NPD Reports Total Prestige Beauty Industry Posts Positive Performance in 2003

PORT WASHINGTON, NEW YORK, February 24, 2004 – Prestige beauty sales (skincare, fragrance and makeup products sold in U.S. department stores only) hit $7.5 billion in 2003, representing a two percent increase in sales versus the prior year. According to The NPD Group, Inc., a marketing information company, over the last five years, increases in average price have allowed dollars to exceed unit sales across the three beauty categories – skincare, fragrance, and makeup.

"Some of this growth is due to larger size products on department store beauty counters and more gift sets selling, which carry a higher price. We are also seeing better quality products with advanced technologies driving prices," said Timra Carlson, president, NPD Beauty, a division of The NPD Group. "Value, convenience, innovation, new launches and technology continue to drive the beauty business across all channels of distribution," said Carlson.

In 2003, prestige skincare and makeup advanced in sales and share of market, while prestige men’s and women’s fragrance sales and market share continued to decline.

Skincare Led Prestige Sales
Posting its best performance since 2000, skincare led all other categories in prestige beauty. In 2003, dollar sales grew six percent to $2 billion, while units rose one percent. Average prices increased five percent as consumers focused on new cutting edge technologies, anti-aging, large size value offerings, and high-end products.

Skincare products priced above $70 (excluding gift sets) have tripled in volume since 2000. Of the top selling high-end products in 2003, almost 60 percent were priced under $85 and primarily offered value in larger size editions of classic products.

Makeup Finds Its Niche
With the continued influx of exciting new makeup products and brands in the prestige marketplace, it is no surprise that department store makeup sales continue to grow. In 2003, prestige makeup generated $2.6 billion in sales, up four percent from 2002 and a two percent increase in units. At an average cost of $19.00, makeup products were priced two percent higher than the prior year, offsetting the difference between dollars and units.

"NPD finds prestige makeup sales to have an edge over other channels of distribution in part because they satisfy the diverse needs of women today with their increasing portfolio of brands. Brands offered by makeup artists, niche, innovation and specialty bring newness, fun, fashionable, and cutting edge benefits to the prestige makeup industry," said Carlson.

Fragrances Continue to Struggle
Prestige fragrances reached $2.8 billion dollars in 2003, down two percent, while units fell six percent from 2002. Several new fragrance launches in the women’s category helped to mitigate further declines, while the men’s category struggled to compete with 2002’s new launch activity.

Established fragrance brands are challenged as new launches capture the eye of the consumer. Manufacturers have taken notice of the success of florals* and have recognized that the top four women’s fragrances in 2003 were from the floral families. In 2003, florals drove new sales, as seven of the top ten launches also came from the floral families, most notable was the Soft Floral family’s increased popularity.

"Looking ahead to 2004, we may witness a more pronounced change in the way fragrances are organized and chosen by consumers – by fragrance family. When it comes to makeup, cross category/multi-functional products that offer innovation, value and convenience will continue to grow. Hot trends in skincare like new anti-aging technologies, luxury products and niche brands that were heating up in 2002 are still on fire and show no indication of abating in 2004," said Carlson.

*Fragrance families classifications are used under license from Michael Edward’s, "Fragrances of the World Guidebook".

About The NPD Group, Inc.
Since 1967, The NPD Group has provided reliable and comprehensive sales and marketing information for a wide range of industries. NPD provides critical knowledge on what is selling, where, to whom and why to help our clients make more successful, fact-based business decisions. Today more than 1,300 manufacturers and retailers rely on NPD to help them better understand their customers, product categories, distribution channels and competition in order to help guide their business and positively impact sales and revenues. Information from The NPD Group is available for the following major vertical sectors: apparel, appliances, automotive, beauty, cellular, consumer electronics, food and beverage, foodservice, footwear, home improvement, housewares, imaging, information technology, music, software, travel, toys and video games.

About NPD Beauty
NPD Beauty, the beauty-tracking division of The NPD Group is the authority on – and leading marketing information provider for – the prestige beauty industry in the United States. The BeautyTrends^® retail point-of-sale service tracks sales of prestige fragrances, makeup and skincare products sold in U.S. department stores. FragranceTrack^® is an annual attitude and usage study that tracks consumer behavior. A key component of FragranceTrack is the scent database and monthly blind scent testing that is based on responses from NPD’s consumer online panel. In addition, NPD’s partnership with Parkod Europe helps beauty retailers and manufacturers identify key market developments and trends in France.

For more information:

Dora Radwick		Cristina Hilsenrath
dora_radwick@npd.com		cristina_hilsenrath@npd.com
516-625-6190		516-625-2443