How indie brands are reinventing the US cosmetics market

Independent cosmetic brands are serving to shake up the cosmetics world, with the larger multinationals carefully observing all the moves, and often buying them up.

As the cosmetics and personal care market in the US continues to deliver respectable but not outstanding growth, it is imagination and innovation that is helping to deliver double-digits for many of the up and coming “indie” brands.

So how are they doing it? The reasons behind the success deliver no secret formula, underlines a new report titled “Beauty’s Most Buyable Brands: Analysis of Booming Independent Brands in the US, authored by researchers at Kline Group.

"Independent brands can often be thought of as disruptors in the sector in which they compete. They typically offer products that solve a problem, offer a more attractive way of doing something, or cater to a specific demographic, and tend to use social media as a means of engaging with consumers. Larger brands may get ideas from these companies in terms of new products, new packaging, or new advertising," said Kelly Alexandre, analyst at Kline Group in an exclusive interview.

105 of the best performing indie brands

The report takes into consideration 105 privately-owned, independent brands, analysing the dynamics of each business operations and how their revenue streams have developed in recent years.

Kline’s figures are compelling. According to its researchers the US cosmetics and personal care industry is currently worth around $43 billion, and is delivering growth of just under 3% per annum.

Although indie brands were estimated to have accounted for 7.3% of the total market in 2014, what is really eye-opening is the fact that Kline estimates indie companies delivered an average growth rate of 19.6% from 2013 to 2014.

Size matters, small is nimble

Size is definitely one winning factor, with a smaller and more flexible business hierarchy enabling indie brand innovators to cut through red tape and deliver new products to market faster – a crucial element in a fast-paced trends driven industry.

This means that the generally younger and more adaptable teams behind the indie brands are tapping into fast-paced consumer trends such as personalization, as well as a plethora of new marketing tools that are available.

With respect to those marketing tools it is social media that has been the driving force to promoting many of the more unique and stand out indie brands to new and curious consumers.

Indie brands have leveraged social media

According to the Kline researchers, one of the biggest reasons for the indie players’ success has been the power of engagement with consumers with these standout products, and much of that has come through social media.

Social media tools such as Twitter, Facebook and Instagram have become a “cost-effective way of promoting a brand” heightening a company’s ability to connect with a consumer on a very personal level.

It is for all of these reasons that the big multinational cosmetic companies have been buying up the top performing indie brands, with M&A activity continuing to grow as these established companies try to develop new and faster growing revenue streams.

Watch out for more indie brand M&A activity

In the last couple of years big moves have included Unilever buying up the Ren and Dermalogica brands, as well as Estee Lauder buying into GlamGlow and Le Labo.

"It already has made quite a splash in 2015  as seen in the numerous acquisitions of Indies including  GlamGlow, Dermalogica, Ren, Murad and Kate Somerville," said Alexandre.

"Indies will continue to be a driving force in the beauty industry. They will continue to be disruptors in the sector, providing fresh innovative ideas in the industry and also inspiring major companies to think outside the box for creative product offerings. It is expected that indies will provoke larger change in the industry, such as reformulating product ingredients to become truly natural. Indies are also expected to drive acquisitions and mergers in the industry because of their problem oriented, innovative products, as well as their creative and engaging advertising."

Industry experts, including the research team at Kline, believe that this is the start of an on-going trend and that many of the current top-performing indie brands will be attracting the attention of the big multinationals in the future.

Kline has identified a list of 15 of the top performing indie brands in the US at the moment and a follow-up article will concentrate on those players, focusing on the reasons for their success.