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While brands once dictated top-down to their audiences, the balance of power is shifting. Nowhere is this felt more than in beauty, as consumers — particularly younger generations — challenge the meaning of everything, from buzzwords like “clean” to the role of celebrities and influencers.
The beauty sector saw strong gains across all categories in 2023, with consumers trading up and spending more across prestige products, yet people are feeling stretched in many directions. The aftermath of the pandemic, the rising cost of living, energy shortages, geopolitical unrest and the climate crisis — not to mention the influence of media and digital content — have all contributed to “hyper fatigue”, according to Mintel’s latest global consumer trends report. As a result, consumers are less tolerant of overinflated prices and false promises.
“People want value for their money, whether it’s at a $20 or $100 price point, and [to] not [be] overcharged for things like marketing and packaging,” says Ilya Seglin, managing director of Threadstone, an investment bank and advisory focused on the consumer sector.
As consumers try to make smarter choices without sacrificing their quality of life, brands that play a functional and multifaceted role while offering tangible evidence-based results will continue to thrive in the coming year, Seglin predicts.
The age of expertise
Growing consumer demand for more substantiated claims from beauty brands has spelt bad news for some celebrities and influencers, who have introduced their own makeup and skincare lines in recent years as they saw an opportunity to profit off their likeability. As industry scepticism around their authenticity and credibility increases, some have started to struggle.
Jared Leto’s skincare brand Twentynine Palms ceased operations in September, while Amyris, which manufactures and sells celebrity brands including Rosie Huntington-Whiteley’s Rose Inc and TV personality Jonathan Van Ness’s haircare line JVN, filed for Chapter 11 bankruptcy in August. Earlier in the year, makeup giant Morphe, once valued at $2 billion thanks to splashy collaborations with big stars, shut down all of its stores in the US, while its parent company, Forma Brands, also filed for — and has since emerged from — Chapter 11.
Consolidation was inevitable, says Lucie Greene, a futurist and the founder and CEO of consultancy firm Light Years. Celebrity and influencer-led brands have an edge because of their pre-existing fan base, but if the product doesn’t perform, consumers have many other options.
The real test for successful brands is their ability to convert and retain customers through the efficacy of their products. “A wave of direct-to-consumer brands have had access to plenty of venture capital investment, and what’s happened is a shaking out of [people] who are popular but can’t convert to sales,” says Greene.
Expert-led content is now paving the way, says Threadstone’s Seglin. “There’s just so much clutter: customers want someone to distil it for them. There’s a natural gravitation towards people that can talk about products with authority, whether it’s dermatologists for skincare or makeup artists for colour,” he explains.
It’s a strategy that has worked well for makeup artists turned entrepreneurs, such as Bobbi Brown with her second makeup brand Jones Road; Isamaya Ffrench, whose namesake beauty label has been stepping up its retail expansion globally; and Charlotte Tilbury, who is behind one of the fastest-growing brands of her generation and was honoured by the British Fashion Council with a special recognition award this month.
Such brands are also attractive targets for investments as their authority makes them reliable and indispensable for consumers, even during tough times. Makeup by Mario, founded by American makeup artist Mario Dedivanovic, landed a $40 million minority investment from private equity firms Provenance and Silas Capital, valuing the brand at over $200 million, while German doctor Dr Barbara Sturm is said to be mulling a sale of her eponymous business.
Beauty companies that prioritise transparency when it comes to their formulations and supply chains are also poised to thrive, as consumers grow wary of buzzwords like “clean”, “refillable” and “biodegradable”, which can mean a lot and very little all at once. Executives keen to do better should think beyond the elimination of certain ingredients and materials and focus on their wider impact through meaningful corporate sustainability strategies, experts advise.
An industry recalibration
As consumers increasingly seek value for their money, the middle market is likely to become squeezed as shoppers gravitate towards mass (for its accessibility and competitive price points) or ultra-luxury beauty (for its desirable rarity and craft), predicts Pauline Mexmain, a senior manager in the consumer practice of global strategy and management consulting firm Kearney. This goes beyond making budget-friendly choices to considering factors like flexibility and sustainability. “It’s not really about [price] but about redefining the next generation of value brands.”
On the high end, luxury groups have signalled their intentions to compete more aggressively across beauty. In September, Richemont formed a new beauty division and appointed a new CEO as it seeks to scale fragrance. Kering launched its new beauty entity in February and made headlines in the summer for acquiring luxury perfumer Creed. There’s also LVMH, which reshuffled its beauty leadership team in March. Luxury and fashion houses such as Prada, Rabanne and Dries Van Noten, which have previously only dabbled in fragrance, are also coming to market with makeup and skincare launches, while Dolce Gabbana joined the likes of Chanel and Hermès in taking its beauty operations in-house.
“There is a real opportunity in beauty for luxury houses, as well as an opportunity in luxury for established beauty players,” says Mexmain. “It’s high margin and recession-proof. True and ultra-luxury represents less than 3 per cent of the total market, and we’ve seen strong momentum, especially in fragrance. It’s untapped compared to other categories like fashion, which is represented much more in luxury. That’s what has been driving some of the key acquisitions.”
With much of the beauty market currently competing in masstige, including launches from celebrities like Hailey Bieber with her skincare label Rhode and the expansion of brands like Glossier and Pleasing across new distribution channels, there’s scope for mass brands to gain more ground. Experts believe there has been little competition for Elf Cosmetics, after gaining momentum from its marketing activations that resonate so strongly with Gen Z. The company acquired skin and bodycare brand Naturium in August for $355 million, its biggest deal yet.
Relatability could be a distinguishing factor for brands looking to connect with younger audiences. It’s why food-themed micro-trends, such as strawberry girl or tomato girl, glazed donut nails, blueberry milk manicures and latte makeup have been trending this year. “Combining beauty with food trends makes them more relatable, which is key for Gen Z,” says Mexmain. The drivers are also evolving, she adds: “ten years ago, you’d see it first in Vogue magazine; now it’s a hashtag on TikTok that will drive the movement globally.”
As consumers increasingly demand brands to be more thoughtful, the focus on authenticity could pivot heavily towards inclusivity next year. Already, consumers and celebrities are revolting against perfectionism in marketing. Yet, some 69 per cent of beauty consumers in the US feel that society’s view of beauty is still too rigidly defined, according to 2022 data from Mintel, and brands have an opportunity to change how they communicate with consumers by better relating to them.
Diversity, equity and inclusion has become a more pertinent topic over the past year, with beauty brands making more commitments and improving representation of some groups. In January, Estée Lauder introduced the first-of-its-kind voice-enabled makeup assistant, which combines AR and AI to help visually impaired users apply makeup, while L’Oréal launched a handheld motorised device to aid people with disabilities in applying lipstick.
BeautyUnited, a non-profit financially backed by Estée Lauder, Procter Gamble and Unilever, among others, sought to tackle racial inequality, while Glossier and Ulta continued to raise money for Black-owned businesses. Stars such as Billie Eilish, with her activism against the climate crisis, and Harry Styles, who stands out through his boundary-pushing aesthetic, have also found success by broadening the traditional base of customers in categories like fragrance.
Ensuring a more equitable beauty industry could extend beyond race and include an environment — both at retail and in executive positions — that does not discriminate against gender, age, skin type, or any kind of physical or mental traits, experts suggest. With growing activity around topics like ageing, women’s empowerment and menopause, Greene predicts that more brands will tap into needs “that have not been addressed by traditional beauty historically”.
And as beauty and wellness continue to converge, mental wellbeing and physical appearance will become more deeply connected than before, Greene believes. Rare Beauty, the makeup brand by actress and musician Selena Gomez aiming to reduce the stigma associated with mental health, and Topicals, a skincare line geared towards people with chronic skin conditions, have been leaders in this space, she notes. “The blur between beauty and wellness could lead to more interesting experimentation and innovation, with more science [applied to] the sensory side.”
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