Sustained higher demand
“Despite recent macroeconomic headlines, beauty consumers remain highly engaged with the category,” says McPhilliamy. "In fact, 93% of beauty consumers expect to increase or maintain their spending over the next year, similar to what we saw in 2021.”
McPhilliamy notes that while inflation plays a role in higher spending, other factors support long-term demand, including increased usage, sustained wellness routines, and consumer preference for premium products. “Overall, health and beauty enthusiasts continue to prioritize high-quality products in this category. That will continue to create growth opportunities for strategic and financial buyers.”
Spending to remain stable
That commitment to health and beauty appears poised to weather a potential downturn, says McBride. “The survey confirms that a large portion of consumers would not reduce spending if economic conditions declined. Those who would spend less would do so by de-stocking their cabinets before they would lower spending on non-core and new products or cut back on beauty services.”
A focus on health
As we reported in last year’s survey, health and beauty enthusiasts prefer products with proven health and wellness benefits. This year’s survey confirms the staying power of this trend and revealed some nuances, says McPhilliamy.
“Consumers told us that skin health is a top priority, along with a continued emphasis on wellness and self-care and hair health,” she says. “Products with tangible benefits in those areas should be well-positioned for growth.”
McPhilliamy adds that nearly half of surveyed consumers plan to spend more next year on products with SPF protection, beauty and wellness supplements, and daily skin care. With a large universe of independent brands in these areas, M&A investors have a wealth of opportunities to participate in this growth.
Clean and efficacious remain priorities
Another continued trend from last year’s study is the importance of clean, ethical, and transparent health and beauty products. However, functional benefits and product efficacy are still more crucial. “Consumers want both, and they’re especially interested in health and beauty products backed by real science, with demonstrable benefits,” says Arkus.
One thing that’s less influential is brand name. “Surprisingly, the research shows that brand name, while important, ranked lower when we measured purchasing decisions,” says McBride. “It’s much more important that the product has benefits, the ingredients work, and the labeling is transparent.”
TikTok’s growing influence
For health and beauty enthusiasts, personal research, browsing, and trusted recommendations are the top ways to discover new products and brands. However, our analysis by age reveals a subtlety.
“More than half of 18- to 24-year-olds say they use TikTok almost every time they find new health and beauty products,” says McPhilliamy. “That’s up significantly year-over-year, underscoring the need for brands to stay on top of their social media strategies.”
Amazon is winning
Likewise, this year’s study shows that Amazon’s expanding health and beauty offerings have made the company an increasingly relevant player in the space.
“While mass retailers and beauty specialists remain top channels for consumers,” says McBride, “Amazon is gaining ground through its enhanced beauty marketplaces and ecosystem. That’s especially the case for men.”
Strong and steady demand creating growth opportunities
The latest Harris Williams Health & Beauty Survey confirms that top-quality companies in the subsector are well-positioned for long-term growth, even if economic conditions weaken. M&A investors should continue to prioritize brands with clean and transparent formulations with real efficacy, and those that connect with consumers on the modern social media and e-commerce platforms where they spend their time.
To learn more about the essential factors differentiating the most promising health and beauty brands, please contact our senior bankers.