(Bloomberg Opinion) -- At the Sephora beauty store in Shanghai’s Super Brand mall, face masks are such a big thing they have their own section. There are rows and rows of them, ranging from special concoctions for the eye area to products that reduce the appearance of fine lines.
The face mask frenzy isn’t confined to the high-end market occupied by this division of luxury group LVMH. It’s the same at a Primark discount emporium near the British seaside town of Margate, and a Walmart big-box store in Washington, D.C., where they’re priced at two for $5 and prominently displayed in the beauty section. That would have been unheard of a few years ago.
This is just the most visible manifestation of a trend that’s sweeping the global personal care market. After color cosmetics leading growth for the last five years, products from moisturizers to multi-tasking serums are making a comeback.
It’s a good sign for global groups such as L’Oreal SA and Estee Lauder Cos. A craze for color cosmetics, from contouring palettes to lip kits, drove solid gains in stock prices and revenue. But when Korean pop stars are spurring sales, it’s natural to worry about what will be the replacement fad when the trend ends.
The shift to skincare is a welcome revival. Not only is there plenty of room for innovation — witness the introduction of snail slime to our evening face-care routine — there’s also the prospect of extending the industry’s period of strong sales growth.
L’Oreal SA Chief Executive Officer Jean-Paul Agon said recently that while make-up demand had decelerated, skincare was picking up. Meanwhile, Estee Lauder Cos. reported a 21 percent increase in skincare sales excluding currency movements in its most recent fiscal year, powered by healthy growth at its namesake brand as well as special labels such as high-end La Mer. The company counts on its skincare business for the majority of its operating income.
Organic sales at Procter & Gamble’s super-premium SK-II line, which traces its origins to the Japanese sake brewing process, rose more than 30 percent in fiscal 2018 to become a key engine of growth for the company’s wider beauty business.
Surging skincare isn’t just helpful to sales. Poring over pores is good for profit margins, too — per ounce, skincare tends to be have higher price points, says Deborah Aitken of Bloomberg Intelligence. The products featuring in this trend also tend to be positioned at the premium end of the market, where demand is strong. In contrast, competition is more intense at cheaper price points, where companies such as Coty Inc. dominate.
There are a few important forces driving the shift.
It’s no accident that Sephora’s Chinese stores are bursting with so-called sheet masks — face-shaped pieces of cotton fabric soaked in ingredients to target any one of an array of skin problems.
This new breed of face mask is a South Korean innovation. The nation’s reputation as a global beauty force owes a big debt to an influx of Chinese tourists bringing cosmetics home with them.
There’s a new competitor on the scene.
Japan has traditionally been a strong skincare market, with a reputation for technologically advanced products. Visits by Chinese tourists have been picking up lately, and if South Korea is any guide, J-beauty is ready for a boom — it’s only natural given that China is the world’s biggest skincare market. That’s good news for Japan’s Shiseido Co., which is much stronger in the category than in make-up.
Another driver is actually make-up itself. Many popular products, such as primers, prepare the skin for the application of color cosmetics. It’s all about being Instagram-ready.
The primal need to look good in selfies could also stoke some industry M&A. Beauty and personal care groups have already been battling to snap up the hottest color cosmetics companies, many of which are cult names appealing to younger customers (the allure of the millennial shopper is an important feature in both trends).
But lately that’s shifted to skincare, as well to make-up that solves problems, such as correcting uneven skin tones. Unilever NV and L’Oreal have both recently acquired Korean companies. With the rise of J-beauty, niche Japanese brands could see the suitors lining up.
Whether Japan does pick up where Korea left off, or influencers skip to yet another burgeoning beauty market, one thing is clear: This trend is more than skin-deep.
To contact the editor responsible for this story: Jennifer Ryan at jryan13@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.
Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
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