The rise of cosmeceuticals
The beauty market in South Korea is booming, with an estimated $13.1bn of sales in 2018 according to Mintel. Facial skin care products alone make up half of the total market share and are projected to reach $7.2 billion by 2020. It is a category in which functional products dominate, leading to it being dubbed as the ‘cosmeceutical’ industry.
It’s no surprise, then, that Walgreens Boots, the health & beauty high street giant, has decided to invest in the South Korean pharmacy chain Guodua. Last week the health & beauty giant announced that it had acquired a 40% minority stake in the business worth $353m. Its interest in the Korean beauty market isn't nascent: in 2016 Boots joined up with E-mart to launch its brands No.7 and Soap & Glory into China and this extended into South Korea last year.
Will Boots bring South Korean cosmeceuticals back to the UK? It could be a great move.
Functional, organic beauty products are front of mind for British shoppers too, but it is a confusing, expensive and fragmented market for us. The Brazilian beauty retailer Natura sees this as a huge commercial opportunity: in June last year it acquired the Body Shop from L’Oreal, whose unethical stance on supplier treatment and on animal testing can't have been a great brand fit for Anita Roddick's legacy. Natura describes itself as a ‘cosmetics pioneer’. It sources many of its raw materials from the Amazon rain forest and works directly with farms and families to supply castanha (brazil nuts) and murumuru (palm trees with nuts that are sometimes used in moisturisers). Natura is planning to leverage the Body Shop’s core ethics as a platform to raise environmental awareness. Boots has some tough competition.
Some retailers have ridden this trend excellently, specifically Lush who announced record profits in April. This was after it had invested £32.6m in its retail portfolio, factories and equipment, as well as digital projects. Even more proof that it's a market worth investing in. The perils of falling behind are evident in the shape of the Body Shop, who perhaps failed to lead the way on products and services under their L’Oreal ownership.
One retailer wanting to seize the moment is Holland & Barrett, who have announced they will be opening multiple vegan stores across the UK. According to Aldis, their CEO, the ‘relentless rise of the health-conscious consumer’ is a massive business opportunity. Recently they have removed products containing gelatin, and krill - after receiving 45,000 emails on the matter - to avoid alienating mindful consumers. I’m excited to see what comes next from them.
The South Korean trend for experiential beauty and for ‘skin-tertainment’, as Christine Chang, co-creator of brand Glow Recipe describes it, are also making headway in the West. Many products, including Chang’s, are exported. It won’t be long until we all own panda palettes and jelly baby hand creams.
Health & Beauty will be the fastest growing retail sector over the next five years. Yet it won’t just be driven by organic products like snail slime face cream, or by kitsch and cutesy packaging. We remain, depressingly so, a nation obsessed by looks. Superdrug last week announced that its positive like-for-likes were significantly boosted by its sponsoring of Love Island, a programme where botoxed and plastic surgery-stuffed women (and men) vie for attention from the opposite sex and from the viewing public.
Just as Asos did for Fashion, H&B retailers who can make fast-beauty affordable to shoppers will reap the rewards. Branding is vital – hence Superdrug doing so well of late. Holland & Barrett has a big job ahead if itself for this reason.
Those that choose to follow in the well-manicured footsteps of Lush and of the Korean brands will also succeed, by putting natural ingredients and ‘skin-tertainment’ at the core of their proposition.
In this commercial contest, may the most beautiful retailer win.