Pretty Price: The rising cost of toiletries & cosmetics

Understandably, most consumers have been focused on the ever-rising cost of food and drink in the past year or so; while ballooning energy bills have also weighed heavily on all our minds.

But all the while, quietly in the background, the price of other important products – like toiletries, hygiene items and even cosmetics - has risen quite significantly.

By how much?

According to the most recent Central Statistics Office data hygiene products were 15% more expensive in April of this year than they were in the same month of 2022.

For context, the overall inflation rate in April was 7.2% – so hygiene product prices were rising at more than double the average rate.

Hair products were up 10.3% in the year – so there was a big jump in that category too.

Cosmetic and skincare products were up 8.3% – so not as significant an increase as others.

But as anyone who buys these kinds of products will know, they're usually quite expensive to begin with, so such an increase on top of what was already a high price is going to be quite significant in real money terms.

Meanwhile 'toilet accessories’ – that would be the likes of toilet roll, baby wipes, tampons, cotton wool – have seen increases of 8.3% in the past year.

Is it because they’re getting more expensive to make?

That’s definitely a factor.

The pandemic led to a spike in online shopping which, in turn, caused a surge in demand for paper pulp.

That had a knock-on effect on the cost of toilet paper – and really any paper-based products including wipes and cotton wool.

Russia’s invasion of Ukraine last year also disrupted the global supply of edible oils like sunflower oil – which pushed up the price of alternatives like vegetable oil and olive oil.

But aside from being a key component of the food industry, oils are also a common ingredient in a lot of toiletries and cosmetics.

In fact there’s a whole category called ‘cosmetic oils’ or ‘carrier oils’, which are the oils that are used as a basic ingredient in a product’s formulation.

In some cases they’re a key selling point too – think of products that promote their use of argan oil, or almond oil in their ads.

So when the price of oil went up in general, it made a lot of cosmetic and personal care goods that bit more expensive to make.

So they’re victim of the same kinds of factors as food and drink?

Yes – although there are other forces at play in this area that relate to the ingredients, but aren’t necessarily about their rising cost.

Hygiene and cosmetic products are often go through ‘reformulation’ – where the ingredients change.

This might be done for cost reasons, or to make one stand out from the other, but increasingly this is also happening for sustainability reasons.

And a lot of that is coming from consumer pressure around certain ingredients that.

Palm oil is a great example of that.

Palm oil seemed to be ubiquitous only a few years ago – and it was often a selling point for a product.

But eventually people started to learn about the environmental impact of this ingredient – from the deforestation its mass production was causing, through to the impact on some animal species in certain parts of the world.

Suddenly, consumers wanted anything but palm oil - and companies were forced to scramble to find an alternative.

But part of the reason why firms chose it in the first place was because it was cheap and abundantly available; so a suitable alternative was likely to be more expensive to source.

This is something that has happened time and time again.

Think of the outrage around the use of microbeads in exfoliating soaps, or the move in Europe to ban Triclosan, an additive in everything from shampoos to toothpastes which has a negative impact on marine life.

So the makers of these products are constantly having to rework their products to meet regulations – and consumer demands.

But they take advantage of that, too…

Absolutely – being sustainable is very in-demand right now, and brands know that people will pay a premium in order to have a product that makes them feel good about their environmental credentials.

So we’re seeing more of a push around goods that are vegan-friendly, sustainably sourced, fully biodegradable, and so on… and the packaging is all being pitched as more sustainable too.

That does add to the cost of the product itself, of course, but not as much as can be justified by the increase at the till.

With cosmetics, for example the ingredients are believed to represent just 15% of the cost of the product.

So there’s a lot of extra margin being added there somewhere, that can’t all be blamed on the cost of actually making the products.

So what other factors are at play?

When you think about some of the big-name brands – particularly cosmetics, but also some toiletries– marketing is a huge part of the category.

The most recent financial results from L’Oreal, one of the biggest beauty brands in the world, underline that.

It had sales of more than €38.2 billion last year; that’s the money it took in.

But it spent more than €12 billion on advertising and promotion in the same year. That’s nearly a third of all the money it made going towards promoting its products around the globe.

Its ads will talk about its new formulations and discoveries – but it spent just over €1.1 billion on research and innovation. That is a lot of money, but it’s less than 10% of what it spent on marketing.

The figure also doesn’t include the actual cost of selling the goods – like paying for sales representatives, or the logistics of getting products into shops. That’s a different cost category all together.

So if you think of all the flashy, incomprehensible ads you see on TV, and the big billboards – that all costs a lot of money.

And part of that are the big celebrity endorsements that are often a key part of the adverts we see.

They cost a lot of money too – far more than the cost of actually making the product.

Charlize Theron reportedly made more than $55m over 11 years from her deal with Dior.

Julia Roberts made something similar from a deal with Lancôme.

All of that has to be recouped, so it gets added onto the price you pay at the till.

Did the pandemic impact prices?

Well it did have an interesting impact on supply and demand for cosmetics and beauty products.

Because, in the early stages of the pandemic, demand for certain products plummeted.

Things like perfume and make-up took a hit, because people weren’t going anywhere, and so didn’t feel they had the need to use it as much as they had before.

Depending on the figures you look at, perfume sales fell by anywhere between 9% and 18% in 2020.

The beauty industry saw revenues fall by 20-30% in the same year.

Though, it should be said that different types of beauty product fared differently.

So the likes of hair dye boomed – because people couldn’t get to their hairdresser, so they had to reach for a box dye instead.

Eyeliner also did okay – because people still used it for their trips to the shop or their zoom calls.

But lipstick sales plummeted – because if you were wearing a mask, it didn’t matter if you had it on or not.

Some brands saw sales fall by 40% in 2020.

But however the categories fared in those early stages of the pandemic – they have bounced back in the past year to 18 months.

Because economies have reopened, people’s social lives have resumed, travel has returned, and the requirements around masks have disappeared.

And suddenly you had people looking to stock up on those goods that they stopped using two or three years ago – which means demand has surged.

And when demand surges, supply can often struggle to keep up – and there’s room for prices to rise.

Do the circumstances of ‘where’ you buy these products matter?

It can.

If you think about the cosmetics section in a high end retailer, it’s usually quite spacious, very nicely lit and furnished. You may also have the likes of beauticians there offering a service, too, or at the very least their expert advice.

Compare that to a pharmacy or even a supermarket, where products are generally stacked on a normal shelf in a normal shop.

The cost of providing those two offerings is very different – and so is the customer they’re targeting, even if the product is the same.

It’s going to cost the high end retailer a lot more to give you that high end experience – so they have to charge more in order to make the same return.

But they are also able to charge more because they know that the customer coming to them is far less price-sensitive than the one going to the pharmacy.

They have also probably sought out that brand – rather than just stumbled upon it – so they are looking specifically for that product either because of the reputation it has, or because they believe that it suits them better than the alternatives.

While a normal grocery item has to be competitively priced, or risk the customer picking up a similar product elsewhere, a luxury good like a high end beauty brand knows it has far more price flexibility.

Those customers have an attachment to that product, for whatever reason, and they’re going to stomach a 5-10% price increase in order to avoid having to go looking for an alternative.