Irina Barbalova, Global Lead of Health and Beauty at Euromonitor International, opened the BeautyMatter FUTURE50 Summit with a bird's-eye view of the evolving global beauty and wellness landscape. Overall, strong demand, promising innovations, and eager consumers across the globe have led to remarkable growth in the beauty industry. Such strong momentum has accelerated the speed at which trends turn over in the beauty and wellness landscape. To maintain relevance and authenticity in this shifting market, brands must embrace novel concepts that intersect with longevity pursuits, innovate in the areas of physical and psychological well-being, and cultivate inclusive wellness values.
Supply and Demand Drivers
“It was a spectacular performance,” Barbalova says of beauty’s growth in 2023. The beauty and personal care industry outperformed expectations for 2023, driven by mass and premium segments, with steady growth in key skincare, fragrances, color cosmetics, and hair- care categories. According to Euromonitor, global beauty and personal care sales reached $569 billion globally in 2023, growing by 9.3%, driven by premium and mass segments, outpacing last year’s growth of 6.8% in 2022.
“A lot of the dynamics behind the positive performance in 2023 was upward consumption rather than price driven and sales growth increases,” says Barbalova.
An impressive outcome of 2023 was that mass and premium beauty and personal care segments exceeded last year’s growth (in both current and constant terms) without cannibalizing the other segment’s growth. Mass beauty and personal care grew 3% constant, while premium beauty and personal care grew 4% in current terms in 2023. Globally, rising consumption contributed to positive sales performance in 2023 (whereas price increases played a larger role in 2022), indicative of strong consumer demand across all price tiers from value and private label to superpremium and luxury.
Premium beauty and personal care exceeded mass growth in 2023, but mass still accounts for one-third of sales. “Premium growth will come from premium fragrances,” predicts Barbalova. "Western Europe and Asia combined will contribute one-third of the overall value in premium beauty.”
According to Barbalova, a heightened demand for derma-cosmetics, premiumization in the bodycare segment, and a shift towards products with multifunctionality drove growth in the skincare segment.
Skincare drove growth in the mass segment in 2023 and added the highest gains to the overall beauty segment. Color and haircare were the second highest in terms of gains. Fragrance, however, stood out with a double-digit performance in 2023, Barbalova noted. Unisex and premium fragrances, an alignment with wellness, and a transition to a more ritual-centric consumption drove this growth.
“Consumers are seeking to build a fragrance wardrobe to match certain moods and occasions,” says Barbalova.
What stood out, more specifically, in fragrance’s growth was China. China's fragrance market has doubled since 2018 and is increasing its penetration further. Consumers there are looking for niche or so-called “salon” scents. Brands like Documents and To Summer, which identify with more culturally embedded values rather than scent profiles, are popular.
Looking at the top countries, the US, China, and Brazil are expected to maintain the top spots. The US grew quite well in 2023 with double-digit premium growth, in contrast to the UK, which is still grappling with a lingering cost-of-living crisis. Premium decelerated from 2022 to 2023. Mexico jumped up in growth, and South Korea is set to replace Italy as a top 10 market in 2028, driven by a sustained and massive appetite for luxury beauty. India grew double digits across almost all categories.
“Consumers are inundated with product choices and sometimes overwhelmed with technology and the burden of information at their hands,” says Barbalova. “Post-pandemic, consumers started looking for more streamlined routines, favoring quality over quantity and experience over product.”
All of these shifts point to brands having to streamline routines, simplify them, and make them more experiential. At the same time, brands must deliver on the efficacy that consumers are looking for and instill the mental and emotional support that will give consumers the ability to regain control in an increasingly chaotic world.
Evolving Consumer and Business Drivers
“New technologies and digitalization are enabling high precision and prevention, tech-enabled wellness, and data-driven self-enhancements,” says Barbalova.
In a rapidly expanding wellness-oriented portfolio, the multiple dimensions and perceptions of consumers' attitudes toward health are driving the growth in the wellness segment. Issues of the mind are as important as issues of the body. Mental and emotional well-being are as high a priority as physical health.
Investing in self-care is not new, Barbalova argues, but what is new is how consumers are approaching it. “Consumers are looking for smarter, more effective, and hassle-free ways to optimize their health and optimize their appearance,” she says.
AI and digitalization allow for the distillation of vast amounts of data that provide consumers with that personalization they’re after. Forty-six percent of consumers are optimistic about their future health, and 36% plan to increase spending on health and wellness. Personalization will involve more precise monitoring, more science-backed credentials, and evidence-based claims, substantiating those higher price points. Consumers will share their personal data in order to gain access to some of these simple personalization solutions enabled through AI and digitalization. A Euromonitor International survey found that 47% of digital consumers agree that personalized experiences are the most important incentive for sharing personal information.
So, how are businesses responding to this consumer need? Businesses are responding on both ends of the spectrum by investing in new science and research to secure technology patents and stay competitive. Additionally, businesses are enhancing consumer experience, which is central to some consumer-centric commerce-related strategies. Making that experience consistent across channels drives acquisition and retention. Forty-eight percent of beauty industry professionals identify personalized experiences as one of the top trends influencing digital commerce strategies.
AI stands out as the most impactful technology that will influence the beauty industry in the next five years. Although the beauty industry is more conservative in its attitude toward generative AI, it’s quickly becoming a part of our everyday lives. It’s facilitating business decisions, inventory management, supply logistics, and so much more.
In terms of innovation, there’s a greater focus on new formulations and ingredients. There are two reasons for this: the pervasive wellness movement and the focus on health and solution-oriented products. A focus on “hero ingredients” that help consumers pursue those health goals is key.
Key Strategic Priorities
Brands have the opportunity to factor in more emotive benefit expressions that prioritize function and emotion equally. Brands that recognize the evolving health, wellness, and longevity pursuits will connect with consumers. Embracing the opportunity from an inclusivity standpoint, particularly in the burgeoning sector of women's health, will also lead to better acquisition and retention.
“The prioritization of mental health and emotional health really drives those opportunities for emotive benefit expression,” says Barbalova. “This means more functional ingredients and formulations that really associate with those mental-emotional need states.”
Products that promote mood enhancement, better sleep, less stress, and mindfulness are becoming popular with consumers. “From a digital and tech perspective, we're seeing technologies evolve to be able to track and recognize emotion in what we call emotion analytics,” says Barbalova. “A lot of that is not just tailoring certain products to match certain emotions, but also creating technology that is aiding emotive therapy and mental support.”
Barbalova gave the example of the skincare brand Selfmade, which features a hero ingredient derived from the Helichrysum italicum flower that’s clinically proven to reduce cortisol levels. Selfmade believes that the reduction of stress levels can enhance skin health.
Last but definitely not least, there is also a huge opportunity in the women’s health space. Women's health is hugely underfunded, under-researched, and underserved. Recently, the conversation around women's health is accelerating, driven by a lot of attention from businesses, the medical community, and governments. The opportunity in the consumer products and services domain is affecting multiple industry sectors, like apparel, fem-tech health, beauty, nutrition, and supplements. Understanding the skin and hair hormonal imbalances and what outcomes they produce is huge for the beauty industry.
Female-specific health concerns are not only about gender/sex-specific gynecological, fertility, or menopausal concerns. They are often accompanied and underpinned by changes in life stages and other related general health concerns. It is critical to explore women’s specific health issues in the context of wider general health concerns and life stage progression. Educational empowerment and recognition of physical, emotional, and social needs across all life stages will amplify trust and empathy and uncover unknown needs. The market around women's health solutions is so fragmented, and it's really about consolidation through retail platforms, partnerships, and collaboration.
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