Beauty and Personal Care: Quarterly Statement Q1 2017

Global beauty industry outlook weakens after third successive growth downgrade in the Industry Forecast Model

The beauty and personal care industry experienced a further downgrade in Q1 2017, with the forecast CAGR over 2015-2020 now standing at 2.7%, down by 0.2 percentage points, as absolute gains were slashed by US$5 billion. This scenario results from uncertainty in core markets, namely the US and UK, and previously hopeful markets such as Saudi Arabia, where growth is faltering.

Premium BPC outlook remains stronger than mass segment despite US$1 billion reduction in absolute gains

While the premiumisation trend gains traction, the premium segment has seen a US$1 billion cut to its absolute growth forecast. While forecasts remain better than the mass segment (3.8% vs 2.6%), the magnitude is greater for the premium segment due to its smaller size relative to mass beauty and personal care, making the premium competitive landscape harsher to operate in.

Russia restores its place among key industry prospective markets

Russia is witnessing a recovery, posting a healthy performance in 2016, and an upgrade to its CAGR over the forecast period. Among the winners were local players and direct sellers, which adapted strategies that were in tune with rational buying behaviour, such as pricing and buying local.

Niche start-ups proliferate, challenging legacy brands

With premium beauty facing an uphill struggle to keep demand intact, legacy brands such as Mac face slowing sales, not only due to market slowdown, but niche labels making a hit, as well as mass-positioned mainstream brands, such as Kiko Milano offering near-premium benefits at affordable price points.

Dynamism in colour cosmetics pushing previously smaller brands into the mainstream

Kiko Milano, Nyx and Urban Decay are among the make-up labels making leaps and bounds, driven by store network expansion, as they become the new mainstream. While their success is to be lauded, newer disruptive entrants would play their game to grow. Reinvention is key to avoid their demise.