Beauty Product Premiumization: Problematic Or Pivotal To Level The Playing Field For Emerging Brands?

A recent article in The New York Times headlined “Is the Entire Economy Gentrifying?” delved into the “premiumization” of everything from Krispy Kreme donuts to WD-40. The beauty industry is no exception.

“Premiumization” has been a leading beauty buzzword, encapsulating what’s going on in masstige makeup, premium scalp care and many more categories to drive revenues and depend on higher income consumers generally insulated from economic shocks. While it’s largely been lionized in the industry as a business builder, The New York Times points out that there could be negative consequences to premiumization as it raises “the possibility that poorer consumers will be increasingly underserved.”

We were curious about beauty brands founders’ thoughts on the pros and cons of premiumization. So, for the latest edition of our ongoing series posing questions relevant to indie beauty, we asked 14 of them the following questions: What’s your take on the premiumization movement in beauty? What are its upsides and downsides? How do you see it evolving?

Michelle Ballard Co-Founder and CEO, Miche Beauty

The beauty industry is trending similarly to the U.S. economy in which there is a shrinking middle class. Though there are numerous brands in the market, what we’re finding is that the targeting is segmented to either cater to a premium consumer or a more budget-conscious one.

Mass retail can oftentimes be more difficult for early-stage and/or smaller beauty brands, which typically tend to manufacture premium offerings, to compete in the lower price bracket due to lower margins, scaling challenges and competitive disadvantages against legacy holding companies.

The rise of premiumization levels the playing field for indie beauty brands to scale as the margins are better, a brand’s target customer typically has more disposable income, and consumers tend to be more supportive of quality niche brands.

I believe that premium products regardless of price point will become the norm as consumers are not only demanding quality ingredients and efficacy from beauty brands, but also expecting a better brand experience. It will be up to brands to ensure they’re meeting the needs of customers beyond their medicine cabinets.

David Gaylord Co-Founder and CEO, Bushbalm

With every strategic move in the industry there is opportunity on the other side. If more companies are focusing on higher income consumers, there is more opportunity in mass beauty. I truly believe the industry will always ebb and flow, but there will always be a balance. If you follow the pack, you'll end up in a saturated category.

I think what's exciting about more premiumization is that we will see a lot of innovation in the prestige category, which will eventually get more cost-effective and move into the mass categories. This is seemingly the evolution of innovation.

Mark Veeder Co-Founder, Sk*p

Premiumization is troubling to me, especially because we are a mission-driven business first and foremost, with our mission to break the beauty industry’s addiction to plastic by offering affordable nontoxic and effective products that are packaged in the industry’s first and only fully recyclable paper-based carton.

Our goal is to provide the vast majority of the population an easy and cost-effective way to be more planet-friendly and to buy their values. I never want to price people out of doing their part to help save our planet.

Amy Chou Granger Co-Founder and President, M2U NYC

Price segmentation and premiumization in beauty is not exactly new practice. The point I would like to focus on is, “Can brands justify the premium price tag for their products?” To claim a premium, brands should deliver true excellence through design, quality, innovation, and stand out from their competitors at every touchpoint.

However, some brands get away charging absurd prices simply because they know consumers will buy into their names. This is exactly the reason I started M2U NYC. We are here to redefine what premium makeup products mean and make high-quality makeup accessible to everyone, so more people can benefit from getting premium makeup on a budget.

Minara El-Rahman Co-Founder and CEO, Mora Cosmetics

Beauty products are typically looked at as a commodity. The main way that beauty brands can move their products away from commodification is to differentiate their offerings. What better way of differentiation is there than premiumization?

As an indie beauty founder, it is essential to keep an eye on profit margins to stay profitable. Offering premium products at a higher profit margin is far easier to execute than trying to sell beauty products with slim profit margins.

As we struggle with the current state of the economy, supply chain issues and raw ingredient price fluctuations, the beauty industry has seen more stability within the luxury beauty segment. Customers may not be able to buy an Hermès bag, but can still pick up an Hermès perfume in this economy.

I am not worried about the "gentrification" of beauty products because consumers will move towards more thoughtful purchases and invest in beauty products that will last a long time and are multitaskers. The unnecessary beauty products will be eliminated by more budget-conscious shoppers who will streamline their beauty routines with a mix of effective beauty products, some premium, some not.

I grew up in a home where budgeting was important and necessary, but we always knew the value of a great product. This mindset carried over to our brand. We invest in sustainable packaging and custom formulations that are clean, vegan and halal because all customers deserve a premium product on the market made with them in mind.

Sherrel Sampson Founder and CEO, Canviiy

Premiumization is definitely a tactic that we see among some of our competitors. Setting higher pricing at shelf as a consumer differentiator versus pricing being a result of cost of goods. At Canviiy, we are instead looking to "democratize" scalp care, making it more accessible to all.

We focus on premium ingredients to drive overall efficacy. As ingredient, packaging and transportation costs have increased over the past two years, we have focused on finding supply chain efficiencies to maintain and not raise our pricing to the consumer.

For beauty to be authentic, we feel that everyone needs to be able to participate and that, by "premiumitizing" the category, it often alienates the people that define the category. The short-term profit gains are not worth it.

Long term many of these brands will not be able to garner the velocities required by many retailers and, as shelf space becomes more competitive, will ultimately need to reduce pricing to achieve a sustainable base.

Sandra Velasquez Founder, Nopalera

I am a fan of the “premiumization” of products across all industries. I believe we are in a new era of transparency of paying people a living wage. The only way you can make products cheaply is you are either a massive conglomerate making millions of units so your cost per unit is low or you are underpaying someone somewhere along your supply chain or both.

The average consumer only thinks about the price. They have to pay for something on the shelf, but they don’t think about all of the people that need to get paid along the way to create and deliver that product to them: ingredient suppliers, manufacturers, freight companies, warehouse pick and packers, distributors and retailers.

I wish people understood how much margin retailers are actually taking. They are the ones making the most money.

I don’t agree with The New York Times that poorer consumers will be underserved. When I go to the grocery store or Walgreens, the shelves are still majorly controlled by the General Mills and Unilevers of the world. As a former CPG sales rep, I am intimately aware of how the margins work.

Aaron Hefter CEO, Imaraïs Beauty

I think there are many inefficiencies in many beauty products and beauty brands, and premiumization is definitely a good thing for the industry as long as brands can back up their higher price tag with premium quality ingredients, formulations and packaging.

As a brand owner, I don’t look at it as premiumization in our NPD process as much as I look at it as creating the best possible product we can produce.

Better-for-you, better-for-the-environment, locally made, locally sourced and clinically backed, all of these benefits cost much more to bring to market than the industry standard, but it’s all part of our mission at Imaraïs Beauty in creating the best ingestible products in the beauty category.

In a crowded marketplace filled with countless me-too generic products, we know in 2023 that there is a demand from both retailers and consumers for better, and we know that our customer is willing to pay extra for such.

I think the evolution of premiumization will keep legacy brands on their feet and will allow indie brands to continue to grow to new heights and bring better-for-you products to the forefront of the industry.

Linda Wang Founder, Karuna and Avatara

My biggest goal with both Karuna and Avatara has always been and continues to be offering quality products at an affordable price point. While I understand premiumization can have an elevated or exclusive appeal, I think it’s so important that skincare be accessible to as many people as possible.

Skin concerns don’t just affect those with a higher disposable income, and we’re here to show our customers that they can achieve the results they deserve and try the ingredients they’re hearing about without having to break the bank.

Shannon Davenport Founder, Esker

It feels like the beauty industry has been trying to define premiumization for a while, whether it’s masstige, prestige or ultra-luxury, so it doesn’t feel new in particular for our vertical. As a premium brand, we price our products based on quality, but we also work to ensure they remain as affordable as possible.

Although our older, affluent customer base has remained consistent throughout the economic fluctuations, we believe in offering value to those with lower incomes. Our mission is to create simple self-care practices that promote wellness through bathing and body care rituals.

A soothing warm bath or an aromatherapy shower are within reach for most people, regardless of the cost of the products they use. Ultimately, we want to promote a culture of wellness that benefits us all, not just the wealthy.

Ryan Babenzien Founder and CEO, Jolie

I'm not sure I agree that premiumization in beauty is a movement nor do I agree that it's gentrifying everything. Regarding premiumization, that has been going on for decades in almost every category, from automobiles to McDonald's.

Beauty is just another category that has always created a tiered premium, and while the media may be covering it more at the moment, I don't think it's new.

We certainly have a wealth distribution issue in this country, and that is a real issue, but it's not because more makeup or hair products are being priced as premium. It's the opposite, and these premiums are being created to cater to higher income customer.

Malaika Jones Founder and CEO, Brown Girl Jane

I think the premiumization of beauty is more reflective of the pseudo-personalization and customization movement than anything else. There continue to be emerging niche and indie brands that are targeted, effective and decidedly reasonably priced.

We live in a beauty environment that seeks to counter a one-size-fits-all approach for all consumers, and premiumization is a part of that. If all the disruption and innovation were only occurring within the luxury or prestige market, that would be concerning, but I see just as many breakthrough brands birthed across all price points.

Kari Asselin Founder, Om

In the past few years, we’ve seen the prices of consumer packaged goods soar. Some price increases were justified, and some were arbitrary.

With inflation and consumer spending predicted to moderate this year, we wholeheartedly believe that consumers will remain loyal to the brands that served them fairly and with consideration during all cycles of the economy.

Part of our founding ethos at Om Organics has always been to deliver a premium product at an affordable price. We don’t believe in high markups because we desire to keep our all-natural skincare relatively affordable to those who desire to access our pure and potent products.

Tamar Yaniv Co-Founder and Co-CEO, Gen See

While price increases may be inevitable, brands can choose whether a gentle price increase that doesn't price out some customer segments is their route of choice or a premiumization that would drive higher value orders but leave some customers out.

For us, part of the objective in creating Gen See was to create an accessibly priced clean brand. And while clean formulas and sustainable packaging don't come cheap and therefore need to be priced accordingly, we make a very conscious effort to get them to our customers at a price point that is still accessible to many.

Premiumization is a choice, not a necessity dictated by market forces, and at the end of day comes down to whether it aligns with brand strategy.

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