Sales of prestige beauty products hit a new high

By Simon Pitman

- Last updated on GMT

Related tags Cosmetics

Anti-aging and celebrity endorsements are continuing to fuel a
significant rise in sales of prestige beauty products in the US,
with the make-up segment providing the main driving force in a
market now valued at $8.2bn.

Overall the market grew by an average of 4 per cent in 2005, but it is the makeup segment, which currently accounts for sales of $3bn and 36 per cent of the market, that grew by an impressive 6 per cent, according to a new report from the NPD Group.

The jump in sales for this category means that it accounts for the same market share as the once dominant fragrance sector, which is valued slightly lower at $2.94bn, while the skincare segment grew by 2 per cent to reach a market share of 27 per cent valued at $2.2bn.

NPD's BeautyTrends has been tracking the highs and lows of the beauty industry for almost a decade, with each of the three prestige beauty categories evolving in quite different ways during that time.

One of the primary growth factors for the prestige beauty market has been the on-set of the first of the baby boom generation reaching mature consumer status. Along with the higher income levels bought about by early retirement and children leaving the home, there is also an increasing desire amongst this generation to look and feel good.

As a consequence expenditure on anti-aging skin care products is one area where growth has been phenomenal. And the prestige beauty segment bears evidence that such consumers are willing to pay top dollar for quality products that they consider to be effective.

"Consumers refuse to age. Most women want to look as young as possible, and they are constantly searching for any solution that promises that miracle,"​ said Karen Grant, senior beauty industry expert with The NPD Group. "Consumers are willing to pay a premium to get it,"​ she added.

As a consequence of this it is the search for eternally youthful skin that is driving this category, with sales of prestige anti-aging skin care products leaping from $500m in 2001 to $664m in 2005, reflecting a 33 per cent jump in sales, compared to sales of ordinary prestige skin care products that jumped just 4 per cent during the same period to reach $415m.

And with the average price of an anti-aging skin care product coming in at $66 - two and a half times the cost of a regular prestige skin care product - it seems that consumers will pay just about anything to fend off those dreaded wrinkles.

In the make-up category nearly all segments reported gains, including the top three - face, eye and lip segments. According to NPD, the face segment was up five per cent; the eye segment was up 10 per cent; and the lip segment was up one per cent - with all three segments representing nearly 95 per cent of expenditure on cosmetics.

"It used to be that makeup was dominated by a handful of major brands, now artist and alternative niche brands are reshaping the industry,"​ said Grant.

It seems that putting a professional or well known face to a product really works in the prestige beauty category, a phenomenon that has similarly penetrated the fragrance category, where sales are still being increasingly driven by star sponsorship.

NPD says that sales of Celebrity fragrances now represent nine percent of the top 100 women's fragrances and generated about $150 million, three times what they generated in 2000.

However, Grant says that the number of launches within the fragrance category could give reason for concern. She points out that there have been more prestige fragrance launches since 2003 than all the launches combined from 1998 to 2002. With life cycles for these products becoming ever-shorter, this raises the issue of sustainability for the category.

"In the past, a new product launch would generate healthy sales for two, three, even five years,"​ said Grant. "In 2005, with sales nearly breaking through the $3 billion dollar mark, the average new launch was down to $0 dollars within 12 months,"​ she added.

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