Beauty's Uneven Growth: Winners in Hair and K-Beauty, Cracks in Fragrance

Beauty consumers are spending but more strategically, rewarding affordable skincare, hair innovation, and K-beauty brands while penalizing reliance on hero products and aggressive price increases.

Summary of Who’s Winning Beauty’s H1 Reckoning. Every timestamp links into the original audio.

The short version

• 00:01:48 — The pandemic-era willingness to buy heavily premium beauty products at any price has shifted to consumers becoming more selective, though desire for newness remains strong.
• 00:02:17 — Shopping behavior is fragmenting away from traditional retail like Sephora and Ulta toward TikTok Shop, Amazon, and Instagram, diluting spend across multiple channels.
• 00:03:00 — Consumers are increasingly buying dupes and lower-priced alternatives rather than paying full price for premium brands in certain categories.
• 00:04:01 — Dermatologist-backed and dermatological skincare brands that combine proven results with affordable pricing, particularly Korean beauty, are seeing strong growth.
• 00:05:07 — Hair care is a major growth driver for conglomerates like L’Oreal and Unilever, boosted by GLP-1 drug users experiencing hair loss and genuine innovation in bond repair and scalp treatments.
• 00:06:06 — Estee Lauder’s 17% stock price jump reflects above-expectations performance, but it’s unclear how much is company improvement versus benefiting from rising consumer spending in China.
• 00:06:56 — Estee Lauder’s core American business remains flat for the year despite some quarterly strength, indicating continued domestic challenges despite corporate initiatives.
• 00:10:50 — Pooj’s interest in acquiring Estee Lauder reflected hopes that diversification beyond fragrance would reduce reliance on a single category facing deceleration.
• 00:15:26 — E.l.f.’s core cosmetics brand shows flat to minimal growth despite affordable positioning, while Rode acquisition drives the company’s 36% overall growth, creating investor concerns about sustainability.
• 00:22:59 — Even mega-brands like Nivea are vulnerable to slowdown when they rely too heavily on a single hero product and attempt aggressive price increases without strong innovation support.
• 00:25:01 — Price sensitivity remains critical for aspirational consumers despite wealth concentration in tech, with successful brands needing clear differentiation to justify full-price purchases over dupes.

In depth

Beauty isn’t slowing so much as scattering

Morsini’s central claim is that beauty’s reputation as a downturn-proof category is still basically true, but the story underneath it has gotten messier. Foot traffic at Sephora and Ulta remains strong and social content keeps beauty top of mind, yet the pandemic-era pattern of buying more of everything at almost any price has given way to something more deliberate 00:01:48. The money hasn’t left the category; it has splintered across more channels and more substitutes, which makes it look weaker in any single data point even as aggregate demand holds up.

That splintering shows up in three ways she flags. First, purchases are migrating away from the department-store-and-specialty-retail axis toward TikTok Shop, Amazon and Instagram, which dilutes any one retailer’s or brand’s visibility into total spend 00:02:17. Second, shoppers are trading down within categories, opting for a dupe or an unfamiliar Korean brand discovered through a trusted creator rather than paying full freight for an established prestige name 00:03:00. Third, and perhaps most striking, some of the dollars that used to go into skincare jars are now being redirected toward dermatologist visits, lasers and injectables, which is why she points to AbbVie’s rallying stock as a sign that consumers are simply reallocating within a broader definition of “looking good” rather than pulling back altogether.

The upshot is that beauty’s headline growth numbers can mask a lot of churn. A brand can lose share not because customers stopped caring about the category but because they satisfied the same underlying desire somewhere else entirely — a different platform, a cheaper alternative, or a dermatologist’s office instead of a shelf of serums.

Estee Lauder’s turnaround: fixed, or just riding the tide?

Estee Lauder’s mid-August report was the most dramatic data point of the season, with the stock jumping roughly 17% on results that beat expectations and a raised profit outlook 00:06:06. Morsini describes the earnings call itself as an exercise in stagecraft — brand montages, upbeat music, a genuine sense of relief from a company that has been mid-turnaround under a new CEO. But she’s careful to separate the theater from the substance, and her central question is diagnostic rather than celebratory: how much of the improvement, particularly in China, is Lauder actually earning through better execution, and how much is it simply benefiting from a Chinese consumer who is recovering across the board, lifting L’Oreal and Pooj at the same time 00:06:33?

The skepticism deepens when she turns to the U.S., which is nominally Lauder’s home turf and the market every beauty company is fighting hardest to win. The American business was essentially flat for the fiscal year despite one strong quarter, and even that quarter’s strength shrinks under scrutiny — Barclays’ estimate that underlying growth was closer to 2% once Amazon Prime Day-related shipment timing is stripped out suggests the improvement is thinner than the topline implies 00:07:01. Lauder has made real strategic moves — pulling back from department stores, pushing onto Amazon, refreshing Mac — but the results in its largest home market haven’t yet caught up to the narrative.

Layered on top of this is a structural worry about what’s actually driving Lauder’s growth: fragrance, via cult brands like Le Labo, Tom Ford and Frederic Malle, has been the only division growing at double digits, and its momentum is now cooling even if only modestly 00:08:16. That concentration makes analysts nervous, because it raises the question of whether makeup and hair — both currently soft for Lauder — can pick up the slack if fragrance decelerates further 00:08:34.

What the failed Pooj talks reveal about beauty M&A logic

The abandoned merger talks between Estee Lauder and Pooj offer a useful window into how investors think about portfolio risk in beauty. Morsini notes the reaction was asymmetric and telling: when news of the talks broke, Pooj’s stock rose while Lauder’s fell 00:09:29. That split suggests the market saw far more upside for Pooj than for Lauder in combining forces — and it raises an obvious question about why, since a deal by definition affects both sides.

The answer, in her account, comes down to concentration risk. Pooj is overwhelmingly a fragrance business, with more than 70% of revenue coming from that single category, and joining with a much larger, diversified company like Lauder would have given it instant exposure to other categories and markets just as fragrance’s post-pandemic growth spurt shows signs of fading 00:10:40. In other words, investors liked the idea of Pooj hedging its bets precisely because they could see the same deceleration in fragrance that’s worrying Lauder’s own analysts 00:10:50.

For Lauder, though, the logic cut the other way. The company is in the middle of a self-directed turnaround built around specific pillars — brand refreshes, channel shifts, cost discipline — and some investors apparently read the merger talk as a tacit admission that management didn’t trust that plan to deliver growth on its own 00:09:36. Morsini’s own view is more pragmatic: despite that skepticism, she thinks Lauder genuinely needs to acquire something, since most beauty conglomerates are built through purchased growth rather than organic invention, and the company currently has about $3.5 billion in cash and no obviously transformative recent purchase beyond consolidating its existing stake in Forest Essentials 00:09:13.

Hair and K-beauty: growth that looks structurally real

Not every part of the earnings season pointed to fragility. Hair care stood out as a genuine bright spot for both L’Oreal and Unilever, and Morsini offers two complementary explanations rather than a single cause. One is medical: the mass adoption of GLP-1 weight-loss drugs appears to be triggering noticeable hair shedding for some users, pushing them toward hair-health products for the first time 00:05:07. The other is simply product innovation — bond-repair treatments and scalp care represent genuine white space that brands like Olaplex and K18 opened up, turning what used to be a commodity category into something people now hold to the same high expectations they have for skincare 00:19:26. She frames good hair as having become a status and youth signal in its own right, which gives brands room to sell premium in-salon treatments and sprays even though shampoo itself is a hard sell precisely because it’s poured down the drain.

K-beauty’s growth tells a related but distinct story. Amore Pacific and APR (owner of Medicube) both posted roughly 50% profit growth, powered by expansion into North America and Europe through Amazon, TikTok Shop and Sephora rather than traditional retail buildout 00:20:07. Morsini contrasts this with an earlier debrief conversation where the hype around K-beauty’s U.S. arrival had outpaced the brick-and-mortar reality; the deficit hasn’t been resolved by opening more stores, but rather sidestepped, since these brands don’t seem to need physical retail to scale 00:22:08.

What’s distinctive, in her telling, is the operating model itself: Korean beauty companies launch fast, test constantly, and kill underperforming products without sentiment, which produces a leaner, more innovation-forward pipeline than Western conglomerates typically run 00:21:06. Combined with genuinely novel formulations — she cites Medicube’s spicule-textured serum as an example — this creates real, defensible differentiation rather than growth borrowed from a rising tide, which is a distinction she’s careful to draw relative to Lauder’s China recovery.

The hero-product trap and the outlook for the rest of the year

The conversation’s clearest cautionary tale is about over-reliance on a single hero brand or product, and Morsini uses Beiersdorf’s Nivea as the sharpest example. Nivea is still a billion-dollar-scale brand, but its deceleration was severe enough that Beiersdorf had to cut its outlook, a stumble she traces to the company pushing aggressive price increases that retailers resisted, combined with new launches that skewed too premium for the brand’s core audience 00:22:59. Shiseido’s own eponymous line shows a similar pattern of slowing, reinforcing her point that scale and distribution don’t insulate a brand from stagnation once it becomes the thing a whole company leans on.

Elf Beauty is the season’s most vivid illustration of this dynamic. The company posted headline growth of 36%, but that number is overwhelmingly carried by Rhode, the Hailey Bieber brand it acquired, while the core, low-price Elf cosmetics line has been flat 00:15:26. Morsini’s read is that this isn’t really a story about affordable beauty losing appeal in a cost-conscious market — it’s that Elf mishandled a tariff-driven price increase, and a dollar increase on a $3 product reads as roughly a 20% hike to consumers, which is a communications failure as much as a pricing one 00:16:53. She’s blunt that she thinks plenty of other brands are now executing the value proposition Elf pioneered, and doing it better.

Looking to the second half, both speakers hedge deliberately, joking about needing an earnings-call-style forward-looking-statement disclaimer before predicting anything 00:24:39. Morsini’s actual forecast is that price-value discipline remains the dominant theme, particularly outside the wealth-concentrated, price-insensitive slice of U.S. consumers, and that brands which can clearly justify full price — through genuine innovation in skin and hair — will keep winning even as fragrance growth cools further without collapsing 00:25:01. The U.S. market itself, she argues, remains the real battleground, with British, Korean and domestic brands all fighting over the same channel questions — Amazon versus TikTok Shop versus pop-ups — that have already reshaped how beauty is bought this year 00:26:06.

Summarised automatically. Listen to the original for the full conversation — this is not a substitute for it.