Beauty Is Growing. Not Everyone’s Benefitting.

Beauty’s current mood is buoyant — if you’re lucky enough to catch a slice of the action.

In the past month, major beauty firms like L’Oréal and Unilever reported strong earnings, and even firms in the midst of turnarounds like Estée Lauder Companies and Coty beat expectations, however narrowly.

While there’s many bright spots, like outsize performance in the prestige hair care and fragrance categories and a bubbling resurgence in China, the market remains polarised. Many areas, including mass cosmetics and sleepier legacy brands, are struggling, according to The Business of Beauty’s analysis of major conglomerates’ first half and full-year results.

“[Beauty] still feels like one of the most dynamic places to be, but with nuances,” said Jeremy Fialko, senior global consumer staples analyst at HSBC.

After years of reliance on raising prices and prioritising speciality retail to drive sales growth, beauty companies are grappling with a new reality. Customers shop across more platforms than before, expect brands to show up on each channel and scrutinise ingredient lists, product claims and prices more closely. These shifts are benefitting digitally native brands like Hailey Bieber’s Rhode, Korea’s Medicube and Estée Lauder’s The Ordinary, which deliver timely innovations with savvy marketing, as well those with a right to win in growing areas like prestige hair care. Top companies, like L’Oréal and Unilever, are delivering meaningful volume growth, and getting customers to add to their routines with new products, like Dove’s new oil-based body range or Cerave’s just-launched suncare selection.

There’s tailwinds for other dynamic, innovative labels that have built successful Amazon or TikTok Shop businesses, or can stand out on-shelf in store. But beauty’s biggest firms — and oldest brands — must ensure their assortments are desirable and differentiated. Beauty runs on two engines, L’Oréal chief executive Nicolas Hieronimus said on a July 30 call with analysts and investors. “Dopamine is beauty as indulgence … Health is beauty as wellness, a quest for longevity and skin rejuvenation,” he said.

Many conglomerates’ hero lines are struggling to cut through. At E.l.f. Beauty, Rhode led the overall group to 36 percent growth, but its core label, E.l.f. Cosmetics was flat for a second consecutive quarter. Shiseido’s eponymous brand and Beiersdorf’s Nivea also disappointed, as customers prioritise modern labels that feel better value for money — or more exciting.

The unstoppable popularity of Korean skincare, which delivers rapid-fire novelties like powder-to-cream formats or freeze-dried “spicules” of active ingredients in serums signals a hunger for newness, as does the resilience of fragrance, from low-cost body mists to $300 parfum extraits.

“Consumers’ wallets have pressure on them, but if [brands] shout loudly and bring a lot of newness, you’ve given the consumer a reason to to buy,” said Fialko.

Hair Grows While Legacy Brands Stumble

For many beauty companies, hair was a standout success.

At L’Oréal, sales of shampoos, dye and styling products grew 15.6 percent across both its premium and mass divisions, comprising everything from Kérastase to Garnier; Unilever also hailed hair as a top-performer, growing double digits, while Korean firm Amorepacific said its Mise-en-Scène and Labo-H lines performed well domestically.

The growth of the hair category is likely as much to do with changes in demographics as it is innovations. As global customers become more ethnically diverse, hair is one of the first categories to feel this shift: L’Oréal has estimated that by 2030, 40 percent of the world’s population will have curly, wavy, or coily hair. Curly and coarse hair types often have more multi-step hair care routines than those with fine or straight hair, creating more opportunity for hair labels.

Fialko pointed to other demographic shifts: women in their mid-life and beyond are now more likely to wear their hair longer than in previous generations, while the rapid uptake of weight-loss drugs has made hair loss a more common concern. On the July call, Hieronimus said that the skin sagging and hair thinning associated with rapid weight loss caused by GLP-1s has inspired products like Redken’s Acidic Color Gloss, as well as skincare offerings from Skinceuticals and Kiehl’s that promise firming.

Still, only brands that feel current and targeted will benefit: Estée Lauder’s hair unit failed to grow, as its Aveda and Bumble and Bumble brands have been challenged in the salon channel.

It’s not the only one struggling with sleepier labels. Core established lines like the aforementioned Shiseido and Nivea, as well as E.l.f. Beauty are barely eking out growth, owing to the increasing competitiveness of the market.

“It’s hard to be everything to everyone,” said Fialko, adding that established brands struggle to reach new customers without alienating existing ones, putting pressure on conglomerates to keep acquiring new labels.

The New World Order

After years of downturns, many beauty firms returned to more solid ground in China. Estée Lauder grew 7 percent, L’Oréal lifted 4.6 percent and Puig soared 20.9 percent.

The local market is favouring Western premium brands again as higher-net-worth customers return to domestic spending and are looking for products that feel elevated. Global names like La Mer, Lancôme and Charlotte Tilbury are benefitting, especially as some local players have pulled back slightly from marketing and advertising on channels like Douyin, the nation’s fastest-growing social media app where a third of the country’s beauty transactions happen, estimated Goldman Sachs. Many local, lower-priced brands like Proya Cosmetics are pulling back, leaving room for global lines with bigger margins on premium goods to step in.

As Western firms rush to regain market share in China, Korean brands continue to focus on the US and Europe. The US is still the main growth engine for many global names, especially for the new guard of K-Beauty giants. Amorepacific and APR, parents of Laneige, Cosrx and Medicube among others, both posted operating profit gains of over 50 percent. These brands have gained ground on TikTok Shop and Amazon as well as in specialty stores like Sephora. While some Western conglomerates own K-beauty lines: L’Oréal has 3CE and Dr.G, and Estée Lauder has Dr. Jart — none are cutting through with the same velocity as the likes of independently owned Dr. Melaxin or Anua or APR Corp’s Aprilskin.

There’s ample runway to win over shoppers, but it takes a delicate balance of well-timed innovation, savvy marketing — and a human touch.

“The consumer is under pressure around the world, but it comes down to the experience that you build with [them],” Estée Lauder chief executive Stéphane de La Faverie said on a media call, saying that creating an emotional connection is key to loyalty.

“Remember, we are in the business of recruitment, but more importantly, the business of retention.”

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