Renewed economic worries may deter cosmetics consumers, analysts warn

By Simon Pitman

- Last updated on GMT

Related tags Personal care players Cosmetics

Concerns about the strength of the economic recovery, continuing unemployment and the global debt crisis are likely to impact US consumer spend on cosmetics for the rest of 2011.

The warning comes from financial analysts at the Demeter Group, who believe that key data concerning the global economy points to another dip, following on from that of 2009 when nearly all the major cosmetic and personal care players worldwide reported a significant dip in revenues.

In 2010 US consumer spend on beauty products recovered slowly after the losses of 2009, posting a total value of $59.7bn, a figure that is predicted to rise slowly to $62.0bn by the end of 2015.

Cosmetic industry growth set to slow

This suggests a CAGR of 0.7 percent per year to 2015, a figure that is significantly down on the period 2005 – 2010 when the CAGR was 1.07 percent, which includes the year 2009, when the industry reported falling sales in the US across the board.

The Demeter forecast suggests there are plenty of challenges that lie ahead in the next few years for the US cosmetics industry, and perhaps one of the most difficult times may prove to be the second half of 2011.

Analysts at the group believe that difficult economic conditions, both in the US and Europe, are likely to lead to consumer headwinds that will affect the bottom line for many of the big players.

Budget deficits, unemployment and personal debt...

In the US the budget deficit breached the debt limit of $14.29 trillion in May, while in the European Union is already having a serious economic impact on Ireland and Greece, while seriously threatening other countries such as Italy, Portugal and Spain.

This has led to significant unemployment in both the US and Europe, with the unemployment rate in the US for the month of June hitting 9.2 percent.

Add in the fact that the average American currently holds in excess of $10,000 in debts and the fact that foreclosures are expected to rise by 20 percent in 2011, and its not hard to see why the Demeter Groups has reservations about the US retail market.

US consumers unsure about the future

The analysts point out these conditions have left US consumers unsure about the future, with confidence falling and spending at its lowest pace in 20 months.

However, the group’s data also reveals that there is an increasingly polarity amongst different consumer groups, with spend growth in the wealthier income brackets far outpacing the harder hit middle class during the past year.

However, the Demeter analysts point to the fact that there are several key categories within the US industry and a number of trends that are likely to provide some insulation from the tougher times, which will be explored in another article to be published later this week.

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