Prestige Beauty Outlook 2011

The (Not So Little) Industry That Could

By Karen Grant, The NPD Group

As we catch our breath from the invigorating exercise of recovery that was 2010, we enter 2011 with a sense of optimism and hope.

To see clearly where we are going, we must reflect first on where we have been. Coming off 2009, one of the most challenging financial years in the history of beauty, 2010 proved to be a year of positive, dynamic, and sometimes record-breaking accomplishments for prestige beauty. And, while the accomplishments of 2010 are applaudable in any light, they are all the more encouraging when considered in the context of the scope of the challenges the industry faced. As we began 2010, we were in an enormous deficit. The losses from 2009 pushed prestige back, not just below 2008 levels, but more than $500 million below 2006 volume. In essence, this erased the equivalent of five years of sales. Yet, from the start of the year, we began to see gains. In 2010, prestige beauty saw the quick recovery of skin care, followed by a gradual upturn in makeup, and finally, a late-year rally in fragrance.

What helped each category turn the tide in the face of such historic challenges?And, how will the elements that helped 2010 be a success position us for continued growth in 2011?

In stores and online we saw initiatives to further engage consumers. While the mass market made bold statements to entice consumers to trade off on prestige, the prestige market took action to show its value. Subtle price exposure at counter, online, and in advertising raised awareness that prestige offers not only beautiful beauty products, but also values well in reach of the mass market and most consumers.
Throughout the market, we saw continued expansion of open sell fixtures, renovations, and incorporation of consumer technology. These innovations provided more options for consumers to self-educate and customize their beauty selections as well as to have greater access to a wider variety of brands.

The strategic positioning of “newness” is always important to drive sales, particularly in prestige. However, while in recent years newness sold at the expense of existing products, in 2010, new product innovation across prestige skin care, makeup, and fragrance provided the excitement to lure consumers to discover new categories of product and rediscover trusted brands.

As we begin 2011, we can take an exhilarating breath from the successes of 2010. We find ourselves well equipped to continue driving beauty forward in all categories. Our objectives remain in focus and within reach: to continue rebuilding revenue, to further re-engage lapsed product users, and to expand the relevance of beauty in the lives of our consumers.

Karen Grant is senior global industry analyst and vice president, beauty, The NPD Group, and a member of Beauty Packaging’s Board of Advisors.