Fragrances lead beauty spend among teens: Survey

According to a recent Piper Sandler survey, beauty spending among teens has risen 8%. To provide insight into what is driving this trend, Piper Sandler Senior Research Analyst Korinne Wolfmeyer joins Yahoo Finance.

Wolfmeyer highlights that fragrances were the biggest catalyst for the increase in beauty spending. She attributes the surge to TikTok trends, as teens are layering fragrances or matching them to their outfits. While fragrances led the way, Wolfmeyer notes that the cosmetics, skin care, and hair care categories also grew within the beauty sector.

Regarding specific brands, Wolfmeyer points to e.l.f. Beauty (ELF) as a standout performer, noting that the company is "capturing share from all generations," particularly Gen-Z. She credits e.l.f.'s success to its ability as a "master marketer" to "hit this consumer at all angles" with a combination of new and exciting products.

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This post was written by Angel Smith

Video Transcript

- Well something else out of that teen survey. Beauty spending rising 8% year-over-year among US teens. That's according to that Piper Sandler teen survey. The core beauty wallet reaching the highest level since spring of 2018. However, growth in beauty spending does seem to be in need of a touch-up, perhaps.

Piper Sandler, senior research analyst, Corinne Wolfmeyer, joining us now to discuss. That's because, basically, it seems like folks are spending on-- teens are spending on different things. But talk to us about the overall beauty spend first of all. The fact that it is up 8% year-over-year. How is that looking? What are they spending on?

KORINNE WOLFMEYER: It's coming from all categories, really. All categories grew year-over-year. But primarily, the biggest strong point was fragrance, which was up 23% year-over-year amongst female teens, up 26% year-over-year amongst male teens. So a huge standout versus the broader category that was just 8%. So we're really finding teens still leaning into fragrance even after several years of very strong fragrance performance, teens are still wanting it.

- And why is that, Korinne? Why this jump there in fragrance, more than 20%? Were there just certain-- were there new products on the market that got their attention?

KORINNE WOLFMEYER: There might be a few new brands here or there entering the market. We are seeing some more indie brands enter the market, more smaller brands, maybe some lower cost brands. But we're not seeing a significant shift in that top 10.

And what we think is really driving the bulk of this consumption is trends amongst teens and TikTok trends where teens are layering fragrances. They're wearing multiple fragrances at once. They're combining them, they're matching fragrance to their mood, they're matching fragrance to their outfit.

So all of these things are causing them to hold multiple fragrances on their dresser. Multiple brands, multiple kinds, on their dresser versus just one, which is what we've seen historically from prior generations.

- Yeah, wearing more than one perfume at once is like baffling to me, Korinne. I have to-- and I'm not on TikTok. All right, I know. I'm not hip.

Anyway, something else-- sorry, I'm still wrapping my head around wearing more than one fragrance at once.

Anyway, something else that stands out to me is the persistence of ELF, E-L-F, on the top of the list as preferred brand. Is that a cost issue? It's on the lower end of the spectrum. What is elf doing right?

KORINNE WOLFMEYER: It's really not the cost. I mean, the cost is definitely a differentiating factor. But it comes from a lot of things and ELF is capturing share both from mass and prestige. They're capturing share from all generations, but primarily doing very well amongst Gen Z.

They are master marketers. They have figured out how to properly capture this demographic. They have perfectly planned out what channels to be in, what social channels, what gaming platforms, TV. They've been able to hit this consumer at all angles and be able to really connect with the consumer.

So it's a lot of marketing. And then also the products, they've been able to churn out very quickly and bring a lot of newness to this generation that tends to not be very sticky to certain brands and products. But ELF has been able to do it because they've been able to bring a lot of newness and a lot of very exciting products to these consumers.

- And Korinne, you look at ELF, I mean, what a run. It's up about 15% this year. It's up about 100% over the past 12 months. You still like this name. Korrine? What are the catalysts ahead?

KORINNE WOLFMEYER: We still like it. Especially-- there's been a little bit of a pullback as some investors have been getting nervous about some slowing in beauty spending, but we still think ELF is a winner. Not only is there good whitespace potential still in the United States, and they're doing incredibly well with Gen Z.

But we also see a lot of exciting international opportunities. They're really only in a few core countries internationally so there's a lot of opportunity for them expand their European penetration, even expand their Canadian penetration, and also try and capture older generations that aren't just millennials or Gen Z. So there's still a lot of opportunity ahead for this name.