Cosmetics market up by 3.8%

Consumers are starting to focus on quality performance and perceived results, and are open to new technology, more sophisticated dermocosmetic products and new retail distribution models. The research finds that the market is mainly supply-driven, and fuelled by innovation.

The largest cosmetic good by type is the skincare market, which accounts for 35% of total market share, followed by hair care at 23%. Makeup and fragrance make up the following two largest segments at 17% and 13% respectively. Hygiene items come in at 11%, while all other types make up 1%. In terms of growth rates, dermocosmetics comes in at 5.1%, followed by makeup at 5%.

Most cosmetics are sold in the Asia/Pacific market, which represents 35% of the overall market. Western Europe comes in second at 22%, followed by North America at 21%. Latin America comes in with 12% of market share and Eastern Europe with 7%. Growth in Western Europe remains sluggish though, at a below average 3%. 

Top 7
L’Oréal continues to dominate the top 7, and is and larger than the rest of the top 7 put together, at €93 billion in market capitalisation. The leader saw below the median 2.4% long term growth at 2%, and has a weighted average cost of capital (WACC) of 7.9%. Estée Lauder comes in second with market capitalisation of nearly €29 billion and 2.5% growth. Beiersdorf is the third largest seller of cosmetics with a market capitalisation of around €18 billion and just below median 2.3% growth. Coty comes in at number 4 with almost €7.5 billion in market capitalisation and 1.8% growth. Shisedio tops off the top five with €6.7 billion in market capitalisation and a WACC of 4.1%.

Advertising costs
An interesting aspect of the cosmetics market is the relatively high spend on advertising by the largest players, relative to the largest players in the luxury goods market. The average spend on adverting as a % of total sales stands at 6.6% for luxury companies and 25.1% for cosmetic companies. According to EY’s analysis, advertising costs remain a major topic within the operational units of companies whose focus is on top-line growth and brand awareness sustainability, with a significant correlation between advertising expense and mass-market positioning.