"Prestige beauty—namely hair, fragrance and skin care ... rounded out the top [sales] performers" for the four weeks ending August 31, 2024, according to a recent Circana report on the U.S. back-to-school shopping season, "making it clear that innovations in design, functionality and marketing are key to attracting consumers to spend outside their immediate need considerations." While innovation is key to winning in a market dominated by shoppers focused on value and needs-based decision-making, beauty is actually in an innovation slump, per a recent Mintel report. Here's why that's happening and why everything may be about to change.
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"Prestige beauty—namely hair, fragrance and skin care ... rounded out the top [sales] performers" for the four weeks ending August 31, 2024, according to a recent Circana report on the U.S. back-to-school shopping season, "making it clear that innovations in design, functionality and marketing are key to attracting consumers to spend outside their immediate need considerations." While innovation is key to winning in a market dominated by shoppers focused on value and needs-based decision-making, beauty is actually in an innovation slump, per a recent Mintel report. Here's why that's happening and why everything may be about to change.
What Exactly is Beauty Innovation and Why Does it Matter?
"Strong innovations attract new buyers, create new usage occasions, justify price premiums and keep brands top of mind," NIQ argues.Daryna at Adobe Stock
The firm added, "Strong innovations attract new buyers, create new usage occasions, justify price premiums and keep brands top of mind."
According to NIQ, product and marketing innovation can be defined a number of ways, including:
- Adoption of eco-friendly formulas, sourcing or packaging
- Formats that reduce carbon footprints
- Ingredients that offer provable results
- Products that omit "problematic" materials
- Collaborations with dermatologists and targeted influencers
- Inclusive, personalized experiences tailored to the needs of individual users
- Concepts that address both physical and emotional well-being
- At-home solutions that mimic pro services
- Democratized luxury
While newness can drive brand growth, NIQ warns: "Successful activation in the beauty industry hinges on the synergy between a compelling idea and a robust product with one third of new launches faltering due to lack sufficient support during their first year."
Low Innovation Amid 'Excess' Launches
While concerns about the intentionality and pace of beauty industry launches is worth exploring, the industry is in fact in a bit of an innovation lull.RDNE Stock at Pexels
Lecointe's concerns about overproduction in beauty echoes a general feeling among some commentators that there is simply too much beauty. As Glamour declared in May 2024, "Skin Care Products Have Officially Gotten Out of Hand," accusing the industry of "churning out unnecessary, unexciting launches for years."
These frustrations coincide with related sustainability concerns. One well-traveled statistic, for example, claims that the industry generates 120 billion units of cosmetic packaging every year, the majority of which are reportedly not recyclable, which is often interpreted as a crisis of overabundance.
Yet, while concerns about the intentionality and pace of beauty industry launches is worth exploring, the industry is in fact in a bit of an innovation lull. Here's what that means for the industry and why this state of affairs may be about to turn around.
What's Slowing Beauty Innovation Post-COVID
A recent Mintel report points out that beauty and personal care brands have "witnessed a slowdown in launch activity compared to pre-COVID levels."
Across food, drink, household, health, beauty, personal care and pet care, Mintel data covering the first five months of 2024 found that "just 35% of global CPG launches ... are genuinely new products ... the lowest proportion of innovation Mintel has recorded since it began tracking new products in 1996."
For the North America, the rate is even lower, 29%, well below the global average. To contrast, 46% of launches across categories in Africa fall in the "new innovation" category.
The decline predates COVID, Mintel points out. In fact, a little more than 50% of global launches in 2007 comprised new launches, which fell to 42% by 2019. That number had dropped to 35% in the first five months of 2023.
Why is Beauty Innovation Slowing?
A recent Mintel report points out that beauty and personal care brands have "witnessed a slowdown in launch activity compared to pre-COVID levels."tatyanarow at Adobe Stock
That may be true for some categories, but beauty tends to be an exception.
“Despite increasing caution in consumer spending, consumers are less willing to cut back on their beauty expenditures compared to other FMCG products, with 80% indicating they intend to maintain or increase their spending in this area," says Claire Marty, vice president, global client development, NIQ,. "The beauty industry's global popularity continues to rise, with industry sales maintaining a double-digit growth rate across all regions and is expected to bring an increase in scale of $300 billion over the next decade.”
That said, not every sector is growing.
As recently reported, mass beauty growth in the U.S. market has been flat overall, even as prestige beauty has grown at a healthy rate. Many mass shoppers are particularly price-sensitive given recent inflation and related brand price increases; as a result, these consumers have often turned to store brand alternatives.
Other key headwinds for novel innovation include raw material costs and shopper concerns regarding product/formula safety. These worries are particularly acute in Europe. Mintel notes, for example, "69% of French adults agree that beauty brands should provide more scientific evidence to validate the claims they make."
The overall result of these headwinds is a slowed innovation pace in regions such as Europe and North America.
Yet regions such as the Middle East have actually driven new innovation growth via upstart local brands, proving regional dynamics matter.
AI: Augmented Innovation
In May 2024, Glamour declared, "Skin Care Products Have Officially Gotten Out of Hand," accusing the industry of "churning out unnecessary, unexciting launches for years."Kittiphan at Adobe Stock
The firm says that the remainder of this decade will be reshaped by the agility of artificial intelligence (AI), which can give upstart brands a number of advantages, including:
- Algorithm-augmented product innovation
- Automated marketing campaigns and customer support
- Rapid, real-time consumer insights
These capabilities will allow small brands to operate leaner teams than in previous indie beauty eras; at the same time, the rapid gathering of customer insights can help brands quickly migrate from direct-to-consumer to wholesale/physical retail, the report argues.
And, because AI never sleeps, beauty is poised to enter an era of rapid innovation, with innovation cycles shifting from years to months.
This will redefine "fast beauty" by creating a never-ending, real-time battle for white space, Mintel concludes.
So, if Mintel is right, things are about to pick up.
