With beauty retailers enjoying a bumper Christmas trading period, the one thing they all had in common was the resounding success of their competitively-priced, own-brand products against the traditionally dominant branded offerings.
The beauty category has historically been dominated by brands, big and small, while own-brand products have been seen as a poor relation. However, own-brand’s contribution to the strong Christmas sales performance of high street giants like Boots and Superdrug is changing that narrative.
Retail Week explores the reasons behind the rise in own-brand sales, the changes in consumer behaviour driving this growth, and whether a tipping point has been passed in the minds of the consumer even as inflation rates finally inch down.
Faultless sales growth
One of the reasons for the beauty category’s continued resilience despite the cost-of-living crisis has been the incremental growth of own-brand sales.
Own-brand labels such as Boots No7 and Superdrug’s Studio London outperformed the total beauty market with sales growing 15% in the 52 weeks to December 24, 2023, according to data revealed by Kantar FMCG Health and Beauty.
This is substantially higher than sales reported by the total beauty market and competitor branded products at 9.4% and 8.1%, respectively.
Matt Maxwell, business unit director of health and beauty at Kantar Worldpanel UK, said: “Across total health and beauty, own label performed exceptionally well in 2023 with sales performance up 15% versus brands at 8.1%.
“This was helped by both Boots and Superdrug’s own-label make-up ranges, the former aided by the release of No7 Future Renew, the retailer’s top-selling skincare range of 2023.”
Boots, the UK’s largest health and beauty retailer, said: “Value remains a key focus for customers with Boots own-brand products proving popular; in particular, own-label skincare and healthcare.” No7 sales grew 13% in the last quarter.
Superdrug reported 10% year-on-year growth in own-brand sales in the run-up to Christmas. Studio London became the fastest-growing and biggest own-brand range, driving 20% year-on-year sales growth and 9.1% volume growth in the cosmetics category.
Pureplay retailer THG, which owns beauty platforms Lookfantastic and Cult Beauty in the UK, hailed a strong performance, ending the fourth quarter with 2.6% growth in beauty sales with “best performances” from THG’s own brands Perricone MD and ESPA.
Closing the quality gap
The ‘lipstick effect’ has helped the beauty sector stay afloat and be resilient in times of economic uncertainty. This was particularly evident when ever-affordable lipstick sales increased during the global economic crisis of 2007 while other sectors suffered a downturn.
But with own-brand beauty products outperforming the larger beauty market and brands this time around, could this be the start of a new lipstick effect?
Until the recent financial crunch, beauty has been a brand-led space, dominated by legacy companies such as Estée Lauder and L’Oréal, and more recently, innovative celebrity brands including Rare Beauty and Trinny London.
However, Tash Van Boxel, retail analyst at GlobalData, said consumer behaviour towards own-brand labels has changed over the last few years, largely due to these products being much more pocket-friendly in a saturated beauty market.
Van Boxel said: “Beauty is quite saturated at this point. There are so many products, especially in skincare and make-up, but they’re quite similar in terms of ingredients, especially for a consumer who may not know the exact composition of [these] things.
“The distinguishing factor then becomes the price point. And when budgets are quite stretched, people are going to choose something that’s at a lower price point if they can’t really see any difference in quality.”
Though much of the initial success of own-brand labels can be attributed to lower price points, retailers have also invested heavily in providing the best possible quality within these price brackets.
Van Boxel said: “A lot of retailers have invested in making the quality of their own-brand quite good. Consumers can’t tell the difference between something that’s a mid-price point and something that’s own brand.”
In April last year, Boots launched its No7 Future Renew range, calling it the ‘biggest-ever cosmetic science innovation” in the brand’s history, scientifically tested to help reverse signs of skin damage.
Staying power
With grocery retailers noting the contribution of premium own-brand ranges in their latest results, the ongoing cost-of-living crisis has led to a shift in consumer attitudes to own-brand labels across retail categories, including food and clothing.
But with inflation predicted to ease in the next 12 months, will own-brand labels continue to grow leaps and bounds or will consumers fall back into old spending habits as purchasing power improves?
Van Boxel said: ”I think that for the next few years, we will continue to see the success of own-brand. Although inflation is coming down, that doesn’t mean that prices are coming down.
“Consumers will still have to pay a higher price point than they used to for their make-up and skincare.
“And, there is still room for own brand to grow and expand within own-brand ranges. Consumers who initially switched to own brand to save money may try other products in that range when they realise there is quality there as well.”
While the initial shift to own-brand items may have been a direct consequence of skyrocketing prices and rising inflation, the category has carved a new space for itself in the saturated beauty market, where there is much more room for growth as we head into 2024.
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