The beauty business: more than just looks

Showing growth of about 5% per year, the global beauty industry dazzles investors with its stunning consistency. But this linear growth conceals several revolutions under way in the sector.

By Bertrand Beauté

"Mirror, mirror, on the wall, who is the fairest one of all?" In the traditional 19th century fairy tale by the Brothers Grimm, the evil queen in Snow White made sure to ask her reflection that question every morning. But how does that work today? If we are using social media as a modern magic mirror to feed our narcissism, our obsession with appearance is all the more alive and well in today’s societies, judging from the beauty industry’s excellent performance. "The market is doing well," says Delphine Le Louët, an analyst at Société Générale. "The COVID‑19 pandemic actually strengthened the industry. After living in pyjamas all day for a while, people emerged with a need to be coquettish and look after themselves."

According to a report by McKinsey published in May 2023, the global beauty market – defined as skincare, fragrance, make‑up and hair care – generated around $430 billion in revenue in 2022. That record is expected to be broken in the near future. The US consultancy expects that the market will grow to $580 billion by 2027, representing growth of 6% per year.

These projections are perfectly in line with performance in previous years. "The beauty market is growing structurally. It has been growing at an average rate of 5% a year for the past two decades," says Paul Rouvière, analyst for investment bank Bryan, Garnier & Co. "Except for 2009 (up 1%) and 2020 (down 8%), impacted by the 2008 crisis and COVID pandemic respectively, the industry behaves independently of the economy. In 2023, its growth reached 8%, despite inflation, following 6% growth in 2022."

What does that mean? "The beauty industry is a good long‑term investment, because it will continue to grow over the next few years," says Alyssa Cornuz, an analyst in charge of the Sustainable Healthy Living Equities strategy at Robeco. Marine Dubrac, co‑manager of the Wellness strategy at Thematics Asset Management, agrees, "I’m confident about the future of the beauty market. Its growth is set to last for at least another 10 years."

Several structural factors explain this trend. "The use of beauty products, such as cosmetics, perfume and skincare creams, is a marker of social status in emerging countries," Marine Dubrac explains. "That means that the development of the middle classes – especially in Asia, but also in South America, the Middle East and, to a lesser extent, Africa – drives growth in the sector." The French group L’Oréal estimates that the global beauty market is set to grow, with an additional 600 million consumers by 2030.

In developed countries, the ageing population is a strong contributor to sales. "Longevity is a ground spring," Alyssa Cornuz says. "People are living longer and want to stay beautiful longer. They don’t hesitate to spend more and more on anti‑ageing products and therapies."

But this fundamental growth should not mask the transformations at work in the industry. "For a long time, beauty was seen as superficial," Cornuz continues. "That’s no longer the case today. A person’s beauty increasingly reflects their state of health and is no longer just about their appearance." Paul Rouvière shares this view. "Consumers are paying more and more attention to the health and protection of their skin, as shown by their demand for products recommended by dermatologists," he says. "This phenomenon is reinforced by an ageing population and an increase in skin diseases generated by pollution, stress and sun exposure, which now affect more than one in four people worldwide." 


"What does beauty mean to you?" Almost 50% answered "looking healthy"

Respondents reply to a "Voice of the Consumer: Beauty Survey" conducted by Euromonitor International


In its "Voice of the Consumer: Beauty Survey", Euromonitor International asked respondents, "What does beauty mean to you?" The results, published in May 2023, found that almost 50% of them answered "looking healthy", making it the most frequently chosen definition, while the answer "Keeping a youthful appearance" garnered less than 30% of votes. 

This shift from beauty associated with appearance to beauty associated with wellbeing has tangible consequences. Historically, cosmetics dominated the market in Western countries. This is no longer the case. Make‑up has been replaced by skincare. L’Oréal reported that in 2023, products labelled as "skincare" accounted for almost 40% of the global beauty market, compared with 17% for make‑up.

And now that beauty is a question of health and wellbeing, 85% of consumers are prepared to pay more for beauty products with proven efficacy or benefits, Euromonitor asserts. "While the consumer goods segment continues to generate high volumes, we’re seeing premiumisation at work, with consumers spending more and more on increasingly high‑end items," says Delphine Le Louët of Société Générale. 

In recent years, for example, the dermocosmetics segment (products recommended by dermatologists, generally sold at higher prices in pharmacies than in large retail formats) has outperformed the over‑all beauty market. According to L’Oréal, dermocosmetics showed growth of 13% between 2022 and 2023, while the beauty industry as a whole grew by only 8%. "Consumers are less naive than they used to be," says Tancrède Amacker, CEO of Cellap Laboratoire, a small Vaud‑based cosmetics company. "They’re no longer going to buy a product because they saw on TV that Julia Roberts or some other actress is using it. They want to be sure that it really works, that its effectiveness is proven with scientific studies."

Consumers also want safety and are paying more attention to product composition. "Skin care is not viewed like any other consumer product. Buyers place a great deal of importance on quality and safety," Paul Rouvière says. "You’re not going to put just anything on your skin."

For Tancrède Amacker, this marks a huge change. "Ten years ago, consumers didn’t care about product composition," says the CEO of Cellap Laboratoire, which has been producing cosmetics since 1987. "Nowadays, every time we change an ingredient in one of our products, our customers ask us about it. They want to know why, what it changes, and whether it’s safe. So, we remove any ingredients with a bad reputation or poorly understood effects and put priority on natural compounds, which are in high demand from consumers."


These days, customers go to influencers: "The role that social media now plays in the beauty sector is unrivaled"

Delphine Le Louët, analyst at Société Générale


And where do customers go these days to find out about the harmfulness of ingredients or product effectiveness? Influencers. "The role that social media now plays in the beauty sector is unrivaled," Delphine Le Louët says. "Even big brands are forced to form alliances with Instagram lightweights."

Tancrède Amacker sees this shift as positive. "How things work with social media is extremely interesting. Serious influencers are knowledgeable people who help consumers understand and learn about the products they use." Cellap’s boss makes no secret about often bringing influencers into the company’s laboratories to relay the message he wants to get across.

Social media has therefore enabled the emergence of a plethora of small brands. Taking advantage of a buzz on the internet for one of their products, they carve out a spot for themselves without spending billions on marketing. "Social media is a growth vector for small players," confirms Marine Dubrac of Thematics Asset Management. But that is not enough to worry industry leaders such as French giant L’Oréal, the Anglo‑Dutch firm Unilever, the US company Estée Lauder or Germany’s Beiersdorf. "Large groups have the capacity to buy up small brands that have managed to capture a market trend," Alyssa Cornuz says.

For example, L’Oréal acquired the Australian brand Aēsop in 2023, US company Skinbetter Science in 2022 and Japan’s Takami in 2021. The German group Beiersdorf, which owns brands such as Nivea, Eucerin and La Prairie, announced in February 2024 that it was buying Clinique La Prairie in Montreux – an establishment renowned worldwide for its expertise in longevity. Meanwhile, in 2023, US group Estée Lauder finalised the acquisition of the Tom Ford brand for $2.3 billion, whose Tom Ford Beauty division (make‑up and fragrances) continues to grow.

But social media is like the witch’s magic mirror in Snow White: one day, people will change their mind. Unlike the textile or food industries, the influence of brands is fairly limited in beauty. Consumers follow trends or innovations. And that happens even faster if bad buzz spreads quickly online. But there again, big brands have another advantage. "Brands or products can frequently be shot down on social media, and that can be devastating for a small company," Marine Dubrac says, "whereas industry giants have the marketing tools to control bad publicity." In other words, a way of silencing a mirror that would dare to say, "There is one fairer than you."