Online Exclusives

Looking Great in a Bad Economy

June 3, 2009

Studies reveal which beauty products budget-strapped consumers won�t do without.

Looking Great in a Bad Economy

Studies reveal which beauty products budget-strapped consumers won’t do without.

By Joanna Cosgrove
Online Editor

The faltering U.S. economy has forced everyone to tighten their proverbial belts and to make tough choices about which purchases are necessity and which are luxury. Oddly enough, the so-called “lipstick index” has proven to be an accurate recession barometer. New market forecasts from Chicago, IL-based Mintel predict cosmetic sales in the U.S. will rise as a result of the recession. In fact, the research firm anticipates a higher growth rate for make-up now than it did just eight months ago (10% over the next five years versus 7%). Though the beauty and personal care sector is struggling overall, Mintel sees some very bright spots, including color cosmetics.

Some women won't skimp when it comes to beauty routines.
Joan Holleran, director of research at Mintel, noted that “many women have a deep emotional tie to their appearance, so cosmetics are a non-negotiable. These women may trade down on other purchases or forgo expensive vacations, but they will still treat themselves to small, feel-good luxuries like makeup and beauty products.”

Another area expected to weather the recession is anti-aging beauty. Mintel expected sales of anti-aging skincare products to increase 20% over the next five years. One year ago, Mintel forecast 44% five-year growth, but the adjusted market forecast is significant given the current economic climate.

The sun care products is another category expected to experience healthy growth, with sales expected to increase 36% from 2008 to 2013. This is a slight decline from Mintel’s original market forecast of 41% growth, but it still shows that consumers are keen on following dermatologists’ advice to use sunscreen daily.

Mintel said multi-use products also stand to do well. Products such as Clinique’s Youth Surge SPF 15 Age Decelerating Moisturizer, for example, claims multiple benefits: slowing the signs of aging, repairing and strengthening skin and providing sun protection.

And rounding out the types of products expected to survive the recession crunch is convenience products. Today’s women are on-the-go now more than ever. Between demanding careers, raising kids and hectic schedules, they need convenient products to suit their busy schedules. Mintel Beauty Innovation reported that more than one in four (27%) skin care products launched in Q1 2009 boasted “convenience” claims. An example of this trend is Johnson & Johnson Clean & Clear Facial Cleansing Wipes, which come in a portable plastic package and claim to instantly dissolve dirt, water and makeup without water or rinsing.

Cost/Value Paradox

Though the aforementioned market segments should hold strong throughout the recession, other beauty and personal care markets may not.

“Shoppers are trading down to save money on purchases they don’t deem necessary. So everything beyond deodorant, shampoo and razors is at risk,” stated Ms. Holleran. “Personal care companies need to focus on value, feel-good benefits and new product innovation to keep shoppers interested.”

Just because consumers are in search of value, doesn’t mean that they will forgo $300 anti-aging creams and $35lipsticks in favor of lesser priced drug and mass market store alternatives. In fact, department store beauty products are definitely safe, but they will see declining profits, said Taya Tomasello, senior analyst, Mintel.

“What we’ve seen is that most women…will absolutely not compromise on at least one product in their beauty regimen. It might be the $300 anti-aging cream that they have seen benefits from—it may be the $45 shampoo that does wonders for their dry, brittle hair.But they will continue to buy that product and maybe trade down on others. And they will certainly get all they can out of that $300 bottle,” she said.

“Where department store brands can entice consumers to spend more during this time is to offer more value,” she continued. “I’ve heard from beauty advisors behind the counters that when bonus time comes around, it’s selling out in record time! So they’ll definitely survive, but they’ve got to know that they will be taking a hit during this time.”

Ms. Tomasello pointed to prestige brands like Benefit, Prescriptives and Smashbox which have pulled together product bundles that offer the consumer more products at a reduced cost.“This is very important for them to attract customers at this time,” she said.

At the same time, department store brands must also be conscious of the growing competition from the mass channels, where mass brands are mirroring department store brand product claims - and consumers are taking notice. One mass brand that’s generated a huge buzz thanks to its science-based marketing claims is Olay’s ProX. Despite its $45-$65 cost per SKU, the brand is selling very well.

“I’m very intrigued by the study of sirtuins and any product…claiming to affect sirtuin genes in our skin,” commented Ms. Tomasello. “They are proof that department store brands need to keep their eye on what is happening in mass.”