The Rise of Private-Label Beauty Brands Amid Economic Uncertainty

Table of Contents

1. Key Highlights
2. Introduction
3. Understanding the Growth of Private-Label Beauty Brands
4. Transformative Strategies by Retailers
5. Product Innovation and Quality Assurance
6. Future Outlook: Challenges and Opportunities
7. FAQ

Key Highlights

• The private-label beauty sector has seen remarkable growth, rising to $3.9 billion in revenue for 2023, marking a 10.4% increase from the previous year.
• Consumers, particularly Gen Z and Millennials, increasingly perceive private-label products as high quality, with substantial interest in retailer-owned brands.
• Major retailers like Walgreens and Ulta are enhancing their private-label offerings to meet this growing demand, introducing innovative products that appeal to young consumers and minorities.

Introduction

As consumers become increasingly savvy about beauty products, the landscape is shifting dramatically in favor of private-label brands. These retailer-owned lines are not just gaining traction; they are flourishing at an exponential rate. A staggering 10.4% increase in private-label beauty sales in 2023, reaching $3.9 billion, showcases a turning tide. This growth underscores a significant evolution in consumer perceptions, particularly among younger demographics like Gen Z and Millennials. What is driving this surge into the realm of private-label beauty, and how is it reshaping the industry?

Understanding the Growth of Private-Label Beauty Brands

Private-label beauty products—those carried under a retailer's name rather than established brands—are experiencing an unprecedented boom. According to Circana data from the Private Label Manufacturers Association, private-label beauty now accounts for approximately 9.5% of all health and beauty sales in the United States. This figure reveals a shifting marketplace where value does not merely equate to lower prices but encompasses product performance and brand loyalty.

A Shift in Consumer Demographics

Historically, private-label brands were largely favored by older consumers, but data shows a noticeable trend: younger generations are now leading the charge. A significant 67% of Millennials and Gen Z consumers believe these products offer equal, if not superior, quality compared to their national counterparts, according to NielsenIQ. Furthermore, higher-income shoppers—those earning over $100,000—are also drawn to private-label, with 72% expressing the same sentiment.

The Impact of Economic Uncertainty

The rise in private-label beauty coincides with greater economic concerns, where belt-tightening often leads consumers to favor affordable options. "Retailers tend to turn to private-labels at the same time consumers start to pinch pennies when the economy is shaky," states Jacqueline Flam Stokes, senior vice president at NielsenIQ.

This phenomenon is particularly relevant in the face of rising costs associated with brand-name products. As shoppers seek to maintain their beauty regimens, the appeal of more affordable alternatives becomes clear.

Transformative Strategies by Retailers

The changes in shopper behavior and economic preferences have prompted retailers to invest heavily in their private-label lines, unleashing innovative strategies to capture market share.

Walgreens and the Launch of Premium Collections

In early 2024, Walgreens introduced its Premium Skincare Collection, a series of budget-friendly alternatives mirroring luxury items. The collection includes sought-after products such as a $22.99 Body Butter Firming Cream inspired by Sol de Janeiro’s $48 product. Such strategic moves have positioned Walgreens to attract consumers looking for quality without inflated costs.

Walgreens aims to have over 300 owned-brand products by the close of fiscal year 2025, with a successful initial rollout already showing 75 basis points growth in brand penetration. This approach aligns with consumer trends toward value-driven purchasing amidst economic uncertainty.

Ulta’s Revamped Offerings

Ulta Beauty has also recognized the potential of private-label through the revamping of their Ulta Beauty Collection. This rebranding process, which began in 2024, is aimed at appealing to a younger demographic with contemporary aesthetics and highly desirable product formulations.

One standout product—an easily shoppable Juice Infused Lip Oil priced at $10—has generated significant interest and engagement among consumers, successfully aligning with the growing high-low shopping trend that many customers are embracing.

The Role of Credo and Mecca

Retailers such as Credo Beauty have launched dedicated skincare lines, while Mecca, Australia's largest beauty retailer, pushes forward through its in-house offerings. Mecca's commitment goes beyond pricing; they focus on product formulation, storytelling, and customer engagement. This holistic strategy is pivotal to developing brand loyalty and consumer advocacy.

Mecca Cosmetica's To Save Face SPF, priced competitively at $22, exemplifies a best-selling item, proving that a price point is not the only factor driving success in private-label products.

Product Innovation and Quality Assurance

As competition heats up, innovation in product development becomes paramount to differentiate private-label offerings. Retailers are embracing a dual approach of responding to market trends while also proactively anticipating shifting consumer preferences.

Creating Emotional Connections

Private-label brands are increasingly emphasizing emotional resonance as an essential component of their marketing strategy. Customers not only seek quality and affordability but also desire brands that resonate with their lifestyles and values.

Events like Mecca's sponsorship of the Sydney Gay and Lesbian Mardi Gras underline the potential for private-label brands to engage with their consumers authentically and inclusively—a move that not only fosters brand loyalty but amplifies brand image in competitive landscapes.

Inclusive and Diverse Offerings

Believing that diverse offerings are crucial to success, brands are also focusing on inclusivity. Major players are not only enhancing their product ranges but are also working on diversifying points of sale to become more accessible to customers.

Future Outlook: Challenges and Opportunities

While private-label brands continue to evolve, they are not without challenges. Industry experts suggest that there is substantial competition from established national brands that are aggressively improving their pricing and quality.

A Bold Vision for the Future

However, private-label beauty holds significant potential for continued growth, particularly in categories that embrace experimentation, such as color cosmetics. As Weissberg noted, "People are always looking for what’s new and different—presented well, private labels can be new, too."

The trajectory indicates that if retailers can succeed in maintaining competitive quality, while also infusing greater consumer awareness and trend-awareness into their initiatives, they may sustain their burgeoning growth trajectory.

FAQ

What exactly are private-label beauty brands?
Private-label beauty brands are products sold under a retailer's brand name, offering alternatives to established national brands that are typically more expensive.

Why are private-label beauty brands becoming popular?
Consumers are increasingly recognizing the value and quality of these brands. Economic uncertainty also drives shoppers to seek affordable options that do not compromise on quality.

How are major retailers investing in private-label brands?
Retailers like Walgreens and Ulta are launching extensive private-label lines with competitive pricing and innovative formulations catering to younger demographics' preferences.

Are private-label products really comparable in quality to national brands?
Consumer research indicates that many shoppers, particularly Millennials and Gen Z, believe private-label products are as good as national brands. Many retailers are concentrating on quality formulation to meet this expectation.

What factors contribute to consumer loyalty in private-label brands?
Factors such as product quality, brand engagement, personalized marketing, and emotional connection promote customer loyalty to private-label brands.

By navigating these dynamics, private-label beauty brands are not only keeping pace with evolving consumer expectations but are also laying the foundation for a sustainable future in an increasingly competitive retail landscape.