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How Millennial Preferences Could Change Beauty Industry

May 4, 2016 1:14 pm
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Millennials prefer skin creams that deliver immediate results and they aren’t willing to invest in expensive products, according to Fabrizio Freda, CEO of Estee Lauder Companies Inc (NYSE: EL) during an interview with the Wall Street Journal.

Apart from Estee Lauder, this is an important read-through for companies such as Coty Inc (NYSE: COTY) and the beauty business of Procter & Gamble Co (NYSE: PG), as they all make anti-aging products and depend heavily on these expensive skin care creams to boost their top line.

Related Link: Overweight Estee Lauder, Underweight Brown Forman: Morgan Stanley’s Pair Trade Scenario

The recent revelation by Freda assumes even more significance, as these consumer product firms are targeting Millennials, people born in the 1980s and 1990s, as they are an important demographic accounting for one-quarter of the U.S. population. Millennials have even surpassed Baby Boomers as the nation’s largest living generation, according to population estimates released this month by the U.S. Census Bureau.

“Millennials are much more about immediate results than saving for the future,” Freda told the Journal. “The 30-year-old today gets more photographs of themselves in a day than their mother did in a year, so they care about what their skin looks like now, not when they are 40.”

The report, citing a data from Euromonitor, said U.S. sales of anti-aging products such as serums and face creams rose just 2 percent last year to $3.6 billion. Meanwhile, makeup sales climbed 8 percent to $5.1 billion.

For the most recent quarter, Estee Lauder’s sales of skin-care products, particularly its Estee Lauder and Clinique brands, declined 2.5 percent, while Makeup sales increased 7.3 percent. On the other hand, Coty, known for its OPI and Philosophy brands, posted 9 percent sales drop for its skin and body-care unit, while cosmetic sales rose 11 percent.

Shares of Estee Lauder were down 0.63 percent at $92.70 at time of writing.

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