A ‘Lip-Glossy’ Recovery In the Forecast for 2002

he recession seems to have relinquished its grip on the beauty/personal care industry as the cosmetic trade recovers. After faltering sales last year, beauty products are poised for a comeback especially at mass outlets. The biggest question to be answered is not whether or not consumers will buy cosmetics, fragrances and personal care products—they clearly will—but where they will go to find them?

Overall Beauty/Personal Care Sales to Rise

Datamonitor, a New York City research firm that measures sales across all channels, predicts slightly improved growth of 3.2% to $34.6 billion for U.S. cosmetics and toiletries in 2002. Skin care and makeup are expected to expand the most, up 3.6%, followed by shaving products and hair care, up 3.3%.

Men and women’s fragrances should increase 2.8%, and personal hygiene, such as bath, deodorant and soaps, are expected to rise 2.3%.

High-End Market in Recovery

Prestige brands are showing moderate progress with most segments, except women’s fragrances, forecasted to increase between 3% and 5% for this year, according to NPD BeautyTrends, Port Washington, NY, figures. This compares to marginal growth of 1.8% last year (2001) for all department store beauty products.

Estée Lauder results also displayed improvement for the last few months. The company sales increased 8% worldwide for the quarter ending June 30, 2002; more robust results than the full fiscal year increase of 2%. Yet the majority of revenue has come from recently acquired and trendy brands such as Aveda and Stila. For fiscal 2003, the company expects worldwide sales to expand 5% - 6%.

Analysts cite intense competition and a challenging retail environment in department stores for the company’s patchy results. Richard Kunes, Estée Lauder chief financial officer, said he expects department store sales to account for a less significant portion of sales in three to five years—60% to 70%—versus 80% currently.

Specialty stores such as The Gap and Bath & Body Works are developing or broadening their own store brands. Ann Taylor’s success with private label has encouraged an expansion of these lines, and Victoria’s Secret has priced their store brands on the same scale as prestige products.
Sephora now boasts 73 stores in the U.S., up from 14 in 1998. Global sales for the company rose 21% in 2001. Specialty stores are the primary venue for 10% of beauty products consumers, points out Wendy Liebmann of WSL Strategic Retail, New York City.

The latest entry in the specialty retail race is Aura Science, a jointventure created by Limited Brands and Shiseido. It has opened six stores since April 2002, with three more scheduled by end of this year (see p. 24).

Mass Markets Surge Ahead

A rosier outlook and overall improvement are on the horizon for the mass market in 2002 as food, drug and discount stores draw more value-conscious consumers. In contrast to the past two years, sales improved dramatically for most beauty care products in the first six months of 2002.

Chicago-based Information Re­sources Inc. (IRI) reports that taken as a whole, personal care dollar sales for the mass market (in supermarkets, drug and discount stores excluding Wal-Mart) were $19.9 billion for the 12-month period ending July 2002. For the first half of 2002, personal care sales increased 3.2%, a noticeable improvement over growth of 2.2% in 2001, and 2.5% in 2000. Personal care sales include the bath, baby, dental, deodorant, hair, shaving and suntan lotion categories in addition to beauty care products.

Skin Care Leads the Way in Mass

Skin care continues to be a bright spot, up 6.1% in the first half, similar to 2001’s increase of 6.9%. Hand and body lotions also benefited from comparable growth trends in 2002.In an effort to distinguish their brands from advances in the mass market, prestige skin care companies, such as Shiseido, La Prairie and Kanebo, are now creating super-premium lines retailing at $100 or more.

Men’s fragrances and shaving lotions fared admirably as well, advancing 4.8% in the first half after two years of declines of more than 2%. Even women’s fragrances results improved, from declining trends in previous years to flat sales for 2002, according to IRI.

Mass Color Cosmetics Rebounds in ‘02

Color cosmetics is one of the fastest growing beauty categories in mass channels, up 5.9% in dollar sales for the first half of 2002.These results are a complete turnaround from previous years, with trends almost 10 times higher than 2001 (0.6%) and five times greater than in 2000 (1.2%).

Color cosmetics growth had been below the total personal care category average until the first half of 2002. The sluggish category performance in 2001 forced Proctor and