Global Beauty Slows (But Doesn't 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 novelties in the beauty sector has supported volumes and price trends. Now, however, geopolitical and economic uncertainty, together with market saturation, are slowing this momentum. In fact, if, between 2022 and 2024, the sector grew by 7% per year, for the next five years McKinsey estimates a growth of 5%.

"Beauty remains one of the most dynamic sectors in the consumer goods market and will continue to grow at a sustained pace, albeit slightly slowing down," said Gemma D'Auria, senior partner at McKinsey, global head of the Apparel, fashion & luxury practice. "However, looking to the future, achieving further growth will be more complex: consumers, after years marked by inflation and an increasingly broad offering, are now much more attentive to value. Purchasing preferences are changing rapidly, not only between countries, but also within the same markets: highly localized strategies are therefore needed, which go beyond national segmentation. Furthermore, classic demographic criteria are no longer sufficient to explain consumer behavior."

And he adds: «Today the real discriminant is attitude: to intercept customers, more sophisticated profiling models are needed, capable of capturing different nuances. In this context, brands are called to further refine their value proposition, making it clear, distinctive and consistent across the entire portfolio. The consumer is increasingly selective, not only in the choice of brands, but also in the categories in which they want to spend more or save: almost half of global buyers, for example, say they buy products within the same category at different price ranges».

Geographically, wealth is growing in markets such as Latin America and the Middle East, providing 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 are looking at India and the Middle East as the most promising markets for industry growth, while they are less optimistic about China. While India and the Middle East are strong points in the market, growing in these countries means brands need to familiarize themselves with and adapt to local consumer preferences and tastes. For example, 58% of Indian consumers say beauty is about feeling confident (less than half of Indian consumers say beauty is about keeping up with the latest trends). However, about half of companies say they expect to increase distribution in North America, while 41% say the same for India.