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Changing Market Dynamics in North American Beauty

By: Svetlana Uduslivaia, Euromonitor International
Posted: March 2, 2010, from the March 2010 issue of GCI Magazine.

The U.S. consumers who felt wealthy from the housing boom had been trading up and treating themselves to indulgences, such as designer handbags and super-premium cosmetics. But as the U.S. fell into a deep economic crisis in 2008, shoppers closed their wallets and started to economize by turning to lower-priced mass brands and private label products. Consumers have also begun to buy less product—waiting until their shampoo bottle is empty to buy another bottle instead of storing several brands in the shower.

Overall, many middle class consumers have become more value-conscious. They are cutting coupons, buying more private label, only using credit cards for essentials, shopping at discounters and online, and utilizing online price comparison Web sites in an effort to stretch their incomes. Some have taken second jobs, while others are selling their cars or choosing to take vacations near home.

Consumer cutbacks hurt sales of hair care, the largest category of the U.S. beauty and personal care market. Value sales of hair care declined by 2% in 2008, for a total value of $10.2 billion. The decline was driven by 1% declines in shampoo, conditioner and styling product sales. Together, these categories represent 70% of category sales, excluding salon hair care. Shoppers’ desire to economize led to fewer trips to beauty salons in 2008. Particularly, salon hair care saw value sales decline by 6% in 2008. Salon hair care was also negatively impacted by continued product diversion into mass market retail outlets such as CVS and Target.

Certain Categories Prove More Resilient

Sun care sales were somewhat recession-resistant, as it was the fastest-growing U.S. beauty category for the fourth year in a row in 2008. Growth for sun care was the direct result of converting non-users to regular sun protection customers by highlighting the risks of unprotected sun exposure to consumers’ health and beauty. In addition to increased household penetration, sun care growth was driven by product innovation in the mass sun protection category.