Market Report on
Daily Naturals
2A
Bachelor of International Marketing University of Technology Sydney Handed in 15.06.2018
Anna Vathne
This paper is done as a part of the undergraduate program at BI Norwegian Business School. This does not entail that BI Norwegian Business School has cleared the methods applied, the results presented, or the conclusions drawn.
Content
1.0 Internal Analysis
1.1 Description of Company 1.2 Business Model Canvas 2.0 External Analysis 2.1 Market Analysis 2.3 Competitor Analysis 2.4 Customer Analysis
2.5 Macro Environmental Analysis 3.0 SWOT Analysis
3.1 Key Issues 4.0 References 5.0 Appendices
1 1 2 6 6 8 11 14 16 18 20 25
1.0 Internal Analysis
1.1 Description of company and the product line overview
Dresslier & Co. Pty Ltd is a hair care company founded in 1930 by formulating chemist John Sloan. Dresslier served as a key distributor for international brands, but refocused its
businessmodel from salon supplier to manufacturer of their own brand. Moreover, Dresslier has a great relationship with major ingredient suppliers in Europe and America and has been first to market using innovative ingredients, as a result they have been able to stay ahead of market developments. As for human resources Dresslier strive to truly understand the needs of their employees to identify the best solutions and continual improvement to be the best in their field. Dresslier has a reputation as a high quality manufacturer of professional hair care products. Davroe is positioned as a wellness range of products with salon quality, and is distributed through hair salons and suppliers,whilst their sister brand Daily Naturals is distributed through pharmacies, and is positioned as a high quality pharmacy brand. In
contrary to traditional haircare products containing harsh chemicals Dresslier´s key objective is to provide high performance, natural based hair care solutions without harmful chemicals.
Dresslier identified an opportunity as pharmacies expressed a demand for Davroe within the pharmacy market. However, due to hair salons perception of selling professional hair care brands through pharmacies the company made a new product line called Daily Naturals to differentiate the two product lines. This opened for an opportunity for expanding their market share nationally, and reaching a new target market. Dresslier has been consistent in protecting their brand image throughout the new line and works proactively to prevent discounting of Daily Naturals in pharmacies to maintain their brand image (Q&A with Dresslier, 16.04.2018).
Their competitive advantage is that the products provide hair salon performance, despite using all natural ingredients and no harsh chemicals at a reasonable price. (Dresslier, n.d)
Daily Naturals product line consists of natural haircare products such as shampoo and
conditioners, leave-in-masque, argan oil and other treatment and styling products. The range consists of several hair care products providing different solutions for specific problems or hair issues. Some examples are provided above. Daily Naturals range of products are consistently in the top three of the hair care category across the board including brands on promotions (Dresslier, n.d)
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1.2 Business Model Canvas
1.2.1 Customer Segments
Dresslier has a differentiated marketing strategy, targeting the consumer hair care market.
The Davroe brand targets salon customers, while the sister brand Daily Naturals target the pharmacy hair care consumers. Customers require professional hair salon quality for an affordable price that satisfied their needs. Dresslier provides the expected hair salon performance, without the harsh chemicals to respond to customer demands.
1.2.2 Value proposition
Traditionally hair care products contains parabens, Sodium Laureth Sulphate (SLS) and Lauryl Sulphate (SLES), these ingredients are used as detergents or foaming agents. However, they are commonly known to cause irritation and allergic reactions (Dermamed solutions, 2018).
In contrary to this, Dresslier´s key objective is to provide high performance natural based hair care solutions, without harmful chemicals. Because of this, Dresslier provides their
customers additional value by merging high performance with natural ingredients and chemical free product for a reasonable price.
Vegan and Cruelty
Free
Australian
Made No SLS/SLES
No Parabens High Performance
In animal testing, Sulfates cause serious health problems (Dermamed solutions, 2018).
Dresslier gives their customers additional value as it is 100% Vegan Friendly and is Cruelty Free Accredited. Furthermore, the brand is 100% Australian made and owned.
“Think globally, act locally” has been emerging as a global trend, whereby the desire for traceable products and the concern of reducing one’s carbon footprint has become more important to consumers (Euromonitor international, 2014). By building their business model on these premises they are adding customer value.
1.2.5 Revenue Streams
The primary source of revenue is through multi retailer sales, which indicates 62.8%, (Appendix 1). Dresslier business model involves transactional revenue resulting from sales through their key partners. From 2016 to the end of 2017 Daily Naturals had a sales growth of 63%, and by June this year the brand had a sales revenue from National Pharmacies of AUD$ 135.000,- (Appendix 2).
1.2.3 Channels
Dresslier does not have their own physical stores. They are using an indirect business model using partner stores as their main distribution channel. Their main brand Davroe is distributed through distributors, multi retailers (e.g Hairhouse Warehouse), professional salons (e.g Price Attack) and online.(Dresslier, n.d.). Through their own website customers are able to
communicate with Dresslier. Moreover, their new brand Daily Naturals products are available through 51 National Pharmacy stores throughout Southern Australia, New South Wales and Victoria (National Pharmacies, 2017) and at the online retail store Flora and Fauna. Through store observations done at Priceline and Blooms the Chemist in Coogee, NSW we have observed that Daily Naturals have made its presence and are available for a trial period (Observed 10.05.2018).
1.2.4 Customer relationships
Customer Service
Daily Naturals have representation in every mainland state in Australia providing high level of service to key partners (Dresslier, n.d.). However, these representatives provides customer service to the B2B market and not the B2C. Currently Davroe has an online channel where it is easy to contact customer service, and to sign up for newsletters to create a stronger
relationship with their customers. However, Daily Naturals do not have an online channel and easily accessible customer service.
Social Media
Dresslier are utilizing social media communities to become more involved with their
customers. They are currently using Facebook and Instagram to enable knowledge exchange and customer service to strengthen the customer relationship. This has not yet been in focus for their sister brand Daily Naturals, but could be a great opportunity to engage and increase sales within their target market.
1.2.6 Key Resources
Physical
Dresslier physical resources consist of manufacturing facilities. Dresslier has a great focus on formulation innovations. Moreover, Dresslier has a great relationship with major ingredient suppliers in Europe and America and has been first to market using innovative ingredients, as a result they have been able to stay ahead of market developments (Dresslier, n.d.). They are planning to expand their manufacturing facilities in the next couple of months to be able to respond to a increasing demand. (Q&A with Dresslier, 16.04.2018).
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Intellectual resources
Dresslier has a reputation as a high quality manufacturer of salon professional hair care products. Daily Naturals has a leading position in National pharmacies. Dressliers brands are promoted as Cruelty-Free and has never been tested on animals. Moreover, they have reformulated their product vision to be Petro, Sulphate and Paraben Free. (Dresslier, n.d)
Human resources
Mainly Dresslier strive to truly understand the needs of their employees and clients,
to identify the best solutions to address those needs and then to inform, educate and support the individual in the application of the solution. The company are seeking continual
improvement to be the best in their field, striving for unique solutions that maximise hair wellness (Dresslier, n.d.).
1.2.7 Key activities
Production
Dresslier holds its own manufacturing to shorten lead time and secure the quality of their products. They are manufacturing their own brand and contract packs and prioritise to source all ingredients that are accessible nationwide from Australia. Furthermore, they source the unavailable ingredients from Europe and America to secure high quality ingredients
(Appendix 3). They have chosen to manufacture their products in their own branches to secure a cruelty free and non-animal tested production.
Problem solving activities
Dresslier takes action in the environment by producing all packaging from biodegradable plastic (Austrade, n.d). Moreover, they are using active ingredients that are petrochemical free, no sodium chloride, or hard cleansers (Dresslier, n.d.) solving the much talked about discussion about sulphates and chemicals used in hair care products. By providing natural based, high quality hair care products with the quality of a salon quality they are solving problems regarding allergic reactions and hair damage.
1.2.8 Key Partners
To reduce risk regarding quality of their ingredients Dresslier is reliant on their key suppliers of from Australia, Europe and the US (Appendix 3). By sourcing ingredients from Western countries, they can be more reliant that the products provided are the expected quality.
Furthermore, the key partners of Davroe are their partner salons in Southern Australia, and Price attack. The brand are reliant on these focus suppliers to get access to customers as the products are only available online through their owned website. Likewise, Daily Naturals key suppliers are National Pharmacies and Flora and Fauna in order to distribute their products to their target market (See Appendix 4 for Value Chain Model).
1.2.9 Cost structure
Fixed cost
Salaries makes up most of the costs for Dresslier; by assumptions drawn from
information gathered from the competitor Sukin Organics the estimated cost of annual salaries are AUD$1.475.140. The manufacturing costs includes raw materials and packaging materials, the estimated price of raw material such as ingredients and packaging is
AUD$1.136.333 annually. Thereafter, power is a significant cost regarding manufacturing their products. Assumptions are made from average usage and price of electricity within the manufacturing industry in Australia and the estimated cost is $810.000 (Appendix 5).
Variable cost
The demand of Davroe and Daily Naturals is a good indicator of how much financial resources should be allocated to the production.
Marketing and advertising costs
To this date Dresslier does only have a marketing department focusing on the postitioning of Davroe. The marketing strategy have focused on product sampling through their partner retail outlets as well as through their website. Furthermore, they have been promoting at New York fashion week, and the famous Katy Perry’s hair stylist. These activities has to be included in the cost structure of their business model. (Q&A with Dresslier, 16.04.2018)
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2.0 External Analysis
2.1 Market Analysis
Market Trend
The Hair care industry has expanded over the past years in Australia. Increasing consumer awareness and a growing concern about the danger of chemical compound in traditional cosmetic industry have driven industry growth (IBISWorld, 2017). Rising demand for
beauty and hair treatment products has been propelled by the emergence of new markets, higher average incomes and a growing populations. The increasing popularity of
premium-priced hair treatment products such as organic and environmental friendly shampoos and conditioners lifted revenue in major segments of the market
(Cision Distribution by PR Newswire 2017).
Market Size
The current market size of the Australian Hair Care industry is worth US 941.1 million dollars and have remained steady by 0.6% compound annual growth rate between 2016 and 2017 (Statista 2018). Australia have an average per-capita spending on haircare of US 39 dollar, while the global average is US 23 dollars. (Appendix 6 ). Observed from a global perspective, the United State generates most of the revenues in 2018 with a market volume of US 15.222 million dollars (Statista 2018).
Market Share
Worldwide, the hair care market is controlled by 7 main companies. L’Oréal is the market leader, followed by Unilever, Proctor & Gamble, Esée Lauder Companis, Johnson & Johnson, Shiseido and Coty. (Statista, 2018). The hair care market can be divided into two main categories; premium hair care and mass marketed hair care. In 2017, mass hair care represented 82.1% of the market share, whereby premium represented only 17.9%. (Euro- monitor, 2018). Based on usage includes shampoo, conditioner, hair colour, hair styling products, hair tonic and hair oil. In Australia´s professional hair care market, shampoo and conditioner are capturing the largest market share with a forecast to exhibit fastest growth.
+ 0.6%
CAGR 2016-2017
US$941.1m
2017
Product Demand
Frequent procedure of hair colour, straightening and styling treatments results in damaged hair caused by repeatedly application of harsh chemicals. As a result, customers strongly demand shampoo and conditioners that combine hair and scalp treatments which will restore moisture and smoothen the hair. (Engine, P. n.d) Pollution, sun damage, scalp issues, hair thinning and loss are causing an increased concern about the health condition of their hair.
Consumers look for repairing products, and manufacturers are frequently producing new products to meet customers demand (Euromonitor International 2017). There is a growing awareness about the danger of synthetic chemicals which has raised the demand of natural and organic personal care products. Consumers are choosing a greener and cleaner lifestyle for themself and their family (BWX Limited 2016).
Market Breakdown by Distribution Channel
The breakdown of the Australian hair care market by distribution channels are divided into four main categories. Grocery Retailers including supermarkets and discounters, where the retail value RSP is set to 52.5 % in 2017. Health and Beauty Specialists was set to 29.1% of the market breakdown including Chemists/pharmacies who stood for 7.2%. Hair salons were set to 10.8% while the online retail market only indicated for 2.6% in 2017 (Appendix 7). This exemplifies that most consumer prefer to buy there hair care products from grocery retailers and pharmacies, rather than in hair salons or online.
Success Factors
Several successfactors are important for companies to follow In order to obtain a competitive position and grow profit within the hair care industry. An important factor is product
innovation which involves continuously spending time and economical resources on R&D to create quality formulas that meet customer demand. Today a larger amount of consumers are more aware of harmful ingredients which forces companies to change their product formula.
Product differentiation; Offering products for various needs is another critical factor since hair care consumers have different hair types and needs. Creating brand awareness within this industry is especially important due to an industry dominated by big well known players. With a vast market dominated of product differentiation, a solid and clear defined brand makes it easier for consumers finding the right product solving their problem and need. The nature of trends drives consumer demands, and capitalize on new trends is vital for a company to not fall behind its competitors. (Epsen Hilmer Graphic & Co, 2015)
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2.3 Competitor Analysis
Through secondary and primary research we have define the two major competitors of
Daily Naturals. Analysis of the online survey indicated L’Oréal as the overall most known brand, whilst Sukin Organics were ranked at the most known natural based brand.
Garnier (By L’Oréal)
Size and goals
L’Oréalholds a wide portfolio of brands across both mass hair care and salon hair care. Their most popular hair care brand in Australia is Garnier Fructis, which is identified as Daily
Naturals strongest indirect competitor. Their goal is to improve their environmental and social impacts, hence the product packaging is made of PET which is the most widely recycled plastic, and the ingredient formula is paraben free and 96% is from natural origins (L’Oréal 2017), (Garnier 2018).
Competitive Advantage
Garnier holds a sustainable competitive advantage based on intangible resources such as patent, innovative knowledge and well known and positive brand reputation. Garnier is part of the L’Oréal network which dominates a strong customer community worldwide, as the number 1 cosmetics group in the world. Moreover, majority of Garnier´s customers are in the age of 16-45 (Marketing 91, 2018). They are a market oriented brand with customer focused strategy, as they offer products based on hair care needs and hair types.
Market Share
L’Oréal Australia maintained its leading position in the Australian hair care market, holding a value share of 20% in 2017 (Euromonitor 2017). Garnier Fructis is the fourth-ranked hair care brand in Australia with a market share of 6,2% (Euromonitor 2018).
Product quality and pricing
Garnier offer affordable hair care solutions whereby they focus on value for money. They offer a differentiated product range, with solutions specialized for various hair types. The price for a bottle of shampoo is AU 6,49 dollars for 200ml and AU13,99 dollars for 700ml. (Euromoni- tor, 2018). A discounting pricing strategy is implemented through their distributors, and their products are frequently observed discounted in pharmacies (Observed in Priceline, 2018).
Marketing strategies
Garnier are targeting consumers who are looking for transparency and more natural products.
Garnier is driven by L’oreal’s unique strategy; Universalisation.“It means globalisation that captures, understands and respects differences. Differences in desires, needs and traditions.
To offer tailor-made beauty, and meet the aspirations of consumers in every part of the world.
L’Oréal is driven by this vision of the world” (L’Oréal 2017). To promote their brand Garnier opts to use methods of viral promotional strategies such as TV and internet advertisement.
Furthermore, they promote their brand throug print media, store promotions and social media such as pre-rolls on Youtube.
Sukin Organics
Size and Goals
Sukin Organics is identified as Daily Naturals strongest direct competitor, as it is the number one Natural Skincare Brand in Australia (Sukin Organics 2017). The company has been on the market since they established in Melbourne in 2007. The establishment of Sukin roots from the discovery of a market gap for environmentally sustainable, high efficacy and affordable natural skin and hair care products. Today, their products are available internationally in over 10 countries (Sukin Organics 2017). Sukin´s domestic revenues accounted for $47.8 million in 2017. Their strong presence on social media is reflected through their 61.100 followers on their instagram account, and 62.238 followers on Facebook. Their product line is continually expanding across face, body and hair segments (BWX Limited 2017).
Market Share
In 2017, Sukin captured 7.3% market share of cosmetic skin care market in the pharmacy market, compared to L’oreal wich accounts for 6.4% Even though Sukin´s market presence is strongest in the skin care market, their offering of hair care products is viewed as a strong competition against Daily Natural. Sukin is the number one preferred natural skin care brand in Australia, hence a high brand loyalty customers can be assumed which means consumers are likely to try out their hair care products if they are looking for a natural and sustainable alternative to traditional hair care. Sukin is the company’s most successful brand and hair care is one of their key knowledge of expertise, hence further expansion and innovation of Sukin´s hair care line could be something to keep an eye on in near future.
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(BWX Limited 2017).
Product Quality and Pricing
Similar to Dresslier they offer innovative hair care products to ensure healthy and shiny hair, with a formula free of strigents, sulphates and harsh chemicals. “Sukin strives to deliver high quality, affordable, and effective natural skin and hair care that consumers trust to meet their needs while remaining environmentally, economically and socially sustainable”
(Busiko et al, 2015). Regarding their pricing strategy, Sukin has a lower price compared to Daily Naturals, furthermore, in contrary to Daily Naturals Sukin is leveraging a discounting strategy to increase sales.
Marketing Strategies
Sukin choose to stay away from producing traditional advertisement, such as print media to be more attractive for their sustainable promotional activities. Moreover, they do not produce any print media of their own, however they take advantage of social media to promote their brand.
Porters Five Forces
The industry dominated by big players with strong brand presence in the hair care market creates a high force of competition. Companies are offering high product differentiation for different customer needs, this creates a strong competitive force. Another strong force is that the industry requires high fixed costs due to products requiring high outputs to cover
manufacturing costs. The industry is driven by the nature of trends, where the ability to capitalize on new trends is vital in order to stay competitive.
The bargaining power of suppliers is estimated low, considering there are a vast amount of suppliers globally within this industry offering the same types of ingredients which results in low switching cost for buyers. The threat of substitutes is estimated to be low due to low availability of products who could substitute the traditional and natural hair care and still give the desired performance. (Euromonitor, 2017). Consumer could make homemade products, thus we assume few consumers would make time and effort to do so. The industry has a medium threat of potential entrants. A barrier to enter is the vast amount of competitors which reduce the overall profitability in the industry, and large firms with economies of scale makes it harder for middle and small business to enter the industry and quickly gain market share (UKessays, 2015). High capital requirements for manufacturing creates a barrier to enter, and strong brand presence is vital due to domination of brand switchers in the industry.
The barriers to exit the industry is high due to high R&D costs and manufacturing that makes it
The buyer power force is high due to a large customer base dominated of brand switchers due to low switching costs, and easilly access product informa on on internet.
2.4 Customer Analysis
To be able to iden fy Daily Naturals potential market segments, we have conducted primary research consisting of two in-depth interviews and one focus group. The participants in the focus group were both vegan and non-vegan to encourage a greater discussion between the two point of views. Furthermore, we have used the information gathered in the qualitative research to elaborate an online survey. Responses from 102 respondents were collected and we have used this data to conduct a cluster analysis to identify the potential micro segments of Daily Naturals. The analysis will provide useful information about internal similarities within the clusters, as well as external differences. See Appendix 8, to see the variables analysed.
“Conscious Consumer”
The first segment identiedfied are consumers between the age of 21-25. They are mainly women and full-time students, and has an annual income between AU$ 40.00 - 49.999 dollars. The conscious consumer is one who cares about ethics and transparency in business (Medium, 2017). The cluster analysis indicated this segment to be most against animalmal tesing. They care about the environment, and compared to the other segments these had the highest usage of natural hair care products in their daily routine. From the outcome of the cluster analysis, the ideal price for a bottle of shampoo within this segment is AUD$ 19.8,- and they are the most willing to change to a non-animal tested product even though the price would be higher.
An outcome from the focus group held, states that the conscious consumers are less price sensitive to buying a more expensive product if the product is free of bad ingredients and/
or if it gives something back to the community, is eco-friendly and cruelty free. The segment demands conscious products and the need for transparency and harmless ingredients is more important than performance. The frequency of purchase within this segment is half yearly, and according to the participants in our focus group the frequency is lower in this segment because they prefer to buy in larger quantity per bottle to reduce plastic consumption. They prefer to buy products in-store, mainly at pharmacies or grocery stores. The segment is slightly influenced by family and friends, as well as hairdressers when it comes to choice of hair care products.
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“Quality Conscious”
This segment consists of female and males between the age of 21-25. These are full time working and has the highest income of all four clusters, which indicate they are less price sensitive towards hair care products. They live around the city/metropolitan areas.
Furthermore, the quality conscious believes that price equal quality, and prefers to buy more expensive and well-known brands (UKessay, 2015). Through the cluster analysis this segment indicated an ideal price of AUD$28,42,- for a bottle of shampoo this is the highest median price throughout the segments. The quality consious consumers visit hair salons to cut and colour/highlight their hair and prefer to buy their products from a professional hairdresser whereas they value professional recommendations prior making a decision. They would not buy their products online, which assumably is because they want quality and trustworthy products to provide the necessary performance and post-treatment personally recommended for their hair type. Analysis indicates that the quality conscious have tried natural hair care products and states that they would definitely change to a more environmentally friendly product despite a higher price.
“Students”
This segment is between the age of 21-35 and are mainly women. These are full-time students and has the lowest income of all segments. The students lives around the city/region,
assumably not too far away from campus. Revealed in our analysis they buy haircare products every second month and would buy their products from both pharmacies, grocery stores and online retailers. Secondary research states that a common factor on shopping preferences in this segment is convenience, whereby most students choose to walk to the nearest
convenience store or supermarket (Fuel Communications, n.d. ). In our analysis the respondents stated that if they were to visit a hair salon they would mainly cut their hair.
According to the focus group they are highly influenced by promotion and discounts when it comes to choosing hair care products which indicates that this segment is brand switchers.
Furthermore, this segment is least influenced by others when choosing hair care products.
The ideal price for a bottle of shampoo indicated through our cluster analysis is AUD$ 19,- secondary studies further indicate that students generally choose price over brand (Fuel Communications, n.d. ) and buys whatever thats on sale. According to the cluster analysis this segment is the most environmentally friendly. However, they have never tried natural hair care products but, states that they would change to a cruelty free product even though the price might be higher.
“Millennials”
The next segment identified are between the age of 21-30. This segment is also mainly
women, and are both full-time students and working full or part time. Similar to the conscious consumers they have an annual income between AUD$ 40.00-49.99,-. The Millennials are a demanding generation who wants a more balanced lifestyle, and they want to be more informed about companies, their products and their practices (Nielsen, 2016). According to a market report on Millennials published by Cloud 10 Hair Care, “88% says scent plays a factor in purchasing shampoos and conditioners. In that group half say it’s very important.” (Cloud 10 Hair Care, 2017) Millenials are savvy shoppers who crave customization. In the survey
conducted by Cloud 10 Hair Care 77% of the respondents were indicating they prefer shampoos and conditioners customized for their particular hair care needs.
A great factor in millennials economy is that they are either studying for their degrees, or having a student loan payments taking up a growing chunk of postgraduates income (Goldman Sachs, 2018). Based on this information we predict that this is the reason why the results from the cluster analysis shows the lowest median of ideal price for a bottle of a shampoo of AUD$ 18,4,- in this segment. Furthermore, this segment has the highest quantity of females who colour or highlight their hair at home which could be indicating that the segment do not have the economy to visit a hair dresser several times a year. Brand switchers dominates this segment and they state that they would probably change to a non-animal tested product despite a higher price. As millennials they care about the environment, and are against animal testing. From the cluster analysis we found that the segment have previously tried natural hair care to a certain degree, but at a daily basis they are using pharmacy brands.
Analysis indicated that the millennials buy products every second month from pharmacies or grocery stores. Furthermore, secondary research states that millennials buy 56% of their hair care from grocery stores and 46% from drugstores or pharmacies. Thereafter, they buy 40% of their hair care from specialized beauty product stores. Only 24% of the millennials buy their products from a hair salon, and 22% prefer to shop online. (Fun global retail teach, 2018) Although the segment prefers to buy products in store, this segment is more willing to buy their products online. Millennials are constantly online and are exposed to extreme amounts subconscious information and marketing promotions. Although the respondents in the segment stated that they are only influenced by family and friends and not influenced by for example influencers we could predict that they are.
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2.5 Macro Environmental Analysis
Political and Legal
Political factors refers to the influence of government’s political decisions and legislations on the economy. Dresslier has an international value chain and operates internationally by importing ingredients from major suppliers in Europe and America. Moreover, they recently started to export Davroe to Europe and New Zealand (Dresslier, n.d). This applies national and international laws which Dresslier are expected to abide. An example of these rules and regulations are achievement of the certification ISO Accreditation, an international standard specification for products, services and systems to ensure quality, safety and efficiency.
This certification is instrumental in facilitating international trade (ISO, n.d.). Dresslier have set a milestone to achieve this certification by July 2018 (Dresslier, n.d)
As Dresslier operates as a manufacturer of hair care products, it operates under the legal environment of the Australian Competition and Consumer Commission (ACCC). The ACCC provides strict regulations for the cosmetic industry, including required standards of
ingredients labelling (Australian Competition and consumer commission, 2014). In the speech of Deputy Chair Delia Rickard about Australian Consumer Law, she stated that product safety has to be a priority for all businesses operating in the cosmetics field (Rickard D, 2014).
Dresslier is obligated to meet the standard and quality control of the Product Safety Law in or- der to provide the products that are of no harm when used in “reasonable misuse” (Australian Government, 2018). The cosmetics industry Daily Naturals is operated in is the industry where health concern is at large.
Economical
In the world, Australia is one of the largest capitalist economies. The economy has a stable inflation rate of 2-4%, a stable and increasing GDP and a low unemployment rate of 5.7%
(Trading economies, 2017). Regarding the economic trends, individual’s income that is left for spending on nonessential items, has been shown to be key external driver in the cosmetic and toiletry industry. The sustainable cosmetic and personal care industry should be experiencing growth as consumer have more income to spend on natural products. (IBIS WORLD, 2017).
The major economic factor for Daily Naturals are barriers regarding the import of ingredients, as well as exchange and currency rates in the countries Dresslier are importing from to maximize their revenue.
Socio-cultural
Social preference, social classes and trends affect the demand for products and services of a company. Australia is a multicultural country that consists of a large number of cultural diversities in the society. People from different classes, races and place of birth might develop different demand for particular products. Almost half of the Australian population was born overseas and 83% of them live in a capital city (Australian Bureau of Statistics, 2016).
Since Daily Naturals is planning to grow, it will initially focus on the big cities. Therefore, it is important for Daily Naturals to have complete understanding of customer differentiation in the metropolitan areas.
There is an evident growth of environmentally-conscious consumers, where awareness of ecological issues has led to a first choice for green products in a various of industries. With the increase of environmentally-concerned consumers, health consciousness has also increased in the consumer market, and has been recognized as key factor for cosmetic and toiletry industry (IBIS WORLD, 2017). This trend demonstrates that consumer will request healthier product alternatives, such as natural ingredients which are beneficial for their health.
Furthermore, social trends also refer to the society’s interest in the hair texture, styles, color and ingredients of hair care products. The Vegan society is rappidly increasing and the cruelty-free awareness has created a massive demand for natural substitutes to traditional shampoo. This vegan trends on hair care products have a positive impact on Daily Naturals because they are able to provide a high quality product, while responding to the the vegan societies needs.
Technological
Technology plays a dominant role in sourcing natural ingredients and packaging within the industry. In the modern era of the 21st century, technology has proved to become necessary for businesses and governments because it helps them to achieve goals and tackle problems more effectively. The rise of social media provides companies a great opportunity to obtain direct contact with their customers and receive immediate feedback from consumers.
Moreover, technological innovations in manufacturing, product development and
transportation gives business the opportunity to frequently improve their day-to-day oper- ations towards decreasing carbon emissions and avoidable waste. By manufacturing their products in Australia, Dresslier works proactively to remain a sustainable business practice.
Additionally, technology will also improve quality and reduce costs (Dresslier, n.d.).
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Environmental
Environmental factors refer to the impact of environment such as climate and weather change towards industries. Daily Naturals takes its pride in sourcing only from natural products.
Moreover, their main ingredients rely on the farming and agricultures. Global warming and pollution can affect the performance of agricultural industry, and thereby Daily Naturals’
manufaturing operations could be affected by this. Another environmental issue within Australia is its water quality and availability. The extensive use of groundwater for agriculture and common needs have put Australia in its shortage of groundwater supply; as said by the ABC NEWS (Eamus D, 2015). These environmental factors have negative impact on the suppliers of Daily Naturals’ raw materials.
In order to protect the environment, the government passed environmental Acts and legislations to all states of Australia. Each state and territory empowered different Acts and legislation; and businesses are advised to understand what protection law apply to their field (Australian Government, 2017). To the extent of nationwide, environmental awareness is significantly developed in the way firms operate. The Australian government stated that businesses can benefit from environment management by reducing the chemicals and waste used in production, finding “green” solution for the goods and services (Australian Govern- ment, 2017). The desire to protect environment could be seen in many businesses by leading their products to be environmental friendly.
SWOT Analysis
Strengths
Daily Naturals has acquired a strong brand position in Southern Australia, and has been consistently in the top three of the hair care category across the board including brands on promotions. We have weigthed this Daily Naturals strength of most importance because this has laid the groundwork for the company beeing able to further expand. Furthermore, we find their unique solutions a vital strength as they provid high performance while using only
natural ingredients, and prevent using harmful chemicals. This is the company’s major competitive advantage as they have accomplish to be ahead of changing market
developments. The third strenght we have remarked is that Daily Naturals build their business operations on sustainable terms being environmental friendly, free from animal ingredients and testing and cruelty free. These factors are major success factors to Daily Natural due to the increase in conciousness of damaging chemicals and an increasing demand for cruelty free and environmental friendly products.
Fourthly, Daily Naturals being Australian made enabling the company to reduce risks regarding manufacturing as well as preventing animal testing. This also shortens lead times and enables complete quality control over production.
Weaknesses
The major weakness of Daily Naturals are their weak nationwide distribution channel. They have concentrated their business to Southern Australia, and have not focused on expanding domestically. This is a major weakness because competitors are able to enter the market before Daily Naturals and could potentionally secure a position in the market, raising the entry barriers for Daily Naturals. Furthermore, there is a lack of communcation channels regarding the B2B market. In a social media world, it is vital for Daily Naturals to be present on online channels, as well as providing easilly accessible customer service. Another weakness have to be aware of when expanding to a new market is their weak brand differentiation. The two sister brands have similar features, and positions themselves as high performance, natural based hair care products. When entering a new market consumers could easilly be confused about the differences between the two brands, which could potentially cause cannibalisation.
Lastly, Daily Naturals is lacking a marketing department. When entering a new market and wanting to expand in such a large scale it is vital to have at least one employee in control of the marketing and promotional strategy.
Opportunities
The most important opportunity regarding their potential to penetrate a new market and increase market share is the increased consciousness of damaging chemicals, leading to an increasing demand for natural hair care. This is a major opportunity because it consumers are more aware of what they are putting into their hair and allocate more of their spendings on products that are beneficial for their health and do not harm the environment.Furthermore, there has been a globally emerging trend in the consumer market to think globally, and therefore acting locally motivating consumers to buy locally made products to reduce carbon footprint. This is a major advantage for Daily Naturals as their brand is positioned as
100% Australian made. The third opportunity for Daily Naturals are the strong social media market presence within the millennial segment. Furthermore, this segment wants to be more informed about companies and their practices. This opt for an opportunity to reach out on social media to engage the millennial segment to create a community to communicate their brand and practises and expand their market share. Lastly, the industry have remained steady by a compound annual growth of 06.%, this shows that the market still has potential to grow.
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Threats
The major threat for Daily Naturals is their product differentiation towards their direct competitors. Sukin is the market leader and has similar product features and values. This is a threat for Daily Naturals as Sukin already has a strong position in the market, this increases the entry barrier for Daily Naturals to entry new markets. Secondly, the increasing demand for natural hair care have resulted in major actors such as Garnier Fructis is starting to produce natural substitutes for traditional shampoo. This is a threat for Daily Naturals as the
competitors have gained competitive advantages regarding market share, and economies of scale. Lastly, regarding pricing strategy Daily Naturals works proactively to prevent being associated with promotional strategies such as discounting. Their main competitors Sukin Organics and Garnier Fructis are actively promoting their products through discounting to increase revenue. This might effect the sales of Daily Naturals, as results from primary
research indicates that consumer tends to buy products on sale. Lastly, when developing two similar products under the same company there is a threat of cannibalisation. This could possibly destroy Daily Naturals sister brand Davroe’s position, as well as their own.
Key Issues
Communication Channel
Dresslier have an online website for their brand Davroe, and has through this online channel been able to communicate through newsletters and easilly accessible customer service.
Furthermore, they are present at social media platforms such as Facebook and Instagram to provide information and engage their customers. However, this has not been leveraged for their second brand Daily Naturals. As the raise of social media is only increasing it is vital for Daily Naturals to be present online to be able to effectively communicate with their
customers. In the consumer purchasing process the second stage is information search, and as we know consumers utilize internet and social media to conduct online searches for information. Hence, if the consumers cannot find any information about the brand it can be percieved as a uknown and undesirable brand. Furthermore, lack of information on where to reach out in need of customer service could cause irritation and in the worst case scenario it could lead to loss of brand loyalty.
Product Development
Dresslier has a great relatioship with major ingredient suppliers in Europe and has been first to market using innovative ingredients, as a result they have been able to stay ahead of market developments. However, as major traditional hair care brands have noticed an increasing de- mand for natural substitutes for harsh chemicals the competative arena is further increasing.
These competitors have competitive advantages on factors suh as market share, economies of scale and patents. For Daily Naturals being able to compete within the hair care market, it is vital to invest in R&D capabilities to further develop their unique solutions and knowledge to be able to differentiate themselves from their competitors.
Market Expansion
Daily Naturals have obtained a strong market position in the Southern Australian hair care market. The hair care market in general is worth US 941.1 million dollars and have remained steady by 0.6% compound growth. The emergin trends of conscious consumers have resulte in an increased awareness of businesses footprints, as well as an increased market demand for natural products. This is a major opportunity for Daily Naturals as consumers have shown to switch from traditional hair care products to natural hair care. Furthermore, secondary research has shown that most consumer prefer to buy theire hair care products from grocery retailers and pharmacies, rather than in hair salons or online. This entails that the pharmcay market is a major potential for Daily Naturals. To be able to increase their market share domestically, Daily Naturals needs to leverage its knowledge and strong brand name in Southern Australia to increase market share.
Possitioning
Dreslier identified an opportunity as pharmacies expressed a demand for Davroe within the pharmacy market. However, due to the perception of prefessional hair care brands being sold in pharmacies, Dresslier made a new product line called Daily Naturals. Dresslier has been consistent in protecting Davroe from being associated with Daily Naturals as their key salon partners have expressed a concern regarding the perception of the quality of Davroe, if being associated with a pharmacy brand. Furthermore, the two brands a quite similar in ingredient quality and product values and there is a risk concerning salon customers switching to Daily Naturals due to a lower price. Therefore, it is vital for Dresslier to enhance the differences between the two brands and focus on positioning in the two markets to avoid cannibalisation.
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Lecture:
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CITY/AP2018_Business%20Model%20Generation_ebook.pdf>
Appendix 1- Overall Sales
(Dresslier, n.d.)
Appendix 2 – Annual revenues
Year Revenue National Pharmacy
Sales
2014 - 2015 AUD$ 156.000 AUD$ 312.000
2015 - 2016 AUD$ 136.000 AUD$ 272.000
2016 - 2017 AUD$ 217.000 AUD$ 434.000
2017 - 2018 AUD$ 135.000 (end of June) AUD$ 270.000 (UTS Online discussion board)
Appendix 3 – Key suppliers
(UTS Discussion Board)
25
Appendix 4- Value Chain Model
Appendix 5 – Fixed Cost
Appendix 6 – Average spending globally
(Euromonitor, 2018)
27
Appendix 7 – Beauty and personal care
(Eurominitor)
Appendix 8 – Cluster analysis/ Customer analysis Criteria `grid`
29
Cluster segmentation analysis through SAS JMP
31
Cluster 1 – The Conscious consumer
33
Cluster 2 – Millennials
35
Cluster 3 – Quality conscious
37
Cluster 4 – Students
39
Appendix 9- Porters Five forces
41
Appendix 10 – Focus Group Summary
Focus group summary
There were 5 people in our focus group: 3 women and 2 men, in the age between 21-28 years old. Mainly students, one working full-time. Moreover, two of them are vegetarians.
The main attributes they looked at when buying hair care products are performance, care, hold, design, smell, reviews and effect. Some of them thinks price is the most important factor and do not like to spend too much money on hair care and are highly influenced by promotions. They spend more money on a good conditioner, and less on shampoo. One of the guy’s thinks that performance is most important and do not care about the price. When family and friends influence buying hair care products almost everyone or they buy already known brands. One of the guy’s buys what the barber recommends, while the rest goes to the store and buy what they feel like.
If they were to change brand it would be due to what the hairdresser recommends. One of the vegetarians said that a big brand-switching factor for her would be if another brand were giving back to the environment or charity. The others would agree but only if it wasn’t too expensive compared to regular shampoo brand. When the word vegan comes to mind they mention: “good to the environment”, “Cruelty free”, “Food”, “Natural ingredients”. Vegan vs organic: “Organic can have animal ingredients”, “Vegan doesn't need be organic”, “The word cruelty free appeals more than vegan”. When showing the product, none of them have heard about Daily Naturals before. Regarding their associations about the name of the brand name almost everyone thought of natural ingredients and that the product is good for you. Their impression of the design made them assume that the product could be sold at a hair salon.
When one of the guys read the back of the bottle he states, “It feels like there are a lot of chemicals inside, for example it says silicon, and that’s bad for the environment. When it says 100% Australian made, it would be more trustworthy if all the ingredients comes from
Australia”. Everyone expect one thought the brand name was too boring expect one of the
vegetarians. She thinks it sounds like it’s good to you and the environment, not too fancy and all straightforward.
There were a lot of opinions in regards to the daily naturals design. Statements like “They should use other colours because the white is too boring, it does not stand out, it should be more hip”, and “It should be more like Asop, that brand appeals more for what daily naturals stands for”. Almost everyone thought that the conditioner looked more expensive compared to the shampoo. However, if they were to see it in a salon they would think it would look more professional compare to if they saw it in a pharmacy. We asked them what Daily
Naturals can do to be more appealing and they suggested to make the bottles bigger and use different material to be more environmental friendly. They tried to guess the price and answered 15, 17 and 10 dollars. We showed them the bottles of Davroe and everyone agreed that the design looked much better and eco-friendly, while daily naturals looked like any other shampoo. Mostly everyone said they would mind if the plastic is recyclable or not, but they wouldn’t purposely go in store and look for it. They also agreed that the information about cruelty free should be more visible and highlighted on the bottle. When a general thought of vegan product comes to mind, the respondents mentions that it would probably look good and fit the interior in the bathroom.
No one of the interview prospects had heard of Davroe and Daily Naturals. When comparing Davroe versus Daily naturals, the majority would definitely buy Davroe because they were influenced by the design. Another reason is their trust toward hairdressers and the quality control of the products accepted in salon, compared to a brand sold at the pharmacy. “If we knew that daily naturals and Davroe were so similar, we would go for Daily Naturals”. No one are able to identify the majority of the ingredients on the bottle. One of the respondents says
“I do not trust it because I do not know any of the ingredients. But on most bottles you do not know so you get used to it and do not check the back of the bottles”. Most of them wouldn’t be bothered to take it up unless the design was captivating. One state it should be more enhanced and visible on the bottle when it says eco-friendly, vegan, organic, where some consumers would pay more for these attributes. When it says vegan, one of the girls mentioned the connotation of “limitation regarding food choices” which can cause negative
43
assumptions among some consumers. She suggests that it should be labelled cruelty free instead of vegan.
Other:
Aesop: walking into the stores, feels more personal, know about the brand, has a good vibe to it. You can test everything, good design, employees has knowledge and good
recommendation.
Targeting: everyone, since vegans would do the research of the ingredients. When I hear natural I think more expensive to produce. Not too expensive.
Reviews: never look at shampoo, hair mask is more important,
Everyone thinks that they will have a hard time in Sydney, because no one has heard about it.
Appendix 11 – Interview 1 Female student (22 year old)
The interviewee is a 22-year-old female student who takes great care of her hair. Her hair condition is dry, while she is interested of changing hair colour and style.
The main aspects of hair care products she is looking for are quality and ingredients.
She is interested in natural based hair care products, as she does not believe in putting too much artificial chemicals into her dry, thick hair. Her usual shampoo and conditioner brand is Garnier because the price and ingredients suit her the most. She is not truly loyal to one brand as she has tried to switch brands before. She admitted that she tried out the Rahua shampoo following the advice from her favourite Youtuber. However, she also did research on those products that she is going to use. The only issue with the Rahua shampoo is the Price which is $60 for a small bottle.
To summarize, the main attributes the interviewee is looking for ranked by scale would be:
1. Quality 2. Ingredients
3. Price (ranged $15-$35) 4. Smell
As she is neither vegan nor vegetarian, 100% vegan products does not matter to her. On the other hand, her opinion of switching hair care brand changed immediately based on the animal-cruelty factor. She also stated that she would definitely support local brands because Australian-made always “sounds good” to her. The interviewee finds out about hair care products in Hair Magazines and social media (Instagram and Youtube). Her usual shops for hair care products are Priceline and Chemist Warehouse because of its convenience, location and great price. Additionally, she would love to handle the actual product herself and look into the back of the bottle so online shopping is not the best place to buy her hair products despite its lower price. She has never heard about Daily Naturals and Davroe products before but she expressed excitement when she realised that it is 100% natural and environment friendly. After she was introduced to Daily Naturals and took a further look at the product specification, she said that she would definitely try it out. However, the design and size are downsides to the product because it is too small and not very attractive. She truly believes that Davroe is much better than Daily Naturals because it is sold to salons.
Appendix 12- Interview 2
Female accountant 25 years old
The interviewee is a 25 years old female professional accountant, which has a basic
knowledge of hair care products to a certain extent. She described her hair as being thick and strong, length of hair is just over shoulder-length with natural black hair colour. The
interviewee told us her hair is healthy, and only experience hair being a little bit oily if she doesn’t wash if for 2 days or more. The participant has only dyed her hair twice in her life and she doesn’t like the idea of dying her hair because she thinks the chemicals within the hair dye will causes great amount of damage to her hair. She believes that health of hair is more
45
important than looks and also states that there are 3 factors that is very important when it comes to picking the right hair care product:
1. Authenticity of the hair care product
2. Price and Options (Product Range)
3. Word of mouth – whether from friends or professionals (hairdressers)
The interviewee told us that she doesn’t have preference buying hair care products online or in store, as long as she can get what she needs in the most convenient way. Although the participant doesn't really know the ingredients in different hair care products, she has a very positive attitude towards natural and organic hair care products, as she knows that the majority of normal hair care products out there contains harmful chemicals, which damages hair over a longer period of time. She also said although she’s been using Pantene for over 10 years, she would consider switching to a healthier alternative such as Davroe and Daily Natural just based on the fact that they contain natural ingredients and its 100%
environmental friendly.She is also very price insensitive because she believes that paying extra for products is better for a healthier hair and definitely worth the money. She also states that she would pay up to 30% more of what she is currently spending to improve the overall health of her hair.
After the interviewee was shown images of Davroe and Daily Natural products, she stated that she has never heard of either of the products and her first impression of the design was that they are nice and simple but doesn’t differentiate them compared to majority of
products out there, but the fact that it is 100% natural and environmental friendly definitely gained her awareness. She wouldn’t mind being a potential customer of Davroe or Daily Natural, but when it comes down to picking one brand between the two, she would then pick Davroe because it is used in salons so it seem far more genuine.
Related Facts Interviewee stated:
• Current spending on hair product – $80-100 every 3-4 weeks
• Salary – $60000
• Don’t care where she purchases products, most important factor is which way is more convenient but prefer at a place where professional advices can be seeked
• Word of Mouth is more important then advertisements when it comes to gaining awareness of a certain brand of products (She started using Pantene because of recommendations from a close friend)
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