Beauty & Cosmetics Industry Insights

Global cosmetics market is expected to reach $429.8 billion by 2022 with a CAGR of 4.3% during the forecast period (2016–2022). There is a growing demand for beauty products as more people begin to take care of their physical appearances. In addition, rising trends for natural ingredients in cosmetic products have led manufacturers to innovate and adapt to customer preferences. The beauty industry has seen incredible innovation and entrepreneurship within the past few years and it will continue to grow for the unforeseen future.

Key Facts

  • The cosmetics industry reached $93.5 billion in the US market in 2019.
  • 48% of Millennials say they prefer products with CBD oil for skincare.
  • 4 out of 5 American women follow beauty trends on a regular basis.
  • 21% of Americans buy organic makeup.
  • 88% of consumers tend to lean more towards socially responsible companies when considering beauty products.
  • Women in the USA spend nearly $3,000 dollars on cosmetics annually.
  • Skincare makes up 60% of the total profit in the beauty industry.
  • Makeup sales revenue grew by 1% in 2018 and reached $8.1 billion with 67% of consumers using makeup products.

Industry Trends

Radical Transparency

The rise of beauty standards as well as media platforms to discover cosmetics products more easily have made Millennials and Gen Z to dominate the industry. What consumers find most important when shopping for cosmetics is the quality of ingredients that companies use for their products. And thus brands are now realizing that when tapped properly, they could access a wide pool of targeted demographics to help accelerate their businesses.

Beauty companies are beginning to adopt a “Radical Transparency” model that showcases to everyone the lists of sources and origin of materials they use to make their products. They sometimes even list out the actual cost of manufacturing. This level of transparency has gained even more trust from the consumers and has allowed businesses to receive higher returns. According to the 2018 FIT Transparency Perception Assessment Survey, over 72% of consumers want brands to explain what their ingredients do and 60% of which want brands to identify their original sources.

Sustainability

Environmental and sustainability have become more important over the years thanks to the ever-increasing awareness of global warming and climate change. And because of this, cosmetics companies have shifted their focus to furthering this initiative and becoming more socially responsible. The clean or ‘go greener’ movement has led beauty brands to use healthier ingredients and practice recycled packaging. Additionally, today’s new technologies allow consumers to track companies’ sustainability practices and help them measure and report elimination of unnecessary waste and management.

Some of the ingredients that are harmful to the environment and human health are found in chemical sources such as BHA and BHT, Coal, Formaldehyde-releasing preservatives, Aluminum, and Dibutyl Phthalate. On the other hand, examples of healthy sources include natural oils, agricultural plants, and specialized bacteria called Deinococcus bacteria. Incorporating these “green” ingredients present a unique opportunity for cosmetics companies to focus on corporate social responsibility.

Growth Prospects in Cosmetics

The global cosmetics industry is categorized into six separate sub sectors and skincare accounts for 36.4%. In recent years, consumers spent higher levels of disposable income on cosmetics — more so than in the past. In the previous years, the global cosmetics market has been controlled by multinational conglomerates. However, ever since the financial crisis in 2008, more affordable merchandise and DIY at home products played a key role in uplifting the beauty market. In 2017, the beauty sector saw more than 149 investor deals, which was an increase of 19% from the previous year. Estee Lauder acquired Too Faced Cosmetics in 2016 for $1.45 billion and L’Oreal purchased It Cosmetics for $1.2 billion. Branding and consumer engagement are extremely important for attracting new investor interests. And thus, brands that keep up with today’s beauty standards as well as the fast moving market will draw investors and win the funding race.

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