PREMIUM OPPORTUNITIES: US MARKET TRENDS AND THE CHANGING CONSUMER LANDSCAPE

AMANDA HARTZMARK SEPTEMBER 2016

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Euromonitor International INTRODUCTION

OVERVIEW OF GLOBAL AND US MARKETS

PREMIUM AND THE NEW CONSUMER CONTEXT

KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

CONCLUSIONS

OVERVIEW OF GLOBAL AND US MARKETS

PREMIUM AND THE NEW CONSUMER CONTEXT

KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

CONCLUSIONS

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Colour cosmetics, hair care and skin care lead global sales OVERVIEW OF GLOBAL AND US MARKETS

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North America sees highest regional growth OVERVIEW OF GLOBAL AND US MARKETS

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Premium beauty defies expectations in a cool industry climate OVERVIEW OF GLOBAL AND US MARKETS

4% CAGR for global premium beauty and personal care growth to 2020

50% of total premium beauty revenues by 2020 will be generated by US and China

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Premium helps U.S. outpace global beauty growth across categories OVERVIEW OF GLOBAL AND US MARKETS

2015 U.S. Beauty & Personal Care Value Sales and Growth by Category

OVERVIEW OF GLOBAL AND US MARKETS

PREMIUM AND THE NEW CONSUMER CONTEXT

KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

CONCLUSIONS

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Consumers flex their power PREMIUM AND THE NEW CONSUMER CONTEXT

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Consumer changes transforming beauty PREMIUM AND THE NEW CONSUMER CONTEXT

Lifestyle

Diversity

Niche products

Digital

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Fitness Paramount Sustainability & Ethical Products

Trends from Foods

Focus on active, balanced lifestyle promotes holistic approach to beauty PREMIUM AND THE NEW CONSUMER CONTEXT

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Diversity has spurred growth of niche products that offer better results based on age, culture, ethnic group

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Lifestyle shifts and diversity inspire new product concepts PREMIUM AND THE NEW CONSUMER CONTEXT

Sensorial: cooling, energising, calming,

mood-enhancing

Multipurpose

Active-wear

Urban-wear

Active lifestyle

Small pack sizes

On-the-go formats

Natural ingredients

Activated/ bamboo charcoal

‘Clean’ label

Food ingredients: oats, nuts, yoghurt,

rice, honey

Lighter textures

Easy application formats

Solution-based: anti-redness, anti-strain, anti-stress,

detoxifying

Healthy

Ethical

Holistic

Ingredient inspiration

Product positioning

Product benefits

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50% of survey participants in the US said the bought products that were suited especially for their hair type

PREMIUM AND THE NEW CONSUMER CONTEXT

Niche brands buoyed by consumer demand for unique, customized products

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Digitally influenced consumers tend to have more extensive routines

PREMIUM AND THE NEW CONSUMER CONTEXT

Note: Minimalists (0-3 skin care products used weekly) , Moderates (4-7 skin care products used weekly), Extensives (8-14 Skin care products used weekly)

Note: Minimalists (0-1 hair care products used weekly), Moderates (2-3 hair care products used weekly), Extensives (4-7 hair care products used weekly)

Note: Minimalists (0-1 colour cosmetics products used weekly), Moderates (2-6 colour cosmetics products used weekly), Extensives (7-16 colour cosmetics products used weekly)

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Consumers’ priorities have been redefined PREMIUM AND THE NEW CONSUMER CONTEXT

Digital & Diversity =

Innovation

Lifestyle =

Multi-benefit

Experience & Niche

Products =

Premium

The New Consumerism and Premium

Products

KEY TRENDS IN US AND GLOBAL MARKETS

PREMIUM AND THE NEW CONSUMER CONTEXT

KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

CONCLUSIONS

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19 KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

Eye, face and lip products see highest growth in colour cosmetics

Premium Mass

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20 KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

Premium products and BB&CC creams lead in facial cosmetics

Premium Mass

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Sephora introduces South Korean BB Cream brand

Dr. Jart+ to the U.S.

Over 15 BB/CC creams launch in the U.S

BB/CC Creams grow 61% (constant value)

Packaging innovations launch

Innovation spurs growth in premium facial cosmetics KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

2011

2012

2013

2015

93% 17% US Premium BB/CC Creams CAGR 2011-2015

US Premium BB/CC Creams CAGR 2015-2020

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Premium mascara, eye shadow and liner push eye category forward

Premium Mass

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Eye cosmetics: Safety and longevity drive growth KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

2015 Growth

• Premium Mascara – 11% • Premium Eye Shadow – 7% • Premium Eye Liner/Pencil – 11%

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Trends spur growth in premium and mass other eye makeup

Premium Mass

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Brow cosmetics: Boldness drives growth KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

Boldly Bushy Boldly Defined

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26 KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

Premium lipsticks and liner lead lip category

Premium Mass

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Variety drives growth in lip cosmetics KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

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Skin care: Premium growth with a twist KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

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Korean Beauty innovations still drive growth Successful skin care products feature natural, innovative ingredients Niche brands continue to gain market share

Innovation still key, ingredients king in skin care KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

Formulations Textures Formats &

Technology

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Premium skin care buyers more results-oriented, experimental KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

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Fragrance: Premium niche brands drive growth KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

Personalization through layering

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Jo Malone and Tom Ford exemplify layering & niche trends KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

KEY TRENDS IN US AND GLOBAL MARKETS

PREMIUM AND THE NEW CONSUMER CONTEXT

KEY GROWTH DRIVERS IN COSMETICS, SKIN CARE AND FRAGRANCES

CONCLUSIONS

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Power to premium CONCLUSIONS

2011 2015 2020

Premium Value Sales ($US billion, constant)

$20 $23 $28

Premium Penetration (% Value)

32% 34% 37%

US$5 Billion U.S. premium beauty growth through 2020

Premiumisation of U.S. Beauty and Personal Care Market Forecasted to Continue

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Future of U.S. premium beauty: Growth-driving categories CONCLUSIONS

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Fragrances: Growth categories CONCLUSIONS

2015-2020 Premium Fragrance Growth (constant value) = US$1 Billion

Premium Unisex 2015-2020 CAGR:

15%

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Strong digital influence on premium purchases

CONCLUSIONS

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Macroeconomic Factors Evolving Retail Channels Success of Niche Brands

Evolving trends and opportunities CONCLUSIONS

Source: Mike Mozart

• Newly-flush consumers seek affordable luxury

• Premium beauty: Gateway purchase

• Rise of masstige

• Well-informed consumers

• Physical customer engagement

• Internet retailing, the great equalizer

• Millennials usher in era of individualism

• Foreign brands garner attention

• Acquisitions: Large companies take note of niche

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Quality of products remains important

Focus on wellbeing, health

Uniqueness prized

Consumer experience in store and online is the key to future growth

CONCLUSIONS

Key takeaways

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THANK YOU FOR LISTENING

Amanda Hartzmark, Ph.D.

www.euromonitor.com

¡MUCHAS GRACIAS!

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