I recently attended a CEW event where brands, retailers and agency partners got to hear exactly how the beauty category performed (mass, drug and prestige, department store) in 2015 and what key trends will drive future growth.

Overall, 2015 was a positive year for the Beauty category. Attendees learned at the CEW’s Global Trend Reports event, The NPD Group’s 2015 Year in Review & Trend Forecast. According to NPD, in 2015 prestige beauty grew +7% to $16 billion while mass beauty grew 2% to $21.7 billion in the U.S.

This is the fourth year CEW has partnered with The NPD Group to present 2015 year-end global and U.S. sales results, retail trends and proprietary consumer research findings, exclusively for CEW members.

Don Unser, Group President, The NPD Group, kicked off the presentations with a macro overview of U.S. retail trends. Through September 2015, annual consumer spending in the U.S. totaled $1.8 trillion, up +2.4%. Of all consumer industries in the U.S., Don noted that Beauty is the top category in terms of growth percentage, with nearly +8% growth, driven by makeup (face, eye and lip). He advised brands and retailers to consider the evolving retail landscape, as e-commerce is maturing in every category. He noted that Amazon poses the biggest threat to retailers, with an online market share of 35%, 25% of households having an Amazon Prime subscription, and they offer approximately 500 million items.

Karen Grant, Global Beauty Industry Analyst, The NPD Group, shared 2015 global and U.S. sales results in both prestige and mass, including data from Nielsen. Key findings included:

• Globally all prestige beauty categories grew in 2015 with makeup seeing the biggest increases. North America saw +14% growth, +8% growth in Europe and +26% growth in South America.
• In Mass, Lip was the top performer for makeup, and Body was the top performer for skincare.
• For the first time in 2015, the fragrance category outperformed skincare. Fragrance dollars grew by 4%, and skincare by 3%.
• In prestige skincare, the Natural and Clinical categories grew +10%, outpacing the total facial skincare market which grew +1%.
• Brow sales have grown consistently around the globe for the 3^rd year, with double-digit increases led by Canada with +42% growth, followed by the U.S., Italy and Spain.

NPD outlines what was presented in the video clip below:

“The beauty industry is in a state of renewal and flux, and what’s driving the industry today has changed,” said Karen Grant. “The lines continue to blur between makeup and skincare as consumers look for immediate results through makeup and rediscover smaller primary care categories in skincare. Fragrance sales are dynamic in core components like juices, and the market for home ancillaries is growing. The trends in beauty are more diverse and moving faster than ever, as are the consumers.”

Finally, Andy Mantis, Executive Vice President, Checkout Tracking, The NPD Group, spoke about consumer spending trends among millennials. He noted that by 2020, millennials are projected to spend $1.4 trillion annually, per Accenture, and represent 30% of total retail sales. He discussed the luxury retail millennial buyer, noting that 87% of this group are also shopping at off-price retailers and are giving a larger share of their beauty spend to department stores and specialty stores, compared to non-luxury retail millennial buyers.

“With millennials representing such a large share of annual spending power, it’s critical to engage this demographic,” said Andy Mantis. “Brands and retailers need to understand how millennials spend their money, what they buy, where they shop and what brands they value. NPD’s Checkout Tracking services allow us to capture this data by harvesting the rich information on paper and e-receipts to understand consumer spend.”

“We are delighted to have collaborated with The NPD Group again to present this critical beauty industry intel,” says Carlotta Jacobson, President of CEW. “Our CEW members are fortunate to have received this exclusive data and learn about how it will impact their companies.”

The event was sponsored by MANE, 24 Seven, Nielsen, Mintel, Beauty Inc, WWD and Kaplow Communications.

Though the beauty sales forecast for 2016 and 2017 are positive, there are some potential risks to look out for.

North America prestige sales grew by 8% in 2015, and mass sales only grew by 2%. And South America prestige sales grew by 13%, Europe prestige sales grew by 3%.

Prestige makeup sales are up globally. North America up by 14%. Europe up by 8%. South America up by 26%.

Most countries showing strong growth.

Most countries are showing strong growth in all beauty categories.

Prestige beauty outpaces mass. Prestige sales up 7% vs Mass only up 2% in 2015.

Total beauty (mass & prestige) up 1.7% vs last year to $21.7B. Total beauty plus Personal Care up 2% vs last year to $58.2B.

What trends are driving growth?

“Experience Is All”: Retailers are creating in-store environments that delight consumers.

Hyper-Personalization: Social listening, data analysis, content and context.

Online Subscriptions: Promote brand loyalty and remove guesswork from next trip.

Mass With Class: Consumers are increasingly able to find prestige-level service in mass outlets.

Exclusive Brands: Continued success for prestige and exclusive brands in mass.

Blurred Lines: E-commerce blurs the line between prestige and mass.

In mass, the makeup category showed the biggest growth.

In mass, of all the makeup segments, Lip was the big winner.

In mass skincare, Body and Gift & Sets were the big winners.

In prestige, all categories did well.

Total prestige sales grew to $16B, signalling record growth.

Santa delivered for prestige. Holiday online sales soared.

What we thought we knew: Boomers are key, skincare continues to grow, fragrance drags the industry down.

Surprise! Fragrance sales nearly tripled in 2015! 2015 marks the first time fragrance added more incremental dollars than skincare.

Looking ahead to 2016, 2017…

In 2015, online gains were 100%+ of the gains in skincare face vs. 36% in total prestige.

The Next Generation is the step forward that perpetually propels us into our impending destiny.

Youth are using more fragrance and less skincare.

At least 60% of male and female fragrance users age 16-24 choose a scent that “Makes a Statement.”

In 2015, Flankers generated 16% of total fragrance sales, but 48% of fragrance gains.

In 2015, skincare users were most looking for value in skin look and feel, hydration and moisturization, and makeup removing properties.

What are users saying about skincare (all brands) vs. Kiehl’s?
Yellow = Purpose; Purple = Emotional/Benefit; Red = Negative

For face, users were most likely to seek a doctor’s endorsement and natural/organic ingredients.

65% of users said they were interested in trying new things beyond face (like hair and sets & kits).

In 2015, makeup accounted for $3 out of every $4 gained in prestige beauty.

Specialized experts (Makeup artists/salon/stylists, Alternative, and Cosmeceuitcals/Clinical) accounted for 93% of dollars gained in prestige makeup.

In 2015, Convergence (two or more things joining together or evolving into one) was key.

Gender-neutral scents were among the top 50 artisanal fragrance brands.

Healthcare and skincare converge when users take supplements to improve their skin from the inside out.

Around the globe, brow sales have grown consistently for the 3rd year.

Two categories, one desire. Consumers use both skincare and makeup to look the best they can for their age.

Top 3 benefits sought from skincare: Evening of skin tone, lightening of dark spots/discoloration, and complexion brightening.

Contour makeup is being used to achieve the top 3 benefits sought from skincare.

Complexion-perfecting foundation and concealer rise across the board, but especially in light and dark shades.

Complexion Preparation is the hot new focus, with $491M in combined sales.

New trend: Pure and unadulterated.

Unadulterated makeup and fragrance both showed positive gains, while skincare was down.

Unadulterated fragrance juices were up in 2015.

Consumers love on-the-go fragrance, though all unadulterated fragrance categories showed gains over last year.

Consumers also sought unadulterated home fragrances, with “other home ancillaries” like fragrance reeds seeing the most growth.

Unadulterated skincare face products all showed gains, especially masks and lip treatments.

Top-performing unadulterated skincare face formats were clay, oil, and paper.

In 2015, unadulterated highlighting concealers grew 31%.

In 2015, mascara posted its third year of double-digit increases, surpassing half billion dollars.

Shimmer eye shadows were 32% of 2015 eye shadow sales. The biggest gains were during the holidays.

Nude/brown lips take over pink. Of 2015’s top-grossing 100 lipsticks, 28 were nude or brown.

Youth, Convergence, and Pure/Unadulterated products where 2015’s Beauty Truths.

2015’s notable skincare launches include Estee Lauder New Dimension Shape & Fill Expert Serum, Chanel Hydra Beauty Micro Serum, Lancome Absolue Precious Oil, Living Proof Perfect Hair Day Dry Shampoo, and Shiseido Ultimate Sun Protection Wet Force.

Clinique ranked number 1 in skincare brands for 2015.

2015’s notable makeup launches included Urban Decay Naked Smoky Eye Shadow, Benefit Roller Lash Mascara, Bare Minerals Complexion Rescue Tint Hydrating Gel, Chanel Rouge Coco de Chanel New, and Anastasia Contour Cream Kit.

Top 2015 Prestige Fragrance launches included: Dior Sauvage, Gucci Bamboo, Yves Saint Laurent Black Opium, Ariana Grande Ari, Marc Jacobs Decadence, Estee Lauder Modern Muse, Ralph Lauren Polo Red, Giorgio Armani Acqua di Gio, Versace Eros Pour Femme, and Chloe Love Story.

Cracking the Millenial Code: What Brands and Beauty Retailers Need to Know.

There are roughly 80 million Millenials in the U.S. alone, and each year they spend approximately $600 billion.

By 2020, Millenials will spend a projected $1.4 trillion dollars annually and will account for 30% of total retail sales.

Connecting with Millenials means assessing your biggest competitors and trending brands, as well as your own brand’s strengths and areas for improvement.