One of the most remarkable trends in the beauty and skincare marketplace over the past decade is the trend toward natural skincare products. In this article, we are going to explore a recent study entitled “Facial Skincare and Anti-Aging US 2016,” by Mintel, a leading market-research firm, and the impact of the survey results on the future of the beauty and skincare segment and explore some of the largest publicly traded companies in the beauty and skincare market.
For investors looking to capitalize on the beauty/skincare trend and the generational shifts between Baby Boomers and Millennials, it may be helpful to understand the size (based on 2016 sales figures) for some of the largest international beauty and skin care companies. L’Oréal is the largest company with yearly sales of approximately $27.6 billion, Unilever (LON:ULVR) is second at $22.3 billion, followed by Procter & Gamble (NYSE:PG) at $18 billion. After P&G, Estée Lauder (NYSE:EL)) and Colgate Palmolive (CL) round out the top five companies with sales of $11.3 billion and $10.7 billion, respectively.
It’s not just affluent customers in the U.S. that are driving this segment, skin care products represent about 40% of the Canadian skin care market, which is seeing extraordinary growth. According to a recent report by Euromonitor International, “skin care, not colour cosmetics is expected to post the highest retail value sales and growth over the next five years – an estimated CAD2.6 billion by 2020 – while other personal care markets such as the US, UK and Germany will see color cosmetics grow faster than skin care until 2020.”
So what’s driving this growth globally? Natural is one of the biggest trends in skincare. According to the Mintel report, one in seven (14 percent) consumers agree that pollution impacts the appearance of their skin. Factors such as hydration (44 percent) and diet (36 percent) impact skin’s appearance more than using skincare products (26 percent). Another 38 percent agree that stress impacts the appearance of their skin, and as such, 30 percent of consumers look for anti-aging products that highlight anti-stress claims.
“We have seen an unmistakable trend of customers asking for “homemade soaps crafted the old-fashioned way, using organic and high quality natural essential oils, herbs and botanicals,” says Sujoy Bhattacharya, Founder and CEO of Falls River Soap Company in Chagrin Falls, Ohio, specializing in handmade soaps for sale, “people are increasingly looking for skincare products with ingredients they can pronounce, things they might find in a botanical garden or health store rather than a laboratory.”
Another related trend shows the intersection between food and beauty in the skincare segment, consumers are most likely to be using or interested in using products with vitamin C (85 percent), fruit based ingredients (78 percent), oatmeal (78 percent) and honey (76 percent). 72 percent of consumers use or are interested in using products featuring probiotics. There is an increasing blurring of the lines between different product categories, as moisturizers now increasingly integrate anti-aging properties, sun protection now highlights its moisturizing properties. While anti-aging is still the dominant segment in the skincare category, it saw sales decrease 6.3 percent 2014-15. Further, 21 percent of consumers do not use and are not interested in using anti-aging products compared to 18 percent of consumers who use them.
While lip balm saw sales increase 55 percent from 2010-14, the segment has faltered lately, in part, to competition from cosmetics (e.g., tints, gloss, lipstick) with moisturizing and protective qualities cutting into sales. The cleanser segment is currently the fastest growing in the market, increasing sales 4.6 percent 2014-15 to reach $1.8 billion and anti-aging products are losing market share to moisturizers.
For those seeking the “next big thing” in skincare, Mintel pointed the spotlight on no-rinse cleansers. Only 8 percent of adults currently use cleansing waters (also referred to as micellar waters), this increases to 14 percent of consumers age 18-34. Consumers view cleansing waters favorably, with many agreeing that they are refreshing (45 percent), safe for sensitive skin (43 percent) and gentler (39 percent) than rinse-off cleansers. However, there are some notable barriers to usage: nearly half (46 percent) of consumers perceive these products as more expensive than rinse-off cleansers and 28 percent agree they have confusing usage instructions. These are not insurmountable marketing obstacles for this segment.
Mintel reported the overall facial skincare and anti-aging market (comprising facial cleansers, facial wipes, facial scrubs, facial toners/astringents, liquid make-up removers, cleansing waters, lip balm, facial moisturizers, eye cream/gels, acne treatment products, anti-aging treatments, facial masks/peels, facial serums, BB or CC creams, and facial oils) experienced a 1.4 percent decrease in sales in 2015, falling to $6.6 billion, with limited penetration among Baby Boomers affecting the entire category.
“Baby boomers do remain a very important market segment for our products,” notes Bhattacharya, “while they have the interest and resources for more aggressive anti-aging solutions, there is a strong interest in skincare maintenance with simple down-to-earth ingredients.”
Author Bio: V. David Ben Melech is a former attorney with over 15 years of experience providing a wide range of legal and strategic advisory services to Fortune 500 companies and financial institutions on a broad variety of regulatory, enforcement, compliance, risk management and transactional matters.