After 74 years in business, Cetaphil is reformulating some of its best-selling products for the first time, to better align with the clean and sensitive skin movements.
The products include the Gentle Skin Cleanser, Daily Facial Cleanser, Moisturizing Lotion and Advanced Relief Lotion. All are now free of parabens, sulfates, mineral oil and animal-origin ingredients. Through consumer research, Cetaphil found that 70% of Americans self-diagnose as having sensitive skin, and claim symptoms like dryness, irritation, roughness and tightness. Cetaphil wants to become the go-to brand for that large consumer base, as does every other brand that has jumped on the sensitive-skin bandwagon. Cetaphil has gained a renewed popularity on social media since 2020, due to its mass distribution, accessible price points (Cetaphil products are less than $17) and the rise of “DermTok.”
“We’re passionate about innovation and relaunching the [traditional] products, but [we’re] doing it carefully,” said June Risser, vp and gm of the consumer business unit at Galderma, Cetaphl’s parent company. “But also, by bringing in new products, we’re expanding our consumer base with younger consumers and locking in our core millennials who know and love us.”
Galderma has its motives for continuing to invest in the relevance and innovation of Cetaphil. At the end of August, Bloomberg reported that Galderma was weighing an initial public offering for its skin-care business, which includes Cetaphil, Proactive and Differin. The spinoff could value the division at $17.7 billion. Cetaphil declined to comment. Similarly, THG announced on Sept. 16 that it will spin off its beauty division on the London stock market in 2022. It stated that the move would increase value for shareholders.
David Ethridge, PwC U.S. IPO services leader, said there could be multiple motivations behind a spinoff or corporate carveout. They include taking advantage of low-interest rates, seeing a tax incentive or helping a promising business unit grow under a dedicated management team. Notably, the public beauty sector has recovered well since the initial Covid-19 sales and stock slump. Companies including Bath & Body Works and The Estée Lauder Companies showed record growth in their most recent August earnings.
“Companies today are looking at the market overall, and they’re saying, ‘Wow, these [public] valuations are strong.’ And if they’re going to send some part of their overall business off on its own, this is a perfect time for them to do it,” Ethridge said. “One thing that’s true is that whatever a company compares themselves to, they feel they can competitively tell a story that’s unique but also familiar enough that investors want to own it.”
Risser declined to share Cetaphil sales but said they’re growing above the overall growth of the mass skin-care category. What also looks to fuel Cetaphil’s growth is the launch of 16 new products within 2021, which expand its total portfolio to 59 products. Some of the new product launches include SPFs, acne products and a Healthy Radiance collection, all designed for sensitive skin. According to the Piper Sandler annual teenage consumer survey from fall 2020, Cetaphil ranks as the No. 3 most popular skin-care brand behind CeraVe and Neutrogena. It moved up from the No. 4 position it held in 2019.
“We hadn’t offered [these types of products] before; a lot of our products are about other areas of a [skin-care] routine, like cleansing,” said Risser. “Now we have more leave-on products like serums and day creams that give consumers more choice when they’re looking for products for sensitive skin.”
Risser said Cetaphil is taking a digital and social-first approach to brand awareness,. That includes hosting an Instagram live event in August with dermatologist Dr. Tiffany Libby centered around sun care education. Since 2015, Cetaphil has invested in B2C digital marketing through videos and both above- and below-the-line marketing. In the fourth quarter of 2020, Cetaphil launched its first TikTok influencer program, tapping 23 people to spotlight its cleansers. But traditional sampling through dermatology offices will also occur, alongside offering a manufacturer’s coupon to patients in derm offices. Risser said Cetaphil will invest more time producing videos for its owned TikTok account by the end of this year, which it has yet to do.