This article is adapted from a July 2023 issue of Ragtrader. In a byline contribution, Julie Illera shares how beauty consumers in Australia are behaving post-pandemic, especially given cost-of-living pressures and concerns over sustainability.
The post-pandemic recovery of beauty and personal care decelerated in 2022, tempered by high inflation, rising unit prices and overall economic uncertainties, which continued to impact the daily lives of consumers in Australia. Total beauty and personal care sales marginally declined at constant 2022 prices, but increased by mid-single digits in current terms, showing the impact of inflation.
Mixed performances for key categories
Deceleration was particularly evident in key beauty categories, such as skin care and hair care, which were standouts the previous year. Declines in premium and mass skin care at constant 2022 prices contributed to this deceleration, despite the well-received messaging of wellness, skin health and self-care. Demand for skin care was also influenced by consumers continuing to return to pre-pandemic lifestyles; this translated into less time for the extensive beauty routines observed during lockdowns.
“Back to normal” also meant the rebound of colour cosmetics, with many products offering specific skin care benefits, which was reflected in the more limited growth of skin care during the year.
The repositioning of fragrances as a self-care item helped the category to become less elastic since the pandemic and sustained its volumes amid rising unit prices. Prestige fragrance has also been a driver of growth, with consumers indulging in more premium brands with stronger concentrations.
Budgeteers
As beauty and health products become increasingly expensive due to high rates of inflation, consumers are forced to make more selective decisions when it comes to the products they purchase. According to Euromonitor International’s Voice of the Consumer: Lifestyles Survey, only 19% of respondents in Australia said they intended to increase their overall spending over the next 12 months.
42% of Australians state they are hoping to save more in the future, which is an increase on the previous year
Source: Euromonitor International
Furthermore, almost 20% of respondents said they were planning to increase their spending on private label products in 2023.
Despite remaining cautious, Australians are more intentional with discretionary purchases, looking for small, affordable luxuries that bring them joy – the “lipstick effect”
Source: Euromonitor International
Despite consumers’ enthusiasm for low cost and greater value, Euromonitor International’s Voice of the Consumer: Lifestyles Survey 2023 found that premium products are still in demand, with 29% of respondents in Australian saying they would rather buy fewer, but higher quality items.
Eco Economic
Concerns about the impact of climate change and the importance of sustainable purchases are influencing Australians’ choices, with many voicing their strongly-held views via conscious consumerism.
This is reflected in the increasing number of ethical claims across beauty and personal care products, with organic, environmentally-friendly and cruelty-free remaining dominant, but newer claims such as reef/ocean safe are also noticeable.
41% of respondents, including 43% of Gen Z, say they believe that climate change will affect their lives even more in the future than it does now
Source: Euromonitor International
Companies are responding with initiatives to innovate in packaging, formulation, certifications and investing in recycling schemes.
For instance, leading department store Myer partnered with Close the Loop in 2022 to trial a cosmetics packaging recycling programme. Funded by a federal government grant, it aims to establish the viability of a national beauty recycling scheme. Similarly, companies such as Mecca, David Jones, Jurlique, Olay, and Schwarzkopf are also partnering with TerraCycle for a recycling scheme. Other initiatives include online beauty specialist Adore Beauty implementing new packaging and recycling initiatives, whilst Kiehl’s partnered with Bush Heritage as part of the brand’s Future Made Better sustainability commitment. Through this partnership, Kiehl’s has committed to donating to raise awareness of Bush Heritage and support the protection, restoration and regeneration of local land.
What next for beauty and personal care?
Acquisitions of local brands by major players highlight the relevance of Australia’s beauty credentials and innovative retailing concepts
Source: Euromonitor International
These acquisitions include Grown Alchemist by L'Occitane in March 2022, independent brand ZitSticka by US online retailer Heyday in November 2022, and Aesop by L’Oréal in the first quarter of 2023.
Natural, organic, sustainable and ethical remain important touchpoints for consumer engagement in Australia, with a plethora of local brands continuing to emerge in this space. Australian brands tend to be created using natural and plant-based formulations, with many frequently highlighting their use of indigenous ingredients as a unique selling point. As consumers continue to show support for local brands, and major beauty players see the erosion of their value share, further acquisitions by multinationals are likely.
Sustainability will continue to resonate in the Australian beauty industry, but recent initiatives by the Australian Competition and Consumer Commission (ACCC) to evaluate and manage the widespread use of environmental and sustainability claims in advertising and marketing, could potentially impact consumers’ trust in sustainability and ethical claims and certifications.
Consumers in Australia will continue to be Budgeteers in the medium term and remain cautious with their spending. Businesses feel threatened in the current economic environment, especially with consumers trading down. However, a shift towards private label, multipurpose/benefits and propositions around the masstige beauty segment will offer strong business opportunities.
For further insight, download our white paper: Top 10 Global Consumer Trends 2023.
This article is adapted from a July 2023 issue of Ragtrader