LITTLE FALLS, N.J., Aug 30, 2006/ FW/ --- Last year the U.S. cosmetics and toiletries industry experienced the highest level of growth in five years, indicating renewed vigor in an industry that had been lagging since 2001.

Consumers are gravitating toward premium products, especially those with anti- aging properties. These trends likely signal a reversal of fortune for the industry's biggest players, according to a recently published market study by Kline & Company.

"Innovation has captured increased interest in categories that had been flat or declining for almost a decade," says Carrie Mellage, industry manager for the Consumer Products practice of Kline's Research division.

"Products with a new twist, like Jergens Natural Glow, show how innovation can turn a category around. It appears the industry has reached the tipping point and is back to business as usual," Mellage added.

Mellage points to a focus on mega-brands as another strategy that has generated interest and excitement as some marketers have extended the equity of their most successful brands into new product categories. In 2005, Dove launched a line of hair styling products, while Axe successfully added shower gel to its product portfolio.

The line between premium and mass-market brands continues to blur. The addition of anti-aging properties has increased the appeal of many products to baby boomers, and mass-market brands are offering added value and upscale packaging, moving those products into a premium-pricing category and pushing sales numbers upward.

According to Kline's study, COSMETICS & TOILETRIES USA 2005, the fastest- growing categories in 2005 included lip balms, deodorants and antiperspirants, manual toothbrushes, and men's skin care products.

These categories benefited from product enhancements such as anti-wrinkle and firming formulations for lip balms and product innovations such as improved toothbrush design. Other categories like hair styling products and facial treatments will also continue to grow over the next five years as they benefit from innovations and technological advances, especially for anti-aging features.

Gender-specific brands targeting the male consumer have also boosted growth in some categories. Meanwhile organic or "natural" products are becoming increasingly popular and are seeing wider distribution as this trend escalates.

To capitalize on the effects of these trends, companies are jostling for market position using a variety of strategies.

L'Oreal has stated its intentions to grow the company through further acquisitions, while Unilever is focusing on core businesses and divesting smaller brands. Kao is the fastest growing of the major companies, leading the field with growth of more than 15% in 2005, largely due to product innovations.

"A shift toward premium and gender-specific products has marketers rethinking product offerings and brand strategies," says Susan Babinsky, senior vice president and head of Kline's Consumer Products consulting practice.

“ It's prompted a move towards innovation and meaningful product launches that are capturing consumer interest. It's innovation that's really going to determine the industry leaders over the next five years,” Babinsky continued.

COSMETICS & TOILETRIES USA 2005 is the latest edition of the annual comprehensive market analysis published by Kline since 1963. It provides detailed data and insights on company and brand sales, retail channels, product trends, new product activity, and advertising expenditures, including five-year sales forecasts.

The study is now part of Kline's GLOBAL COSMETICS AND TOILETRIES program, which presents sales data in more than 350 product category and 250 company profiles for 16 countries in Asia, Europe, Latin America, and North America.

For more information on this study, go to www.klinegroup.com/cia1.htm