As we approach the end of the year, we’re covering trends from key markets in 2022. We’ll recap the state of each industry over the past year, the ad strategies of its biggest players, and what we predict 2023 will hold.
What if we told you lipstick sales were the best way to gauge the economy’s health?
It’s called the lipstick effect, a term coined by Leonard Lauder, the chair of Estée Lauder, that describes the idea that consumers will spend on small indulgences during recessions and economic downturns.
For this reason, companies that sell these “small indulgences,” like beauty brands, often thrive when consumers are tightening their belts.
Warren Becker, CEO at Cosmetic Solutions, said, “When times are tough, and consumers are forced to tighten their belts, affordable luxuries like beauty are generally not the first areas to cut, if at all.”
Here’s proof: As the U.S. economy declined in Q1, lipstick sales jumped by 48%.
That said, these brands may not be as immune as we once thought—Estée Lauder’s fiscal 2021 Q3 results reported makeup sales fell by 10%.
What do these mixed signals mean for beauty advertisers? Overall, not much.
Through October 2022, beauty advertising—everything from acne skincare to women’s razors—increased by 13% to $4.6b. Except for January and September—which were down by just 1% YoY—ad spending increased every month.
Will spending continue into 2023? We looked at our data to find out.
Top Beauty Advertising Categories in 2022
Through October, the top beauty advertisers came from anti-aging skincare, cosmetics, deodorant, haircare, and skincare, collectively spending $1.8b or 39% of the category total.
As the skincare market grows—it’s projected to reach $145b by 2028—advertisers promoting skincare will continue to spend big.
Overall, spending on skincare products, which accounted for 13% of beauty advertising, increased by 14% YoY, despite a decrease in Q1 by 9% YoY.
After this single-digital dip to start the year, which could simply be a post-holiday reset, skincare advertisers increased their budgets in Q2 by 39% YoY.
Q3 was a bit of a rollercoaster though. In July, spending increased by 5% YoY before falling by 68% in August and then rising again in September.
While October experienced another decrease in spending—this time by just 3% YoY—it was up by 38% MoM from September as advertisers geared up for the holiday season.
Advertising for cosmetics products, which accounted for 8% of the beauty ad spend, rose by 100% YoY to $376mm.
The most significant increase came in Q1 when spending rose by 198% YoY. The surge continued in Q2—this time by 134% YoY.
Then, spending slowed in Q3 by 16% YoY due to August’s 41% YoY decline.
Outside of Q2, cosmetic advertising strategies were the inverse of their skincare counterparts, illustrating that the market forces impact some pockets of the beauty industry differently.
Given the economic outlook for 2023 and likely tempered spending from some beauty advertisers, this shows that some advertisers will be willing to spend.
Hair advertising, which represented 7% of beauty advertising through October, increased by 17% to $315mm.
Although advertisers opened their wallets for much of 2022, spending declined in Q3 by 44%, thanks largely to a 73% decrease in August.
That said, spending rebounded in October by 27% YoY and 8% MoM.
Advertising for anti-aging skincare products increased by 14% YoY to $79mm despite decreases in Q1 and Q3 by 12% and 29%, respectively.
In October, advertisers increased their budgets by 26% YoY and 18% MoM.
The overall increase in spending comes as the anti-aging skincare market grows. Between now and 2029, the market is expected to grow at a CAGR of 8%, significantly faster than some other categories, including deodorant.
Despite the deodorant market growing at a 5.3% CAGR, advertising was down by 5% YoY, making it the only top-spending category to spend less in 2022.
The most significant decrease came in Q3 when budgets fell by 50% YoY. The decline continued into Q4, with the investment falling in October by 35% YoY and 2% MoM from September.
Top Beauty Advertisers in 2022
The top beauty advertisers in 2022 are likely the ones you expect.
The six beauty advertisers who spent the most through October came from industry powerhouses, including Estee Lauder, L’Oreal, LVMH, Joh. A. Benckiser Holding Company, P&G, and Unilever.
Combined, these advertisers spent more than $1.7b or 36% of the investment from the beauty industry.
Advertisers for Estee Lauder increased spending by 25% YoY—primarily on digital ad formats— thanks to triple-digital spikes in Q1 and Q2 by 320% and 565% YoY, respectively.
Spending tightened in Q3 but was still up by 26% YoY.
Everything indicates that business is going well for the beauty giant, including news that it agreed to buy the Tom Ford brand for $2.8b.
That said, the company recently reported a quarterly decline in makeup sales.
It’ll be interesting to see how advertisers respond in the wake of weakening demand. Still, given its strategy so far in 2022, it seems likely that, at minimum, spending will remain steady—the industry is too competitive for advertisers to take their collective foot off the gas.
While we wait and see, we know that TikTok will play an increasing role in its strategy, which makes sense given its historical digital-heavy approach.
Lubna Mohsin, social media and content manager for Estée Lauder, recently said, “Last year, Estée Lauder’s presence on TikTok was staggered, whereas this year, we’re mandating its use because recruitment is our top objective on social media.”
The strategic shift comes after declining reach on Instagram, which could indicate where beauty advertising is headed in 2023.
Advertisers for L’Oreal read from a similar script as their contemporaries at Estee Lauder, increasing spending by 15% YoY, thanks to an increase in Q2 by more than 400% YoY.
While the company is synonymous with cosmetics, which received 30% of its budget, it wasn’t its biggest investment. Through October, L’Oreal spent 44% of its investment on skincare.
Meanwhile, haircare ad spend accounted for 15%.
Again, similar to Estee Lauder, L’Oréal recently reported slowing growth.
Advertisers for LVMH Moët Hennessy Louis Vuitton (LVMH) increased spending by nearly 230% YoY, making it by far the brand with the biggest increased investment.
Much of this increase came thanks to a Q2 where spending jumped 3x YoY on the heels of double-digit growth in Q1.
The spending spree continued in Q4, with budgets increasing by 237% YoY and 21% MoM, with the majority devoted to cosmetics & toiletries (57%) and fragrance (34%) of its investment.
Some of these ad dollars undoubtedly went to planning the headline-grabbing campaign featuring Cristiano Ronaldo and Lionel Messi.
Joh. A. Benckiser GmbH (JAB Holding Company)
Advertisers from Joh. A. Benckiser GmbH—think Coty—increased spending by 71% YoY, thanks to a Q2 that saw a 3x spike from last year.
For Joh. A. Benckiser GmbH and Coty, spending comes on the heels of “solid financial progress.”
Advertisers continued to spend in Q4, with budgets increasing by 45% YoY and 19% MoM in October. Most of the company’s ad dollars went to promoting cosmetics (58%), fragrances (23%), and skin care (9%).
Procter & Gamble
There are two sides to Proctor & Gamble’s ad strategy in 2022.
On the one hand, spending increased by 26% YoY, thanks to consistent spending and a 400% increase in Q3 to promote skin care (40%), oral hygiene (15%), and hair removal/shaving (11%) products.
On the other side is budget cuts—or at least an intensified focus on efficiency in the wake of a looming recession.
Unified ID 2.0 will help the industry giant drive that efficiency as they prepare for a world without third-party cookies. A further push into digital is also likely as advertisers prioritize measurable ad formats and ROI. Through October, just over 80% of P&G’s investment went to digital-only formats, which is relatively low compared to its competitors.
Beauty advertisers have used 2022—and the lipstick effect—as a reason to spend. Unilever doesn’t fall into that camp, with spending flat through October.
While Q1 and Q2 saw increases of 109% and 318% YoY, spending tightened in Q3, increasing by just 15% YoY. The tightening continued in October, with spending dipping by 18% YoY and 5% MoM.
While Unilever’s relatively plateaued spending is surprising considering the substantial increases of some competitors, the shift could be telling as it gears up for a “serious retail media boom.”
The shift could indicate that Unilever is moving away from ads as a growth engine and will instead rely on retail media to drive its bottom line. This isn’t surprising given the state of retail media and the goldmine of consumer data on which all beauty brands sit.
The Lipstick Effect Is Real
We’ve seen this story before.
Warren Becker, CEO at Cosmetic Solutions, said, “We saw a similar situation in 2008, and while growth slowed, the overall market did not decline.”
While the growth will likely remain steady throughout 2023, the industry’s makeup is changing, and ad strategies will follow.
For instance, celebrity beauty brands, which have exploded in popularity during the rise of social media and influencers, are on the decline, accounting for just 7% of sales in the U.S.
At the same time, U.S. prestige beauty sales reached $6b in Q3, while expensive haircare products are expected to explode in popularity as people forgo salons for the foreseeable future.
Environmentally friendly products also continue to gain steam—64% of consumers say sustainability is very important when purchasing a beauty product.
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