Makeup takes the lead in the U.S. prestige Beauty Industry.

For the first time in a decade, makeup has taken over as the top prestige beauty category in the U.S., according to leading consumer and retail information provider The NPD Group. In 2006, prestige makeup sold $3.1 billion and now makes up the largest dollar share of the prestige beauty industry, toppling fragrance, with 37 percent of sales. In the last decade, since NPD has been tracking the industry, the dollar share in the prestige beauty industry has shifted, and makeup has increased 66 percent over 1997’s dollar volume. Prestige fragrance generated $2.9 billion in 2006 and now makes up 35 percent of beauty dollars, down from 45 percent in 1997. Prestige makeup went from 30 percent of sales in 1997 to 37 percent in 2006.

NPD saw consistent performance in cosmetics across nearly all the segments. The largest growth areas were the Face and Eye segments. Representing almost half of total makeup dollars, the Face segment saw a gain of three percent to $1.4 billion due primarily to new product launches.

“The latest trend bringing excitement into the Face segment is mineral makeup. The recent popularity of mineral makeup illustrates that natural ingredients are resonating with consumers and have broad appeal,” said Karen Grant, senior beauty industry analyst, The NPD Group. “Green beauty is reflecting changing world beliefs. We see natural ingredients as being part of a lifestyle, rather than just a trend. I believe this is just the tip of the iceberg and we will see significant activity in this area,” said Grant.

The Eye segment, which makes up about 30 percent of the makeup category, grew by four percent to $875 million. Gift Sets, a much smaller, but important segment of the makeup category, saw the strongest growth in 2006 with sales up 37 percent to $99 million.

Niche Players Drive Dollars
Major fashion houses, like Chanel and Dior, have always had their hand in the beauty industry, but The NPD Group is seeing more designers enter the cosmetics arena.

“The number of designer brands has doubled since 1997 and we have seen an explosion of Artist and Alternative brands as well,” said Grant. “These three types of niche or specialty brands now make up about 39 percent of the dollars in the prestige beauty industry. They’re keeping the younger audience attracted and involved in the playfulness and fun of the makeup category. We are even seeing a bump up in sales in prestige fragrances because of designer brands, particularly targeted to younger consumers,” said Grant.

Fragrance Facts

Total sales for men’s and women’s fragrances were down two percent in 2006 to $2.9 billion. The declines were due in part to slower sales during the holiday season, when nearly half of all fragrance sales are generated. Although the business was soft, there are some interesting shifts occurring.

Eight of the top ten new prestige fragrances in 2006 were from designers, such as Vera Wang Princess and Juicy Couture. In fact, designers have been adding more incremental dollars to the fragrance category than celebrities have in the last few years. Since 2003 designer brands have grown $115 million in sales totaling $1.9 billion in 2006, taking the focus away from celebrity scents.

After year over year increases in women’s celebrity brands since 2003, these brands slowed down in 2006. Women’s celebrity scents were down about 17 percent in 2006 to $140 million.

“We saw a plethora of celebrity brands on department store counters and increased competition from the mass market; both of these factors have impacted prestige fragrance sales. In 2006 for example, an average women’s prestige celebrity brand brought in over $11 million less than 2002 as the number of new celebrity brands grew tenfold,” said Grant.

Skincare–Growth at the High End

Prestige skincare products posted growth of one percent overall in 2006 totaling $2.2 billion, the slowest growth NPD’s tracked since 1997. Higher priced products selling for $70 and up fueled the category. Particularly since 2001, these premium priced products (more than twice the average price of total skincare products) have been driving growth. In 2006, premium-priced face products of $70 and above brought in $475 million, up from $382 million in 2005.

“These high-end products have doubled in sales almost every two years. We’re even seeing products over $150 tripling in volume in the last two years,” said Grant. “It really seems the cost to keep a youthful appearance is “priceless” for women. This growth at the higher price points both in the prestige and mass market appears to be squeezing the middle or average priced products, putting the prestige skincare industry under pressure to produce more new, innovative products,” said Grant.

Cosmeceuticals Continue to Grow in `06; Start to Level Off
The largest area of growth within the niche brands in prestige skincare has been the Cosmeceutical/Clinical brands- brands that have a clinical background or are inspired by doctors. This group of products grew from a one percent dollar share in 1997 to 11 percent in 2006 for a total of $235 million in sales in `06.

“Cosmeceutical and clinical brands have been a driving factor in the growth of the prestige skincare market, but we are seeing existing brands in this sector, those that have been on the market for more than two years, starting to show some declines,” said Grant. “The growth is coming from the new brands. This is really the first sign of a slowdown in this area of the industry,” said Grant.

The Spa/Natural/Wellness brands, another piece of the niche pie, now account for eight percent of dollar sales, up from five percent in 1997. These brands often promote wellness, natural ingredients and/or are inspired by spas and the environment. Makeup Artist/Salon and Alternative inspired products were virtually non-existent a decade ago, now they represent a total of eight percent of the prestige skincare dollars. These varied brand offerings are providing a choice for everyone and fueling prestige skincare growth.

To view charts CLICK above on ‘More Images’.

For more information at http://www.npd>