Beauty retailers must go organic to mind generation gap

Personal care and skin products are increasingly expected to be natural, sustainably sourced and ethically produced, as consumer demographics shift. Demand for such products is set to grow, topping $22 billion by 2024.

Millennials are keen on niche companies seen as more ‘authentic’, which use natural product ingredients, while Baby Boomers simply prefer detailed and transparent labelling. As one demographic increasingly replaces the other in terms of its importance to consumer product firms, the shift is creating opportunities for small players to expand rapidly.

New research from AlixPartners shows that while demand for beauty and personal care products continues, demographic changes are resulting in new expectations around the type and sources of products. Results from the firm’s survey of 4,500 individuals in China, France, Germany, the UK, and the US show that increased awareness among consumers about the potential impact of products on their health has driven revenue growth for natural, ethically and sustainably sourced products in the beauty and personal care sector.

Such organic products have increased their market share to $11 billion, with the coming five years projected to see that total double to $22 billion. This will drastically outpace the broader beauty and personal care product segment. Valued at around $500 billion today, the segment is projected to hit $800 billion by 2023 – at around 7% annual growth, driven by the growing middle class of Chinese consumers.

Also driving the shift in demand to more natural and ethically derived products is the growing concern that some ingredients used in such product have undisclosed/unknown harms. This has prompted regulators to make rules more stringent for a variety of products. Concern about the environmental/ethical impact of product choices, from micro plastic beads to supply chain labour standards, is also seeing consumers shift their spending to products that meet their sustainability and ethical criteria.

While all generations are generally concerned about the overall quality of the ingredients that are used in products, some are more worried than others. When it comes to the type of concern exhibited by different demographics regarding the value chain stages of their products, some differences are noted. For instance, 70% of Millennials say they are most concerned about the source of ingredients for their products, compared to 54% of Generation X.

Overall, Millennials were found to be the most concerned about all parts of the value chain. Almost 60% of this group stated concern about the manufacturing process, while 40% similarly foster concerns about logistics. Baby Boomers remain the least concerned about such factors, although there is concern throughout the group relating to almost all parts of the value chain – with marketing of most concern at 20% of the group.

‘Pronounceable’ produce

When it comes to the factors that top the five most important categories, differences between demographics are noted. Millennials are keen on all natural or ‘pronounceable’ ingredients. That the products are derived from sustainable sources took the number two spot for the group, while detailed and transparent labelling was in third place.

For Generation X, being allergen-free was the number one area of concern, followed by all-natural or ‘pronounceable’ ingredients. Sustainable sourcing took the number three spot. For Baby Boomers, meanwhile, detailed and transparent labelling is the most important, followed by being allergen-free and sustainably sourced.

Regarding the implications of the shift as authenticity and quality expectations from Millennials takes hold, the firm concluded, “Across industries, Millennials are rejecting traditional brands for 'authentic' niche products and experiences. While larger manufacturers continue to dominate in sales, smaller brands are driving growth.”

The news echoes the findings of an Accenture study late in 2018, which found that Millennial and Generation Z consumers value companies with purpose much more highly than preceding generations. Top factors consumers listed saw 66% say a brand should demonstrate “it does what it says it will do and delivers on its promises,” along with how a firm treats its employees, and its commitment to environmental responsibility.