In taking stock of the 2024 performances from beauty’s biggest players, the verdict was OK, but far from great.
“We haven’t seen a pickup in the consumer; they’re still price sensitive. China’s still so-so, and there are a lot of headwinds facing the beauty category. But what we saw was the industry held up OK given the circumstances,” says Korinne Wolfmeyer, VP and senior equity beauty and wellness research analyst at Piper Sandler. Jon Tenan, managing director of Baird’s global consumer investment banking group, agrees: “2024 was a year of missed expectations. Coming into 2024, leaders were bullish and we heard a lot of ‘this is the return year’. It was not. It was slower than folks had wanted, with many missed earnings from strategics within the sector. So, choppiness persisted.”
Recent earnings reports reflect the mixed landscape. Estée Lauder Companies (ELC) reported a 2 per cent decline to $15.6 billion in 2024, attributed to challenges in China, Asian travel retail and a sluggish performance in makeup, skincare and haircare. L’Oréal sales rose 2.5 per cent for the year, reaching €11.1 billion, but fell short of expectations due to soft sales in North America and China. Shiseido’s sales rose 1.8 per cent, but its 2024 operating profit plummeted 73 per cent to JPY 7.6 billion ($49.4 million), hindered by the Chinese market.
Some fared better. Coty’s full-year 2024 net sales grew 10 per cent to $6.1 billion, but came in below expectations as it faced similar headwinds in Asia. Puig concluded 2024 with a 10.9 per cent increase in revenue to €4.7 billion, driven by fragrances but tempered by challenges in Asia as well as its makeup category. Ulta Beauty saw a modest improvement in Q3, with net sales increasing 1.7 per cent to $2.53 billion, yet faces stiff retail competition (the beauty giant will announce its final 2024 performance on 19 March). Elf Beauty reported net sales climbed to $980.9 million for the nine months ended 31 December 2024, but lowered its full-year outlook given a “softer than expected” January.
Overall, “2024 saw the end — or the beginning of the end — of a ‘growth supercycle’ in beauty”, says Andrew Ross, senior advisor and venture partner, Brand Capital Fund at XRC Ventures, who previously led M&A and strategy integration at ELC. “Chinese consumer demand dropped off domestically, in travel retail channels like Korea and Hainan, and major destination cities like London, Paris, Hong Kong and New York. That drop-off is weighing on growth across beauty, as well as luxury hard and soft goods.”
Looking ahead, experts identify what beauty needs to do to set a better 2025 in motion.
Shaking up China and travel retail
Two significant challenges persist across the board: China and travel retail. Experts predict these areas won’t return to growth in 2025, despite improving consumer sentiment, meaning brands would be wise to lessen reliance on them.
Analysts aren’t anticipating a swift recovery in China in 2025. Sucharita Kodali, VP and principal analyst at market research firm Forrester, asserts: “It [China] won’t recover anytime soon. The consumer is still recovering from the real estate crisis in the region.” Experts suggest recovery hinges on Chinese consumers regaining confidence in spending on beauty products.
Coty plans to reduce its focus on China and travel retail, redirecting efforts towards Western markets, primarily the US and the EU, to balance its performance. ELC CEO Stéphane de la Faverie has outlined a similar strategy, with outcomes yet to materialise.
Revitalising the travel retail sector, particularly in Asia where a full recovery isn’t expected until 2026 (per management consultancy Kearney), requires a lengthy to-do list, according to Henry Harteveldt, president and travel industry analyst at Atmosphere Research Group. He emphasises the importance of competitive pricing. “Airport purchases aren’t what they once were. Consumers are now securing better deals online and through dedicated loyalty programmes, offering better incentives,” Harteveldt says. Brands must engage in regular promotions and price products competitively to recapture consumer interest. Additionally, enhancing personalisation and experiential marketing is crucial. He suggests leveraging premium services like airport lounges for pop-ups and exclusive treatments.
Brands should also collaborate with credit companies and airlines to gain deeper intel on who the travel customer is. “Airport store operators don’t do much outbound email marketing or promotion at all. They just wait until consumers are in the terminal, and it’s a missed opportunity,” says Harteveldt. Investing in technology like artificial intelligence to analyse real-time consumer data can help brands better align their product offerings with customer preferences.
Newness, newness, newness
New and better products are a clear way to win customers. “The key thing is innovation — they have to keep the pace high,” says Linda Bolton Weiser, managing director and senior research analyst at DA Davidson investment firm.
For Wolfmeyer, innovation will remain the differentiator. “When I look at L’Oréal, Puig and those that have performed well, there’s been a lot more innovation, consumer engagement around launches and stronger brand activity,” she says.
Makeup, which slumped in 2024, is primed for a resurgence — provided brands can bring something new to market. “We haven’t seen anything game-changing in makeup since contouring. There have been no big statements. Right now, there’s not enough happening in the colour category to suggest dramatic growth, but that could change,” says Baird managing director Wendy Nicholson. Meanwhile, wellness and bodycare are poised for strong gains in 2025, thanks to growing consumer demand.
“Skincare is one area where I think we’ll continue to see breakthroughs,” Nicholson says. She predicts that consumer spending on injectibles and other treatments is likely to translate into product innovation, as brands respond to the shift.
L’Oréal is already moving in this direction, taking a 10 per cent investment stake in Galderma, an injectable aesthetics company. L’Oréal CEO Nicolas Hieronimus describes the move as a strategic way to gain market insights before making further plays. In January, Shiseido launched a microneedle skincare device inspired by in-clinic treatments, designed to deliver active ingredients like niacinamide beneath the skin. The debut technology, part of Shiseido’s Bio-Performance range, will launch in Japan on 1 May.
Beyond product innovation, analysts expect M&A activity to drive further advancements within conglomerate portfolios. “Global strategic players innovate via M&A,” says Baird’s Tenan. “Not to say that in-house innovation isn’t happening, but the biggest leaps will come from brands that can deliver step-change growth.” He suggests that conglomerates should watch indie brands excelling with key demographics as well as those capturing white-space opportunities in longevity wellness, at-home spa experiences, nailcare and biotechnology-led skincare.
Fast and furious
Moving quickly and casting a big retail net will be a clear mandate for beauty brands in 2025. “Companies need to be really, really agile and quick to adjust — the name of the game is going to be broad distribution, being in those high-growth channels and markets but in a careful way where they’re not commoditising product. But, I do think being where the consumer is, is super important,” says Wolfmeyer.
Leading retailers Ulta and Sephora are no longer the reliable high-growth channels they once were, so brands must differentiate, says Wolfmeyer, given the competition for shelf space, store closures (Sephora phased out stores in Korea, Jersey and San Francisco in the last 12 months) and the rising scale of Amazon. Still, they remain important outlets to occupy, given they provide a gateway to growth markets like Mexico and the Middle East.
Experts say strategic players and brands can’t ignore Amazon any longer. ELC has seen this firsthand, with The Ordinary, Clinique and Estée Lauder all performing positively on the platform. The channel has been critical for Clinique’s market relevancy, says Wolfmeyer. “Amazon is vitally important, and not only to be in Amazon but to be marketed on Amazon effectively,” says Nicholson. That requires maintaining brand integrity by establishing a strong presence, utilising Amazon’s brand registry to protect intellectual property and ensuring consistent representation including branded content, tutorials and product information.
Tenan cautions that leaning into Amazon can be a double-edged sword. “It [Amazon] will cannibalise other channels without a doubt, but companies just need to make sure it doesn’t destroy the other parts of the business. Companies must vary merchandising — whether owned channels or in retail — to maintain a value proposition.”
TikTok Shop is still a contender and shouldn’t be written off just yet, say experts. “TikTok is still a very important channel for now and even if it does go away or there’s some regulation, that demand will shift elsewhere and so brands need to be able to move where consumers migrate to,” adds Wolfmeyer.
Varied price mix
Consumers are still price-conscious and fussy when spending in a post-inflation market, per reports from global management consultancy McKinsey. As a result, beauty will need to broaden its price mix to reach more people, including consumers with higher disposable incomes. “An important note we’re hearing is to offer a good, better, best option for pricing,” says Wolfmeyer. ELC’s de la Faverie has outlined a tiered pricing strategy in order to meet consumers at every level with brands across price points.
Prestige beauty is showing signs of strength, even if some shoppers are more price conscious. Circana reported that prestige beauty sales in the US rose 7 per cent in 2024, outpacing other categories. However, Wolfmeyer warns that price hikes must be coupled with innovation to sustain consumer investment. Otherwise, Luca Solca, managing director and luxury goods analyst at Bernstein, says: “Maintaining a prudent cost profile seems wise just in case new factors like US import duties stop the cyclical recovery in its tracks.”
Moving forward, beauty companies will need to make more concentrated efforts to meet customers where they are as shopping habits shift. Staying agile will be paramount, as newness is a consistent growth driver, sustaining excitement and demand. Smart pricing strategies are also pivotal in a cost-conscious climate, says Wolfmeyer. Those who achieve these “will be the players that stand out”, she adds
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