Because the National Association of Chain Drug Stores prepares to rejoice its 90^th anniversary, the mass market is gearing up for what may very well be its most pivotal juncture in the sweetness business previously decade. The NACDS Annual Meeting kicks off at The Breakers in Palm Beach, Florida, on Saturday.

Beauty is at a crossroads. While the mass market accounted for nearly all of sales within the $93 billion beauty industry, in line with Circana (formerly IRI and NPD), the $27 billion prestige segment has been growing faster than mass while also experiencing lesser price increases.

Whether the mass market will profit from what many consider is a looming recession can be amongst the most important topics when leaders from brands including Coty, L’Oréal, Markwins, Unilever, Maesa, Kiss and Revlon meet face-to-face with representatives of greater than 50 retailers. The meeting will offer a probability for Revlon executives to present their reorganization plan following its exit from bankruptcy. Also included on the roster is Amazon — a formidable competitor to each mass and sophistication — and one that can surely be a part of discussions.

The query of whether shoppers will trade down and even trade out of beauty can be one among the recent topics throughout the four-day gathering that can feature an address from Dr. Anthony Fauci, whose call for vaccinations drove shoppers to pharmacies in droves. NACDS can be missing the nation’s largest drug chain (based on store count). CVS executives can be absent following the retailer’s exit from NACDS last summer, a loss of virtually 10,000 doors. CVS didn’t comment on the departure, but industry sources speculated it was linked to NACDS support of the regulation of Pharmacy Advantages Management practices.

Also gone this yr are lavish parties once related to the annual gathering which have been eliminated or pared down for 2023. The industry is able to get all the way down to business and there’s loads at stake.

“On the annual meeting, we sit up for having meaningful conversations with key players in the private care, health, wellness and wonder industry to bring additional digital/e-commerce capabilities to life, find ways to steer in channels of the long run, and proceed to drive supply chain practices with a key concentrate on sustainability,” said Esi Eggleston Bracey, president of Unilever USA and chief executive officer of private care. “We’ll even be sharing how brands like Dove, Vaseline and Degree are contributing to people’s wellness. We stand committed to overserving the underserved and driving inclusivity through our purpose initiatives laddering as much as each brand’s mission.”

Coty U.S. managing director Debbie Erickson plans to focus on the corporate’s ongoing turnaround exemplified by its 10^th consecutive quarter of growth with strong performance in each the Prestige and Consumer Beauty divisions. “We’re very happy with sustainability initiatives announced this yr from product packaging and formulation to fulfilling our gender pay gap commitment,”  she said. The corporate can even tout its  #UndefineBeauty campaign, which focuses on changing the perception of beauty. Coty has asked leading English dictionaries to update their definitions and has launched a world petition to generate support.

Regardless of the way it is defined, beauty is the third largest producer behind pharmacy and over-the-counter medications for many drug chains, producing anywhere from 6 percent to 10 percent of total sales.  The category ranks inside the top five priorities at Walmart, in line with Creighton Kiper, vp beauty. A lesser consider grocery stores, it’s increasingly essential, with chains like H-E-B, Hy-Vee and Wegmans opening beauty departments that rival specialty stores. For those retailers, beauty gross margins help offset razor-thin profits in food.

The race for market dominance can be closely monitored and will determine how much attention the category gets at mass in the long run. While it’s important, slow inventory turn has at all times put beauty on the recent seat to perform. And competition from prestige retailers stays fierce, a dynamic expected to proceed. “Amongst beauty shoppers who reported reducing their overall spending on account of inflation, seven out of 10 said they weren’t cutting back on their beauty spending,” said Larissa Jensen, beauty industry advisor at Circana. “Consumers have shown us that when economic sentiment gets shaky, they turn to prestige beauty products for an emotional lift. This ‘treat mindset’ is a giant piece of what ties the entire beauty industry picture together.” 

Scott Emerson, president of The Emerson Group, concurred that the mass/prestige ratio will remain static. “The people buying $200 serums will still buy $200 serums despite a troubled economy,” he said. “During economic uncertainty, beauty becomes an accessible indulgence, and shoppers typically don’t trade down their beauty products.” 

At the identical time, retailers like Walmart, CVS and Walgreens have upgraded their beauty departments, while Walmart and Goal are also partnering with specialty retailers to bring prestige to their aisles.

Vennette Ho, managing director global head of beauty and private care at Financo Raymond James, portends a shift. “We consider that there can be some migration from mass to prestige, driven not just by price but in addition by people emphasizing ‘quality for value.’”

Ashley Helgens, vp of Jefferies, doesn’t rule out a trade-down.  “We’re seeing beauty get more promotional, but I don’t think we are going to see any massive trade-down until this quarter or next. I do consider beauty is something you purchase regardless when you are in a recession or not. In case you have a look at the information from the last recession, there definitely was a trade-down happening.”

She singled out mass brands which can be well-positioned to draw shoppers.  E.l.f., for instance, operates at lightning speed and advantages from a powerful social media presence. “They’ve the flexibility to innovate quickly and get products on shelves in as little as nine weeks,” Helgens said, noting the brand is attracting each prestige and mass shoppers.

The mass versus class distinction is extinct, suggested Scott Kestenbaum, chief growth officer for Maesa. “Newest beauty shoppers don’t make this distinction. For a few years, we now have seen a blurring of the lines between these two channels,” he said. He noted that prestige retailers like Sephora, Ulta Beauty and SpaceNK have diversified their footprints by forging partnerships with retailers like Kohl’s, Goal and Walmart. Meanwhile, mass market retailers are continually expanding their masstige offerings with brands like Kristin Ess Haircare, Naturium and Being Frenshe, which look, communicate and perform like prestige brands but at more accessible prices.

“In an inflationary economy, when consumers have less discretionary income, it could be intuitive to anticipate consumers trading down,” Kestenbaum said. “Nonetheless, history suggests that beauty doesn’t follow this trend.”

While there’s chatter about shoppers going downscale, there are indications mass retailers can sell pricier beauty. Sales in 2022 from Ulta Beauty at Goal were greater than 4 times higher than in 2021 and the expansion was almost entirely incremental, in line with Christina Hennington, Goal’s chief growth officer. Beauty is delivering the best growth rates of any category in the shop.

In announcing one other 250 Kohl’s stores that can add Sephora, bringing the entire to 850, the corporate said the partnership has been “mutually” useful. Kohl’s projects that Sephora at Kohl’s will grow to hit $2 billion in annual sales by 2025. Last yr, nearly 8 million Kohl’s customers purchased beauty products on the Sephora shops at Kohl’s. Within the fourth quarter of 2022, total beauty sales increased 90 percent.

Walmart’s Kiper said the partnership with SpaceNK goes well from a performance and learning standpoint. “What we’ve been talking about recently is how lots of our $100,000 [income] are coming into our stores and staying. We’re learning what works and what doesn’t. There isn’t really a price ceiling,” he said during a recent CEW event. He noted that the shop continues to check and learn. There are a handful of Walmart stores dubbed Beauty Shop, where Walmart is tinkering with the sweetness department. “I at all times say there is no such thing as a finish line, you may have to proceed to enhance,” Kiper said.

One other issue sure to be on the agenda is price hikes. The industry can’t count on price hikes to grow anymore, insiders said. “How can we work together to execute price decreases? We want to begin measuring units, not dollars,” said Emerson. “Inside the past five months, we’ve seen the gap between dollars and units rise from 5.2 percent to 9 percent, and now, we’re at 13 percent. 

“There are still many more issues to return that we haven’t considered,” he said. “So, how can suppliers and retailers work together to fulfill these challenges?”  

Emerson believes prices have hit a ceiling. “Most brands took meaningful price increases in 2022 to offset supply chain costs; we don’t think many brands have many opportunities left on this regard as consumers are feeling the pinch across all categories.”  

Eric Weeks, president of sales at Markwins Beauty Brands, said his meetings will delve into the impact of inflation and average unit price growth versus units decline with a goal of finding ways to mitigate that trend and take costs out of systems.

Innovation, higher service and elevated experiences will drive the industry’s growth, said Wendy Liebmann, chief executive officer of WSL Strategic Retail. “We’re hearing a variety of discussion about selection and merchandise mix. How much is simply too much? Is more at all times more? Plenty of retailers wish to reduce stock keeping units to create a greater experience,” she said. “They’re reorganizing stores to make them more open and easier to buy.”

Tighter departments could make it tougher so as to add latest items which have unknown potential. Weeks said there’s a fragile balance between established brands and emerging contenders. “Legacy brands are reasonably stable and somewhat predictable versus latest market brands which can be short-term winners but are largely uncertain two or three years after they’re initially set [in planograms],” he said.

One segment where retailers plan so as to add latest items is wellness. “We’re in search of our supplier partners to assist us deliver health and well-being-led assortments to our patients and shoppers,” said Heather Hughes, group vp of beauty, personal care and seasonal, at Walgreens. Bridging the gap between health, well-being and wonder is at the highest of her to-do list. Skincare continues to be a “huge focus” for the chain, especially brands bringing skilled quality products with ingredients similar to retinol, salicylic acid and vitamin C.

Wellness was redefined post-pandemic, said Kestenbaum. “It has evolved towards a multidimensional approach to holistic well-being, including mental and emotional health. Consumers are in search of community, experiences and products that make us look nearly as good as we feel,” he said

“Retailers have taken notice of this and have rushed to capitalize, many with mixed results,” Kestenbaum continued, noting that retailers like Whole Foods, CVS and Thrive Market, that were born with health and wellness as a part of their DNA, are connecting well, but others, who historically haven’t focused on health, are finding it a much bigger leap. “Customers find it difficult to know how a retailer selling cigarettes and sugary food can offer guidance on a healthy lifestyle,” he said.

Emerson said wellness is a whole-body beauty experience that advantages brands like Dr. Teals and Lumify and that they’re becoming a part of the day by day beauty routine as shoppers seek to feel and look well-rested. “The healthy skin revolution is simply becoming more significant,” he said. “Last yr, dermatological skincare was probably the most outstanding beauty trend. Now shoppers are adding sun protection, day by day supplements and hydration products like Liquid IV to attain healthy skin from the within out.”

Eggleston Bracey added that well-being goes beyond products. “A key component is giving back to the community. Doing good makes you are feeling good,” she said. “People need to vote with their dollars by purchasing products that supply superior quality and value and do more by doing good. People need to live long, healthy lives, making selections which can be higher for his or her bodies and for the environment. Wellness is moving beyond just what people eat, to how the products we love make us feel and what we’re putting on our bodies for that all-encompassing sensorial experience.”

She cited SheaMoisture for instance, noting it reinvests not less than 1 percent of net sales directly into economic opportunities for underserved entrepreneurs and Black business owners.

It has been seven years since Unilever purchased SheaMoisture’s parent Sundial Brands and for a lot of entrepreneurs, it’s a case study in constructing and selling a brand. Just when it seemed M&A activity was cooling off, Procter & Gamble snapped up Mielle Organics and most recently  L’Oréal purchased Aesop for $2.5 billion.

Nascent brand founders hope there are still deals within the offing.  “We’re excited concerning the potential for more transactions in mass beauty and private care this yr. Historically, there have been fewer transactions in mass on condition that the barriers to entry for independent brands are generally higher at mass than in prestige. Nonetheless, we’re now seeing more independent brands break out, which drives M&A opportunities. We expect to see more as independent brands proceed to scale nicely,” Ho said.

As NACDS celebrates its history Liebmann noted the presence of future leaders on the attendee list. “A next generation of leaders is emerging including a variety of women,” she said. “There may be a generational shift that is essential. There may be also an interesting mixture of firms from Amazon to smaller brands.”

Perhaps the entertainment on the meeting illustrates the direction with a young pop trio called AJR opening the conference and the legendary Gladys Knight within the starring role as closer.