Throughout 2022, a cloud of inflation loomed over the global economy as prices rose by around 8% and consumer confidence rapidly declined.
Like all CPG industries, beauty and personal care (BPC) was hit by price hikes. Average unit prices have risen faster with each consecutive quarter and many consumers have cut back on non-essential purchases, resulting in slowing unit sales.
BPC manufacturers are pushing up their prices in response to this beauty inflation, with the largest companies having the biggest impact.
A ray of sunlight shines through
The recently released CPI report by the U.S. government showed inflation slowing from an increase of 7.1% in the year ending in November, down from 7.7% in October.
While this provides a glimmer of hope, 97% of shoppers surveyed by NIO say they would be concerned if prices were to increase for everyday items over the next 12 months, with 41% of BPC consumers saying they would be extremely concerned.
Fragrance and HBL shoppers are the most worried about further potential price rises, but there are high levels of concern about further beauty inflation across all BPC categories.
Headwinds and tailwinds
Since Q4 in 2021, prices have almost consistently risen every quarter, with NIQ data showing that the average unit price increased by +13.2% by the end of Q3 2022.
By September 2022, the U.S. inflation rate stood at 8.2%—for food, this was even higher at 11.2%.
Although the BPC industry is currently facing headwinds from price increases and changing consumer shopping behaviors, it is still blessed with more positive tailwinds, such as social media influence, the clean beauty movement, and premiumization, and is still seeing overall dollar growth.
The industry is also unique in that while some categories will be impacted by consumers pulling back and having fewer out-of-home occasions, others may benefit from a rise in money-saving solutions, driven by at-home self-care.
Our five-year forecast
To anticipate the future performance of BPC, we ran a five-year forecast to predict across both in-store and online channels.
Looking ahead to 2023, we forecast that prices in the beauty and personal care industry will continue to rise throughout the first half of the year, but then expect sales to return to historical dynamics of modest in-store dollar growth, with a larger contribution to growth from online stores.
Beauty and personal care inflation 2022
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