Beauty doesn’t happen in a vacuum. The performances of Asia’s beauty markets are dependent on economic, social, and cultural changes that can drive or inhibit sales in different ways across the region.
In the second year of the COVID-19 pandemic, the market started to recover with the reopening. However, it remains a primary concerns for consumers.
Right now, the rising concern among consumers is centred on the war in Ukraine and its impact on the global economy.
Ukraine may be far from Asia, but the war has had an effect thanks to its global inflationary pressure on raw commodity materials such as wheat, palm oil, energy, and some packaging materials as well. These have had local consequences, forcing prices higher and changing people’s purchasing behaviour.
But the factors that affect the beauty sector are not all negative. The end of the pandemic in most markets has been a positive for many. People want to celebrate. Beauty, a key element in the joy of going out again, has been a beneficiary.
These two trends mean that the market is almost stable across the region, even if the winners and losers are much less evenly distributed. Kantar’s household panels across nine markets show a drop of just 0.1% in the total beauty market, when comparing value for quarter two in 2021 and 2022.
The nine Asian markets in this report are Mainland China, South Korea, Taiwan and Thailand where we have panels covering female individuals and India, Indonesia, Malaysia, the Philippines and Vietnam, where we have household panels covering all purchases.
It’s certainly true that the inflationary surge isn’t being felt as hard across Asia as it is in the US, EU or UK. The Inflation rate has gone as high as 9.6% in the EU and 9.1% in the US, compared to 7.7% in Thailand (the most inflationary market in our study) and just 2.5% in Mainland China.
Nevertheless, even if the economic impact of inflation has been smaller, the psychological impact has been significant, depending on local market familiarity with rapidly rising prices.
For some – such as the North Asian markets (Mainland China, South Korea and Taiwan) and Thailand – inflation is a relatively new phenomenon giving rise to more extreme behaviours, while most South-East Asian markets are familiar with the experience of rising prices and likely to be more adaptable in their purchase patterns.
The difference can be seen in South Korea, a market that has little experience of inflation, where consumers are seeking more economical options across the board. Changes in behaviour include choosing more affordable convenience store meals rather than visiting restaurants, using second-hand buying apps and seeking out discount offers.
By contrast, in Indonesia, where inflation has been a fact of life, the impact of the end of the pandemic is a bigger driver and consumers are keen to resume travel or celebrate with weddings now allowed, for example.
Between these two contradictory forces sits the consumer. Consumers often make selective investments in beauty and beyond. Some might want to save money by not spending on luxury products but instead focusing on their basic needs, while others minimise their daily spending in order to buy what they value once in a while.
In most markets, beauty benefits from the desire of consumers to treat themselves, even in hard times. Often dubbed the “lipstick effect”, this means consumers will continue to spend money on small indulgences during economic downturns.
Beauty also tends to be less impacted by inflationary pressure than other categories. In the UK, for example, we see bakery and dairy prices rising by 57% and 51% on average respectively, compared to 31% for prices across the Health and Beauty categories.
The resilience of beauty is reflected in the business results of the big four cosmetics companies, all of which have beaten Wall St estimates for Q2 2022. Estée Lauder Companies, for instance, has released its second quarter 2022 results, which ended December 31 2021, with net global sales up 14% year-over-year from $4.85 billion to $5.54 billion.
Sophistication of affordable beauty Malaysia, the Philippines, Thailand, and Vietnam
Continuing Premiumization Mainland China and Taiwan
Resilient Beauty Indonesia, South Korea and India
You can’t take a region-wide approach
APAC is a complex region, where overall trends and growth statistics hide a multitude of diverse responses from consumers. Only by understanding the real behaviour on the ground in each market can brands make the right choices to ensure they find growth.
Two contradictory trends are driving hugely different responses with growth rates varying by 13 points between the most extreme markets in Q2 (Thailand and Vietnam are -5% while India is +8%).
In every market, whatever the level of inflation, the state of Covid restrictions and the response of the consumer, however, we see beauty proving to be more resilient than many other categories.
Beauty is a powerful category but brands will only benefit to the maximum if they understand the local nuances and different responses to the same macro signals.
