While it is almost typical to see a beauty investment surge at the end of the year before everyone packs up for holidays, the end of 2022, however, didn’t quite follow the same trend.
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The year 2022 was yet another banner year for beauty. Despite lingering uncertainty brought on by rising inflation, an impending recession, and ongoing supply chain issues, a plethora of brand launches, product innovations, store openings, and acquisitions demonstrated the industry’s continued resilience.
As the last three months of the year approach, many prepare themselves for the holidays; however, for financial institutions, law firms, and investors, the fourth quarter marks the rush to close deals before everyone heads off for the holidays in December.
However, the end of 2022 didn’t see as much of a surge in beauty investments as it used to in previous years.
Beauty Investment Surge: 2022 Statistics
According to statistics from the BeautyMatter Deal Index, only 79 deals were recorded in the last three months of 2022. It showed a sharp decline of 28.8% from 2021, a 12.2% decline from 2020 and a 9.2% decline from 2019.
As per the statistics, the entire last six months of 2022 recorded a decline compared to the previous years. The last half of 2021 had 28.1 % more deals, while 2020 and 2019 reportedly had 9.3% and 15.6% more deals than the same period in 2022 respectively.
At the start of 2022, the decline was only 2.9% compared to 2021, while in comparison to 2020 and 2019, there was a sharp growth of 85% and 94.1% respectively.
The 2022 slump in the second half of the year is largely attributable to the market’s perception of growing risk and uncertainty. As the year progressed, due to geopolitical unrest around the world, the greatest possible rate of inflation in a generation, the government’s response to that inflation, and extremely turbulent capital markets, the level of uncertainty in investments increased.
The decline in beauty investment surge isn’t the only problem the beauty industry is dealing with. The continued spending of affluent consumers benefits some prestige beauty brands, but several others have struggled. For the three months ending September 30, the Estée Lauder Companies, the parent company of brands such as Mac Cosmetics and Bobbi Brown, saw organic sales fall 5% and net sales fall 11% to ₹313.86 crore. China, which accounts for more than a third of the company’s sales, is especially reliant on it.
Four brands announced their closures during the fourth quarter, bringing the total for the year to eight. Vapour Beauty and Lilah B., two colour brands; Lora DiCarlo, a sex-tech startup; and Medly, a digital pharmacy, all made announcements about closing their businesses this quarter. Insiders began to wonder if the rise in brand closures and bankruptcies for the beauty industry was just the start of a wave that would last through 2024.
Beauty Investment Surge: 2024 Expectations
Despite the evident decline in beauty investment surge, executives and investors in the beauty industry are surprisingly upbeat about 2024. As they predict a milder recession in 2024 for the US economy, they are seemingly assured about the growth in beauty investment.
Vice President at the investment bank Jefferies, Ashley Helgans, sketched a slightly more sober but nonetheless upbeat picture for the coming year. Even though beauty is still a relatively bright spot for the US consumer in 2024, financial institutions continue to anticipate a mild US recession.
With consumers shifting from wants to needs as their budgets adjust to inflation, the environment for beauty brands is rapidly changing. Beauty has so far managed to survive the underlying shift from products to services thanks to its relationship to socialisation, events, and self-care practices. Early indications of economic stress may affect trading up and lead to more discounting in 2024 compared to 2022. She continued.
Harris Williams managing director Kelly McPhilliamy predicts that the pace of beauty deals in 2024 will be slower as sellers wait to announce any capital raising or sale plans until they have evaluated the macroeconomic and market environment as well as their own holiday achievements and momentum.
According to Houghton of The Future Laboratory, looking forward to 2024, science and technology could indeed help protect cosmetic brands from unforeseen events, secure supply chains, and generate new concepts for experiences and products.
According to data from Euromonitor International, the global beauty sector was on track to reach ₹4360 thousand crores by the end of the year, up from ₹4224 thousand crores in 2021, and has the potential to reach ₹4759 thousand crores by 2025 due to growth across all categories.
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