|
|||||
 |
|||||
|
|||||
|
Because You're Worth It? Investing in beauty trends by Rita Silvan, CIM As the former editor-in-chief of ELLE magazine, people always assumed I must be mad for fashion. While I appreciated the innovation of certain designers, it was the beauty side of the business that beguiled me. Lucky that it also happened to be where the real money was made. After all, it was advertising revenues from the beauty conglomerates that paid for the glossy fashion pages and my salary. Fashion may garner the attention but it's the little things - lipsticks and face creams - that steadily rake in the dollars no matter who is designing the frocks that season. Beauty is big and about to get a lot bigger. According to McKinsey, a consultancy, the entire beauty market encompassing skincare, fragrance, cosmetics, and haircare is expected to reach US$580 billion by 2027, at a growth rate of 6% annually. Investors may wish to have a look. Beauty is a resilient business as consumers consider beauty products a daily essential, not a discretionary purchase. In 2022, higher inflation caused many consumers to cut back on spending but 7 out of 10 reported no plans to reduce their beauty spend. Folks, skin is in. Skincare is the best performing category. Everyone from sagging boomers to self-care-focused Gen Z are prioritizing "skincare as self-care" by spending on products and treatments. Social media is accelerating beauty and skincare trends and driving sales with "skinfluencers" touting products on TikTok and Instagram. According to a Google survey, two-thirds of beauty consumers search online, watching tutorials and browsing social media, before making a purchase. In 2022, the trend was "Dolphin Skin", achieving a complexion that appears glassy and luminous, not to mention smooth and rubbery - just like the ocean mammal. Products mentioned in #dolphinskin posts saw double-digit growth over the prior year. More recently, the skincare trend is "snatched", with the contours of the face appearing carved out. Getting "snatched" does not come cheap with these next-gen (monthly) facials costing upwards of US$1,800. The beauty tech market for both in-clinic and at-home products is expected to reach nearly US$9 billion by 2026 and the growth in non-invasive skincare procedures (think ablative laser vs. surgical incisions), currently valued at US $60 billion globally is expected to triple by 2030. In 2024, the baton has passed from glazed skin to "cloud skin" - a pillowy, matte-look that requires yet another set of new products and protocols. Market researcher Mintel has identified "neuro-glow" as one of three important social trends for 2024 as consumers focus on the interconnectedness between mental and emotional health and outward appearance, a field of psychology called psychodermatology. (A clinical example is how psychological stress has been shown to disturb the epidermal layer triggering inflammatory disorders such as atopic dermatitis and psoriasis.) This trend is driving more personalized skincare treatments, enabled by artificial intelligence, and a new market for wearable devices that track stress levels and skin health. Another trend is "premiumization" where consumers level up to more expensive products. Whereas mass beauty is expected to grow 5 per cent annually to 2027, the luxury segment is expected to grow by 8 per cent. Deep pocketed beauty companies, such as L'Oreal, are snapping up luxury cult brands like Aesop. Even beleaguered Estee Lauder recently spent big on acquiring the Tom Ford brand in 2022. For investors looking to jump onto the beauty train, there are several ways to do so: The top five beauty manufacturers, based on market capitalization, are L'Oreal, Unilever, Estee Lauder, Proctor & Gamble, and Shiseido. There is a wide dispersion in total sales among the group with L'Oreal in a comfortable lead (US$40.31 billion) to runner up Unilever (US$25.11 billion). Estee Lauder, once a market darling in the prestige beauty segment, has become a laggard with its shares plunging due to lagging sales in the travel retail channel in Asia and changing global consumer shopping habits taking business away from department stores. It remains a turnaround story. L'Oreal, like other beauty brands, has seen a softening of demand in duty free shopping, particularly in Asia, however it continues to pursue M&A, adding to its roster of luxury brands, now its largest division. Unilever and P&G offer a wide range of consumer goods, including beauty. If you like your face cream with a side of Hellman's mayonnaise, these stalwarts continue to look attractive. Japan-based Shiseido is suffering from weak China demand primarily due to the boycott of its products over the release of radioactive water from the Fukushima nuclear plant. However, demand for beauty products remains strong in China providing good growth prospects longer term. Beauty lovers still prefer to purchase their products in-store where they can enjoy the sensory experience and try new beauty technology. On the beauty retail side, beneficiaries of growing consumer demand include Ulta Beauty which is the largest specialty beauty retailer in the U.S. with plans to expand globally, Walmart, Sephora (LVMH), and Amazon which is expected to overtake Walmart by next year with 14.5 per cent of the beauty market. Given these positive demographic and secular trends, beauty investors may achieve that coveted "neuro-glow" - the one that comes from capital gains. About Rita Silvan Rita Silvan, CIM, is a financial writer and public speaker who specializes in women and investing who has appeared on BNN Bloomberg, CBC Newsworld, conference panels, and other media outlets. She is the former editor-in-chief of ELLE Canada magazine and Golden Girl Finance and writes a blog about money & lifestyle at ellesworth.ca and the Canadian Moneysaver Magazine. |
|||||
| |||||
| |||||
| Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More... | |||||
