Contraction of US cosmetics industry set to rebound by 2014

By Simon Pitman

- Last updated on GMT

Related tags Private label Cosmetics Us

With economic hardship and uncertainty set to persist as 2011 unravels, researchers at the Demeter Group believe that the US cosmetics and toiletries industry should start to rebound by 2014.

After two years of contraction, the industry is now valued at $58.3bn, economic sluggishness means that the hardship is likely to continue as cosmetics consumers look set to keep a tight reign on their spending for some years to come.

Demeter Group’s Beauty Industry 2010 Review and 2011 Outlook, gives a detailed look at economic conditions in the US, cosmetic market trends and an individual account of the five key market categories.

Trading down to inexpensive products

In the last couple of years many consumers have traded down from up market or luxury cosmetic products, to lower-priced mass market and private label alternatives in an effort to make their household budgets stretch further.

In the first half of 2010, all the pointers suggested an economic recovery, but this was short-lived, as the second half of the year saw further economic contractions that have continued to affect the retail segment in the US considerably.

Currently unemployment amongst US adults aged under 30 is at a record level of nearly 20 percent, while foreclosures on homes were at an all-time high towards the end of 2010.

Market opportunities still exist

But despite the economic gloom and shrinking market size, the team of researchers at Demeter believes that there are still several areas within the cosmetic and toiletries market where there are significant opportunities.

One specific area is what the research company refers to as ‘new value shoppers’. These consumers are said to exist across all demographic profiles in the US and are willing to pay higher prices for products that are perceived to be of better quality and increased efficacy.

Alongside this there has also been a marked increase in consumers switching to private label and cover label brands, which has already been well documented within the industry in the course of the past two years.

Private label growth likely to be sustained in 2011

However, whereas at the start of last year, many industry experts were suggesting that consumers would be likely to revert to the previous spending patterns in the course of 2010, this has failed to materialize in the US market, which is likely to prompt further growth within the private label category.

Technological breakthroughs are also likely to draw consumers in, the Demeter report states. Advancements in formulation are helping to create ‘breakthrough’ categories based on new technologies providing added functionality, particularly for the hair care and skin care categories.

Finally, the report also stresses the importance of having an online presence as a means of maintaining a higher profile in a market that is likely to remain under pressure for the short- to mid-term.

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