Global Beauty, Home and Personal Care
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Global beauty, home and personal care A review of purposeful branding and digital efficacy EQUITY RESEARCH | 3 SEPTEMBER 2020 For required non-U.S. analyst and conflicts disclosures, please see page 31. Disseminated: September 3, 2020 00:15ET; Produced: September 2, 2020 21:34ET Global Consumer Staples: a review of purposeful branding and digital efficacy RBC Europe Limited Emma Letheren Global Consumer Staples: a review of purposeful branding and digital efficacy (Equity Analyst) +44 20 7002 2100 Beauty, home and personal care [email protected] Our view: We consider the ESG credentials and digital efficacy of 66 beauty and HPC brands in this follow up to our report Global Consumer Staples: James Edwardes Jones a review of digital efficacy which reviewed the digital capabilities of 58 food brands. We have looked at the use of purposeful marketing at the brand (Equity Analyst) level and used Refinitiv for company-level judgements. Our conclusions: 1) a brand’s online ‘buzz’ seems minimally correlated to its purposefulness, +44 20 7002 2101 [email protected] at least for now; 2) with the exception of Unilever, high corporate ESG scores are not reflected in positioning at the brand level. We believe that it will take time for purposeful marketing to influence brand equity and expect to see brand purpose become increasingly relevant to consumers as we RBC Capital Markets, LLC carry out further iterations of this analysis. We think our coverage companies’ failure to extend corporate-level ESG efforts to positioning and Nik Modi marketing of individual brands presents a potential opportunity for those so inclined. (Equity Analyst) (212) 905-5993 [email protected] The online consumer isn’t recognising ongoing ESG efforts. - Unilever has found evidence that Digital Leaders Digital Laggards Steven Shemesh purposeful communication leads to better growth. However, we have found little evidence that Avon Air Wick (Equity Associate) brand purposefulness boosts online consumer sentiment and only some to say it results in ‘buzz’ (a Dermalogica Ariel (212) 428-2390 high volume of social media posts about the brand). This link may become more evident over time Estée Lauder Banana Boat [email protected] as purposefulness drives brand equity and consumers increasingly appreciate ESG. Fenty Beauty Cascade Mehra Romezi With the exception of Unilever, corporates scoring well in terms of ESG are not using purposeful Kylie Cosmetics Cillit Bang (Equity Associate) marketing consistently at brand level. – There is a disconnect between investor and consumer MAC Domestos (212) 266-4099 NYX Downy/Lenor [email protected] communication. This could be an opportunity: we have not found evidence that consumers are Olay Mr Muscle recognising brands’ purposefulness but expect this to change over time given the importance of ESG Sara Mahaffy Seventh Generation Oral-B (US Equity Strategist) considerations to many consumers. Tarte Rexona/Degree (212) 618-7507 Disruptors are showing the way. As we found in our food edition, the smaller, more agile disruptors Urban Decay [email protected] are significantly more digitally competent than their incumbent peers. These include Dermalogica, Seventh Generation and Kylie Cosmetics. Little correlation between purposeful branding and online strength Priced as of market close on 1 September 2020 Acquiring the winners: expensive and not necessarily replicable. - (unless otherwise stated). Many of the digitally impressive disruptors have been acquired by All values in EUR unless otherwise noted. the larger companies we cover. We see little evidence that the incumbents have managed to extend these capabilities to the rest of their business with the exception of L’Oréal and Estée Lauder. Lockdown woes. Buzz and sentiment fell during lockdown. We haven’t found any correlation between brand performance in lockdown and digital capabilities pre-lockdown. We infer that consumers were too distracted for existing digital marketing and e- Purpose rankings commerce efforts to pay off. 1 – low purpose 2 – moderate 3 – strong purpose Cosmetics brands enjoy the best digital capabilities. Sources: Crimson Hexagon, RBC Elements, Euromonitor, RBC Capital Markets 3 September 2020 2 Global Consumer Staples: a review of purposeful branding and digital efficacy Table of contents Acceleration in the shift to digital ......................................................................................................................................................................................... 4 ESG factors rising in importance ........................................................................................................................................................................................... 5 Methodology ......................................................................................................................................................................................................................... 6 Does purposeful marketing matter? ..................................................................................................................................................................................... 7 Category summary ................................................................................................................................................................................................................ 8 Cosmetics .............................................................................................................................................................................................................................. 9 Skincare ............................................................................................................................................................................................................................... 10 Hair Care .............................................................................................................................................................................................................................. 11 Personal Care ...................................................................................................................................................................................................................... 12 Oral Care ............................................................................................................................................................................................................................. 13 Home Care (1) ..................................................................................................................................................................................................................... 14 Home Care (2) ..................................................................................................................................................................................................................... 15 Company analysis ................................................................................................................................................................................................................ 16 Beiersdorf (Sector Perform, price target EUR 98) ............................................................................................................................................................... 17 Edgewell Personal Care (Outperform, price target USD 36) ............................................................................................................................................... 18 Estée Lauder (Outperform, price target USD 240) .............................................................................................................................................................. 19 L’Oréal (Sector Perform, price target EUR 203) .................................................................................................................................................................. 20 Procter & Gamble (Sector Perform, price target USD 128) ................................................................................................................................................. 21 Reckitt Benckiser (Underperform, price target GBP 64) ..................................................................................................................................................... 22 Unilever (Underperform, price target EUR 42/GBP 37) ...................................................................................................................................................... 23 Henkel, Church & Dwight, Clorox and Colgate-Palmolive ................................................................................................................................................... 24 Valuation summary ............................................................................................................................................................................................................. 25 Appendix: Methodology ...................................................................................................................................................................................................... 26 Appendix: Purpose rankings I .............................................................................................................................................................................................