While the prestige beauty category grew 3 percent in 2014, we should not rest on our laurels.

That was the theme Tuesday night at The NPD Group’s 2014 Year in Review and Trend Forecast presented by CEW.  New York’s Harmonie Club bustled with attendees eager for insight from Marshal Cohen, chief industry analyst of NPD Group; James Russo, senior vice president of global consumer insights at Nielsen, and Karen Grant, vice president and global beauty industry analyst for the NPD Group.

Cohen pointed out the larger consumer trends that affect the beauty industry — most notably, a more casual and active lifestyle. “The consumer that is living that so-called more active lifestyle, they want to look the part,” said Cohen. “How do you create makeup to look like they are working out?”

Equally as important is the idea of timing.

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From a merchandising standpoint, the industry follows a 126-year-old rule, shipping spring assortments into stores now when customers are actually looking for winter items. “Ten months out of the year, the consumer buys in sync with the weather,” said Cohen. “I’m not suggesting you make a wholesale change. But I am suggesting you take a few key items and keep that color palette alive a little longer — a longer selling period on a couple of key, strong items.”

For his part, Russo ticked off three areas to address in order to drive business: health and wellness, multicultural and men’s. “Health and wellness is bigger than any one category — it’s bigger than beauty,” he said. Organic beauty products, namely hair and skin care, grew 24 percent last year and are rooted in the overarching consumer trend that Cohen mentioned — a healthier lifestyle.

Multicultural beauty is another huge opportunity that brands are not taking full advantage of.

According to Russo, the Hispanic market posted more growth across all beauty segments than the general population.

“We have been talking about multicultural for the past 18 to 20 years and I would challenge any one organization to say, ‘Yeah, we’ve got it figured out,” he said.

The facts prove the allure of these consumers: they’ve reached $3 trillion in spending, they are highly involved in social media, many are Millennials and 76 percent own a smartphone.

“There’s a very significant opportunity here,” added Russo.

In addition, men are embracing beauty. “Eighty percent of men’s sales within beauty are currently within the three core categories of skin care, hair care and shaving,” said Russo.

“It is not just shaving.”

Russo also noted that brands must look at Millennials differently by dividing the generation into two age groups. In terms of advertising, younger Millennials — 18- to 25-year-olds — prefer a relatable setting in the ad, such as a home, product demonstrations and an explanation of the multiple benefits. On the other hand, 26- to 34-year-olds respond well to glam shots, lifestyle changes and limited product information. Two ads that resonated well with consumers were Tina Fey for Garnier Nutrisse, which drove a 4.5 percent increase in dollar sales, and Troy Polamalu’s Head & Shoulders ad, which generated a 14 percent increase.

Grant whittled her presentation down to four Ps: priorities, people, product and pace. First, priorities are shifting. Fewer consumers are cutting spending, but “it also means that some of that is going to other areas and other categories,” said Grant. For 2014, there was a 4 percent drop in the number of women who shopped for beauty. A small percentage, yes, but it means six million fewer women shopped the category. “While our industry is positive and doing well in many ways, we need to wrap our heads around what else she is looking at,” added Grant. Women are spending in “we” categories, such as dining out, vacations and elements for the home.

In terms of people, Grant cited world beauty as an important trend. Every 16 seconds, the U.S. population grows by one person; every 33 seconds, one immigrant is added. “Our population is fundamentally changing at its roots,” said Grant. “There is both an evolution in the consumer base and the needs. It’s about the world population being right here in the U.S.”

This shift has resulted in product sales. “From the world beauty standpoint, we see that the darker shades — more range in color — is really driving the sales here,” said Grant. In foundation, light shades remained flat, medium tones grew by 1 percent and dark colors grew by 4 percent.

Overall, makeup was strong last year. “The entire unit growth that we saw in the prestige market was because of makeup,” said Grant. “This category is doing extremely well.” Primers and illuminators drove the face segment, while brows accelerated growth in the eye sector. “These subject matter experts — brands like Anastasia — are coming in and really driving categories,” added Grant.

Lifestyle also played out in the categories. While foundation was not a driver of growth, radiant foundations were up 10 percent. In the other face category, bronzers grew 43 percent and alphabet creams grew 49 percent. “We’re seeing strong growth in these on-the-go and easy everyday products,” said Grant.

While skin care grew in terms of dollars, the number of unit sales took a dip for the first time. Masks drove growth, while antiaging sets boosted the sets and kits business. Facial devices without coordinating products grew 39 percent compared with last year.

In fragrance, “we did see that the category has, after years, broken the $3 billion point,” said Grant. “However, we continue to see that units continue to decline. A high average price increase here really helped to boost the category.”

Once again, lifestyle was the keyword. Men’s travel-size fragrances grew 43 percent. For women, travel size grew 37 percent and roller balls increased 64 percent.

Certain categories are quickening the pace of the beauty industry: since 2010, natural and clinical skin care doubled in size, alternative brands more than tripled in dollar volume and artisanal fragrance almost tripled.

“Today, we see that these brand types have brought in almost $1 billion since 2010 and are helping to cause the pace of our market to grow at such an accelerated rate,” said Grant. “It’s a new game with many thrones. We have to keep it simple, nimble, aware, flexible and moving quickly.”

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