Beauty is big business.
Research firm Euromonitor said global sales of skincare products exceeded $111 billion in 2014, and that doesn’t even include cosmetics. Skincare is the key revenue driver in the total beauty industry, Euromonitor said, and a few factors are behind this growth.
“On one hand, technology gives rise to devices and diagnostic tools, changing the consumer beauty experience, while on the other, niche brands and personalization can revive categories such as face masks and facial moisturizers, marking a new turning point for the market,” they said in their 2015 report.
Euromonitor is referring to specific skincare routines and other facial care methods that have become extremely popular. These routines include up to 10 or 12 steps to cleanse skin alone, meaning devotees buy a lot of products.
The Price of Beauty
While the skincare business is growing, don’t forget cosmetics. MarketResearch.com said one of the categories driving growth in the beauty and cosmetics industry is premium products, which usually means products priced at $30 and up. The global premium cosmetics market is expected to reach over $126 billion by 2019, they said. Many companies are experimenting with this trend, with two top brands owned by Estée Lauder Companies (EL): Tom Ford Beauty and MAC.
Beauty products were previously marketed only to women. Now more men are focusing on their skin, but in a slightly different way. Tess Fox, director of marketing at TriDerma MD, a botanical-based skincare company in southern California, said the company has seen an increase in men ordering products.
“In the past few years we have been seeing more men interested. We’re seeing more men ordering our products online, more men calling in and asking, ‘I have this problem, what do you have to help?’ They’re concerned about skin conditions like redness and bruising, which help him without feeling like he’s using a ‘beauty’ product. That’s where men feel more comfortable using them,” Fox said.
A “Foundation” for Your Portfolio?
As is the case for some other consumer products, U.S. companies are looking to Asia for future growth, Euromonitor said. That likely prompted cosmetics giant L'Oréal SA (LRLCY) to buy privately held IT Cosmetics for $1.2 billion in an all-cash transaction. This is L'Oréal’s first acquisition in eight years, and the company hopes it will help spur growth as it’s facing a slowdown in other parts of the world.
Stores like Ulta Salon, Cosmetics & Fragrance (ULTA) and Sephora, owned by LVMH Moët Hennessy Louis Vuitton SE (LVMUY), may benefit from the increasing interest in skincare. Sephora is also starting to roll out its “TIP” stores, which bring makeup tutorials to customers along with an interactive setup, in an effort to sell more of Sephora’s premium products to devoted customers. The store has been a strong earner for LVMH’s brand. Sephora’s main competitor, Ulta, has also been performing well. It’s rated as a strong buy from Zacks Investment Research.
Beauty may be in the eye of the beholder, but it may also put a little sparkle in a portfolio.
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