A recent research report from CITIC SEC (600030) indicates that global beauty demand showed signs of recovery in the first half of 2026, based on its analysis of selected international beauty and personal care companies. While leading international brands and Korean contract manufacturers delivered relatively strong performance, growth momentum and profit recovery trajectories continued to vary across different players.
Focusing on the China market, international beauty giants including L'Oreal and Estée Lauder have demonstrated improved growth, while personal care leaders such as Procter & Gamble and Unilever have seen their growth rates gradually recover. However, some Japanese and Korean brands remain under pressure due to channel restructuring. In the near term, the solid performance of premium and functional products in China's market highlights structural growth opportunities, though the operational recovery of international brands may raise the bar for domestic players. Over the medium term, the divergent operational results among international beauty companies and the overseas expansion of Korean cosmetics further underscore that sustained industry growth requires comprehensive capabilities across organization, R&D, product development, channel management, and marketing. The firm maintains a positive outlook on domestic cosmetics brands, which continue to enhance their competitiveness through organizational evolution, improved product offerings, and marketing advantages, while sustaining an "Outperform" rating on the beauty sector.
Global demand shows initial recovery, brand leaders and Korean supply chain players outperform
Global beauty demand has gradually improved this year, with several companies reporting accelerated sales growth, although operational and profitability performance remains mixed. Among brand companies, L'Oreal continues to outpace the market, Estée Lauder is progressively recovering, and APR has achieved strong growth driven by product momentum and channel expansion in Europe and the Americas. Unilever and APR have both raised their full-year revenue guidance, while Kao and Ulta have upgraded their revenue and profit outlooks. Among supply chain companies, Cosmax and Korea Kolmar have accelerated revenue growth benefiting from Korean cosmetics export expansion and increased customer orders, though profitability recovery varies by region. Coty and Beiersdorf's brands remain in adjustment phases with earnings still under pressure.
Premium segment thrives in China, Korean beauty surges in Western markets, emerging markets retain growth potential
Sales growth for international leaders in China, particularly in the premium segment, has picked up. According to management commentary from L'Oreal and Estée Lauder, the China beauty market grew approximately 1%–2% in the first half of 2026, with the premium segment potentially reaching high single-digit growth while the mass market remains sluggish. Since the first quarter, both L'Oreal and Estée Lauder have intensified their online channel strategies, achieving high single-digit to low double-digit growth—L'Oreal has increased its presence on Douyin while expanding penetration into lower-tier cities. Additionally, since the second quarter, the consolidation of domestic duty-free operators has largely completed, with Estée Lauder, Kose, and Coty all reporting incremental gains from the recovery of the travel retail channel.
In Europe and the US, Korean beauty and functional skincare products have demonstrated notable strength. APR's revenue surged 261% in North America and 363% in Europe, while L'Oreal's Dermatological Beauty division posted rapid growth across both regions. In emerging markets, Shiseido and Amorepacific have seen improving growth in their home markets of Korea and Japan, while L'Oreal and Unilever maintain mid-single-digit to low-double-digit growth in Latin America and India. The Middle East continues to face weak consumer demand amid geopolitical tensions.
Functional products lead growth, premium outperforms mass; fragrance fastest growing, skincare recovers, color cosmetics and personal care diverge
By positioning, functional products have maintained superior performance this year, with L'Oreal and Beiersdorf's dermocosmetics businesses leading growth. Premium products are also outperforming mass-market offerings—L'Oreal and Estée Lauder's premium divisions achieved mid-single-digit growth, accelerating from Q1 to Q2, while NIVEA and Coty's mass cosmetics lines face growth pressure. By category, fragrance leads growth across all segments, with Estée Lauder and Ulta both reporting double-digit fragrance growth outpacing other categories. Skincare growth improved in Q2 compared to Q1 across companies, while color cosmetics and personal care contract manufacturers saw sequential growth recovery in Q2, though companies like Procter & Gamble experienced deceleration.
Leading brands ramp up marketing investment while operational efficiency keeps SG&A stable
International beauty companies have maintained stable-to-declining selling expense ratios this year with optimized cost structures. Brand-side investment has intensified—L'Oreal, Shiseido, and Coty's brand and advertising expense ratios rose by 0.7, 0.5, and 1.2 percentage points year-over-year respectively in the first half of 2026, reaching historically high levels. Estée Lauder increased consumer-facing spending by 7% in fiscal 2026. Meanwhile, companies continue to streamline headcount and enhance organizational efficiency—L'Oreal is driving IT and AI-led organizational improvements, while Shiseido's structural reforms, natural attrition, and outsourcing cost reductions lowered personnel-related SG&A expenses by 2.0 percentage points in the first half of 2026.
Key risks
Discretionary consumption remains sensitive to consumer purchasing power; domestic brands may see slower-than-expected improvements in product and brand strength; risks of sales concentration on e-commerce platforms; potential major shifts in marketing channels; rising online sales expense ratios; and intensifying industry competition.