Jamie Matusow: What is the current value estimation of imported/exported cosmetics?

Yann Pencolé: In 2023, the trade flow of cosmetics from the EU to the United States amounted to USD $4.96 billion, according to the Fédération des Entreprises de la Beauté (FEBEA), France’s beauty association. France is the leading exporter of fragrances and cosmetics to the United States among the 27 EU nations, followed by Italy, Spain, Germany, and the Netherlands.

JM: How do you expect the imposed/forecasted tariffs to affect the cosmetics industry? How do you expect the tariffs to impact supply chain disruptions for both suppliers and brands?

YP: The imposed or forecasted tariffs are expected to have several impacts on the cosmetics industry:

• Price Hikes and Consumer Behavior: Higher import costs due to tariffs are likely to be passed down the supply chain, ultimately reaching consumers. This could lead to price hikes, influencing consumer behavior as shoppers may opt for more affordable alternatives, potentially shifting their loyalty to local brands or private labels.
• Innovation and Product Development: Increased costs and uncertainty may lead companies to scale back on research and development investments. Smaller brands, which often drive innovation, could be disproportionately affected due to their lack of financial resilience to absorb additional costs.
• Supply Chain Disruptions: In the mid to longer term, companies may need to re-evaluate their sourcing strategies, seeking alternative suppliers or manufacturing locations to mitigate the impact of tariffs. This realignment can be time-consuming and costly, potentially leading to delays in product launches and availability.

JM: Anything in particular as far as the packaging itself?

YP: As packaging materials are often sourced internationally, tariffs on imported packaging materials could increase costs and complicate the supply chain, potentially affecting product pricing and availability.

JM: Have brands prepared for the onset of tariffs? What are their options?

YP: Brands may need to adopt more resilient and flexible business models to navigate the challenges posed by tariffs. Options for brands could include:

• Diversifying Supply Chains: Reducing reliance on any single country by sourcing materials and products from multiple regions. 
• Localizing Production: Shifting manufacturing closer to key markets to minimize tariff exposure and improve supply chain resilience. 
• Adjusting Pricing Strategies: Reevaluating pricing to maintain competitiveness while covering increased costs.

JM: Moving ahead, how do you think the beauty industry will fare? What (if any) changes may need to be made?

YP: Kline’s extensive research has consistently shown that, during times of uncertainty, the beauty industry remains stable, as consumers often turn to beauty and personal care products for self-care and emotional comfort. However, the future is yet to be determined. Much will depend on how trade policies evolve, how brands adapt their supply chains, and how consumers respond to potential price increases.

Yann Pencolé is a Vice President of Advisory Services at Kline + Company, a global market intelligence and advisory firm with core competencies in the Chemicals, Energy, and Beauty sectors. Based in London, Yann has over 15 years of advisory and industry experience, supporting leading beauty companies on market entry, growth strategy, M&A advisory, and other strategic initiatives to navigate the dynamic global landscape.

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