As we head into the new year having binged on list after list of expert trend forecasts, it’s time to put away the crystal ball and focus on those that are evolving the beauty category. Like most things, trends have a life cycle. If you need further validation that the ideas below have evolved from trends to the new norm, all you need to do is look at the M&A activity related to each. One could argue that once it moves from the realm of niche entrepreneurial brands to the playground of strategics, this is the tipping point of a trend.

Using the activity of the financial community as the lens that identifies the tipping point, below are five “trends” that are fundamentally changing the beauty landscape.

1)  BEAUTY AS HOLISTIC HEALTH CARE: As the consumer perception of aging morphs from chasing the elusive fountain of youth to aging well, and as millennials focus on prevention rather than repair, the focus has health at the center of the conversation. This shift is the result of the merging of wellness and beauty, and evolution in the beauty lexicon. Anti-Aging as a term is out, and Self-Care as a concept is in. The implication of this shift in the consumer mindset opens the borders of the conventional beauty landscape to include competition from the food and beverage, health, pharmaceutical, and fitness categories, all of whom are grasping for their piece of the beauty market through the inside-out paradigm.

Trends Driving the Evolution:

  • Personal care and self-care devices
  • Probiotics
  • Athleisure
  • Nutraceuticals
  • Sleep hygiene

Data Points:

  • Saves for self-care increased by 537% on Pinterest.
  • According to Mintel, millennials are eager to try beauty from the inside out through wellness-oriented nutritional supplements designed to improve hair, nails, or skin. The goal is healthful, glowing skin, and millennials are looking for clean ingredients that will improve the overall health and appearance of their skin in the long term.
  • People spend $3.7 trillion on their wellness every year, but they spend $8 trillion on homes that often encourage unhealthy lifestyles. Then we spend another $7.6 trillion on health expenditures to fix those problems. The math doesn’t add up: $20 trillion not directed towards making us healthier.
  • JWT found that 58% think of sleep quality when asked about their health.

M&A Validation:

Brands to Watch:

  • Ritual
  • Mother Dirt
  • Sweat Cosmetics
  • Hayo’u

The Opportunities: This cross-pollination will open up new points of distribution for beauty brands, and the emergence of brands that transcend categories to provide a holistic beauty offering and allow for interesting collaborations to add context and activate brands.

2) GREEN, CLEAN, AND SUSTAINABLE: I believe we can all agree these terms are no longer a trend or a differentiator for beauty brands, but rather a consumer mandate. The natural trend has become a way of doing business, and encompasses more then positioning or distribution. It now includes clean labels, ethical credentials, sustainable sourcing, and transparency. Conscious consumerism has resulted in a highly educated public that scrutinizes safety and efficacy along with the ethical considerations in a product’s development, and all the while demanding transparency. If consumers uncover that you do not walk the walk as a brand, they will respond with not only their wallets, but also their voices. The misstep NARS made with their expansion into China and backpedaling on animal testing should be a lesson to every brand owner.

Trends Driving the Evolution:

  • Conscious consumerism
  • Mainstreaming of natural products
  • Consumer awareness about health and wellness

Data Points:

  • The organic personal care market is expected to hit $25 billion by 2025.
  • According to Mintel, beauty products with simple, recognizable ingredients such as vitamin C, seaweed, and collagen appeal to the 57% of millennials who say they’re confused by the different ingredients used in skincare products and the 81% who want to keep their routine as simple as possible.
  • Searches for vegan skincare have grown by 83% year over year on Google in 2017.
  • Unilever reported that their “Sustainable Living” brands are growing more than 50% faster than the rest of the business and accounted for 60% of growth in 2016.
  • Kline & Company predicts that the synthetic cosmetics sector will decline in the next two years, while the natural skincare segment will grow. Already, the firm found, naturals have grown by 7% in the US, compared to a 2% rise in the overall beauty market in 2015.

M&A Validation: 

Brands to Watch:

  • Biossance
  • Misiluki
  • Goldfaden M.D.
  • Ursa Major

The Opportunities: The biggest opportunities perhaps lie in packaging design and on the supply side of the beauty industry. It’s the trickle-down theory. The consumer’s commitment to living clean, green, and sustainable lives will drive brands to deliver products that fit this bill in order to maintain or capture market share and in turn brands will demand more from their design and supply chain partners to make it happen.

3) PERSONALIZATION MAINSTREAMED: Personalization is less of a trend and more of an innate human desire. Was there ever a time when a consumer would choose a mass-produced product over a personalized offering if all things (especially price) were equal? The personalization “trend” has been around as long as the beauty industry. While brands like Estée Lauder’s Prescriptives and 3Custom Color tried to capture this opportunity, they were simply too early. Up to now, two things relegated personalization to the realm of luxury—cost and scalability. Smart technology and devices along with app-based diagnostics have unlocked the personalization conundrum—it has evolved from a trend and gimmick to an expectation and viable business model.

Trends Driving the Evolution:

  • Brand participation in personalized experiences amplify the brand identity
  • The “retail apocalypse” has retailers quickly evolving into experiential formats
  • Technology has made customization economically viable
  • Big data is driving and informing brand and product development

M&A Validation:

Data Points:

  • 50% of consumers expressed interest in purchasing customized products or services
  • 1 in 4 consumers are willing to pay more to receive a personalized product or service
  • 22% of consumers are happy to share some data in return for a more personalized customer product or service
  • 70% of consumers in the US now expect personalization from online businesses

The Opportunities: Personalization may be one of the saviors of brick-and-mortar retail because it delivers on the consumer’s desire for experiential retail environments. Another opportunity lies in businesses that facilitate data capture and synthesize the information. Consumers are willing to part with an incredible amount of information in order to receive a customized product or experience. For brands that understand how to mine the data, this presents the opportunity to make informed business product launch decisions.

Brands to Watch: 

  • ShampYou Custom Shampoo
  • Nip + Fab
  • Loli Beauty

4) DISTRIBUTION: There was a time in the not-too-distant past where there were very clearly defined channels and very strict (if often unwritten) rules of engagement. A confluence of factors (economic, technology, consumer behavior, and niche innovations) has removed any concept of structure when it comes to distribution. One might even say that anyone that tries to play by the rules is taking a huge risk. What has become clear is that consumers are omnichannel. They don’t care where they buy beauty products as long as it’s convenient and the product offering meets their need in the context of the distribution outlet. For example, today you can find e.l.f in branded stores, FDM, airport news stands, gyms, bookstores, subscription boxes, online, and in apparel stores like Old Navy.

Trends Driving the Evolution:

  • Social selling
  • Consumer path to purchase
  • Brands focusing on the direct-to-consumer channel
  • Specialty apparel retailers entering into the beauty category

Data Points:

M&A Validation:

The Opportunities: The beauty landscape is wildly competitive, and many traditional beauty outlets like department stores are on shaky financial footing. If brands approach their distribution strategies from the perspective of where their clients shop and category adjacencies rather then where beauty products are traditionally sold, they can create a financial model that is not dependent on one channel of distribution for success.

5) NICHE IS BIG BUSINESS: Even Estée Lauder could have been considered to be a niche brand at one point, but technology and social media have changed the startup landscape. Niche businesses are not a trend as much as they are part of  a business cycle, but today’s niche brands have the ability to scale faster then ever before, fueled by technology, social media, and a direct-to-consumer focus. Today’s niche beauty brands are rewriting the rule book and setting new expectations for consumers. The paradigm at retail has flipped with established brands fighting for the consumer’s attention sitting next to indie brands on the shelves of specialty retailers like Sephora and Ulta. The era of the mega-brand may be over and permanently replaced by community-minded niche brands.

Trends Driving the Evolution:

  • Millennial and Generation Z brand preferences
  • Experimental consumers’ demand for individualism and uniqueness
  • Brand building via social media
  • The shift by strategics to acquire and build niche brands

Data Points:

  • According to Kline Group, beauty indies are the most sought-after brands by cosmetics marketers and retailers alike. Recording high double- to triple-digit growth rates, these privately owned gems outpace total market growth in the United States by over five times.
  • Marc Rey, president and chief executive of Shiseido Americas, also points out that sales growth of 42.7% in the independent segment is far outstripping that of mainstream brands.

M&A Validation:

The Opportunities: The market is inundated with indie brands all who have the dream of scaling and perhaps an exit. There is an opportunity for technology platforms, suppliers, and advisors that have the ability to provide these business category experiences and access partnership opportunities and distribution.

Brands to Watch:

  • Him
  • Farsali

Photo: Matthew Schwartz via Unsplash