1 Targeting Consumers in Today’s Digital EraJamie Mills Analyst Canadean 9th November 2016 Hi everyone. I’m Jamie Mills, and today I’ll be presenting to you on Targeting Consumers in Today’s Digital Era Just to briefly introduce myself I’m a consumer insight analyst within Canadean’s non-food and drink FMCG division specializing in the beauty and personal care categories.

2 Agenda About Canadean The global digital landscapeTrends and innovations in digital beauty Where next for digital beauty? So the agenda for today is as follows: First I’ll talk a little bit about our brand and what we do, we’ll then move on to an overview of the global digital landscape, trends an innovations in digital beauty, what next for innovation in this space, and then finally a summary and conclusion at the end.

3 About Canadean Unique, robust dataTrusted industry analysis and insight Innovative integration and collaboration So to start off with, a little bit about our brand. For those of you who may be unfamiliar with Canadean, we are an business intelligence firm specializing in consumer markets. Our three core strengths as you can see on this slide are unique datasets which offer extensive global coverage; industry analysis and insights from the acquisition of Datamonitor Consumer; alongside innovative integration and collaboration.

4 About Canadean’s primary consumer researchIn 2016, we surveyed over 50,000 respondents in 51 countries worldwide At Canadean we conduct a great deal of primary research in-house in the form of our consumer surveys and this slide showcases our 2016 coverage. We conduct three surveys every year and in this year alone we surveyed over 50,000 respondents across 51 countries globally. 4

5 About Canadean’s TrendSights frameworkAnother important part of our research and analysis is our TrendSights framework which we have designed to highlight the trends shaping consumer behavior and innovation across the FMCG space. It is comprised of eight over arching mega trends highlighted on the left hand side which are then broken down into a further 63 trends represented by the stops on this metro style map. 5

6 About Canadean’s TrendSights frameworkToday’s presentation is going to focus on the smart and connected megatrend and its impact on the beauty landscape. This is the pink line you can see running through the middle of the map. 6

7 Today’s consumers live in a highly connected, technologically advanced societyThe digital landscape is being driven by two key factors. The first is connectivity. Digital platforms, the internet, and social media have resulted in a more informed, more connected consumers who are able to connect with people, products, and information at the click of a button. In turn this has become coupled with advancements in technology. The boom in smartphones and portables such as tablets and notebooks, and growing accessibility of this consumer technology has disrupted how consumers live their everyday lives. From checking reviews online, to snapchatting our friends, or tracking our activity with a wearable, digital lifestyles and consumption have had a significant impact on our daily lives and in turn, how consumers interact with and consume beauty brands and products.

8 find being active on social media importantMillennials show the greatest engagement with the digital environment 64% find being active on social media important Of course we can’t talk about the digital landscape without mentioning millennials, or year olds. Millennials are digital natives. Having grown up with technology, they are likely to be most engaged with the digital environment and on this slide we have some stats around this. They are the age group most likely to be engaged with social networking, with 64% believing being active on social media to be important.

9 Millennials show the greatest engagement with the digital environment22% purchase most of their beauty/ grooming products online 64% find being active on social media important They are the age group most likely to be engaged with social networking, with 64% believing being active on social media to be important.

10 Millennials show the greatest engagement with the digital environment46% are highly influenced by how digitally advanced/ “smart” the product is when choosing beauty products 22% purchase most of their beauty/ grooming products online 64% find being active on social media important Finally, millennials are the most like of all age groups to be influenced by how digitally advanced or smart the product is when making their beauty and grooming product choices. This means that this segment is likely to be very receptive to new technologies and smart solutions within this sector. While this segment is not the only age group to which digital strategies are relevant, they are a key target when considering pursuing digital approaches within beauty innovation.

11 Hyper image-consciousnessConsumer preferences and behaviors are changing in response to this evolving landscape Hyper image-consciousness Community influence Tech-validation So in this next section we’ll be exploring the key consumer trends and innovations in response to this changing digital landscape. We’ll be exploring three key themes which are: hyper image consciousness where we’ll look at the impact of digital culture on consumer’s perception of appearance community influence – the influence of the online community on consumer purchasing decisions tech validation – the growing dependency of smart integrated technologies In the next few slides we’ll examine the key consumer behaviours towards these trends combined with examples of innovation from across both the Asia Pacific region and globally.

12 Hyper image-consciousnessConsumer preferences and behaviors are changing in response to this evolving landscape Hyper image-consciousness Community influence Tech-validation So the first theme we’ll be exploring is hyper-image consciousness.

13 Social media has created limitless, spontaneous, interactionsAsia Pacific: Consumers who post the following on social media once a week or more The explosion of social media has led to limitless social interactions. Consumers no longer need to be together physically and can tell or show their friends and the wider online community what they’re doing or how they’re feeling anytime, anywhere. On this slide we have a chart which shows the different activities consumers in Asia Pacific do on social media, at least once a week or more. We can see that updates on moods and activities are highest, followed by image based posts. Interestingly, the frequency in posting images such as selfies or group images is highest among year olds with almost 40% posting a selfie at least once a week, indicative of the high receptivity of this groups to these behaviors. The image-based nature of social media interactions, particularly of oneself, means consumers are more appearance conscious that ever before both on and offline. Top selfie countries millennials India 62% China 55% Indonesia 40% 37% of

15 Innovation implications: Photo ready beautyBareMinerals BarePro Performance Wear Powder Foundation Photo-ready matte finish with 12 hour long wear. Combined with vitamins and minerals to support healthy complexion. Banila Co Prime Primer Photo Layer Powder Designed to give the appearance of polished and flawless complexion. Absorbs moisture and conceals redness and imperfections So how can brands approach this. Well as consumers seek to look their best in images, cosmetics products which can deliver a flawless and appearance and contribute to this will appeal. Assisting in light reflection, illumination, as well as keeping the look natural through an “invisible” finish. So here we have some examples. This first is Banila Cos Prime Primer Photo Layer Powder: This finishing powder is designed to give a silky make-up finish, cover pores and fine lines, and absorb oil and moisture and therefore minimize shine. It’s available in two shades – one for in a natural peach shade and the other in a brightening pink shade. The second is BareMineral’s BarePro Performance wear foundation. This powder foundation is designed to deliver a long-lasting photo ready matte finish. It also provides skincare benefits through being formulated with vitamins and minerals which are clinically proven to improve skin clarity and reduce pore size and appearance.

16 Innovation implications: Real life “photo shop”W-Lab 3D Face Stick Designed as a non-invasive way to reduce the size of the face and enhance the structure of the face. A two product system featuring a highlighter and shading stick. Features active ingredients to moisturize and soothe irritation. As we touched upon earlier, advances in editing software such as selfie apps mean that consumers can drastically change their appearance. They can make their faces thinner, their eyes and lips bigger, make their cheekbones look higher, or even their legs look longer. This creates opportunities to translate these photoshop effects into real life resulting in the popularity of techniques such as contouring, strobing, highlighting, and non-touring, which have also been endorsed by many celebrities. One such example is W-Lab’s 3D face sticks which are positioned as a non-invasive method of reducing the size of the face and making it look more angular. The highlighter stick is designed to enhance the structure of the face and features pearl extract to brighten skin and aloe vera to moisturize. The shading stick is used to contour the cheek area and make the face look smaller. It features mung bean and heartleaf extracts to soothe irritated skin and add glow. The product is also positioned to assist in achieving the perfect selfie.

17 Innovation implications: Filter-inspiredKoh Gen Do Maifanshi Pressed Powder Designed to illuminate the skin and mimic a soft focus filter. Reflects light from multiple angles to give a polished look. Sephora Eyeshadow Filter Palette Inspired by editing software commonplace on social media. Available in two “filters” – Sunbleached and Overcast Brands can take inspiration from the photo filters found on social media platforms and apps to allow consumers to transfer the perfection of social media selfies into real life. The appeal of selfies and online filters is often due to the ability to control and enhance lighting, which in turn assists in creating a flawless and radiant appearance. Similarly this can also drive novelty and excitement among consumers as they are able to transfer their favorite filters into real life. Similarly this association takes advantage of consumer familiarity with filters and positive association of them on the appearance. Koh Gen Do Mafanshi Pressed Powder This is a pressed powder by Japanese brand Koh Gen Do which is designed to mimic the effect of a soft focus filter on the skin while adding a natural brightness and illuminate the skin. The unique milling and cut of the powder is claimed to deliver the appearance of naturally flawless skin through reflecting light and providing coverage on pores and lines. Sephora Eyeshadown Filter Palette Available in two different varieties (Sunbleached filter and Overcast filter) this make-up palette is inspired by the editing software that is now commonplace on many social media websites such as Instagram.

18 Innovation implications: Make it for millennialsThe Estee Edit Specifically targets millennials behaviors through its “camera-ready” instant benefit solutions. Focuses on consumer individuality with the #beautyattitudes campaign Uses Kendall Jenner as ambassador for the brand. Capitalizing on consumers in this demographic being the most active in taking selfies, posting on social media, and therefore most likely to find photo-ready solutions appealing, Estee Lauder launched the Estee Edit earlier this year. The range features a number of cosmetic offerings including flash photo powder which features a blue tint to instantly brighten the skin as well as flash photo gloss which feature blue micro pearls to help white the users smile. The brand seeks to resonate with this younger audience by identifying with their desire to be unique with the slogan “a declaration of who you are and who you make yourself up to be” as well as an accompanying twitter campaign using the hashtag beauty attitudes to encourage interaction online. This combined with celebrity and social media sensation Kendall Jenner as ambassador for the brand helps to clearly define the positioning of the product as designed for millennials and their digital engagement.

19 Hyper image-consciousnessConsumer preferences and behaviors are changing in response to this evolving landscape Hyper image-consciousness Community influence Tech-validation The next theme we’re going to look at is the influence of the digital community on beauty innovation.

20 57% Consumers value the opinions of the online communityof consumers in Asia Pacific agree they are more likely to trust blogger/ user reviews over brand claims The online community represents an important resource which consumers can use to make purchasing decision evident in that almost 60% of consumers in Asia Pacific agree that they are more likely to trust blogger or user reviews over brand claims. While reviews aren’t necessarily new, the astronomical popularity of beauty bloggers and vloggers over the last few years has created new influencers for the online community. These individuals appeal to consumers desire for real people giving impartial and candid reviews of products, therefore deemed more trustworthy than claims from the brand itself. Similarly, beauty bloggers don’t just give product reviews, they also give advice such as how best to look after the appearance or how to achieve new looks and styles. Essentially bloggers make the complicated routines and styles, perceived to be available only to models or celebrities, easily accessible to consumers at home. They therefore create a highly important avenue for both reaching consumers, enhancing trust in brands and products, as well as appealing through their real life celebrity statuses. Millennial trust in beauty bloggers India 79% China 68% South Korea 65% Daeyong – 432k youtube followers Yeon du kong – 500k followers youtube Zoella – over 11m followers youtube

21 Asia Pacific: Consumers who do the following activities onlineConsumers are seeking to interact with the beauty brands via the online landscape Asia Pacific: Consumers who do the following activities online Alongside the influence of bloggers, the online community also provides a forum for brand to consumer interaction. As we can see on this chart, the majority of consumers use the online environment as a platform for information. Nevertheless, the second most popular activity is to follow brand news and updates. This suggests that there is an opportunity to better utilize the online environment for greater brand consumer dialogue which can both enhance the authenticity and trust in the brand as well as get a more accurate idea of consumer needs and wants.

22 Innovation implications: Blogger affiliationPony Effect An ongoing collaboration, Memebox has joined forces with South Korean vlogger and make-up artist, Pony to create a range of cosmetics. Designed to allow users to put her beauty tips and tricks into practice Capitalizes on the blogger’s Youtube following and trust credentials. So how can brands capitalize on the new online community to enhance their products? Well blogger endorsement is one such approach. Memebox teamed up with Pony, a popular celebrity in South Korea, to launch a range of cosmetics capitalizing on her popularity. Currently, she has around 1.8m youtube followers alone. The range has proved highly successful, with their initial eyeshadow palette being reported to have sold 20,000 units within the first 45 mins of availability and highlights the success of creating cosmetic lines which incorporate the influence and expertise of trusted vloggers and online influencers. Similarly this also allows followers to put beauty tips and suggestions from Pony into practice.

23 Innovation implications: Using online platforms to co-create with consumersGlossier Milky Jelly A facewash designed in collaboration with the brand’s online community. Users of the brand’s blog were asked what their dream facewash was from the type of texture and fragrance through to product pricing. On this slide we have an example of how brands can utilize the online platform to enhance dialogue with the consumer and create more meaningful interactions. Glossier asked their online blog community what their ideal facewash was, from texture, to fragrance, to ingredients, and pricing. They received almost 400 comments and inputted them into their new product development process, creating the Milky Jelly Cleanser. The facewash is designed to condition the skin and features a creamy gel formula with key ingredients including rosewater and provitamin B 5. This product highlights how brands can effectively engage their online communities to form a more interactive, two way relationship. Similarly it also showcases how customers can input into the new product development process and strengthen the relevance and overall connection customers have with the product, particularly as co-creation is perceived favorably. https://intothegloss.com/2015/01/emily-weiss-glossier-cleanser/

24 Hyper image-consciousnessConsumer preferences and behaviors are changing in response to this evolving landscape Hyper image-consciousness Community influence Tech-validation The final theme we’re going to look at is Tech Validation

25 customized or personalizedConsumers want products which are customized to their needs 44% of consumers in Asia Pacific have a more favorable perception of products which are customized or personalized 64% find products they have helped to create appealing Given that today’s consumers are under increasing pressure to look their best, products which are specifically created to meet their individual beauty profiles are often perceived as the best way of reaching their beauty goals. This is evident in that 44% of consumers in Asia Pacific have a more favorable perception of products which are customized or personalized, while a further 64% find products they have helped to create appealing. Aside from well established approaches such as through formulation, harnessing digitized and smart solutions is another way to approach customization in beauty. While many types of functional electronic beauty tools are already well-established on the market such as facial cleansing brushes, the opportunity lies in taking it one step further using a combination of diagnostic tools, smartphone technologies, and devices to deliver a truly unique made-for-me solution. This has the potential to deliver on superior efficacy through “tech validation” while also generating consumer excitement and promoting long term appearance related health.

26 High potential exists for digital tools in beautyAsia Pacific: “Do you use digital tools such as smartphone apps or wearables, to monitor/manage the following?”, top five Currently use Product prices/ promotions Exercise/ fitness Your weight Manage spending habits The usage of “smart” tools becoming increasingly integrated into day to day life. Our research shows that at present they are largely related to general health, fitness, and managing personal finances as we can see on this slide. Food/ drink consumption

27 Don’t currently use, but would consider using in futureHigh potential exists for digital tools in beauty Asia Pacific: “Do you use digital tools such as smartphone apps or wearables, to monitor/manage the following?”, top five Don’t currently use, but would consider using in future Currently use Product prices/ promotions Sleep quality/ quantity Exercise/ fitness Dental/ oral hygiene Your weight Sun exposure Manage spending habits However, if we look at the issues consumers are most likely to consider using these tools for in future, we can see that beauty and personal care issues rank within the top five areas of interest. This suggests that while usage is currently in its infancy, there is remarkable potential for tech integrated solutions which can address beauty and personal care needs among consumers. In particular, oral hygiene, sun exposure, and skincare offer the highest areas of interest for today’s consumers, offering brands the opportunity to deliver more customized solutions to best meet these needs. Skin conditions Cleanliness of surroundings Food/ drink consumption

28 Innovation implications: Wearable techMy UV Patch A “stretchable” electronic which changes color to show levels of sun exposure. Smartphone connected, it alerts the user as to when to apply more SPF. MAPO A “connected” beauty mask which measures skin moisture through a one minute skin check up. It is connected to companion app, “La Clinique Digitale”. MAPO Underlying damage - You think you have no skin moisture issue, but your skin is daily exposed to various kinds of stress and external aggressions, that make it more fragile and subject to dehydration. MAPO® will give you a precise and sound measure and will reinforce the action of your skincare cream thanks to its TREAT function. You wonder if your skincare cream is effective enough for your skin. MAPO® and its community companion App La Clinique Digitale™ will help you find the right solution. L’Oreal’s My Uv Patch Describe by the brand as a stretchable electronic, it sticks to any area of skin and contains photosensitive dyes which change color when exposed to UV to show levels of sun exposure. It is connected to a companion smartphone app which allows the user to scan the patch, read the levels of UV they have been exposed to, and tells the user whether to apply more SPF or not. Essentially it ensures that the user can monitor how safe they are in the sun, in real time.

29 Innovation implications: Diagnostic toolsWAYSKIN A smart device which is designed to improve user’s skincare regimen and track daily skin health. Users can measure skin hydration in real time and levels of UV and environmental factors they are exposed to. The WAYSKIN app delivers personalized advice such as a water intake guide and personalized skincare tips dependent on the tool’s skin results.

30 Innovation implications: Customized formulasRomy Paris Figure A home “beauty assistant” which uses capsule technology to target skin issues such as pollution, lack of sleep, cold weather, and signs of aging. The connected smartphone app measures real-time data e.g. sleep patterns and air pollution levels so users can respond to their skin needs on a daily basis. The machine itself allows users to create single serve with different capsule combinations dependent on their needs at a specific point in the day.

31 Looking ahead: Where next for digital beauty?3D printed beauty Combining customization and emerging 3D technologies for production and in the home. So what for the future of digital beauty? Well one area to explore could be 3D printed beauty products. As consumers seek out more customized beauty solutions this could be a unique way by which to create personalized, made to measure products while also revolutionizing beauty manufacturing. This also creates opportunities for at-home 3D printing, a concept our research has found to be highly appealing in this region and again taps into favorable perceptions of products which consumers can create themselves or co-create alongside a brand. With concepts already emerging, such as the Mink Make-up printer – a concept printer designed to create color cosmetics based upon colors from photographs taken on smartphone, this type of innovation could be highly disruptive for the beauty industry upon reaching the mainstream.

32 Targeting tech-stressLooking ahead: Where next for digital beauty? 3D printed beauty Targeting tech-stress Combining customization and emerging 3D technologies for production and in the home. Appearance related damage caused by “tech-stress” creates new concerns to target. The second potential implication for digital beauty is targeting tech stress. The growing dependency on technology and its seamless integration into everyday life could create new opportunities to target the stress of digital usage on the appearance. For example, research suggests that bluelight which emanates from computer, mobile, or TV screens could induce oxidative stress in the skin and beauty ingredients are emerging which address the potential damage caused by this.

33 Targeting tech-stressLooking ahead: Where next for digital beauty? 3D printed beauty Targeting tech-stress Digital “detox” Combining customization and emerging 3D technologies for production and in the home. Appearance related damage caused by “tech-stress” creates new concerns to target. Consumers may eschew or limit usage of new technology and associated behaviors. Finally, as technology becomes part and parcel of everyday life, the concept of Digital Detoxes, where consumers disconnect from social media and smart technologies could become more prevalent. Technology addiction is something which is becoming increasingly recognized on an individual and national scale. In China there are reportedly around 300 technology addiction treatment centres for young people, while similar centers are also being set up in Singapore. In turn this could result in greater limiting of tech usage and a segment of the population being unreceptive to connected solutions utilizing digital cues, an important consideration for brands in future who are engaging with the digital or digitally inspired beauty strategies.

34 Presenter – Jamie MillsThank you! Presenter – Jamie Mills Follow me on Thank you for listening, if you have any questions I’ll be around for a few minutes after the presentation so please do feel free to come and find me. Phone: (+44)