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State of the Industry
By: Rob Walker, Euromonitor International
Posted: June 1, 2012, from the June 2012 issue of GCI Magazine.
- Many consumers have converted to DIY and home beauty treatments, contributing to the growth of nail care and other beauty categories.
- The nail care category and its growth could be on the verge of a tipping point, particularly given the probability of long-term economic sluggishness in developed markets and the untapped opportunities presented by emerging markets.
- Western markets will be at the frontline of continuing growth for nail care.
- Globally, retail sales of premium beauty were up 5% in 2011, the best performance since 2007, with hair care and fragrance posting strong numbers—10% and 6%, respectively.
- Brazil continues to be one of the globe’s strongest beauty markets, and its profile is set to rise with the upcoming World Cup and Olympics.
- Consumers in developed markets are responsive to affordable premiumization but also are trading down; the result is a squeeze on the middle ground, and an industry characterized increasingly by its polarization.
Latin America and emerging Asia continued to prop up the global beauty industry in 2011, driving collectively more than 60% of worldwide incremental retail revenue, according to data from Euromonitor International. However, developed markets also played their part, notably the U.S., which posted its best beauty performance in more than five years on the back of strong sales of premium brands. Furthermore, austerity-hit Western markets were the key drivers of nail polish, the industry’s fastest-growing category.
The Nail Polish Effect
Nail polish seems to have replaced lipstick as a more accurate barometer of austere times. In 2011, nail polish recorded global retail growth of 11%, double the growth rate of lipstick, according to Euromonitor International. And between 2008 and 2011—a period characterized by the global financial meltdown—sales increased by 43% (based on current U.S. dollar prices at fixed 2011 exchange rates), compared with 7% for lip products, 11% for facial makeup and 17% for eye makeup.
Nail polish has become the fastest-growing category in the global beauty market for three consecutive years. What is most striking—and the reason why nail polish, rather than lipstick, is a window into the health of the macro economy—is that its heaviest demand over the past year has come from the U.S. and Western Europe, not from the BRICs.
The U.S. even dethroned Brazil last year to become the largest nail polish market in the world, with retail value sales climbing by 31% to reach $778 million. At the core of this bullishness was the growing perception of nail polish as an affordable fashion accessory and a quick-fix morale booster for these tougher economic times.
From Salon to Supermarket
Significant growth in nail care culture first became visible in developed markets in the wake of the 2008 financial crisis, although it was primarily in away-from-home beauty salons, not in the retail channel. This salon pampering has now filtered into DIY nail care, fueled in the U.S. by wider retail availability of the salon brands such as Sinful Colors, OPI and Essie, which were rolled out in more mainstream shopping channels following acquisitions by Revlon, Coty and L’Oréal, respectively.
L’Oréal’s Essie, for example, grew its U.S. market share from 1% in 2010 to 5% in 2011, according to Euromonitor International. Salon brands also lifted the premium nail polish segment in the U.S., with sales more than doubling in 2011 to reach $191 million. That was equivalent to 25% of the total nail polish market, compared with less than 10% five years earlier.