also been quick

to respond to demand by forming partnershipswith cosmetics companies to develop beautyitems. Allegan, the maker of Botox, joinedforces with Elizabeth Arden last December toproduce Prevage (pictured below), an anti-ageing line that gave Arden a firm foothold inthe segment.

Beauty2market consultancy partner Marie-Clothilde Brulé estimates that sales ofcosmeceutical products have reached$13bn in Europe and the US.“The Euro-pean and US consumer search for beautyhas moved beyond Botox and facelifts,from anti-wrinkle treatment to lip-plumping and vitamin-infused shampoo,”she says.“[The market for cosmeceuticals]should exceed $17bn in a few years andskincare is a category that many retailersare keen to make space for.”

In department stores and at leadingretailers such as Sephora, “age-defyingmoisturisers” are increasingly prominent.Cosmeceuticals do not come cheap atbetween $70 and $2,200, but their pop-ularity is a worldwide phenomenon.Shoppers in Asia keen to brighten theircomplexion have especially welcomedthe latest skincare technology.“The best

target market is the baby boomer generationwith its high disposable income,” says Brulé.“They want to live longer and look youngerand are therefore more savvy about their skin.”

A logical stepCosmeceutical brands are still in their infancy,but the expansion into duty-free is logical, saysBrulé. “These niche, drug-like brands areexperiencing great success in many domesticmarkets and will keep on increasing sales andsurpassing some of the leading establishedskincare brands, so they will have to move intothe travel-retail business,” she argues. “It is asubstantial source of revenue to consider andnot one to neglect. It is a logical strategy toadopt as the demand is already there.”

Although skincare distribution is frag-mented—spanning upmarket department stores,spas, mass-market channels and online retail—travellers will nevertheless appreciate the oppor-tunity to buy the latest skincare accessories atduty-free prices, says Brulé. She suggests thatthere are several ways that such niche brandscould be introduced into travel-retail, either byshowcasing a wall dedicated to the most suc-cessful names or through a partnership with aspecific brand for a set period.“[The retailers]

“Cosmeceutical” or “doctor” brands are making the leap from the high street to duty-free.Often commanding premium prices, such products offer considerable profit potential and formany retailers their arrival in travel-retail cannot come fast enough. Tina Milton examines the cosmeceutical phenomenon

Under doctor’s orders

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Beauty report • cosmeceuticals

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DFNI June 1 2006

cannot afford to ignore these brands becausethere is too much revenue at stake,” she insists.

Among the retailers to have expressed interestin growing the cosmeceutical product categoryin travel-retail are Philippines-based LandmarkDuty Free, Nuance-Watson (Singapore) andCanadian border store operator Blue WaterBridge Duty Free. Nuance-Watson (Singa-pore) executive general manager and Nuanceglobal head of category fragrances and cosmeticsKen Tse says:“Cosmetics is an expanding cate-gory with double-digit growth potential.And thecosmeceuticals sector offers great prospects forrevenue as consumers today are looking formore advanced and clinically-proven beautyproducts. [Consumers] want to look good ormaintain their youth and most are prepared topay a premium price for a well-known andendorsed ‘wonder’ product. It is probably acheaper and safer alternative to cosmetic surgery.”

Prevage was the first cosmeceutical line to beintroduced at Singapore Changi airport byNuance-Watson (Singapore) and the companyhas reported encouraging results.“We launchedPrevage in early April,”explains Tse.“Changi wasthe first airport launch in Asia. The productrecorded S$90,000 [$56,600] in sales in theinitial launch month for just one sku,which rep-resents potential annual revenue of S$1m[$628,930].The highest spenders [on the brand]are from Singapore, Indonesia and Australia.”

To demonstrate its commitment to the sector,Nuance-Watson (Singapore) plans to allocategreater space to cosmeceuticals in its existing cen-tral stores at Changi terminals one and two.

Blue Water Bridge Duty Free vice-presidentsales Tania Lee-Hartmann agrees that cosme-ceuticals have great potential to increase revenueand insists there is growing awareness amongyounger women of the need to establish aregime that will prevent ageing to their skin.Sheargues that men are also more aware of the needto follow a skincare routine and are increasinglyprepared to make a substantial outlay to protectagainst skin damage. The Canadian borderretailer has already allocated greater space tomen’s grooming.

Lee-Hartmann acknowledges that most skin-care products now contain active ingredients.“Today more cosmetics companies offer prod-ucts they claim will have the same [medical]effects, such as foundations featuring anti-oxi-dants and collagen-boosting ingredients andlip-plumpers.”

She points to several emerging brands thatclaim to offer the benefits of minor plastic sur-gery.“Strivectin is a good example of a productthat offers the Botox effect without containingBotox,” she explains. “L’Oréal and Smashboxboth have collagen fillers that reduce wrinklesand lines and promote the production of col-lagen.Products from Estée Lauder,Lancômeand Christian Dior feature anti-oxidantsthat protect the skin from free radicals[highly-reactive molecules capable of caus-ing damage to skin cells and other tissue].”

Among the most popular cosmeceutical brandsare lines from Dr Murad, Dr Pat Wexler, DrSebagh and Strivectin, but well-known main-stream names at the high end of the segment arecapitalising on the trend.“Brands such as Orlane,Estée Lauder,Revive and La Mer are also takingtheir first steps into the segment with the mostexpensive creams ever,” says Brulé. “It is theiranswer to the triumph of cosmeceuticals; theyknow that this is the direction to take if they wantto capitalise on the trend.By doing so they willmaintain their existing space in travel-retail.”

Doctors on callBut Landmark Duty Free managing directorJose Esteban says the niche brands still needwork. The “doctor brands” emerging in theskincare sector have to be introduced faster,according to Esteban,who claims that some sup-pliers in this sub-sector have been slow torecognise the specific needs of the travel-retailindustry.

Nevertheless, cosmeceutical companies suchas Skin Doctors have recognised the segment’spotential.Most Skin Doctors’ products fall intothe €29–59 ($36–75) price range and theirproducts are recommended for consumers agedbetween 18 and 55. It also targets the teenmarket through treatments such as Zit Zapperand its Blemish Free skincare kit.

Skin Doctors European business develop-ment manager Elliot Walker tells DFNI:“SkinDoctors has enormous potential in duty-freebecause cosmeceuticals are a very differentoffer from traditional skincare. The brand

bridges the gap between conventional skin-care and more invasive cosmetic procedures,with concentrated formulations that delivera specific result on the skin.We have seen bigdemand for our non-surgical skincare solu-tions through our other distribution channelsin the past few years and we expect our pres-ence in the travel-retail market to be equallysuccessful.”

Walker reveals that the company is keen tomake its duty-free debut in the next six monthsand has held discussions with a number ofoperators. He recognises that cosmeceuticalbrands have much to do before they achieve apresence in the duty-free business.“It could bebecause other cosmeceutical companies wronglyconsider duty-free to be a discount channel thatonly serves well-known high street brands,”hesays. “However, we want to change this per-ception because we believe that duty-free is aprestigious market that can enhance our distri-bution network and strengthen our position asa worldwide brand.”

Given the youth of the cosmeceutical market,it is difficult to predict which names will be thefuture front-runners in the sector.What is cer-tain is that consumers want beauty companies toturn science fiction into reality, so mainstreamand cosmeceutical brands will be able to co-existin the skincare sector for as long as the demandfor the technology remains high. Skincare hasbeen heralded as the fastest-growing sub-segmentin the beauty category today and the emergenceof the cosmeceutical phenomenon will onlyhasten its expansion. DFNI

As the name suggests, cosmeceuticals are hybrid products that embody cosmetic and phar-maceutical qualities.The sub-sector is associated with dermatology, high-tech cosmeticsproducts offering Botox-like effects, “miracle creams”, chemical peels and microder-mabrasion.What was once restricted to doctors’ prescriptions to treat specific skincare needsis now widespread in today’s skincare market.

Cosmeceutical products affect the biological function of the skin and contain active ingre-dients that will penetrate the epidermis and change the way the skin reacts to internal andexternal aggressors.They usually have drug-like qualities.

Cosmeceutical products do not have to be approved by the Food and Drug Administra-tion in the US because they are classified as cosmetics and usually contain ingredients suchas vitamin C (which stimulates collagen repair), anti-cellulite (promotes the internal drainageof fat), retinol A (removes the outer layer of skin), hydroxy acids (mini-face peels) and anti-oxidants (prevent damage from free radicals).

What are “cosmeceuticals”?

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