The premium segment remains the growth engine of the global beauty industry; it is forecast to generate one third of the US$63 billion absolute global value gain over the 2016–2021 period. Future growth will be driven by a range of interconnected consumer megatrends, such as premiumisation, healthy living and digitalisation.
International players and heritage brands face increasing competition from local companies, alternative business concepts and start-ups. However, these challenging factors also fuel all strategic directions of major companies, including frequent acquisitions, research partnerships and more aggressive internal developments. This white paper presents the current industry landscape, highlighting the top 30 beauty and personal care companies and what they are doing to maintain or improve their position on the leaderboard.
The top 30 global beauty and personal care companies, 2013-2016, considered in the order of Retail Value are:
L’Oréal Groupe, Procter & Gamble Co, Unilever Group, Colgate-Palmolive Co, Coty Inc, Estée Lauder Cos Inc, Johnson & Johnson Inc, Beiersdorf AG, Shiseido Co Ltd, Kao Corp, Avon Products Inc, Henkel AG & Co KGaA, LVMH Moët Hennessy Louis Vuitton AS, AmorePacific Corp, GlaxoSmithKline Plc, Natura Cosméticos AS, Mary Kay Inc, Revlon Inc, LG Household & Health Care Ltd, L Brands Inc, Chanel AS, Botica Comercial Farmacêutica Ltda, Edgewell Personal Care Brands LLC, Kosé Corp, Amway Corp, Puig SL, Clarins AS, Reckitt Benckiser Group Plc (RB), Yves Rocher AS, Oriflame Cosmetics AS, e Pierre Fabre SA, Laboratoires
(Source: Euromonitor International)
KEY TRENDS AND TAKEAWAYS -What companies are gaining market share and why? – Top five companies’ share of the beauty market
While the global beauty industry is showing a moderate level of consolidation across all regions, the top five companies combined command 30–45% value share; there is regional diversity in the competitive landscape.
North and Latin America are the most highly consolidated regions, since they are domestic or primary target markets for the largest global industry players, such as Procter & Gamble, Johnson & Johnson, Estée Lauder, L’Oréal and Unilever. These companies focussed on scaling their core businesses and outgrowing the competition through acquisition. For example, Estée Lauder’s recent additions served as the main contributor to their revenue growth, complementing operations in fast-growing market segments and providing access to more extensive retail channels. These additions complemented its operations in fast-growing market segments and provided access to more extensive retail channels.
Expanding brands stay ahead Competition is rife, especially in the middle of the ranking table; Coty’s newly established fifth place might be short-lived, with fast-growing Estée Lauder narrowly behind. Although Estée Lauder’s growth has also been boosted by a series of attainments, the brands it has incorporated are smaller and significantly more dynamic than Coty’s newly enlarged brand stable.
Beiersdorf has been closing the gap on Johnson & Johnson with consistently faster growth in recent years, fuelled by a stronger innovation pipeline of its heritage labels but its aversion to acquisitions holds it back from making the jump ahead in the global ranking.
BEAUTY AND PERSONAL CARE INDUSTRY PERFORMANCE
Premium beauty continues to outperform the mass segment and total beauty and personal care at nearly 6% value growth. Greater uptake and trading up are boosting the segment, especially in Eastern Europe, the US and China. Over 2016–2021, a third of the global US$16 billion in absolute gain is forecast to come from premium beauty, with the US and China contributing 55%.
North America and Asia boost the Beauty and Personal Care Industry North America is projected to contribute 25% of the global absolute gains in premium BPC between 2016–2021. Colour cosmetics, followed by skincare will be the key growth driver powered by a rising per capita expenditure, providing room for expansion with high-value brands, specially in the Asia Pacific region.
Skin care dominates the beauty and personal care market
Skin care leads major markets due to increased demand for premium products. The healthy living megatrend positively impacts the category, as consumers seek preventative measures to maintain healthy skin. More are willing to spend on high-quality solutions, thus driving premiumisation. Skin care is forecast to deliver 32% of the industry’s absolute gains over 2016–2021, led by Asia Pacific.
Preventative categories, notably facial moisturisers and masks, are set to be growth drivers. Consumers understand the benefits of maintaining hydrated, nourished and deeply clean skin to avoid future issues, and these categories cater to these demands. Meanwhile, anti-agers are shifting from the ageing “stigma” to skin renewal with a focus on preserving healthy skin whatever the age.
In addition to local players, the rapid rise of new beauty concepts and alternative distribution models have been eroding shares of the major industry players. With easy access to high-tech solutions to take products to market, there has been an eruption of new brands, products and concepts competing for consumers’ attention and wallets.
Integration of large-scale new assets
The incorporation of new assets is proving to be a significant challenge for Coty, as sluggish growth is reflected in its recent financial figures. Although the company reported a 65% increase in a nine-month revenue excluding the positive contribution from the acquisitions of ghd., Younique and seven months of Brazil attainment, the enlarged company’s net revenue declined 6% on a constant currency basis.
Coty has gained access to new markets, customers and technology, but many of its new, iconic brands struggle for growth. In a call with investors, the company maintained its forecast that it would save on costs as it works new brands into its operations, but stressed that the efforts would not be felt until the second half of FY2018.
Major beauty players’ 2016 retail sales performance widely fluctuated around the industry growth line of 4.8% due to a wave of intense M&A activities in the year. Through large-scale acquisition, established brands have enhanced operations in their core categories. However, many still position only modest growth when excluding the impact of integration, especially for new assets that show flat to negative performance. L’Oréal, Estée Lauder and Unilever all made smaller-scale purchases of fast-growing, niche labels such as IT Cosmetics, BECCA, Too Faced and Dollar Shave Club, adding strong development to their portfolio of more sluggish mainstream heritage brands.
All main beauty companies have been building stronger, aligned portfolios via acquisition and innovations, as premium segments have been the key growth engines in the industry in recent years. Competition between L’Oréal and Estée Lauder has strengthened for the global top position in premium beauty. Both have purchased share via niche, well-performing labels as well as invested heavily in digital innovations in expanding the consumer base for their heritage premium brands.
The shift towards premiumisation
Premiumisation no longer refers only to a higher price tag. Added experience, unique ingredients and formulations, sustainability credentials and ethical values all contribute to higher quality perceptions. Technology is at the forefront of this behavioural shift, with devices, digital platforms and science evolution facilitating consumer awareness, health tracking and vetting brand and ingredient authenticity.
Premiumisation and a focus on healthy living have resulted in skin care greatly impacting the beauty industry. Consumer are more willing to spend on high-quality skin care solution and tap into the luxury market. Additionally, updated messaging and branding to address a spectrum of consumer needs helped eliminate skin care stigmas.
The move towards more expensive products is pushing mass brands in the premium direction as more consumers seek the quality and results associated with high priced formulations. While global mass colour cosmetics and skin care remain stronger than the premium segment, predicted to add US$6 billion and US$12 billion in absolute gains, respectively, the key regions of North America and Western Europe reveal a healthier outlook for the more expensive segment.
Smaller brands increasing competition
A flux of mergers and acquisitions by larger, heritage brands has resulted in the expansion of the premium beauty space. Additionally, with the emergence of new brands, products and concepts, the battle for consumers’ attention and dollars has been more difficult. Established and emerging market companies must continue to refine strategy and innovate to ensure they are appealing to changing consumer interests and that they are able to stay ahead in an ultra-competitive marketplace.