COVID-19: Beauty Ingredients Face a Challenging Road Ahead
By Yann Pencole, Director, Kline Management Consulting
With most economists predicting a prolonged recession for the global economy, the usually resilient cosmetics industry will not escape the impact. While the Lipstick Theory implies that consumers will splurge on an expensive lipstick in place of an out-of-reach luxury item during recessionary times, the COVID-19 economic fallout will have a pronounced impact on consumer spending. While many personal care products are essential, there are others that are not, along with products for which consumers will make alternate choices. These changes in consumer consumption will directly impact Kline’s outlook for global personal care ingredients.
U.S. Market on Track for Sharpest Decline in Over 60 Years
Kline expects that consumer behavior and spending in 2020 will shift even more dramatically than the last recession in 2009. The cosmetics and toiletries market is heading toward the sharpest decline ever recorded in the 60-plus years Kline has been tracking the market, with a decline of 5% likely in 2020. During the 2009 recession, the market dipped by 0.8%. The only other time Kline noted a decrease was a 0.3% falloff in 1991 amid another recession.
Consequences of COVID-19 in personal care will likely lead to a reduction by consumers on discretionary expenses (e.g., fragrances, hair styling products), while spending on basic necessities would be relatively protected (e.g., personal liquid soap, hand and body lotions). With this approach, Kline analysts have classified each product according to such consumer needs, from critical essentials or “rescue categories” to non-essentials or “can-wait” categories. The new phenomena of stay-at-home mandates and social distancing are also major factors in 2020 consumption and unique to this recession.
PROBABLE IMPACT ON FINISHED PRODUCTS
Recession-Resilient or At Risk: The Ingredients Outlook
Ingredient demand will closely follow product consumption trends. Consequently, ingredient groups such as UV absorbers, pigments, and hair fixative polymers that are used, respectively, in sun care products, makeup products, and hair styling products could be hit the hardest. Conversely, ingredients such as preservation solutions, emollients, and mild-surfactant products are expected to have sustained if not exceptional growth due to the heightened use of hand soaps and sanitizers.
PROBABLE IMPACT BY INGREDIENT CATEGORIES
|INGREDIENT GROUP||COVID-19 GROWTH OUTLOOK|
|Antimicrobials||Key ingredients of the formulation “chassis,” antimicrobials are essential and therefore will continue to be used across all product categories. Kline also expects additional volumes coming from lotion and hand sanitizer applications.|
|Surfactants||Surfactants are largely used in rinse-off formulations (hair care and cleansers), which are proven to be more resilient products during recessions.|
|Emollients||Typically used in skin care formulation, this group also includes a significant proportion of humectants used in oral care products (40% in volume). Emollients could be impacted by a decline in professional and premium consumer products.|
|Rheology Control Agents||Ingredients mainly used in oral care. Skin care, and hair care products account for a third of overall volumes. While there will be some mild moderation in consumer frequency of use, stable moderate growth is expected.|
|Emulsifiers||Three-quarters of volumes are used in skin care products (leave-on); decline is anticipated due to a fall-off in sales of premium skin care, mitigated by mass, masstige and budget products|
|Conditioning Polymers||These ingredients are mainly used in hair care, followed by skin care, antiperspirant, and deodorant products. Categories will be mainly impacted by the pressure on leave-on hair care products.|
|UV Absorbers||Sun care products will suffer from the negative impact on recreational activities and tourism; therefore, UV absorbers will likely be among the deepest impacted.|
|Hair Fixative Polymers||The consumption of hair fixative polymers— used in hair styling products—is expected to drop due to both a decline in consumer product uses and salon services. This ingredient category could be among the most adversely impacted.|
|Color Cosmetic Ingredients||Formulated in makeup and hair colorants, ingredient consumption will dip due to a decline in use/frequency of use and a sharp decline in the professional salon industry.|
Predicting the Post-Pandemic Future of Personal Care Ingredients (PCI)
Without a doubt, the personal care industry will experience declines across the globe in 2020. For ingredients, Kline forecasts modest growth as global economies work toward recovery over the next several years. Kline’s assessment of the expected CAGR for personal care ingredients for 2018 through 2023 is based on a U-shape recession, followed by a rebound expected in 2021. Several scenarios have been developed, here is the likelihood one:
|Region/Country||PCI CAGR 2019-2023 Forecast in %|
(forecast as of Mid-April 2020)
In our just-published add-on report to Kline's Personal Care Global Market Analysis - Personal Care Ingredients: Impact of COVID-19 on the Global Market, Kline provides its forecasts to 2023 for more than 10 ingredient categories covering best-case, most-likely case, and worst-case scenarios, with supporting assumptions and rationale.
Yann Pencolé provides strategic business intelligence services to Kline’s clients in Europe as well as globally. He is based in Kline London office.