Circana is reporting resilient sales in many aspects of FMCG retail, with beauty outpacing the total market in both Australia and the US. While shoppers have become measured in their spending, they remain willing to spend on self-care products that matter to them.
FMCG a retail bright spot
Many parts of FMCG retail have been rare bright spots in an otherwise challenged retail market. In fact, Australian FMCG accounted for 77% of all retail growth in the 12 months to September 2024, fair market share would be considered at 43%, so that represents a significant outperformance.
Grocery alone accounted for over half (51.5%) of all retail growth. Pharmaceuticals and personal care accounted for nearly one-quarter (24.8%). This is ongoing evidence of essential retail servicing immediate day-to-day demands outperforming discretionary retail. That said, we do anticipate a revival in discretionary retail in 2025 as consumer confidence responds to an easing macro-economic environment.
It is not only the Australian market where beauty sales are outperforming total retail. Circana measured US$3.3 trillion in US retail spend in the 52 weeks to October 2024. The US$250 billion health and beauty product spend represents a 6% increase on the prior year. Prestige beauty grew 8.7% and mass beauty grew 6.1%, versus the total measured retail market growth of 2.4%.
Supermarket resilience
Beauty sales in Australian supermarkets continue to outperform the total channel, despite some doom and gloom surrounding non-food merchandise performance in retailer trading updates due to increased competitor activity. In the 52 weeks to 3 November 2024, beauty product dollar sales lifted by 4.3% versus the prior year. That compares to a 3.7% increase across the channel.
Beauty product unit sales are also back into growth (+1.1%) following two successive years of decline. In other words, supermarket retail has succeeded in stimulating organic demand amid diminishing price influence. Unit price increases have slowed from 11.2% annually to 3.2% in the most recent year (to early November).
It’s also important to acknowledge the noise and distortion in the performance data. 2022-23 was the year of mobility and normalisation leading to an enormous recovery in skincare (+17.1%) and cosmetics sales (+16.9%) in particular.
Sales have subsequently slowed, but cosmetics sales are still up nearly 6% and skincare sales have grown by more than 2%. The latter, while recording the slowest value growth among beauty meta-categories, has notched up three successive years of unit sales growth.
There is plenty of positivity to take into 2025 when the macro-economic environment is expected to ease, including the fact Australians are far less frustrated and resentful of price inflation for health and beauty products versus food and beverages.
Pharmacy soars
Beauty products are recording double-digit dollar gains in retail pharmacy. The strong performance is led by Chemist Warehouse, but also supported by robust performance in community pharmacy banners.
Skincare has been the standout performer, with sales up nearly 15% – despite grocery retailers working hard to close the ranging advantage the pharmacy channel, especially Chemist Warehouse, has cultivated.
We see evidence of the ‘destination effect’ from the fact that the average trip to Chemist Warehouse results in beauty basket spend that is 2.9 times higher than the supermarket average.
As a result, total health and beauty product spend per buyer in Chemist Warehouse far outweighs the major supermarkets and Aldi. So, whilst supermarket retailers have upped-the-ante in ranging and merchandising, there remains work to do.
Innovation impetus
Our outlook across all channels is broadly favourable for 2025 as beauty retailers and suppliers compete for higher share of at-home occasions as more consumers indulge in self-care at home.
With limited upside left for pricing, a reinvigoration of new product development (NPD) is required for organic demand generation. This also includes supporting retail marketing activity to aid in the discovery of new products in-store. After all, Circana panellists have revealed they are most likely to learn about new products by discovering them in-store. In other words, socials are important in generating interest and inspiration, but it’s important to not lose sight of the fundamentals.
The industry can also be encouraged by several high performing brands proving that well-executed NPD will capture the attention of health and beauty enthusiasts. For example, Hismile has generated nearly $22 million in growth in the last year and Skin Control, a high-performing start-up, is having an enormous impact on the local mass beauty market.
These examples are a timely reminder that ‘on-trend’ benefit-led innovation can support demand growth at a time when pulling the price lever is more restricted. We need to shift the dial towards benefit incentives to sustain future growth. After all, that’s how Australians evaluate value for money; it’s about price, but equally it’s about benefits that signify quality.
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