Larissa Jensen, Vice President, Beauty Industry Advisor, The NPD Group02.01.23
There is no question that the prestige beauty industry had a banner year in 2022, with U.S. revenue growth in the double digits across makeup, skincare, fragrance, and hair products. Consumers were clearly indulging in these products, even as consumer sentiment went into a freefall earlier in the year.
Nevertheless, when consumer confidence crept back up, the prestige beauty market continued to demonstrate resilience. Regardless of whether confidence was up or down, prestige beauty growth remained strong and the factors which drove this phenomenon should continue to fuel a positive performance over the next year.
Growth Driven by Higher Income Households
Prestige beauty was the only industry across both discretionary spending and CPG categories tracked by NPD and IRI to experience unit sales growth in the past year. It’s important to note that this indulgence was unique to the prestige side of the business; in the mass market, beauty product unit sales were negative compared to 2021.Part of this dichotomy is driven by the prestige beauty consumer base, which is comprised primarily of higher income households. About half of the prestige beauty shopper base earns over $100k per year. These are the consumers who are less likely to cut back on spending during a challenging economic period.
Conversely, the beauty shopper in the mass market has a greater diversity of income levels and is therefore more impacted by inflationary pressures. If this higher income consumer remains less affected by the economy, they should maintain their indulgent mindset into 2023, which will benefit higher end beauty sales.
A Boom in Wellness
Another factor that should continue to drive beauty industry growth in the future is wellness. While physical wellness remains important, consumers are focusing on their mental wellness more than ever before.This is a shift that began in 2020 and has only accelerated since, contributing peripherally to the sales of beauty products. There are very few industries outside of beauty that are better positioned to meet consumers’ emotional needs. As mental wellness priorities become the norm, beauty stands to benefit.
Return to Socialization
Lastly, the return to socialization has been a simple but hugely impactful shift that has benefited many industries over the past year and should continue to do so going forward. Some challenges of the pandemic remain, but its impact has been minimized in consumers’ minds. As we move further away from the shock of 2020, we will settle into more normalized behaviors, including going out and gathering with each other, which in turn should lead to an increase in beauty sales.As we look ahead, the promise of a healthy year is palpable. While differences exist by beauty categories and markets, there are more commonalities than not. When we look at our industry holistically, inclusive of the prestige and mass markets, the outlook for complete beauty is a positive one. Our consumer has demonstrated they are willing to continue to spend on beauty, an industry steeped in emotion. Beauty brings joy, which is a universal aspiration and will drive our industry’s resiliency into 2023.