Coco Chanel was one of the first fashion designers to understand the business potential of own-label cosmetics and the appeal of affordable luxury. In 1921, the savvy French couturière launched her popular namesake perfume so customers could have the Chanel aura without the high-cost apparel.

Today, the global cosmetics market for fragrance, makeup and personal care items is booming. UK consumers are among the biggest spenders, stumping up an average of £391 per person per year on a variety of products[1]. In Europe, the cosmetics market is worth €80 billion (bn) per year with Germany, France, and Italy the top-spending countries[2]. Meanwhile, the Asian market is set to grow from US$5.70bn in 2021 to US$14.75bn by 2028[3].

Luxury brands have seen runaway performance since Covid lockdowns eased and consumers returned to the checkouts. In 2023, LMVH – parent company to brands such as Louis Vuitton, Guerlain and Tiffany – became Europe’s first $500bn company by market capitalisation[4].

There are numerous interesting smaller companies busy working behind the scenes for these big brands. Many research, develop, create and ‘white label’ quality products that are sold to end-consumers under luxury brands. We believe this is where investors can find some exciting opportunities.

A peek behind the curtain

Intercos is not a household name, but this Italian company manufactures branded cosmetics for some of the biggest labels in the world. It makes skincare for French fashion houses, lipsticks for A-list celebrity brands and more. However, it does so under strict non-disclosure agreements, meaning it flies under the radar of many investors.

French company Inter Parfums has similar agreements with major brands and celebrities to make upmarket perfume under licence. It recently signed deals with fashion brands Lacoste, DKNY and the exclusive Italian clothing label Moncler. With these contracts in place, we expect robust growth from this manufacturer, especially as fragrance is an expanding market. According to the company, sales of its prestige fragrances were up 49% year-on-year in 2021, while mass fragrance sales rose 45%. As a result, fragrance sales now match skincare sales for the first time. The home scents market is also on a growth trajectory.

As developing countries grow in affluence, an inevitable rise in demand for consumer goods follows. People with more money in their pockets are choosing to spend on affordable luxuries that will elevate their everyday lives. This includes skin- and haircare products, as well as makeup. The rise of global online influencers is accelerating this trend, with many promoting and selling products so they can take a slice of the profits.

Proya Cosmetics, China’s biggest cosmetics company, makes beauty across brands and price points, focused on its core domestic consumer base. The company has committed to environmental improvements and promoting female health, employment and gender equality. While its ESG credentials have improved, there’s still some way to go before it can join most of the other Chinese consumer discretionary companies at the top of the ratings.

Final thoughts…

Global beauty product spending was $483bn in 2020 and is expected to increase to $716bn by 2025. This year, online sales are forecast to contribute 48% of total spend[5]. Not only is this fascinating industry poised for significant global growth – it’s also well-prepared for the shift to online retail.

The opportunity for investors goes beyond the big luxury brands. For those willing to put in the research, there are some innovative smaller companies behind the scenes offering potentially compelling returns. Furthermore, given the enduring consumer appetite for affordable luxury throughout economic cycles, we believe the industry benefits from appealing defensive characteristics. So, while “A smile is the best makeup one could wear”, we think a lipstick will always come in handy.

Companies are selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance. Past performance is not a guide to future results.


1Average UK spend: 450 euros, so made it £391: Cosmetics: average annual spend worldwide 2020 | Statista

2European cosmetics market value: Cosmetics Europe - The Personal Care Association :: Cosmetics Industry

3ASEAN market stats: