The coronavirus pandemic is predicted to cause a 2.5% drop in the US beauty and personal care market in 2020, according to Kline—the biggest drop in the more than 60 years the market-research firm has been tracking the industry.
This decline dwarfs the 0.8% dip seen in the 2009 recession—so far the biggest decrease recorded by Kline.
Kline previously forecast that the $75bn US beauty market would see a CAGR of 3.8% through 2023. Now, its forecast of a 2.5% decline in 2020 is the “most likely outcome”. The firm predicts that the market’s best outcome could be a 1.5% increase this year and a decline of 8.1% in the worst-case scenario. Given the current situation, Kline says that its worst-case scenario could be the mostly likely.
“Even our worst-case scenario of 8% probably does not feel steep enough given the dark days we are all living,” comments Carrie Mellage, vice president of Kline’s Consumer Products Practice.
However, Mellage notes that there are enough essential categories to keep the beauty and personal-care market stable. Rescue categories, such as liquid hand soaps and hand sanitizers are set to see increased sales, as are everyday basics like deodorants and shampoos. In the short term, soothing solutions, such as nail polish and facial skincare are expected to decline, but could benefit from consumers purchasing them as a treat, or as part of a routine, says Kline. It is the can-wait categories like fragrance and makeup that are expected to see the sharpest decline, Kline predicts.
But what of the ‘lipstick effect’, the theory that during an economic crisis, consumers will still buy less expensive luxury goods? Kline says that the ‘lipstick theory’ has historically held true, with lipsticks, during the four recessions from 1973 through 2001, and eye makeup, in the 2008-2009 recession, seeing an exceptionally strong performance. “Perhaps we’ll have another winner in the mix this time too,” comments Mellage.
When asked whether consumers of luxury beauty are expected to trade down to cheaper products, Mellage told Luxe Packaging Insight that shoppers are indeed likely to opt for cheaper alternatives—behaviour that is typical in a recession.
Kline says that while the cosmetics market will undoubtedly take a hit this year, it should recover in three to five years, as has been the case in previous recessions.