Beauty Inflation Surge: Tackling Margin Pressures and Uncertainty

April 2023

Beauty and personal care multinationals have predicted continued cost increases in 2023, further increasing the price of finished goods. Companies are developing multifaceted strategies to remain competitive, often combining approaches to cover multiple eventualities for both short- and long-term impacts. Consumers are being more conservative in their discretionary spending as the cost of household essentials rises, contributing to a deceleration in certain beauty and personal care categories.

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This report comes in PPT.

Key Findings

Inflation continues to have a profound impact on the beauty and personal care industry in 2023

The major beauty and personal care multinationals have reported that input and raw material costs will keep increasing in 2023, further driving up the price of finished goods. Price rises may, however, not be as substantial in 2023 as they were in 2022. However, the baseline of prices is still notably higher in most categories compared to 2019, and is likely to either remain steady or increase further.

Beauty players must adopt a multi-faceted approach to ensure consumer loyalty

In response to rising costs, beauty and personal care companies are raising unit prices, adjusting package sizes by offering more miniatures or refills, revising raw materials in favour of reduced/cheaper ingredients or components, streamlining SKU range and variety, and implementing targeted price point management that maximises the bottom line. Promotions help offload excess inventory in the short term; however, beauty players must adapt to a more discerning consumer who is expending more effort on finding the best value.

Beauty consumers will not stop consuming beauty, but they are likely to make trade-offs amid rising prices

Since the cost-of-living crisis is driving the majority of expenses upwards, consumers are being more conservative in their discretionary spending, which is contributing to a deceleration in certain beauty and personal care categories. Private label is experiencing renewed consumer interest in ingredient-led skin care. Categories and brands whose main strategy has been focused on price increases should be attentive to the slowing down of purchase frequency, which may negatively affect volume.

Pricing strategies, experiences and other point-of-sale touchpoints will play a big role for the discerning beauty consumer

Today’s beauty consumers spend more time educating themselves about products and ingredients, and they take this same approach to finding retailers that offer the best value for their preferred brands. As price sensitivity rises, point-of-sale touchpoints are key to demonstrating the value of a beauty purchase through competitive pricing or showcasing experiences, especially for discretionary categories (eg fragrances and high-end skin care).


Key findings
Inflation is having “extensive impact” on beauty and personal care players across regions
The many layers of global inflation
Commodity impact: Rising energy costs do not suggest a return to January 2021 levels
Deconstructing inflation drivers for the beauty and personal care industry
FMCGs most commonly implement these five strategies to combat inflation
Beauty and personal care professionals take a multifaceted approach to combat inflation
Company impact: Streamlined routines contributed to less usage, more lipstick overstock
Promotional activity on hold in the US until lipstick demand picks up
Consumer impact: Trading down in some categories to maintain spend in others
Consumer impact: Limiting usage to afford more expensive products
Company impact: Growth of miniatures outside the travel industry
Company impact: Miniatures offer opportunity for experimentation
Consumer impact: Private label benefiting from restricted budgets
Consumer impact: Dupe culture is growing especially within private label
Consumer impact: Price influenced lower fragrance consumption in the UK, but less so in US
Unilever price increases come at the detriment of volumes
Case study: Deodorant in Argentina – brand strategy affects consumer behaviour
Estée Lauder Cos Inc’s price increases are targeted at specific brands and SKUs
Case study: Anti-agers’ prices climb in France towards the end of 2022, but not every brand
L’Oréal focuses on hyper-premiumisation and specialisation in high-spend markets
Case Study: L’Oréal focus on premiumisation and specialisation, especially in Asia and China
Coty’s resilience based on high growth segments and affordable luxury
Case study: Coty raises prices within the masstige category while remaining affordable
Inflation dents turnaround plans for Natura&Co’s The Body Shop
Case study: Nominal price increases boost Aesop sales as demand, interest remains high
Pricing strategy for major global brands correspond to the local brand share picture
Many factors influence elasticity in beauty beyond price, such as trends and emotions
Conclusion: Consumer impact will be multi-faceted and uneven across regions
Inflation impact is nuanced, but recommendations around adding value can mitigate risks
Highlight any product multifunctionality or pricing accessibility feature
Reallocate resources to fast-growing channels or positioning
Focus on clinical, science-backed beauty while “clean” becomes more important
Lean into digitalisation trends, such as influencer marketing and personalisation
Global economy edges closer to recession amid sharp slowdown
Global inflation begins gradual downward trend – but remains significantly elevated in 2023
Real GDP annual growth forecasts and revisions from last quarter
About beauty and personal care quarterly forecast updates
Beauty and personal care: Reporting timeline
About Via from Euromonitor International

Beauty and Personal Care

This is the aggregation of baby and child-specific products, bath & shower, deodorants, hair care, colour cosmetics, men's grooming, oral hygiene, fragrances, skin care, depilatories and sun care. Black market sales and travel retail are excluded.

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