In today’s Money Weekend…a potential US$270 billion growth in just six years…how the beauty industry makes its billions…why the most exciting possibilities aren’t in big household names…and more…
Primer, foundation, concealer, contour, translucent powder, eyebrow pencil, eyebrow gel, eyeshadow, eyeliner, mascara, bronzer, blush, highlighter, lip liner, lipstick, lip gloss, setting spray.
Have I still got your attention?
Above is a list of some of the products one may use when applying a face of makeup. We’ve come a long way from the origin of cosmetics, when Cleopatra first wore a distinctive line of black kohl eyeliner (then made of a mixture of metal, lead, copper, ash and burnt almonds) around her upper and lower eyelids in ancient Egypt.
Now we have a whole ecosystem of products, colours and textures many would find dizzying. Superfluous? You bet. But this industry is one in which many can profit, despite how silly or unnecessary some of the products seem.
The beauty industry was globally valued at approximately US$532.43 billion in 2017, according to Reuters, and is expected to hit a whopping US$805.61 billion by 2023. That value only grows with each new product created by the industry.
It seems every few years a new product is created which is absolutely vital to one’s makeup routine, despite never existing until that moment. Often these new products are met with incredible enthusiasm from beauty buyers, creating a sense of urgency and demand which is unimaginable for a product which hasn’t even been released yet. They hype it up with such tenacity and for so long that the thought of missing out on this new ‘invention’ could be devastating for any makeup enthusiast.
This process in and of itself may be the most important factor driving the beauty industry’s ongoing success.
Prep ‘n’ prime
A real-life example of this process can be seen in the first product that’s meant to hit your skin (after of course cleansing your face and applying a variety of moisturisers and serums), primer. Or to be more specific, foundation primer. When we look back even a couple of decades, primer wasn’t something that really existed in makeup routines. Generally, primer was known in different industries, such as priming a wall before it was painted, but we didn’t need it for our faces! But due to the ever-expanding beauty industry, and the billions that come from a newly created product, obviously the need for primer as we know it today had to come about.
Like many makeup products, primer’s initial invention was for the stage, originally designed to extend the wear of performers’ stage makeup. However, since then primer has come a long way, to become an utmost necessity in most makeup kits.
Although primer’s primary function is still to ensure your makeup lasts all day, newer formulas also claim to fill in pores, blur fine lines, colour correct and even reduce oiliness or dryness. Not only that, but now there are lip primers, eyeshadow primers, even mascara primers, all apparently tailored to their respective areas.
Now, if you were a makeup wearer, wouldn’t you want your complexion to be smooth, unblemished and oil-free all day long? Of course. But what if you couldn’t possibly achieve said results unless you applied a particular product beforehand? But this product didn’t even exist 20-odd years ago…so how were people achieving this then?
It may baffle some makeup wearers. And those who don’t wear it may not even care to know. But when it comes to the bigger picture it’s quite clear that these products were created and perpetuated by a money-hungry industry, which has found successful techniques for marketing to mostly young women.
So if the industry is constantly creating new products which make it seem as though a makeup routine without them would be inferior and incomplete, at what point does it stop? Which product will be the last product absolutely necessary in achieving your desired look? It seems as though that last product will never exist…
As we become more and more advanced, of course there are going to be newly discovered products and even improved existing products. But when it comes to necessity, who calls the shots? The customer or the industry?
How the beauty industry makes its billions
What valuable lessons can other industries learn from the beauty industry’s amazing ability to create urgency and high demand for newly created products?
Is their power tied to that fact that most women can be especially vulnerable when it comes to their appearance? And the fact that these companies are creating products playing on these same vulnerabilities?
As an investor, it could be useful to note that the beauty industry is not limited to the cosmetics industry. The beauty industry expands into many subsections. One of these subsections is referred to as ‘beauty services’, which includes grooming services such as laser hair removal and eyebrow waxing.
Stephanie Cashman, from Australian beauty salon Simply Stunning, brought to readers’ attention the increase of beauty services available and purchased by young people in today’s society. Cashman noted that she has personally witnessed an ‘increasingly young clientele opting for increasingly high-intervention treatments’. Cashman went on to say that more and more young people are coming in to get a variety of beauty services which usually wouldn’t be performed on people until they were much older.
But what is driving this ramp up in ‘beauty’ related spending?
As reported by the ABC, Tim Olds, a professor of health sciences from the University of South Australia, says the industry is ‘being spurred by the images around us — which are often very unrealistic.’
‘We’re exposed to more and more bodies, and we see more and more of those bodies, and those bodies are more and more ideal all the time,’ Olds stated. ‘That drives a great deal of dissatisfaction.’
And it’s this constant dissatisfaction which drives the beauty industry into what it is today. Women are constantly shown pictures of other more beautiful women, and then these images become some sort of a standard as to how all women should be.
It is in the best interest of the industry to perpetuate an unrealistic, unattainable perception of beauty. Therefore women (and some men) are constantly trying to improve themselves, sometimes to levels which don’t actually exist in real life. And what do they do to achieve this so-called improvement? A plethora of beauty products and treatments.
But how can you, as an investor, directly profit from this ever-expanding industry?
Where to start looking
If you’re interested in expanding your investment portfolio by investing in beauty or beauty-related companies, it is essential to get in on brands before they become household names. That’s if you want to make the biggest possible profits, of course.
While there aren’t many cosmetics companies listed on the ASX, there are many beauty-related companies which could be worth having a look at. Hint: Most pharmacies sell makeup!
As mentioned, perhaps the most exciting possibilities aren’t in the big household names like L’Oréal or Max Factor. Instead, to benefit from consumers’ constant appetite for the new and exciting, look to smaller, newer companies breaking into the industry with fresh ideas. These tiny young companies are inherently riskier, but their small size can mean huge potential for growth if they get it right.
In Wealth Eruption, his premium service focusing on smaller stocks with exactly that kind of explosive potential, Money Morning editor Harje Ronngard recently tipped a cosmetics company riding an exciting new trend. I won’t give away too many of the details here, as that wouldn’t be fair on Harje’s paying subscribers, but this speculative little company is at the forefront of exactly the kind of new trend that appeals to young consumers, the beauty industry’s core audience.
You can find out more about Harje’s Wealth Eruption here.
Whether it’s Harje’s latest tip, or a similar speculative stock, the beauty industry is the perfect space to find disruptive new trends that could potentially lead to big gains for investors.
This week in Money Morning
Due to Easter Monday, there was no Money Morning on Monday this week. And on Thursday, in recognition of Anzac Day being set aside for solemn remembrance of our servicemen and women’s sacrifice, we stepped away from markets for a day.
As an investor, it’s important to know when one of your stock prices is changing direction. Oftentimes, price action is so complex that the very idea of ‘up’ and ‘down’ is difficult to define. Which is why on Tuesday, Murray outlined a strategy he has been perfecting over the last decade.
To find out what it is, click here.
On Wednesday, Murray wrote about a recent Labor pledge that could potentially mean big news for the small ASX-listed gas companies with stranded gas in the Galilee and Bowen basins and even those with land holdings around the Beetaloo Basin in NT. In fact, some of those stocks have already started to move.
To learn more about them, click here.
Then in Friday’s Money Morning, Sam tells readers he’s never been this excited about the crypto world as he is right now, after returning from attending Paris Blockchain Week.
To learn more about the interesting takeaways he gathered from the summit, click here.
For Money Weekend
PS: Revealed in our brand-new Money Morning report: ‘Three Small-Cap Stocks to Own Right Now’. Click here to download your free copy.