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Amidst a relatively subdued economic, political and social climate that has expressed itself in various forms and dimensions globally, the beauty industry defied the odds yet again in 2017 by recording close to 5% value growth, a slight improvement on the previous year. This positive business sentiment reinforces the high propensity for trading up in the industry at a time when surging global middle and upper middle classes are willing to invest in new-found luxury, emerging disruptive and digital players are luring in younger consumer cohorts and ageing populations are identifying beauty with new means to healthy ageing and a more youthful appearance.
A thriving premium segment was once again the standout story in 2017, outpacing its mass counterpart and the overall industry in terms of growth for a third consecutive year. With the exception of Eastern Europe and Middle East and Africa, all other regions marked an improvement in premium beauty growth compared to the previous year. While China and the US accelerated even further, the premium market proved challenging in France, Russia, South Korea and the Gulf countries. Skin care and colour cosmetics offer the most lucrative prospects within the premium space (7% and 9% growth in 2017, respectively), two categories where levels of disruption and innovation have been most pronounced.
Benefitting from further social media appeal, desire for self-expression and technologically-enabled make-over experiences, colour cosmetics outperformed all other categories globally (up by 7%, the highest on record over the past decade). The influx of newly emerging brands continues to inspire with community-driven, excitement-generating stories that have gone beyond just aesthetics and make-up artistry to include more purpose-driven concepts, such as ethnic inclusivity, environmental sustainability and cruelty-free labelling. The digital aspect of the category’s success will continue to be paramount, with many legacy brands, be it premium or mass, looking to reinvent through more digital story-telling, in-store experiences and a fast-fashion approach to innovation.
Another noteworthy boost to the premium colour cosmetics market in particular came from China, which had a hugely successful year in make-up (up by 50% for premium) and lipstick products specifically, with many luxury brands, such as Dior, YSL, Estée Lauder and MAC all enjoying high double-digit growth rates through further expansion of their online presence and increased penetration among younger consumers. Despite its much underdeveloped per-capita spend at present, China is set to replace Japan as the second largest colour cosmetics market after the US by 2022.
After a few years of subdued results, skin care came back into the spotlight in 2017, expanding by 6% in value, the highest increase since pre-recession years. A number of factors fuelled this, including the rising shift towards prevention and prioritisation of healthy skin maintenance in line with the pursuit of healthier lifestyles, which reflected in positive category growth for sun protection, cleansers, facial masks and facial moisturisers, as well as a softer pro-age and health-aligned narrative in anti-agers, which in turn doubled their premium sales growth to an impressive 10% globally.
This new ‘wellness’ positioning in skin care boosted further adoption levels among the young who are not concerned with anti-ageing properties as such, but more and more with prevention and health, as well as increased spending among the age-agnostic generation X and Baby Boomers, who are drawn to the more benefit-focused and result-driven claims over age-defined labelling of yesteryears. The greater convergence with health and wellness is also spurring innovation around microbiome-inspired product development, clean and pure formulations, skin protection features (eg air or digital pollution), and adjacent concepts, such as nutrition (ingestible wellness products), and mental wellbeing (eg benefits addressing sleep deprivation, stress, hormonal imbalance).
Aside from pure product evolution, skin care is now starting to embrace digital activation and social media penetration much akin to colour cosmetics, as well as similar levels of disruption from creative start-up brands that challenge in terms of story creation, experiences and novel formulations.
While South Korea will continue to be the hotbed for further K-beauty inspiration, local brand expansion and multinationals’ acquisition interest, total beauty sales in the country in 2017 were lacklustre at best (up by 0.9% value growth). Japan on the other hand benefited from more healthy domestic consumption, growth in Chinese tourists, following limits imposed on travel to Korea by the Chinese government, and mounting anticipation in the run up to the Olympics in 2020.
The macro context has been just one part of the story. A lot of the enduring hype surrounding K-Beauty is now in parallel existence with a new similarly influential Asian force, that of the Japanese beauty traditions and rituals. Much like the proclaimed ‘konmari’ home de-cluttering method in Marie Kondo’s tidying up manual, the search for simplicity and aspiration for perfection are finding their impact in beauty. The surge in popularity for Japanese brands comes on the back of their long-standing credibility in terms of efficacy, quality and aesthetics – concepts now spreading beyond China and other Asian markets to discover their new-found appeal among western consumers too.
Shiro, Decorté, Three Cosmetics, Tatcha and DHC are among some of the brands spreading their influence beyond their home market. Just like Korean beauty will continue to entice with its novelty, on-trend and buzzy image, the scope for embracing Japanese beauty concepts founded on more sustainable authenticity and heritage will be equally, if not more significant in the coming years.
With a steady pace of strong year-on-year expansion, the markets of India and Indonesia will be among the top 10 absolute growth contributors in the years to 2022. India is set to topple Germany, UK and France to become the fifth largest beauty market by 2022, while Indonesia will be among the top three contributors to actual revenues in skin care in the next five years, only surpassed by US and China. While much of the existing scope in both markets remains in the domain of the mass segment, further cemented by the GST reforms in India, increased middle class consumption will benefit brands that project more premium qualities, such as make up brand Lakmé in India and L’Oréal Paris in Skin care in Indonesia, both growing at double-digit rates in 2017, respectively.
The unprecedented growth of local brands like Himalaya, Patanjali and Emami in India, as well as Wardah in Indonesia, which are becoming increasingly visible in the global beauty rankings, will continue to reinforce the significant potential around the international commercialisation of traditional local concepts such as Ayurveda, herbal and plant-based ingredients in product formulations, and halal beauty, tipped to be the next hot industry topic for Muslim and non-Muslim consumers alike.