Premium beauty saw a strong 2013, with upticks in skin care, color cosmetics/makeup and fragrance. But what’s ahead? Imogen Matthews Associates made the following predictions about what is set to be hot in the U.K. for premium beauty in 2014.
- Increase in M&A activity—The U.K. economy is forecast to pick up in 2014, and this will give multinational beauty companies the confidence to start going on a shopping spree. Many have large stashes of cash ready to snap up attractive niche brands, thus 2014 could see acquisitions from P&G, L'Oréal, Coty and The Estée Lauder Companies. For takeover targets, Imogen Matthews Associates speculates that Burberry, the fashion retailer, and House of Fraser, currently in discussions with Galeries Lafayette, are both potentials.
- Online traders head for the high street—Online sales of premium beauty are a long way from peaking, but Imogen Matthews Associates predicts that some pure e-tailers will go from clicks to bricks. The high street is ripe for development with large swathes of vacant property due to the retail failures over the past seven years. Online may be where many people like to shop, but many more prefer to go out shopping, where they can touch, feel and try on products, and ask for advice from a human being. 2014 potentially will see the start of the high street revival, which will be part of a longer-term trend.
- Retailers will reduce portfolios and choice—Maybe this is more for the wish list than a reality, but retailers will be looking hard at the economics of stocking brands and ranges that do not pull their weight. Not only does it make economic sense, but consumers likely will be more inclined to purchase in a less cluttered environment. Fewer brands and less clutter = higher turnover.
- Less discounting next Christmas—Consumers got savvy last Christmas and refused to spend, prompting a flurry of panicked promotions by some retailers. It didn't work and those retailers were the losers, while others who did not play the discounting game were the retail winners. That said, discounting won't go away, because it's proven to be effective in increasing footfall, but by next Christmas, it likely will be more measured. Premium beauty will still play around the margins, where it must stay if it is to retain credibility with the consumer.
- Men's grooming is set to grow—The British Fashion Council and Mintel are seeing strong growth in the U.K. menswear market, which is indicative of men's spending power and growing sense of style. Role models include actors such as Benedict Cumberbatch and entertainers such as Harry Styles. It's not just about the clothes they wear but their groomed appearance. Looking ahead, it’s likely that 18-34-year-old men will be the biggest spenders and will drive growth in men's skin care, hair care and fragrance.
- Life after BB creams—BB creams are losing a little luster, and the industry is looking around for the next big thing. Unfortunately, nothing likely will be as big as BB creams. As brands trawl through the alphabet in search of something new, the novelty will continue to wear. However, beauty products claiming multifunctionality will feature strongly for many skin care brands. It is conceivable that tinted versions will edge out foundations, and on the horizon are tinted serums, a clever way of capitalizing on the above-average growth of facial serums.
Additional information on the U.K. premium beauty market is set to be included in the forthcoming “Premium Market Report 2014” from Imogen Matthews Associates.