Beauty is back in business with 2021 results reversing the losses that several categories, such as fragrances and skin care, faced in the year prior. The U.S. beauty and personal care market surpassed $85 billion in retail sales in 2021, an increase of $7 billion from 2019 sales levels. This is the market’s strongest performance in the last 10 years, with no signs of slowing down given the 6% CAGR forecasted for the market through 2026.
According to our Cosmetics & Toiletries USA report, the 10% retail sales gain over the last year was fueled by various factors such as the return of several product classes like makeup, which were in a downturn in recent years, as well as foot traffic re-emerging in brick-and-mortar. Increased consumer spending levels driven by a combination of greater demand for beauty products coming out of the pandemic and rising costs due to supply chain challenges translating to product price increases also contributed to the sales gain. Growth lies ahead, but what will be some of the most important trends defining beauty in 2022 and beyond?
The Makeup and Fragrance Boom
Cosmetics and fragrances are back on the radar for consumers and retailers alike, with escalating sales of these products fueling total industry growth now and in the future. Makeup, which jumped 12% in 2021, is moving in a direction where hybrid experiences, or skin-improving makeup, are becoming more common when it comes to product innovation. Recent launches include Kosas’ Revealer Skin-Improving Foundation SPF 25, with brightening and plumping claims, and legacy brand Chanel’s new N°1 de Chanel Revitalizing Foundation, with moisturizing and plumping claims. Meanwhile, fragrances, up 25% last year, are observing significant activity within the luxury segment and witnessing an influx in male consumers. This growth trend is further supported by recent results from market leaders; for instance, L’Oréal’s recently released Q1 2022 sales report showed that makeup was a top growth contributor and its fragrance portfolio continued to drive the performance of its Luxe division in North America.
M&A Activity Heating Up
Large deals have returned to the beauty space. Last year was characterized by a number of beauty deals, including Estée Lauder’s increased ownership in DECIEM and L’Occitane’s majority stake acquisition of Sol de Janeiro. Already in 2022, there have been acquisitions, both large and small. Some of these involve indie beauty brands such as Ilia Beauty, up 200% in 2021, and Tula Skincare, up 41% last year and recently acquired by P&G—which had been previously identified as strong acquisition targets in our Beauty Indies: Analysis of Brands to Watch report. Strong competition for market share among the leading beauty companies will drive M&A activity moving forward, as these companies seek growth via acquisitions of fast-moving, niche brands that are looking for resources to better access consumers, new channels, and product innovation.
Retailers Investing in Beauty
Our analysis of foot traffic data from SafeGraph reveals that Q1 foot traffic was up 25% versus year ago and up 14% from 2019 levels for select beauty retailers such as Sephora, Ulta, and Bath & Body Works. With consumers back to shopping in stores, big retailers are now transforming their beauty operations to keep shoppers coming back. Mass retailers like Target and Walmart are tapping further into beauty via store remodels and partnerships with premium beauty retailers, including Ulta (Target) and Space NK (Walmart).
The Cosmetics & Toiletries USA database is now available with a written report to be published in Q2 2022. This flagship study covers sales for all product classes and 19 product categories by historical and 2021 retail sales, leading brands, and outlets, plus an outlook to 2026. To uncover more brands that could be the next M&A superstars, please refer to our upcoming Beauty Indies: Analysis of Brands to Watch, in which we profile several compelling indie brands in China, Europe, and the United States