Global beauty slows down (but does not stop growing). New challenges for the sector

After reaching a total value of 450 billion dollars, the global beauty market is showing signs of slowing down although it remains a healthy sector. This is what emerges from the 'State of Beauty' report by McKinsey, which explains how for years the seemingly limitless interest in new products in the beauty sector has sustained volumes and price trends. Now, however, geopolitical and economic uncertainty, together with market saturation, are slowing down this momentum. If, in fact, between 2022 and 2024, the sector grew by 7 per cent per year, for the next five years McKinsey estimates a growth rate of 5 per cent.

"Beauty remains one of the most dynamic sectors in the consumer goods market and will continue to grow at a sustained pace, even if it is slowing down slightly," comments Gemma D'Auria, senior partner at McKinsey, global head of the Apparel, fashion & luxury practice. "However, looking ahead, achieving further growth will be more complex: consumers, after years marked by inflation and an increasingly wide range of offerings, are now much more value-conscious. Buying preferences are changing rapidly, not only between countries, but also within markets themselves: very localised strategies are therefore needed, which go beyond national segmentation. Moreover, classic demographic criteria are no longer sufficient to explain consumption behaviour'.

He adds: 'Today, the real discriminator is attitude: to intercept customers, more sophisticated profiling models are needed, capable of capturing different nuances. In this context, brands are called upon to further refine their value proposition, making it clear, distinctive and consistent across the portfolio. Consumers are increasingly selective, not only in their choice of brands, but also in the categories in which they want to spend more or save money: almost half of global shoppers, for example, say they buy products within the same category at different price points'.

Geographically, in markets such as Latin America and the Middle East, wealth is growing, offering an opportunity for global brands, but not without competition from local players. McKinsey expects the Chinese beauty market to recover in the medium term, although growth is unlikely to reach pre-pandemic levels. Europe will grow in line with global trends, although economic challenges could dampen volume growth in the region.

Global beauty companies look to India and the Middle East as the most promising markets for industry growth, while they are less optimistic about China. Although India and the Middle East represent market strengths, developing in these countries means that brands need to familiarise themselves with and adapt to local consumer preferences and tastes. For 58% of Indian consumers, for example, beauty means feeling confident (less than half of Indian consumers, on the other hand, believe that beauty means keeping up with the latest trends). In any case, about half of the companies say they expect an increase in distribution in North America, while 41% say the same for India.