Facial care and cosmetics are sitting pretty in an ugly economy. It’s true that most consumers like to put their best face forward even in the toughest of times. Although usually considered to be recession-proof, the skincare and cosmetics market has seen its share of struggle. But the latest reports indicate that, as the economy mends, the outlook is bright overall, with the category poised for healthy growth.

“Rising consumer confidence, aggressive promotional activity and technological advances have propelled sales of cosmetics and toiletries in the United States by 2.4 percent to reach $36.5 billion in 2010 at the manufacturers’ level,” according to recently released data from Parsippany, N.J.-based research firm Kline & Company. After a slight decrease in 2009, the 2010 uptick has brought sales to above pre-recession levels.

While the category is improving, it is not yet thriving. According to a report from Chicago-based research firm the Mintel Group Ltd., 27 percent of shoppers surveyed said they made replacement purchases in color cosmetics, but avoided “splurge” products in 2010, down from 33 percent in 2009. Another 39 percent of those surveyed said they actively looked for sales and tried to only buy products on sale during 2010 versus 45 percent in 2009.

“Women are really starting to do their research when it comes to making cosmetic and skincare purchases. The days where favorite beauty products were simply automatic replacement purchases are gone,” notes Kat Fay, senior beauty analyst at Mintel in a recent press release. “Nearly a quarter of respondents claim to shop around more to compare prices, while 16 percent say they use the internet more to research prices and products.”

As shoppers continue to scrutinize their spending, venues with competitive pricing and products that provide an added value are poised for success, agrees Matthew Stych, research director for the London-based global retail analyst firm Planet Retail.

“Recent years have seen a trend towards the blurring of shopping channels, with younger consumers in particular willing to purchase premium products, not just in department stores but also in drugstores, specialty stores and even via the internet or TV shopping. Mass merchandisers are also raising their game in terms of merchandising, which is presenting increased competition to drugstores in the mass segment. These shifts are driving the opportunity for private label and retailer-exclusive lines,” he says.

As an example, he points to the successful development of the UK’s Boots private label No7 Protect & Perfect Intense Beauty Serum. “We expect value-seeking consumers to increasingly demand facial care products whose benefits are validated by scientific evidence,” he predicts.



Facing the issues

With savvy consumers sensitive to ingredient and product claims driving the market, the biggest pressures facing contract manufacturers are often just keeping up with the demand to get high-quality, competitively-priced new products to market quickly.

“More and more, the consumer is asking for natural, sustainable materials to replace the synthetic products out there,” says Ed Schack, principal of Lanoka Harbor, N.J.-based EES Cosmetics Solutions. Compiling the necessary natural, organic or sustainable materials means longer lead times and a lot of research and development to ensure that natural products perform as well as their synthetic counterparts.

“Contract manufacturers have to balance what their customers want: quality, quickness and competitive pricing, and still provide the functionality. The challenge is that everyone wants everything yesterday,” he explains.

“The biggest issue facing contract manufacturers is the ability to manufacture a continued stream of new products in a market that is very fast-paced with shrinking lead times. In addition, the ever-changing packaging presents challenges to manufacturers attempting to streamline operations and reduce costs through automation,” says Stan Vander Roest, manager of contract sales and finance at the Ada, Mich.-based Access Business Group.

Companies are addressing these issues by developing concise policies and procedures for new product introductions. The process is continually reviewed and leaned-out to create the quickest and lowest cost model for product introductions, he says.

“Our clients are asking for ways to shorten the new product introduction cycles, ways to reduce costs and for assistance with new product development. Consumers are asking for innovation and uncompromised quality,” Roest explains, noting that category growth will come through, “the development of new and innovative products that provide scientifically-based benefits to the end consumer.”



Super-Fruits = Super-Growth

One innovation that will continue to penetrate the market is the development of products made with super-fruits or super-foods, and whose product claims are backed by clinical studies.

“Super-food ingredients are still prevalent, such as acai berry, olive oil, lemon juice, and green teas, as well as the focus on ‘natural’,” says Fay “but some of the higher-end skin care formulations are featuring plant stem cell technologies.”

Products containing super-fruits such as pomegranate, mango, coconut and sea buckthorn are as in demand as ever, notes Shack. “People are interested in the anti-oxidant/anti-inflammatory properties of these super-fruits. Consumers have a lot more information at their fingertips and have done their research.”

“Because of the prolific amount of product introductions it’s safe to say that skincare is slated to grow sales,” forecasts Fay, nothing the positive growth in the category.

When it comes to color cosmetics, she says, the eye segment and face makeup is expected to outpace lip product sales.



Men Go Mainstream

According to data from Chicago-based research firm Euromonitor International, U.S. male consumers spent $4.8 billion on men’s grooming products in 2009. The fastest growing segment was skin care (facial cleansers, moisturizers, and exfoliants) with sales of $217 million.

In other words, men’s cosmetics are no longer limited to shaving cream and after-shave. “What started this movement was that funny term that emerged a few years ago, ‘metrosexual.’ Men were given permission to no longer be hung up on purchasing skin care products and are a lot more comfortable with it,” says Schack. “All the big companies are marketing to men now.”

Many men’s skin-care products are designed to perform the same function as women’s, providing SPF protection, retinol, or anti-aging properties; they’re simply packaged and marketed specifically to appeal to men.