Fulfilling Consumer Needs in the Changing Cosmeceutical Market



There is great hype in the personal care industry regarding the potential of cosmeceutical products. But is the buzz justified? In this industry overview, independent market analysis firm Datamonitor plc takes you through the state of the industry, in the United States and Europe, with projections for future growth opportunities.

The first step is defining the term “cosmeceutical”, as it blurs the lines between the official, statutory categories of cosmetics and drugs. It is not an official term and is nowhere to be found in the Federal Food, Drug and Cosmetic Act of the United States. The controversial position of the term cosmeceutical is based on the fact that such products are considered hybrids of a cosmetic and pharmaceutical. Other expressions used to describe the intersection of these categories have included functional cosmetics, dermaceuticals, performance cosmetics, bio-functional materials and treatment ingredients.

To quantify this market, Datamonitor defines cosmeceuticals as: “personal care products containing at least one bio-active ingredient that not only enhances appearance but also has a positive physiological effect at the cellular level.”

Cosmeceutical products, therefore, go one step further than every day product equivalents by inducing changes beyond removal. Enzymes are an example of an active ingredient used in cosmeceutical products, since they stimulate skin cell regeneration, affect collagen and elastin, modulate skin lipid and oil production, and regulate cellular turnover. Vitamins, polysaccharides, botanicals, proteins and peptides are all examples of active ingredients in anti-aging cosmeceuticals.

Table 1: Total cosmeceuticals sales by country (US$M), 2001-2011

US$ 2001 2006 2011 CAGR 01-06 CAGR 06-11
France 672 904 1,161 6.1% 5.1%
Germany 538 698 865 5.4% 4.4%
Italy 497 655 805 5.7% 4.2%
Netherlands 106 131 157 4.3% 3.7%
Spain 234 329 423 7.0% 5.2%
Sweden 111 127 144 2.7% 2.6%
UK 421 526 637 4.6% 3.9%
Rest of Europe 511 671 839 5.6% 4.6%
Europe Total 3,090 4,041 5,031 5.5% 4.5%
US 3,003 4,150 5,386 6.7% 5.4%
Europe and United States 6,093 8,191 10,417 6.1% 4.9%

Source: Datamonitor analysis

The cosmeceutical industry has seen strong growth in past years, outpacing that of the overall personal care market. Core market drivers include:

  • increasing desire to look and feel beautiful in an image-conscious society;
  • an aging population;
  • desire to minimize the effects of aging;
  • younger and middle aged consumers pre-occupied with preventing aging;
  • growing demand for need-specific, efficacious solutions (consumers increasingly expect demonstrable, visual, sensory or functional benefits from cosmetic products); and
  • growing availability of high-performance cosmetics.

The total European and U.S. market for cosmeceuticals currently stands at US$8.2 billion (Table 1). Accounting for more than half of this value, the United States is the largest cosmeceutical market at US$4.2 billion in 2006, after showing a strong compound annual growth rate (CAGR) of 6.7 percent between 2001 and 2006. This strong growth is forecast to continue, albeit at a slower pace, over the next five years, with a CAGR of 5.4 percent.

The European market for cosmeceuticals has also seen strong growth, reaching US$4.0 billion in 2006 after a CAGR of 5.5 percent between 2001 and 2006. France represents the largest individual European market at US$900 million. Over the next five years, the French and Spanish cosmeceutical markets are expected to have the fastest growth, with forecast CAGRs of 5.1 percent and 5.2 percent, respectively. The French market is dominated by strong local players, particularly L’Oreal. The company is a global market leader and its domestic market often serves as a testing ground and launching pad for its new products. In addition, and partly because of this exposure to cosmeceutical products, many French consumers are very aware of the potential benefits of cosmeceuticals and will readily try new products.

Per capita income spent on cosmeceuticals was highest in France at US$14.9, and lowest in the Netherlands at US$7.9 in 2006 (Table 2). The United States and Sweden are second behind France at US$14.0 each. Despite Sweden’s relatively small share of the global cosmeceutical market and moderate growth, per capita consumption in the country means there is still opportunity in Sweden to develop the market.

Table 2: Per capita value consumption of cosmeceuticals by country (US$), 2001-2011

US$ 2001 2006 2011 CAGR 01-06 CAGR 06-11
France 11.0 14.9 19.1 6.1% 5.1%
Germany 6.5 8.5 10.5 5.4% 4.4%
Italy 8.6 11.3 13.8 5.7% 4.2%
Netherlands 6.4 7.9 9.5 4.3% 3.7%
Spain 5.8 8.1 10.5 7.0% 5.2%
Sweden 12.3 14.0 15.9 2.7% 2.6%
UK 6.9 8.7 10.5 4.6% 3.9%
United States 10.2 14.0 18.2 6.7% 5.4%

Source: Datamonitor analysis

Skin, Hair Care Growth Markets

Skin care was the most common personal care category with active ingredient-based product launches in 2006. Productscan analysis (Figure 1) shows 31.4 percent of all personal care products with active ingredients launched in Europe and the United States in 2006 were skin care products. The second most popular category was lipsticks and lip products (8.6 percent), followed by shampoos and conditioners (8.6 percent).

Growth in both the skin care and hair care cosmeceutical markets across Europe and the United States continues to outpace the overall personal care market, resulting in continued growth of cosmeceuticals’ percentage share. In 2006, cosmeceutical skin care accounted for 38.9 percent of the total skin care market in Europe, and 59.8 percent in the United States. In hair care, cosmeceuticals accounted for 16.9 percent of the total market in Europe, and 21 percent in the United States.

Skin care cosmeceuticals account for around 80 percent of the total U.S. and European cosmeceutical market (Table 3). Overall, growth in skin care cosmeceuticals in the United States outpaces that of Europe. Between 2006 and 2011, the U.S. market for cosmeceutical skin care may grow from US$3.5 billion to US$4.5 billion, with a predicted CAGR of 5.5 percent, compared to only 4.9 percent in Europe. Forecast to near US$4.0 billion in five years, the European skin care cosmeceutical market will be driven by strong growth in France and Spain in particular.

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There are three core skin care cosmeceutical formats:

  • acne treatment (particularly targeted at teenagers);
  • specific skin care treatments (e.g., dry skin treatments and skin protection, etc.); and
  • anti-aging (e.g., all anti-aging active ingredients-based products).

According to Chemical Market Reporter, 62 percent of all cosmeceutical skin care brands in the United States in 2004 were anti-aging brands. Older consumers’ desire to combat the visible signs of aging, together with the growth of this age group, means this will remain the main target group for cosmeceutical players.

On the hair care side, the European cosmeceutical hair care market, valued at US$915 million, is currently larger than the United States market (Table 4). Spain saw the strongest growth between 2001 and 2006 with a CAGR of 6.1 percent, and could set the pace with a CAGR of 5.2 percent predicted between 2006 and 2011. Much of the strong growth seen in the Spanish cosmeceuticals market can be attributed to consumers’ changing attitudes toward beauty and concerns about appearance.

Table 3: Total skin care cosmeceuticals sales (US$M), 2001-2011

US$ 2001 2006 2011 CAGR 01-06 CAGR 06-11
Europe 2,332 3,126 3,964 6.0% 4.9%
U.S 2,445 3,464 4,532 7.2% 5.5%
Europe and U.S. 4,777 6,590 8,496 6.6% 5.2%

Source: Datamonitor analysis

Table 4: Total hair care cosmeceuticals sales (US$M), 2001-2011

US$ 2001 2006 2011 CAGR 01-06 CAGR 06-11
Europe 758 915 1,067 3.9% 3.1%
U.S. 558 685 854 4.2% 4.5%
Europe and U.S. 1,316 1,600 1,921 4.0% 3.7%

Source: Datamonitor analysis


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