Consumer spending continues to be impacted post-recession

By Simon Pitman

- Last updated on GMT

Related tags: Personal care, Late-2000s recession, Cosmetics, Personal care brands

Although green shoots of economic recovery have occurred in many of the key global markets, the recession may have a longer lasting effect on consumer spending patterns.

According to Kline Group consumer products director Carrie Mellage, the days of running up hard-to-pay credit card bills and enthusiastic consumer spend seem to have been seriously curtailed by the difficult economic conditions.

This, combined with the fact that consumers are both more environmentally aware and more knowledgeable about corporate responsibility means that patterns have rapidly shifted towards more responsible and frugal spending.

But whereas many industry experts believed that, post-recession, consumers would return to their old spending patterns, there are many indications that this is not about to happen any time soon.

Growth in spending in natural personal care

Kline data from across all the consumer product markets shows that it is not just about reduced spending power; in several key areas spending continues to grow.

One example of this is the natural personal care category, which continues to go from strength to strength, despite the overall reduced consumer spend.

Throughout the recession, Kline data shows that the global market for natural personal care and household products has grown at a rate of 12 percent, creating a market valued at $18bn.

This growth has been driven by a combination of two factors, Mellage says. Firstly that the supply of natural ingredients has improved drastically and secondly, the fact that consumer interest in these products has continued to grow, even in the recession.

Leading the way have been the markets of Asia and Brazil, where growth in spending power has continued throughout the recession, but even in the hard hit developed markets, modest growth has continued through the difficult times.

Private label continues to thrive

Another segment that has continued to grow throughout the downturn has been private label - a trend that has led to retailer names such as Walmart, Target and Costco developing their own private label personal care brands in the US.

But whereas many industry experts had predicted that this interest in cheaper private labels would diminish once consumer spending power started to return, Mellage points out that in the US personal care market in particular, private label has not displayed this trend yet.

“Sales of private-label personal care products surged nearly 6 percent in 2009, compared with an overall market decline of 0.8 percent,”​ she said. “As consumers traded down for lower-priced products, brand manufacturers scaled back on domestic advertising and shifted their focus to burgeoning international markets.”

L’Oreal and Procter & Gamble, the two biggest players in the cosmetics and personal care market, were hard hit by consumers scaling back. In particular L’Oreal’s professional care and luxury divisions were hardest hit, results that were reflected in those two market categories as a whole.

Although these categories have shown some signs of rebounding in the first two quarters of this year, continued economic uncertainty makes this upward trend seem uncertain for the rest of 2010.

In the US market, the uncertainty has already been observed in the luxury segment, with luxury products researcher Unity Marketing pointing to its most recent luxury consumption index for July. This index suggests that consumers of luxury products are uncertain about the economic outlook, indicating that further growth in the sector might be curtailed in the rest of 2010.

Related topics: Market Trends

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