The Harris Williams 2021 Beauty & Personal Care Consumer Study

What matters most to today’s beauty and personal care consumers? How have beauty and personal care routines changed during the pandemic? What does growth look like going forward, and where do we believe there are investment opportunities?

We answer these and other questions in our new study of consumer attitudes toward the dynamic beauty and personal care sector.

“The beauty and personal care sector is poised for strong and steady growth, supported by a base of devoted consumers who intend to spend more going forward,” says Kelly McPhilliamy, a managing director in the Harris Williams Consumer Group, leading efforts in health and beauty. “What`s most exciting to us is that this growth is supported by lasting behavior changes adopted by consumers during the pandemic—not just the return to work and social life.”

McPhilliamy reports that self-identified beauty-conscious consumers are spending more in 2021 than in 2020, and plan to spend even more in 2022 (Figure 1).

Figure 1: Spending in Beauty and Personal Care to See Meaningful Uptick in 2022

According to William McBride, a director in the Consumer Group, companies and investors in the space are benefiting from long-term commitments by consumers to take better care of themselves.

“Adopting new wellness and self-care routines was the single most cited reason for the higher spending on beauty and personal care, almost double the percentage of people spending more because of social life,” he says (Figure 2). “During the pandemic, consumers have become more aware of their overall health and wellness, and that`s driving their buying behaviors.”

Figure 2: Wellness and Self-Care Routines Driving Sustained Increase in Spending

How can beauty and personal care investors tap into this growth? Paying close attention to consumer preferences reveals a wide variety of potential avenues to drive value creation in beauty and personal care.

One is by bringing products to market with the right blend of efficacy and ESG (environmental, social, and governance). As shown in Figure 3, ESG concerns drive brand and product choice, but product efficacy matters more. Brand name was the least important factor, highlighting the opportunity for new market entrants.

Figure 3: Most Important Product Attributes: Works Well, Made Well

“Consumers are not willing to sacrifice performance for ESG concerns,” says McPhilliamy. "At the same time, ESG has quickly become a key priority for consumers seeking brands that align with their values from clean-label, environmental, and social standpoints.”

In terms of channel strategy, companies with products easily discovered online and tried in person stand to grow the most (Figure 4).

Figure 4: Preferred Way to Discover New Beauty & Personal Care Products

“Personal research is the top way for consumers to learn about new beauty and personal care products, followed by online or in-store browsing,” notes McBride. “Brands that are successful in providing a seamless journey from discovery to purchasing either online or in-store will be the long-term winners.”

When it comes to demographics, growth-focused companies should ensure 18- to 34-year-olds and wealthier consumers (Figure 5) are part of their plan. As shown in the figure, younger and higher-income consumers are significantly more likely than others to be spending more this year and to have a budget above $100/month for beauty and personal care.

Figure 5: Spending Intentions Highest Among Younger, Wealthier Consumers

How to reach these free-spending consumers? By emphasizing the channels they prefer. In particular, companies trying to reach higher-income consumers should make recommendations from doctors, stylists, and other professionals part of their strategy. Social media also appears to be a more important product discovery channel to both higher-income and younger consumers (Figure 6).

Figure 6: Preferred Way to Discover New Beauty & Personal Care Products

Another important consideration is go-to-market strategy. Loyalty is highest in areas such as beauty and wellness supplements, daily skin care, and daily hair care. Conversely, consumers are less loyal in home fragrance, nail products, and skin care treatments like masks and peels, creating more opportunities to gain share through product trialing (Figure 7).

Figure 7: Brand Loyalty by Product Category

Perhaps the best news for buyers: Brand ownership is relatively unimportant to consumers, suggesting an equal playing field for independent and legacy brands (Figure 8).

Figure 8: Most Important Brand Qualities

Conclusion

Health and personal care consumers are on an upward spending trajectory, creating a growing array of opportunities for investors. With new, long-term health and wellness routines boosting demand in the category, success will hinge upon offering products with proven benefits and a compelling ESG profile. Winning also requires providing a seamless, channel-agnostic discovery-to-loyalty experience tailored to younger and more affluent consumers.

Download the full report for additional details, including specific product categories with the highest growth potential, the top ways beauty consumers discover new products, and the beauty and personal care services consumers will always hire a pro to perform (and which they plan to do themselves).

For a deeper discussion on beauty and personal care M&A, please contact us.

Kelly McPhilliamy
William McBride

Published September 2021