LIVE ISSUE/BOOTS: Boots’ own-labels set to take on cosmetics giants - The retailer wants to be a global cosmetics brand as well, Richard Cook writes

L’Oreal we know all about; Nivea we can understand. These are big-name brand owners that have spent fortunes over the years carving out a distinct, upscale brand personality. The result is that they are now global marques available in stores worldwide. We think we know about Boots as well. We think we understand its solid, no-nonsense retail values.

L’Oreal we know all about; Nivea we can understand. These are

big-name brand owners that have spent fortunes over the years carving

out a distinct, upscale brand personality. The result is that they are

now global marques available in stores worldwide. We think we know about

Boots as well. We think we understand its solid, no-nonsense retail


We may just have to think again.

L’Oreal and Nivea have seduced us over the years with the help of

celebrity endorsements and beautifully shot commercials, so that when we

consider their ranges of fancy anti-ageing skin creams and the like, we

think of them as little short of passports to an entirely better


The contrast is sharpest if we compare the global brands with something

like the E45 range of dermatological creams. If we have come across

these at all, it’s probably because a pharmacist or doctor has

recommended them to us.

They are in fact wonderfully efficacious products and have undergone the

most rigorous clinical tests to prove it. But Cindy Crawford is unlikely

to start gushing about their benefits and, as a result, we tend to tuck

them behind closed doors in the back of the medicine cabinet.

E45 is, in fact, a brand owned by Boots Healthcare International. A

hugely successful niche product, it doesn’t have anything like the

international profile of a L’Oreal or Nivea range, nor does it perhaps

have that kind of potential.

But then Boots is predominantly a retail business - it sold its

pharmaceutical production arm some years ago when it became clear that

the drugs industry was moving towards consolidation by the big


As a retailer, Boots is heavily dependent on own-label merchandise.

According to the retail consultants, Corporate Intelligence, own-label

accounts for 46 per cent of sales of toiletries, while just a quarter of

these are sourced from external manufacturers.

So far, so understandable - Corporate Intelligence estimates that half

of all the food sold in British supermarkets will be own-label products

within the next five years, and the demise of branded good in the

toiletries market is on a similarly accelerated journey.

But Boots wants to be both a retailer and an international brand


And it thinks it now has the means to achieve both these goals. The

company has already started briefing a confidential list of

international agency networks - McCann-Erickson, DMB&B, Young & Rubicam

are among the favourites - about a major piece of business (Campaign,

last week).

It wants to develop the so-called cosmaceutical market - products that

fall somewhere between the clinical E45 and the lavish L’Oreal and Nivea

skincare ranges - into brands of truly international stature.

The initiative will be based on the two large acquisitions the company

made in mainland Europe last year, of Germany’s leading medical skincare

company, Kurt Herman, and of Lutsia, a similarly positioned French

anti-ageing and acne prevention range.

’Products like L’Oreal and Nivea make pseudo-scientific claims about

their products, but actually sell because the ads and the packaging look

great,’ says a director of the specialist shop, the Healthcare Agency,

’but now Boots wants to market brands that have been subjected to tough

clinical tests in that same market, by repackaging them and spending

heavily on advertising.

’In my view it’s a mistake because all the dermatologists in Europe

don’t want to be seen recommending a product that everyone can see on

television. They might actually be throwing the baby out with the


It’s an ambitious challenge, but then Boots is especially well placed to

develop internationally. The figures make impressive reading: Boots the

Chemist has 1,301 stores in the UK and according to the retail

consultancy, Verdict Research, is expanding at the rate of 50 small

branches a year. A third of the UK adult population already shops in

these stores every week. Sixty per cent of the UK adult population shop

in Boots every month.

It owns the largest cosmetic, teenage cosmetic, suncare and vitamin

brands in the UK and is the largest retailer of cosmetics, fragrances,

skincare, dental, haircare and bath toiletries. Oh, and it accounts for

a quarter of the over-the-counter medicine market in this country. Sales

in the stores have improved from pounds 2.6 billion in 1993 to pounds

3.3 billion last year: while operating profits have risen at a faster

rate because operating margins have improved every year.

A little hubris then is perhaps almost to be expected, and it’s true

that the company has already successfully reinvented itself,

particularly in this country, not just as an own-label provider, but as

a brand owner.

’Own-label used to be quite straightforward in that you’d either have

value products plastered with the supermarket’s name and cheap

packaging, or else ’me-too’ offerings like Gold Roast for Gold Blend and

so on,’ Merry Baskin, head of account planning at Boots’ retail agency,

J. Walter Thompson, explains.

’But Boots has always been able to sell proper brands like E45,

Strepsils and Natural Collection, where the Boots name is written only

in small print. It gives it the enormous advantage of being able to play

properly in both the retail and manufacturing leagues,’ Baskin adds.

The strategy has already worked well in the UK, where Boots own-brand

products have become brands in their own right.

’Boots uses brands like No 17 as a sort of lighthouse to get young women

and teenagers to come into the stores - the sort of people who might not

otherwise be tempted,’ explains Mari Cortizo, an account planner on the

brand at St Luke’s.

’We can follow Frisky on tour around Britain and come up with giant

inflatable lips, or in the case of Natural Collection, a naked woman

dancing in a pool, because we are free to create youth brands. We are

not tied to the values that Boots as a company provides.’

Boots’ move into the billion-pound international skincare market is on a

different scale altogether, but the aims are similar enough. In 1996,

1,000 of Boots’ UK own-label lines were repackaged to help take them

upmarket, and the result was a 19 per cent increase in cosmetics


Now it only has to elbow aside L’Oreal and Nivea to do the same on the

biggest stage of all, the international market.

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