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1
February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Thisreportispartofournewseries,TheNewBeautyConsumer,whichlooksatvariousaspectsofbeautyretailingandconsumption.
1) GenZisthefirstgenerationtousesocialmediaintheirformativeyears,anditispressuringteenstolookgood.AccordingtoasurveybytheAmericanPsychologicalAssociation,nearlyone-thirdofUSteengirlsfeelbadwhencomparingthemselveswithotherstheyseeonsocialmedia,andotherstudieshavefoundlinksbetweensocialmediausageandlowself-esteem.
2) Wethinkthesekindsofpressureswilldriveupspendingonbeautyproductsandservicesandfitnessservices.USteensarealreadygrowingtheirspendingonbeauty;thecategory’sshareofspendingamongupper-incomefemaleteensgrewtoitshighestleveleverinfall2016.
3) Whenshoppingforbeautyproducts,youngconsumersturntosocialmedia,andespeciallyvideocontent,foradvice.ThevolumeofbeautycontentonYouTuberocketedby200%between2015and2016,andfemaleconsumersages13–24makeupfully47%oftheaudienceforthesevideos.
4) GenZ’soldestmembersareonthecuspofadulthood,andweexpectthisgeneration’sdemandstobeafactorinfuturebeautyindustrymergersandacquisitions(M&A).Large,establishedmultibrandcompaniesarelikelytoacquirebeautybrandsthatresonatewithGenZersasthegeneration’sspendingpoweraccelerates.
Deep Dive: Gen Z and
Beauty—the Social Media
Symbiosis
Deborah Weinswig
Managing Director,
Fung Global Retail & Technology
US: 917.655.6790
HK: 852.6119.1779
CN: 86.186.1420.3016
2
February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
TableofContentsExecutiveSummary..................................................................................................................................................3
Introduction..............................................................................................................................................................5
DefiningGenZ......................................................................................................................................................5
NotJustSocial...Visual..............................................................................................................................................6
SocialMediaFuelsImageConcerns..........................................................................................................................7
USTeensAreGrowingTheirBeautySpending.........................................................................................................8
SocialMediaDrivesBeautyandBeautyDrivesSocialMedia.................................................................................10
USFemaleTeensSpentanEstimated$2.3BilliononBeautyCategoriesLastYear...............................................12
GenZ’sFavoriteBrands..........................................................................................................................................13
GenZLikelytoImpactBeautyM&A.......................................................................................................................16
KeyTakeways…………………………………………………………………………………………………………………………………………………….17
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
ExecutiveSummaryWedefinethemembersofGenerationZasthosebornafter2000,whichmeansthegroupisboththenextgenerationofconsumersandonewhosemembershavenotallbeenbornyet.
WehaveidentifiedthreemainthemeswithintheGenZbeautymarket:
Imagepressuresfromsocialmediaarefuelingbeautydemand.GenZersarethefirstgenerationtobothdocumenttheiryearsgrowinguponsocialmediawebsitesandbeexposedonlinetoaspirationalimagesofcelebritiesandself-madesocialmediastars.Consequently,nearlyone-thirdofUSteengirlsfeelbadwhencomparingthemselveswithotherstheyseeonsocialmedia,accordingtoasurveybytheAmericanPsychologicalAssociation.Andacademicresearchstudieshavefoundlinksbetweensocialmediausageandlowself-esteem.Wethinkthesepressuresarelikelytofuelteenspendingonbeautyproducts.
BeautyspendingisagrowingpriorityforUSteengirls.AccordingtoaPiperJaffraysurvey,upper-incomefemaleteens’shareofspendingonthebeautycategorygrewtoitshighestleveleverinthefallof2016.Reflectingthistrend,usageoffacialcosmeticsishighamonggirlsages12–14:accordingtoMinteldata,roughlyhalfofthisagegroupusesmascara,foundationorconcealer.Reflectingtheimpactofsocialmedia,lastyear,brandownersEstéeLauderandL’Oréalattributedstrongdemandforcosmeticstotheselfieculture.
GenZturnstosocialmediaforbeautyadvice.Notonlydoessocialmediaheightenpressuresonyoungpeopleregardingpersonalappearance,butalsoservesasasourceofbeautyinformationandexpertiseforthem.Manyyoungconsumersturntosocialmedia,andespeciallyvideocontent,whenshoppingforbeautyproducts.Mintelfoundthatthree-quartersofUSfemaleteenshadlookedtoYouTubefortutorialsonnewstylesornewproducts.Moreover,theamountofbeautycontentonYouTubesurgedby200%between2015and2016,accordingtoanalyticsfirmPixability,andthefirmfoundthatfemaleconsumersages13–24makeupfully47%oftheaudienceforthesevideos.BrandsseekingtoengagewithGenZmustofferengaging,authenticcontentonvisual-drivensocialmediasites.
Figure1.TheSocialMedia-BeautySymbiosis
Source:FungGlobalRetail&Technology
TeensTurntoSocialMediaforBeautyAdvice
SocialMediaAddstoImagePressures
Lastyear,EstéeLauderandL’Oréalattributedstrongdemandforcosmeticstotheselfieculture.
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Source:Shutterstock
WeestimatethatUSfemaleteensages12–17spentapproximately$2.3billiononthecorebeautycategoriesofskincare,cosmeticsandfragrancesin2016.IntheUS,MAC,CoverGirl,MaybellineandUrbanDecayarethefavoredbrandsoffemaleteens,accordingtoPiperJaffray,whileUlta,Sephora,WalmartandTargetaretheirfavoredretailers.
Inthecomingyears,weexpectthedemandsofGenZconsumerstobeadriverofbeautyindustryM&A.LegacymultibrandgiantsarelikelytoseektostrengthentheirpositionwithGenZasthedemographic’sspendingpoweraccelerates.WebelieveGenZersplaceheightenedimportanceonthefollowingwhenshoppingforbeautyproducts,andthatthesepreferenceswillimpactbeautyM&Ainfutureyears:
• Formulatedwithpureandnaturalingredients.
• Celebrity-brandedand/orformulatedby“star”skincareandhaircareexperts.
• Madebycompaniesthatrecognizeanddemonstratesocialconsciousness,whichmayincludeafocusondiversityandequalityandcruelty-freeprocessesandgoods.
Weincludeatableofrecent,relevantbeautyindustryM&Aactivitytoconcludethereport.
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
IntroductionBornafter2000,GenZwillformthenextgenerationofconsumers.Itsoldestmembersareonthecuspofadulthood,andsoarebeginningtodrawtheattentionofmass-marketretailers.InAugust2016,wepublisheda20-pageoverviewofGenZanditspreferencesandbehaviorsasaconsumergroup:readerscanfindthatreportatbit.ly/FungGenZ
Inthisreport,weturntothebeautycategoryinmoredetailanddiscusshowsocialmediainparticularfuelsbeautydemandamongteens.Wealsolookathow,inturn,theseconsumerslooktosocialmediaforadviceandrecommendationswhenshoppingforbeautyproducts.ThefollowingsectionsalsoexplorewhichbrandsandretailersarepreferredbyUSteensandthelikelihoodthatGenZdemandswillimpactfutureM&Ainthebeautyindustry.
Thisreportispartofournewseries,TheNewBeautyConsumer,whichlooksatvariousaspectsofbeautyretailingandconsumption.SomeofthedatacitedinthisreportareglobalornotspecifictotheUS,butourfocusisontheAmericanmarket.
DefiningGenZGenZisthefastest-growingsegmentofthepopulation.WedefineGenZasthosebornafter2000,andmaintainthatnotallofitsmembershavebeenbornyet.ButthereisnoconsensusonthedefinitionofGenZ:somecommentatorssuggestthatthisgenerationincludesonlythosebornbetweenthelate1990sandthemid-2000s.Wethinkcategorizingthisgenerationasincludingthoseborninaspanofapproximately20yearsmakesitmorecomparabletopreviousgenerationsandthatdefiningitasincludingonlythosebornwithina10-yearrange,assomeimply,isnotuseful.Thetablebelowillustrateshowwedefinethegenerations.
Figure2.Generations,byBirth-YearRange
Generation Born AgeRangein2017
GenZ 2001–2020 0–16
Millennial 1980–2000 17–37
GenX 1960–1979 38–57
BabyBoomer 1946–1959 58–71
Senior/Pre-Boomer Before1946 72+
Source:FungGlobalRetail&Technology
In2015,GenZmadeup19%oftheUSpopulation,weestimate,basedonUSCensusBureaudata.By2020,itssharewillbearound25%.
SomeofthedatacitedinthisreportarebasedonsurveysofconsumergroupsthatincludedsomerespondentswhowereolderthanGenZers,accordingtoourdefinition,atthetimethesurveyswereconducted.Forinstance,somesurveyedgroupsincludedyoungermillennials.Wecitethesedataanywaybecausewethinkhavingdefinitivecutoffpointsbetweengenerationsisbydefinitionarbitrary,andthatsuchdataoftenhavevalueinpointingtomoregeneraltrendsanddifferencesbetweenbroadagegroups.
GenZ’soldestmembersareonthecuspofadulthood,andsoarebeginningtodrawtheattentionofmass-marketretailers.
In2015,GenZmadeup19%oftheUSpopulation,weestimate,basedonUSCensusBureaudata.By2020,itssharewillbearound25%.
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
NotJustSocial...VisualItisworthrememberingthatGenZisthefirstgenerationtogrowupalongside—andsobeshapedby—fast-changingconsumerdevicesandservices.FromSkypetosmartphonestoInstagramtoAmazonPrime,majoreverydaytechproductsandtech-enabledserviceshaveallemergedduringGenZers’lifetime.
Inaddition,theseconsumersareenthusiasticallydocumentingtheirlivesonline,fromtheirsocialandpoliticalviewstotheirphotographs.Themassiveadoptionofsmartphoneshascoincidedwiththeemergenceofsocialmedia,andoneresultofthisisthatteenscannowexpecttobephotographedanytime,anywhere—andtohavethoseimagessharedonline.
Reflectingthisemphasisonvisualcontent,youngconsumersnotonlyavidlyusesocialmedia,butalsoflocktovisual-dominatedsocialmediachannelssuchasSnapchatandInstagram.Inresponse,othermajorsocialmediasitessuchasFacebookareracingtokeepupwiththeseimage-heavyrivalsbyattemptingtoincreasetheamountofvideocontentavailableontheirplatforms.
Figure3.US:ProportionofUSTeensandYoungAdultsUsingSocialMediaSites,2016(%)
Base:2,002USrespondentsages12–24surveyedinJanuary–February2016Source:EdisonResearch/TritonDigital
4
9
10
21
24
26
27
29
36
66
68
72
Tinder
GooglePlus
Tumblr
Vine
Kik
Twiser
Snapchat
Visual-Heavy
Youngconsumersflocktovisual-dominatedsocialmediachannelssuchasSnapchatandInstagram.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Weperceivesocialmediaascausingteenstofocusmoreattentionontheirpersonalappearance,andwethinkthatislikelytoboostdemandinthebeautyproductmarket,aswellasadjacentmarketsthatarefocusedonpersonalappearance,suchbeautyservicesandthefitnessindustry.
SocialMediaFuelsImageConcerns
“Everytime[teens]switchontheirphones,they’regettingmessagesaboutpartiestheyhaven’tbeeninvitedto,orthey’reseeingphotosoftheirfriendsdoingthings....Itabsolutelypermeatestheirsenseofself-worth.”
–EmilyCherry,HeadofParticipationatUKchildren’scharityNSPCC
Socialmediauseis“significantlyassociated”withincreasedincidenceofdepression,accordingtoa2016studyofyoungadultsbytheUniversityofPittsburghSchoolofMedicine.A2015reportfromCanada’sCentreforAddictionandMentalHealthsimilarlyfoundmeaningfulassociationsbetweentimespentonsocialmediaandnegativementalhealthindicators:heavysocialmediausersweremorelikelytoreportlowself-esteem,forinstance.
So,itisperhapsnotsurprisingthatnegativesentimentsassociatedwithpersonalimageandbody-consciousnessappeartobewidespreadamongGenZers.AccordingtoasurveybytheAmericanPsychologicalAssociation,nearlyone-thirdofUSteengirlsfeelbadwhencomparingthemselveswithotherstheyseeonsocialmedia,asillustratedinthegraphbelow.Itisworthnotingthatthissurveywasconductedin2013,whenimage-focusedsocialmediachannelssuchasInstagramandSnapchatwerestillintheirinfancy.
Figure4.US:PercentageofTeensWhoAgreedwithStatementonTheirAppearance,2013
Base:1,018USteens,ages13–17Source:AmericanPsychologicalAssociation
13%
30%
55%
68%
Boys
Girls
Feelbadwhencomparingthemselvestoothersonsocialmedia:
Boys
Girls
Someaspectoftheirappearanceisasomewhatorverysignificantsourceof
stress:
AccordingtoasurveybytheAmericanPsychologicalAssociation,nearlyone-thirdofUSteengirlsfeelbadwhencomparingthemselveswithotherstheyseeonsocialmedia.
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Source:Shutterstock
Asthedataabovesuggest,thisisnotanissueconfinedtogirls.A2016surveysponsoredbyadvertisingthinktankCredosintheUKfoundthatmorethanhalfofyoungmalerespondentsrankedsocialmediaasasourceofpressuretolookgood.Socialmediarankedhigherinimportanceoverallthaneitheradvertisingorcelebritiesdidasaperceivedsourceofpressureamongrespondents.
Figure5.UK:PercentageofMaleRespondentsAges8–18WhoNamedFactorasOneoftheBiggestSourcesofPressuretoLookGood,20
Base:1,005UKmales,ages8–18Source:Credos
USTeensAreGrowingTheirBeautySpendingSo,youngpeopleappeartofeelgreaterpressurethaneverbeforetospendontheirpersonalappearance.WenotethattheimpactthispressurehasonGenZers’consumerbehaviormaychangeasthegenerationgrowsolder,but,fornow,beautyspendingisagrowingpriority,particularlyforUSteengirls.
49%
53%
57%
68%
Celebriues
Adverusing
SocialMedia
Friends
SpendingonbeautyisagrowingpriorityforUSteengirls.
InaUKsurvey,morethanhalfofyoungmalerespondentsrankedsocialmediaasasourceofpressuretolookgood.
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Upper-incomefemaleteens—ademographicseenasaleadingindicator—grewtheirshareofspendingonthebeautycategorytoitshighestleveleverinthefallof2016,accordingtoasurveybyPiperJaffray,aninvestmentbank.Some11%ofthisgroup’stotalspendingwasonthebeautycategory.
Figure6.US:Upper-IncomeFemaleTeens’ShareofSpendingDirectedTowardtheBeautyCategory(%)
Source:PiperJaffray
Reflectingthisspending,usageoffacialcosmeticsishighamonggirlsages12–14;accordingtoMintel,roughlyhalfofthisagegroupusesmascara,foundationorconcealer.
Figure7.US:PercentageofFemaleTeensAges12–14WhoUseSelectedCosmetics,2016
Source:Mintel
9.89.3
10.511.3
Spring2015 Fall2015 Spring2016 Fall2016
"Highestshareintenyears"
"Highestshareinthesurvey'shistory"
54%
45%
30%
10%
Mascara Foundauon/Concealer
Blush/Bronzer HairColoring
Usageoffacialcosmeticsishighamonggirlsages12–14;accordingtoMintel,roughlyhalfofthisagegroupusesmascara,foundationorconcealer.
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
AccordingtoMintel,beautyandgroomingproductusagebymaleteensisalsohigh,withfourin10maleteensages12–17usingfragranceorlip-careproducts.
Figure8.US:PercentageofMaleTeensAges12–17WhoUseSelectedBeauty/GroomingProducts,2016
Source:Mintel
Beautybrandsarereportingstrengtheneddemandasaresultofsocialmedia.In2016,bothEstéeLauderandL’Oréalsaidtheselfieculturehadcontributedtostronggrowthintheircosmeticssales.Andtheparticulartrendforgymselfiesisfuelingyoungconsumers’demandforgym-friendlymakeupfrombrandssuchasTarteCosmetics,BirchboxandCultBeauty,accordingtoTheTimes.
SocialMediaDrivesBeautyandBeautyDrivesSocialMediaVisual-focusedsocialmediaandthebeautymarketexistinakindofsymbiosis:notonlydoessocialmediaheightenpressuresonyoungconsumersregardingtheirpersonalappearance,butalsoservesasasourceofinformationandexpertiseforthemwhentheyareshoppingforbeautyproducts.Manyyoungconsumersturntosocialmedia,andespeciallyvideocontent,forinformationwhendecidingwhatbeautyitemstobuy.
Figure9.US:PercentageofFemaleTeensAges12–17WhoUseSocialMediaforSelectedBeauty-RelatedPurposes,2016
Source:Mintel
29%
41%
42%
44%
Hair-StylingProducts
Lip-CareProducts
Perfume/Cologne
Facial-CleansingProducts
45%
56%
65%
HavePostedAboutBrandsonSocialMedia
FollowBeauty/PersonalCareBrandsonSocialMedia
UseYouTubetoLearnHowtoCreateaNewStyleorUseaNewProduct
Manyyoungconsumersturntosocialmedia,andespeciallyvideocontent,whenshoppingforbeautyproducts.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
BeautycontenthasballoonedonYouTubeandcontinuestogrowapace.AccordingtoPixability,thenumberofbeauty-relatedvideoshostedonYouTubemorethantripled,to5.3million,inthe16monthsendedJune2016.
Figure10.NumberofBeauty-RelatedVideosonYouTube(Mil.)
Source:Pixability
GenZersaretheleadingconsumersofthiscontent.AccordingtoPixability,femaleviewersages13–24makeupfully47%oftheYouTubebeautyaudience.ThiskindofdemandhasmadestarsofvloggerssuchasZoella,whosetargetaudienceisyoungfemaleteens.PixabilitysaysthatZoellaleadsbynumberofbeautysubscribers,with10.9millionsigneduptofollowheronYouTube.
Source:YouTube
1.8
5.3
March2015 June2016
+200%
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
OnYouTube,beautyvideosgarnerfarmoreviewsthandovideosinrivallifestylecategories,Pixabilitysays.AsofJune2016,beautyvideosonthesitehadbeenviewed125billiontimes.Meanwhile,onFacebook,thetop200beautybrandshadnotchedsome850millionvideoviewsbyJune2016.
Figure11.YouTube:TotalViewsofLifestyleCategoryVideosasofJune2016(Bil.)
Source:Pixability
USFemaleTeensSpentanEstimated$2.3BilliononBeautyCategoriesLastYearWeestimatethatAmericanfemalesages12–17spentapproximately$2.3billiononthecorebeautycategoriesofskincare,cosmeticsandfragrancesin2016.ThisestimateisforspendingbyteensthemselvesandexcludesspendingbyyoungerGenZers.Thetablebelowshowshowourestimatebreaksdownbysubcategory.
Figure12.US:EstimatedSpendingonCoreBeautyCategoriesbyFemaleConsumersAges12–17,2016(USDBil.)
TotalSpend
TotalCoreBeauty $2.3
Skincare $1.1
Cosmetics $0.8
Fragrances $0.4
Source:PiperJaffray/USCensusBureau/FungGlobalRetail&Technology
Thefollowingdatapointsinformedandcontextualizedourestimates:
• PiperJaffray’sfall2016USteensurveyfoundthatupper-incomefemaleteensspentanaverageof$395acrossskincare,cosmeticsandfragrancesperyear.Basedontheratioofupper-incomehouseholdincometoaverage-incomehouseholdincomeinthePiperJaffraysurvey,weestimatethataverage-incomefemaleteens’
125
0
20
40
60
80
100
120
140
Beauty Fitness Food Travel Fashion
OnYouTube,beautyvideoshadnotched125billionviewsasofJune2016.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Source:Shutterstock
annualspendingwasabout$192acrossskincare,cosmeticsandfragrancesin2016.
• Populationestimatesofaround12millionfemaleteensages12–17intheUSleadtoaballparkspendingfigureof$2.3billionacrossthesethreebeautycategories.
• Ourestimateequatesto3%ofthetotalUSbeautyandpersonalcaremarketsizeasrecordedbyEuromonitorInternationalfor2016(andwenotethatEuromonitor’stotalincludestoiletriesandpersonalcarecategoriesthatextendbeyondskincare,cosmeticsandfragrances).Ourestimatesuggeststhatfemaleteensaccountedforaround7%oftheUSskincaremarketrecordedbyEuromonitorand6%ofthecosmeticsmarket.
• USfamiliesspent$24billionon“miscellaneous”categories—whichincludebeautyproductsandservices—forthoseages12–17in2015,weestimate,basedonUSDepartmentofAgriculturesurveydata.Ourestimatedfigureof$2.3billionforcorebeautycategoriesequatestojustunder10%ofthismiscellaneousspendingtotal.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
GenZ’sFavoriteBrandsBeautybrandsthatareaffordable,aspirationalor,ideally,bothresonatewithteens.TheaspirationalMACbrandtoppedthemostrecentPiperJaffraysurveyofteens’preferredbrands.However,budget-pricedCoverGirlandmass-marketMaybellinewerethenexttwomost-popularbrands,thesurveyfound.
Figure13.US:PreferredCosmeticsBrandsAmongAverage-IncomeFemaleTeens(%)
Base:10,000respondentswithanaverageageof16Excludesone“namewithheld”brandineachperiodSource:PiperJaffray
Turningtoretailers,thesamePiperJaffraysurveyfoundthatUltaandSephoraenjoystrongpositionsamongfemaleteens.TheprominenceofvalueretailerssuchasTargetandWalmartremindusthatyoungconsumerstendtohavestrictlylimitedbudgets.
Figure14.US:PreferredBeautyDestinationsAmongAverage-IncomeFemaleTeens(%)
Base:10,000respondentswithanaverageageof16Source:PiperJaffray
AspirationalbrandMACtoppedarecentsurveyofteens’preferredbrands.
15
9 97
5 54 4 4
19
11 11 11
35
0 0
4
MAC CoverGirl Maybelline UrbanDecay TooFaced Sephora NYX Anastasia BareEscentuals
Fall2016 Spring2016
2927
1210
3 3 2 2 1 1
2724
139
4 3 3 2 1 1
Ulta Sephora Walmart Target MAC Walgreens CVS Macy's Bath&BodyWorks
SallyBeauty
Fall2016 Spring2016
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
InEurope,weperceivemass-marketretailerssuchasKIKOMilano,SephoraandLushaswellpositionedtoresonatewithGenZers.LikeMAC,eachoftheseretailersisverticallyintegrated,beingaretaileraswellasabrand,andeachcombinesaqualitybrandexperiencewithsomeaspirationalqualitiesandrelativeaffordability.
ThebeautybrandslistedbelowaremorenicheornascentbrandsthatwererankedasthecoolestbyTeenVoguefor2016.Wenotethefollowingbrand-positioningthemeswithinthislist,whichwethinkgivesomeindicationofthepreferencesofyoungerconsumers:
• Skincarebasedonnaturalingredients.
• Haircaredesignedbycelebrityorcutting-edgestylists.
• Positivemessaging,suchas“forwomen,bywomen.”
• Celebritynames,suchasKylieJenner.
Figure15.TeenVogue’sCoolestBeautyBrandsof2016
Brand Positioning
OUAI PremiumhaircarefromcelebritystylistJenAtkin
Milk MakeupfromcreativeproductionhubMilkStudios
TheEstéeEdit The“babysister”ofEstéeLauder
PatMcGrathLabs Eponymouscolorcosmeticsrangefromcelebritymakeupartist
KylieCosmetics ThemakeuplinefromrealityTVandsocialmediacelebrityKylieJenner
Lano Australianskincarebrandfocusedonnaturallanolin
SainteMuse Skincare“forwomen,bywomen”
SaturdaySkin Playfulbranding,rootedinscience
IGK “Hairstylingforthemoderngeneration”frominnovativestylists
Babe Plant-based,naturalandorganicingredients;madeinAustralia
TanLuxe Premium-positionedself-tanner
Kopari Coconutoilskincareproducts
Source:TeenVogue/companyreports
Alsoin2016,GoldmanSachsandTeenVoguerankedwhatteensandyoungwomenages13–29saidweretheirfavoritebrands.WhiletheagerangeofthissurveyextendssignificantlybeyondourGenZdefinitiontoincludepartofthemillennialdemographic,wethinkthelistingshownbelowfurthersuggeststhestrengthofMAC,SephoraandUrbanDecayamongyoungconsumers.
InEurope,weperceivemass-marketretailerssuchasKIKOMilano,SephoraandLushaswellpositionedtoresonatewithGenZers.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
Figure16.TeenVogue-GoldmanSachsLoveList:“ItGirls”Top10,2016
Rank Brand Sector
1 MAC Beauty
2 Nike Fashion
3 FreePeople Fashion
4 Sephora Beauty
5 PINK(Victoria’sSecret) Fashion
6 UrbanDecay Beauty
7 Victoria’sSecret Fashion
8 Forever21 Fashion
9 MakeUpForEver Beauty
10 H&M Fashion
Basedonasurveyoftrend-focused,fashion-conscious“itgirls”Source:GoldmanSachs/TeenVogue/BusinessInsider
GenZLikelytoImpactBeautyM&AInthecomingyears,weexpectthedemandsofGenZconsumerstoinfluencebeautyindustryM&Aactivity.LegacymultibrandgiantssuchasL’Oréal,P&GandUnileverarelikelytoseektostrengthentheirpositionwithGenZconsumersasthedemographic’sspendingpoweraccelerates.
Basedonattitudinalsurveydataandotherindicatorssuchasthebrandrankingsshownabove,webelievethefollowingproductthemesareofheightenedimportancetoGenZ,andsowilldrivebeautyM&Ainthefuture:
• Productsformulatedwithpureandnaturalingredients.
• Celebrity-brandedproductsandproductsformulatedby“star”skincareandhaircareexperts.
• Productsmadebycompaniesrecognizeanddemonstratesocialconsciousness,whichmayincludeafocusondiversityandequalityandcruelty-freeprocessesandgoods.
Asthetablebelowshows,wearealreadyseeingacquisitionsofbrandsthatarefocusedonthesethemes.
WeexpectthedemandsofGenZconsumerswillinfluencebeautyindustryM&Aactivityinthefuture.
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DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
TheoldestGenZerswillturn16thisyear,andsoareonthecuspofbecomingfullyfledgedadultshoppers.
Figure17.SelectedRecentBeautyM&AActivity
Year Buyer CompanyAcquired Positioning TransactionStatus(USDMil.)
2016 L’Oréal ITCosmetics Premiumcolorcosmetics $1,200
2016 EstéeLauder TooFaced Playful/cruelty-free $1,450
2016 EstéeLauder BeccaCosmetics Diversity N/A
2016 Unilever LivingProof Scientific N/A
2016 Unilever DollarShaveClub Subscription $1,000
2016 CounterBrands NUDEBrands Pure/natural N/A
2016 JakksPacific C’estMoi Kids’beauty N/A
2016 Johnson&Johnson VogueInternational Sustainable/natural $3,300
2016 OrigamiOw Willagirl Kids’beauty N/A
2015 Unilever Dermalogica Professional N/A
2015 Unilever KateSomervilleSkincare Natural/prestige N/A
2015 Unilever REN Purity N/A
2015 Unilever Murad Clinical N/A
2015 Coty CoverGirl Youth/mass N/A
2015 Coty Bourjois Mass N/A
2014 L’Oréal Carol’sDaughter Natural/diversity N/A
2014 EstéeLauder Glamglow Celebrity/edgy N/A
Source:Bloomberg/companyreports
KeyTakeaways• SomeretailersandbrandsalreadycountGenZersascustomers—but
thegroupcomprisesthecustomersoftomorrowforallretailersandbrands.Theoldestpeopleinthisdemographicwillturn16thisyear,andsoareonthecuspofbecomingfullyfledgedadultshoppers.
• SocialmediaimpactsGenZers’spending,particularlyinthebeautycategory.Inturn,GenZersoftenturntosocialmediaforinformationandexpertisewhenshoppingforbeautyitems.Thereappearstobegreaterpressurethaneverbeforeonyoungpeopletospendontheirpersonalappearance—althoughitispossiblethatthesepressureswilllessenasthisgenerationgetsolder.
• Inthenearterm,brandsseekingtoengagewithGenZmustbepresentinthespacesthattheseconsumersfrequent—visual-drivensocialmediasites—andtheymustofferengaging,authenticcontent.
• Lookingfurtherahead,weexpectthedemandsofthisgenerationtobeafactorinfuturebeautyindustryM&AactivityaslegacyplayersseektoappealtoGenZbybuyingupbeautybrandsthatalignwiththegeneration’spreferences.
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February27,2017
DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.[email protected]
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