The health and beauty sector remains in shape

The health and beauty market is growing at an average of 2% p.a. in Western Europe. So far, there has been a number of deals completed in the health and beauty sector over the last few months in the UK which PwC was involved in (including Holland & Barrett, The Body Shop, and Grenade). These have attracted interest from a variety of investors from both the UK and abroad.

So why is that?

  1. Healthy habits
    Consumers are becoming increasingly aware and focused on maintaining healthy habits and accordingly, there has been a change in consumer behaviour towards maintaining active and healthy lifestyles (including healthy eating/snacking).

  2. The ‘lipstick’ effect
    With disposable income under pressure, shoppers are turning their attention away from spending on ‘big ticket’ items (such as household goods) towards more affordable products to treat themselves (lipstick, perfume, skincare, etc.).

  3. The sophisticated consumer
    Demand by customers for specialised products has led to product innovation and the development of a number of niche brands with narrow focus (organic / ‘clean’ beauty, ethnic group focus) as well as  innovative products (beauty supplements, ‘well-being’ beauty products) which specialty retailers have capitalised on.

  4. Distribution channels
    The growth of online and introduction of innovative delivery models (such as on-demand apps and subscription services) have played a major role in driving the growth in the sector, with a number of retailers adding health and beauty products to their online catalogues (e.g.. Net-a-Porter, ASOS, and New Look).

  5. Going global
    The success of some retailers has also been driven by the adoption of the right expansion strategies and venturing into new countries and markets, whether through a franchise model or by acquiring local brands or pre-established retailers.

Looking ahead

Going forward, the health and beauty market in Western Europe is expected to continue to grow at 2.8% p.a. over the next three years. In order to maintain relevance and success, brands and retailers will need to focus more than ever on finding the right balance between specialisation, picking up on emerging trends and changing customer behaviour, the right choice of distribution channels, as well as international expansion. Also, how do you provide affordable, latest technology products?

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Lisa Hooker |  Partner, Retail Transaction Services
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