Global investment bank Harris Williams recently surveyed 1,250 beauty enthusiasts to understand their current spending habits and outlook, what they prioritize, and how they discover and shop for brands and products, resulting in the 2023 Harris Williams Annual Health & Beauty Survey.
“Overall, sustained demand in health and beauty, coupled with evolving consumer preferences and lifestyles, will support increased M&A activity across the sector,” says Kelly McPhilliamy. “Socially conscious and digitally native brands are attractive targets for companies looking to increase presence with younger consumers.”
The report summarizes key findings from the research and the implications for M&A investors. Diving into data often surfaces interesting insights and helps reaffirm trends we're tracking. BeautyMatter takeaways:
- Clean beauty is losing its grip on the beauty narrative as efficacy and functional benefits become the focus among consumers.
- Brands are embracing AR and AI technologies, seeing the impact on engagement, conversion, and sales, but these technologies are not important to consumers when choosing brands and products.
- The adoption of daily use of SPF is increasing as indicated by the use among the youngest cohort.
- In-store is the preferred shopping channel, closely followed by Amazon.
- Fragrance is a top self-care category, over-indexing in spending among the youngest cohort.
McPhilliamy shared, “Ninety five percent of consumers plan to spend the same or more on beauty and personal care in the coming year. Similar to last year’s survey, we found the most spending is on hair and skincare. However, we’re also seeing higher spending in the cosmetics, supplements, and fragrance categories. This will give strategic buyers and financial investors greater confidence in the sustainability of demand for the broader industry, as well as spur interest in a wider array of categories that will drive M&A activity across beauty and personal care subsectors.”
- 86% of consumers surveyed are spending the same or more than 2022, with 50% of those under 55 spending more vs. only 30% of consumers over 55 spending more.
- The highest spending is among consumers 18-34 years old, 46% spend $150 per month.
- The top three drivers for increased spending are inflation, maintaining wellness, self-care routines, and experimentation.
Product Considerations and Selection Criteria
- Product efficacy (91.9%) and functional benefits (89.4%) outweigh clean and safe formulations (80.4%) in selection criteria, where they were equally weighted last year.
- The bottom three considerations are the seriousness of the science (64.4%), ethical business practices (61.5%), and inclusion of specific ingredients (56.4%).
- Trust and affordability rank slightly ahead of science backing and ethical business practices, with 55+ consumers valuing trust more then younger cohorts, and 18- to 34-year-olds caring more about ethical practices.
- Daily haircare (79.4%) and skincare (77%) lead higher expected spending by category.
- Eye, lip, face cosmetics (64.4%) outrank foundation/complexion cosmetics (59.6%).
- Spending on personal fragrance is significantly higher among 18- to 24-year-olds (62%) vs 55+ (45%).
- Men's grooming products (63%) top the list when it comes to brand loyalty, followed by daily skincare (61.9%) and supplements (61.4%).
- Nail polish (36.2%) and home fragrance (39%) have the lowest brand loyalty.
Skin and Hair Health Priorities
- Active ingredients (51.5%) rank ahead of clean and safe (49.9%) followed by daily SPF (49.3%).
- Nearly 60% of 18- to 24-year-olds prioritize daily SPF vs 48% of respondents over 35.
- The beauty tech trend doesn't track in this survey, as using an app to follow skin health progress (9%) is the lowest in priorities ranked.
- Younger consumers prioritize protective hair tools and hair treatments twice as much as those 55+.
“Three years post pandemic, it’s clear that maintaining self-care routines remains important - it’s the number one reason for 18-24 year olds’ higher spending this year," said McPhilliamy. "As we dug into self-care priorities, personal fragrances and home fragrances topped the list. This helps explain the high level of M&A activity we’ve seen in the category, and with the generational dynamics, suggests fragrances will remain a sought-after product category for strategic buyers and financial investors.”
- Personal (55.2%) and home (51.4%) fragrances top the list of self-care priorities, followed by bath and body treatments (46.6%).
- 18- to 24-year-olds' top self-care spending across fragrance, skincare devices, and sexual wellness products.
- 35- to 54-year-olds (42.4%) only slightly edge out 18- to 24-year-olds (41.2%) when it comes to personal cleansing wipes.
“It was interesting to see the meaningful influence authorities have on consumer choice. For example, skincare brands founded by dermatologists are preferred nearly 4x more than skincare brands founded by other types of creators. Buyers and investors in beauty and personal care will be choiceful in the founders they back and seek those with an authentic brand story, high performance products, and a strong community," McPhilliamy shared.
She continued, “Younger consumers between 18 and 34 are almost twice as likely than those over 55 to care whether the brands they buy support the environment and social causes. As strategic buyers and financial investors focus on brands targeting Gen Z and Millennial consumers, it will be critical to emphasize their ESG strategies and how these initiatives resonate with those groups.”
Brand Selection Criteria
- The top three considerations are quality/deliver results (88.6%), clean/ethical/transparent (69.4%), and environmental stand (48.6%).
- Stand on social issues (36%), minority owned/founded (30.2%) and celebrity/influencer endorsed (21.7%) ranked the lowest in brand selection criteria.
- Younger consumers care deeply about the environmental and social stances of the brands they buy.
- Brands founded by professionals like dermatologists (61.9%), hairstylists (46.2%), and makeup artists (39%) far outrank those founded by celebrities and influencers.
Product and Brand Discovery
- Personal research (62.3%) and in-store or online browsing (57.4%) are beauty enthusiasts' top discovery channels.
- 18- to 24-year-olds over-index on celebrity/influencer recommendation (61%) and TikTok (53%).
Beauty and Personal Care Trends
- Top three trends are skin health (69.3%), hair health (64.8%), and personalization (64.6).
- Clean beauty (57.1%) ranks fifth in this survey behind proven/functional ingredients (61.7%).
- Utilizing AI (29.5%) and AR (26.5%) rank lowest.
Shopping Channel Preferences
- In-store mass retail (87.1%), Amazon (79.6%), and in-store beauty retailer (79.5%) are the top three channels.
- The least popular channels are social media (35.9%), day spa (30.1%), and TV shopping (28.6%).
- Among online channels, Amazon (79.6) and online mass retailer (76.8) are neck and neck, followed by online beauty retailers (73.9%), brand website (71.3%), and online-only retailers (49.7%).