With sales of nearly $100 billion in 2012, equating to one-fifth of global beauty and personal care value, skin care’s dominance remains unbreakable. But the category’s prevalent trends currently play on opposite sides of the spectrum. On the one hand, an increasing focus on status and individuality is driving a greater need for products, services and experiences tailored to the individual. On the other, a one-size-fits-all approach has triggered demand for more convenient and quick-fix solutions.
Asia—The Knight in Shining Armor
With almost half of global skin care sales coming from Asia-Pacific—where sales are more than double those in Western Europe—the region’s predisposition toward multi-step skin care regimes has served the category well. Japan, the leading global market in terms of skin care, has had its first year of positive growth in 2012 after five years of decline, with both the premium and mass segments growing. China, which displaced the U.S. in 2011 to become the world’s second-largest market and which continues to mount the pressure on Japan, posted a 14% value compound annual growth rate (CAGR) over the last five years. Its strong momentum is expected to add a further $7 billion to the global skin care market over the forecast period, with the country assuming the number one spot from Japan in 2017.
While the main focus for skin care players remains the golden three (China, Japan and South Korea), with the latter expected to displace Germany in 2014 as the world’s fifth biggest market, Indonesia, India and Thailand are quickly gaining status as the next skin care markets to watch. Over 20% year-on-year increases in value and estimated combined added value of $2.5 billion, or around 15% of anticipated global value to 2017, have put these regions in the spotlight. As increasing urbanization and a vibrant rising middle class drive a switch from unbranded to branded goods, many of the large players are expanding their presence and investing heavily in these markets despite the presence of powerful local brands.
The U.S. and North American markets are set to remain stable, with modest CAGRs of 1% to 2017, while Western Europe will continue to struggle due to declines in Spain and Italy—a gain of just $15 million to 2017 is predicted. As the other emerging regions of Latin America, the Middle East and Africa, and Eastern Europe remain relatively weak in skin care, Asia-Pacific with its additional $11 billion, or close to 70% of overall value, will continue to be the story in the skin care category.
Premium Skin Care Boosted by Specialization
With a multitude of new product launches every year, an increasing focus on catering to the individual and providing a more exclusive and unique experience is gaining momentum. This has materialized in more targeted solutions, which have emerged in many different forms. These vary from the type of product, like a serum, a device or a service (offerings that target specific problems such as fighting hyperpigmentation or minimizing pores) to application formats—oils, roll-ons and measured doses, and age-segmented products, as examples. Specific examples include recent launches for the over 50s from Mary Kay, Shiseido and L’Oréal Paris.
Devices in particular, especially since the acquisition of Clarisonic by L’Oréal in late 2011, have been the focus for many companies and retailers alike. Looking beyond devices, the next generation of targeted solutions will gradually start to shift to beauty services in the form of personalized or bespoke formulations that target the specific needs and concerns of consumers. Examples of this are already on the market, such as the Ioma Beauty Diag machine, which, after taking a series of pictures, analyzes the skin and offers a tailored recommendation from over 800 possible skin care formulations. The Organic Pharmacy’s DNA skin care test is another example, analyzing a saliva sample to offer a personalized skin care prescription.
Anti-aging Starts to Feel the Heat
Anti-aging, the fastest growing category in skin care over the last five years, is showing signs of stagnation, growing by 7% globally in 2012—the same growth rate as in 2011. One of the primary reasons for this is the rise of multifunctional products across all beauty and personal care categories. From hair care to color cosmetics, the majority of new products are including anti-aging claims, showcasing how the anti-aging label has become a must-have on new products’ list of multiple attributes.
Furthermore, anti-aging claims continue to be the hot ticket in terms of extra benefits, even within skin care, with both body care and hand care adding anti-aging claims to their new product launches. With the median age of the female population nearing 40 and rising in North America, Australasia, and Western and Eastern Europe, anti-aging is expected to only strengthen its presence within other categories.
The Future Remains Skin Deep
While this multifunctional trend is not expected to fade anytime soon, targeted solutions will continue to push unit prices upward, and skin care’s dominance in overall beauty will remain unquestionable. As more segments—from color cosmetics and hair care to deodorants—look at skin care for inspiration as well as align claims with skin care, blurring the lines between these categories, some cannibalization is inevitable. However, skin care, with its supremacy in Asia-Pacific and increasing penetration in Latin America, is expected to increase the gap on hair care by a further $5 billion by 2017.
The full article is available from GCI.