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Trends and Patterns in the Beauty and Personal Care Industry

Report Overview

In the U.S. alone, the beauty and personal care products market size was $81.1 billion in 2019 (“U.S. Beauty and Personal Care Products Market Through 2030,” n.d.). It has been estimated that it will witness a CAGR of 4.8% during the forecast period (2020-2030), to reach $128.7 billion in 2030. The Coronavirus pandemic has impacted nearly all industries, including the beauty and personal care industry. Due to the unexpected lockdown of offices, factories, and malls, the industry has witnessed weak sales in 2020 (“U.S. Beauty and Personal Care Products Market Through 2030,” n.d.). On a global scale, the supply chain of this industry was heavily affected as the supply of raw materials, which are required for the manufacturing of cosmetics and personal care products, was held up by delays or cancellations by suppliers from other countries (Thomas 2020).

This report will take an in-depth look at the beauty and personal care industry as a whole, analyzing various trends and patterns that have occurred historically, taking a closer look at L’Oréal as a case study, and analyzing trends in the industry caused by the shift in consumer behavior due to the Coronavirus pandemic.

Industry at a Glimpse

The first graphic that you will see provides an overview of the annual growth of the global cosmetics market from 2004-2020. The data published in the L’Oréal - Annual Report 2020, provides insight into the growth trend in the industry. In recent years, consumers have been spending higher levels of disposable income on cosmetics than they had in the past. Due to the pandemic, the growth rate between 2019 to 2020 plummeted, hitting a historical low of -8 percent (“Cosmetic Industry Growth,” n.d.). Interestingly, as evident in the bottom half of the dashboard, the U.S. cosmetic and beauty industry is projected to increase revenue from a -17.98 percent change to a 5.59 percent change in 2021 (Thomas 2020). It is projected that in the five years to 2025, industry revenue is expected to return to growth, increasing at an annualized rate of 3.1% to $45.2 billion As the industry returns to producing products after retrofitting facilities to aid against the Coronavirus pandemic, the industry is expected to return to growth (Thomas 2020). Despite these growth trends, industry revenue is not expected to surpass 2019 levels over the five years to 2025 (Thomas 2020).

Key Industry Players

This visualization provides a clear indication of the revenue of the leading ten beauty manufacturers worldwide in 2020. L’Oréal has the largest segment of the market share earning 33.4 billion dollars in revenue. The next highest earning beauty manufacturer is Unilever and Estée Lauder. The lower portion of the dashboard illustrates the compound annual growth rate of leading cosmetics companies between 2018 and 2021. The information obtained in this analysis, led to the further exploration of L’Oréal and an analysis on how the company has been able to experience continued growth despite drastic decrease in industry revenue and growth rate as a result of the Coronavirus pandemic.

Case Study: L’Oréal

Founded in 1909, the L’Oréal Group has become the largest cosmetics and beauty company in the world. In 2020, L’Oréal was the leading personal care brand in the world with a brand value that amounted to 29.47 billion U.S. dollars. As denoted above, Between 2018 to 2021 the company’s CAGR is expected to grow by eleven percent (cycles and Text, n.d.).

This statistical visualization depicts the consolidated sales of L’Oréal’s cosmetic branch worldwide from 2010 to 2020, by product division. L’Oréal’s global portfolio of brands is organized as four complementary divisions. Each one has a specific vision of beauty for its respective market: Professional Products, Consumer Products, L’Oréal Luxe, and Active Cosmetics. Illustrated in the top portion of this visualization is the consolidated sales of L’Oréal’s cosmetic branch worldwide from 2010 to 2020, by product division. It can be noted that L’Oréal’s Consumer Products division has had by far the highest level of sales. Up until 2020, L’Oréal Luxe was experiencing a steady increase in sales, while Active Cosmetics and Professional Products sales have remained relatively constant throughout this nine-year period.

In 2020, L’Oréal’s Consumer Products division generated approximately 11.7 billion euros worldwide. As exemplified in the bottom portion of the visualization, the most valuable L’Oréal brands worldwide are L’Oréal Paris, Lancôme, and Garnier which are all a part of the Consumer Products division. Also included in this visualization is a depiction of L’Oréal’s market share worldwide in 2019, with a breakdown by region. In 2019, L’Oréal’s market share in Western Europe was estimated to amount to approximately 20 percent.

What Sets L’Oréal Apart?

L’Oréal is based in a strategy of ‘Universalization’ meaning globalization that captures, understands and respects differences (“L’Oréal Group : Strategy & Model,” n.d.). For L’Oréal this means having a truly global presence through a unique organization. With 36 global brands under four different divisions, it enables L’Oréal to cover all of the aspects of beauty. L’Oréal’s organizational structure is composed of 21 research centers and 14 assessment centers (“L’Oréal Group : Strategy & Model,” n.d.). To ensure its continued growth and development, “L’Oréal Group : Strategy & Model” (n.d.) relies on global R&I and integrated industrial production, supported by a set of corporate functions: Administration & Finance, Digital, HR, Communications, and Corporate Responsibility (“L’Oréal Group : Strategy & Model,” n.d.).

L’Oréal Marketing Strategy

L’Oréal describes itself as a ‘digital first company.’ They have been able to channel the power of technology to create revolutionary beauty experiences. This is a short clip that focuses on L’Oréal’s digital innovation. Using artificial intelligence, augmented reality, data, and automatic statistical data L’Oréal has been able to anticipate demand which has allowed the company to remain a market leader even through a global pandemic.

Consumer Behavior & Industry Trends

It is impossible to look at the beauty and personal care industry without acknowledging that the conglomerates mentioned in the “Industry at a Glimpse” section are responsible for 182 leading cosmetics and personal care brands in the sphere of consumer goods. The seven mega companies — Estée Lauder Companies, L’Oréal, Unilever, Procter & Gamble, Shiseido, Johnson & Johnson, and Coty — employ thousands of people around the world and make billions of dollars in revenue every year. They also control advertising and the way we all think about beauty (Gould, n.d.). These industry leaders have been able to harness the power of big data and analytics in order to meet and exceed the wants and needs of the customer. Social media has been a significant tool in maintaining the popularity of the various brands under these large corporate umbrellas. In the top-most visualization in the dashboard, you will see how the 40,327 respondents who took a survey conducted by GlobalWebIndex responded to the question, “How do you typically find out about new brands and products?” As seen in the pie chart, 37 percent of responding global beauty buyers stated that they typically found out about new beauty brands or products via ads on social media and 33 percent stated that recommendations or comments on social media also led them to discover beauty products.

The lower portion of this dashboard illustrates the most popular beauty and style channels as of January 2021, ranked by number of subscribers in millions. In 2018, beauty-related content on YouTube generated more than 169 billion video views (“YouTube Most Subscribed Beauty Channels 2021,” n.d.). The most popular types of beauty content videos are campaign films, favorites/reviews, and tutorials (“YouTube Most Subscribed Beauty Channels 2021,” n.d.). For female consumers, YouTube ranks higher than TV in terms of its appeal for inspirational beauty content and a third of female consumers also reported to watching YouTube beauty tutorials at least occasionally (“YouTube Most Subscribed Beauty Channels 2021,” n.d.).

The final important trend that will be discussed in this discourse relates to the most popular beauty brands on Instagram. Beauty, fashion and food images and videos are some of the more popular and inspirational types of content, drawing huge audiences and user engagement. Brands frequently partner with influencers to address potential shoppers (“Instagram: Most-Followed Beauty Brands 2020,” n.d.). As of June 2020, Kylie Cosmetics was ranked first as the most popular beauty brand on Instagram with 24.2 million followers, and MAC Cosmetics ranked second with 23.66 million. Instagram is a popular social network for brands to connect with digital audiences, and beauty brands have been making inroads on the platform due to its visual focus and strong presence of social media influencers (“Instagram: Most-Followed Beauty Brands 2020,” n.d.). All of the brands that are identified on this list aside from Anastasia Beverly Hills, Sephora, and Morphe belong to one of the seven conglomerates mentioned.

The Future of the Beauty & Personal Care Industries

Consumer Behavior Shifts in Shopping for Beauty and Personal Care Products

The dashboard below includes data collected from Mintel regarding the beauty retailing industry. The data was collected in August 2020, so it is representative of the impact COVID-19 had on the beauty industry. The sample size of this study was 2,000 internet users aged 18+.

Based off of this visualization, 30.6% of respondents said they had health concerns about shopping in-store and about 19% of respondents said they were no longer interested in the option to sample beauty products. These sentiments further the notion that shopping for beauty and personal care products with see an increased presence on digital platforms. An interesting thing to note about this dashboard is that 31% of respondents said that they were using fewer beauty products since the onset of the pandemic. Another trend that will be seen in the industry is consumers performing services at home that used to be done by a professional. Companies will have continue to to find new ways to cater to the shifting preferences of consumers. These changes in consumer behavior have been expedited due to the implications of the pandemic. One of the final observations to note in this visualization is the factors that are important to customers when purchasing beauty or personal care products. These factors additionally reflect the change in consumer priorities and are important variables for companies to consider in order to meet customer needs and predict consumer buying behaviors in the future as this will be a rapidly changing landscape in the coming years.

Based on the data and research collected, here’s what can be expected from the beauty industry moving forward. Due to the pandemic, the beauty industry took the digital environment by storm. With many beauty retail locations closed, Online experiences reset expectations for the industry (“The New Beauty Rules: The Tech Trends Redefining Category Experiences,” n.d.). As brands have shifted to cater an increasingly digital consumer, AR and AI have become the driving forces towards new category experiences that combine digital and physical (“The New Beauty Rules: The Tech Trends Redefining Category Experiences,” n.d.).

The synthesis of AR and AI is a key driver for four key trends in the industry :

1. Digital Diagnosis: A tool that leverages machine learning to analyze key skin health metrics (i.e. oiliness, texture, etc.) in order to help brands deliver more personalized product recommendations (“The New Beauty Rules: The Tech Trends Redefining Category Experiences,” n.d.).

2. Diagnosis to Delivery: Using an AI-powered device it enables users to experiment with cosmetics in their own home (“The New Beauty Rules: The Tech Trends Redefining Category Experiences,” n.d.).

3. Smart Sampling: AR technology where customers can try on makeup virtually and purchase immediately (“The New Beauty Rules: The Tech Trends Redefining Category Experiences,” n.d.).

4. E-Make-up: L’Oréal Paris launched a virtual-only makeup line. This consisted of 10 beauty looks that customers could ‘wear’ on key video platforms like zoom (“The New Beauty Rules: The Tech Trends Redefining Category Experiences,” n.d.).

To conclude, the beauty and personal care industry have been impacted by COVID-19. However, many companies have been able to adapt to the changing environment by harnessing the power of big data in order to meet customer demand and accommodate the shift in consumer behavior.

References

“Cosmetic Industry Growth.” n.d. Statista. http://www.statista.com/statistics/297070/growth-rate-of-the-global-cosmetics-market/.

cycles, This text provides general information Statista assumes no liability for the information given being complete or correct Due to varying update, and Statistics Can Display More up-to-Date Data Than Referenced in the Text. n.d. “Topic: L’Oréal.” Statista. http://www.statista.com/topics/1544/loreal/.

Gould, Megan Willett-Wei, Skye. n.d. “These 7 Companies Control Almost Every Single Beauty Product You Buy.” Insider. https://www.insider.com/companies-beauty-brands-connected-2017-5.

“Instagram: Most-Followed Beauty Brands 2020.” n.d. Statista. http://www.statista.com/statistics/536991/leading-beauty-brands-instagram-followers/.

“L’Oréal Group : Strategy & Model.” n.d. L’Oréal. https://www.loreal.com/en/group/about-loreal/strategy-and-model/.

“The New Beauty Rules: The Tech Trends Redefining Category Experiences.” n.d. Marketing Magazine.

Thomas, Brigette. 2020. “Cosmetic & Beauty Products Manufacturing in the US,” 46.

“U.S. Beauty and Personal Care Products Market Through 2030.” n.d. Prescient & Strategic Intelligence Private Limited. https://www.psmarketresearch.com/market-analysis/us-beauty-personal-care-products-market.

“YouTube Most Subscribed Beauty Channels 2021.” n.d. Statista. http://www.statista.com/statistics/627448/most-popular-youtube-beauty-channels-ranked-by-subscribers/.