The U.S. Cosmetics market, measured in manufacturers' shipments, grew by more than one $1 billion dollars in 1998, at a rate of nearly 7%. Growth was driven by Color Cosmetics with its focus on teens and tweens, and Skin Care with its dermal patches and pore strips, as well as the impact of niche lines with spa positioning. As for Body & Bath, there were few cellulite or slimming body products and the bath market seemed close to saturation. Fragrance exhibited modest growth, fueled by classic scents and by limited editions.

I. Channel of Distribution

A. Dollar Volume in Manufacturer's Sales (millions)

All channels experienced increases, led by Alternative with added sales of nearly $600 million versus 1997. Broad followed with an additional $400 million, and Prestige trailed with close to $300 million.

B. Growth Rate

While all channels of distribution experienced some slowdown, the Alternative market's growth was reduced by half, even though it continued to outpace Prestige and Broad.

C. Market Share

Market share for Alternative gained one point from Broad distribution, while the share for Prestige was unchanged. Clear divisions between distribution channels are a thing of the past, with Alternative spa/salon brands being sold in Prestige doors, and other Alternative brands (health food) expanding into drug stores.

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