Beauty is no longer recession resistant, as evidenced by an announcement Monday from the NPD Group Inc. that total prestige beauty sales dropped 3 percent to $8.38 billion in 2008, versus 2007.
This story first appeared in the March 24, 2009 issue of WWD. Subscribe Today.
Fragrances overall took the hardest hit, declining by 6 percent to $2.68 billion, according to the firm. Total makeup sales were down by 3 percent in 2008 to $3.2 billion, while total skin care sales, a formerly hot category, were flat at $2.4 billion.
Men’s fragrances were down by 8 percent while women’s scents declined by 5 percent, the company said.
“Due to one of the worst economic downturns in the nation’s history, 2008 was different. It was the first year each [prestige] beauty category truly struggled,” the firm stated.
“The economic realities of 2008 have created fundamental shifts in the behavior of our consumers and the way they approach beauty,” said Karen Grant, NPD’s senior global industry analyst and vice president of beauty. “In 2009, we recognize that while consumption will not stop for prestige beauty, it has changed. It has become and will become more careful, more selective and more meaningful.”
NPD noted that, “New fragrance launch activity was down in total [in 2008], stemming from [a] 20 percent drop” in new men’s fragrance launches, compared with 2007.
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On the other hand, total new women’s fragrance launches, like Viva La Juicy, Estée Lauder Sensuous, Ed Hardy and the Harajuku Lovers collection, were up by 9 percent in 2008, but it was still not enough to drive the category into positive territory. The number one fragrance overall, at least since 2005, has been Acqua di Gio Pour Homme, according to Grant. Behind Acqua di Gio for 2008, was Estée Lauder’s Beautiful, followed by Coco Mademoiselle, Dolce & Gabanna’s Light Blue and Chanel No. 5.
“Historically, women’s fragrance has always outsold men’s,” Grant said in an interview. “That’s not the case today.”
One bright spot was gift sets priced from $60 to $100. According to NPD, higher priced fragrance gift sets have become the largest part of the gift set market — representing 65 percent of gift set sales in 2008, compared with 40 percent in 2005. In addition, the firm added, this segment has grown in both dollar sales, which were up by 12 percent, and units, which were up by 11 percent. These gift sets posted double-digit growth in 2008, the company added.
In makeup, the “decline was most surprising,” the group stated. “2008 marked the first time makeup products posted a decline, dropping 3 percent in dollar [sales] and 6 percent in unit [sales]. All segments in the makeup category showed declines including face, eye and lip segments.”
“The biggest shock to our system was makeup,” said Grant. “That’s where we got blindsided.” She estimated that for eight of the past 10 years, “makeup has been the leader of growth. The makeup decline was the biggest shift,” she added, noting that makeup had been up by 3 percent for 2006 and 2007.
“We’re post-peak on some key trends that excited people around the category,” said Grant “like the makeup artist trend.” Also “we’ve been seeing that some of the ‘fun’ areas, like the eye shadow and lip gloss categories have shifted away — we began seeing erosion going on in those categories.
“There’s saturation of brands, a lot more sku’s coming in,” she continued, “so productivity on counter has dropped off.”
While prestige skin care was even in 2008 compared with 2007, on a dollar share basis, it gained a share point and captured 29 percent of the market. Makeup was the biggest category, with a 38 percent share of the market, as fragrance held on to a 32 percent share.
“Across all three prestige beauty categories,” Grant stated, “there were areas that experienced growth despite overall soft performance.” Within prestige skin care, there were some “beacons of light.” These included segments like antiaging, a category that grew. Products that offered specialized benefits such as allergy and redness relief and whitening/brightening effects were up by double digits. Also, “premium priced” face products with an entry price point of $70 increased by 4 percent in dollars from 2007.
Not doing well in skin care are the body and sun categories, which “have been challenged,” said Grant. Also, some facial treatment products, like eye care, facial cleansers and toners showed declines,” she added.
Still, “The higher end of the market and designer-focused brands seem to be having greater appeal,” said Grant.
Also, natural, spa and wellness skin care brands showed the strongest dollar growth, up 6 percent versus the year prior to $304 million, NPD stated.
“The biggest opportunity for expansion is increasing usage [and] bringing the buzz back among the younger consumer,” said Grant, who added that “naturals and mineral-based products have room for growth and greater usage.” She noted that bronzers experience double-digit growth, while certain face products and innovative mascaras “seem to be more stable and [growing].”
Meanwhile, “The mass market is outperforming prestige in quite a few areas,” said Grant. “While mass had unit sales declines, some of the higher-end products in mass were selling well and gave mass an overall [dollar] increase.