Skin Care Market Sees Increase in Price Points

Analysts note premium skin care products' role in rising sales.

Promising smooth skin, a clear complexion, and the return of the healthy glow of youth to their customers, skin care products retailers are answering the growing demand for beauty-enhancing and beauty-sustaining products. The payoff, as two recent studies of 2006 performance are showing, has been huge.

"Skincare Products in the U.S.," a 2006 year-end study by Packaged Facts, shows the skin care products market grossing an astonishing estimated $5.8 billion in 2006. Packaged Facts' study attributes some of this to sales of anti-aging skin care products to aging baby boomers. The effects of this increased demand on gross sales have been compounded by a price point shift in the U.S. skin care products market shown by a recent study by Kline & Co. An increase in higher-priced products has benefited traditional retailers, increasing their gross sales.

The Packaged Facts study projects that sales of moisturizers, cleansers, hand and body lotions, and anti aging skin care products will top $7 billion by 2010. They are led by anti aging skin care products, which are expected to retain double digit growth rates over the next several years.

Packaged Facts projects the compound annual growth rate of anti aging skin care products to be at 11.3 percent through 2010. All other skin care product segments are expected to see similar healthy growth, with the exception of facial cleansers, which should remain relatively flat, according to the report.

While prestige skin care products have suffered fallout from department store mergers and closings, sales are expected to recover. Additionally, higher-priced, higher-quality mass-market products, often referred to as, "masstige," and increased mass-market distribution of prestige products, will continue to stimulate market growth.

Procter & Gamble's recent acquisition of a dermatology skin care products line is one example of the trend toward at home treatments that promise the same results once available only through surgical procedures or high end clinical skin care products, according to Carrie Mellage, industry manager for the consumer products practice of Kline's research division. She refers to P&G's recent acquisition of the DDF line from private equity firm, North Castle Partners.

While creating a shift in distribution, this trend is also boosting overall sales. Today, physicians and spa professionals face stiff competition from retail channels, including drug stores and mass merchandisers, the Kline study shows. As evidence of this growing competition, in 2005, CVS teamed up with Dr. Jeffrey Dover, a practicing dermatologist for more than 20 years, to create the first anti-aging line developed by a dermatologist for the mass market.

According to Kline's Professional Skin Care 2006 report, U.S. sales in the so-called, "professional," component of the skin care products market totaled $870 million in 2006. That represented more than five straight years of double digit growth. "It was nearly unanimous that physicians and spas wanted to see more in the way of providing product samples, training and educational materials to help them sell the products," says Mellage. The Kline study also noted a decline in the number of cosmetic procedures performed by physicians.

"Clearly the physicians are seeing a shift in their business, from providing procedural services to offering consultation and product recommendations to their patients," Mellage adds. Highly-functional product promises, such as protection, prevention, deep cleansing, or regeneration, combined with natural and organic ingredients are also ideally poised to fuel dollar growth, according to both studies.

"Marketers and retailers have done an excellent job of repositioning products based on need and catering to a wider audience including teens, twenty-somethings, and men," says Don Montuori, publisher of Packaged Facts.

"Rebranding has paid off in several instances, and positioning products in a more cosmeceutical fashion has fueled market growth and will continue to do so in the next several years, as consumers buy into the promise of better-looking skin," he concludes.

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