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For years, outside of China, beauty companies have often talked about Brazil and India when it comes to capitalizing on sales in emerging markets. But recently, the chatter is centering around Mexico, which just elected Claudia Sheinbaum as its first female president.

With a young population influenced by American trends, companies are eager to capitalize on demand for beauty and personal care. However, the road ahead for Mexico’s economy is uncertain with Sheinbaum’s full agenda yet to be revealed, while the outcome of the upcoming U.S. election could alter American-Mexican relations.

Among the beauty companies making a play in Mexico is Ulta Beauty. After scrapping earlier plans to enter Canada, it is making its international debut next year in Mexico through a joint venture with Axo.

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Sephora, its main competitor in the U.S., is already in Mexico with more than 30 stores and many more in the works. Other key retail players include the department stores Liverpool and Palacio de Hierro, and Superama, a subsidiary of Walmart. 

E.l.f. will also debut in Mexico via Sephora in the fall, marking the first time in that country and in that retailer, while Sheglam is to launch in all 1,400 Liverpool department stores in Mexico this month. Glossier entered via Sephora in April. Sources also told Beauty Inc Charlotte Tilbury is opening a marketing office in Mexico City, although the brand did not respond to a request for comment.

And Fabrizio Freda, the chief executive officer of the Estée Lauder Cos., has conceded that while there will not be another China in terms of growth, emerging markets are going to be a very important segment of growth. At this point, “Mexico is even stronger than Brazil,” he said during an earnings call earlier this year.

In terms of beauty consumers, demand is certainly there. According to data from Euromonitor, Mexico was the ninth-largest beauty and personal care market in 2023 at just over $15 billion, sandwiched between France and Italy. In 2018, it stood at around $10 billion.

For consumers, Karla Martinez, the head of content of Vogue Mexico and Vogue Latin America, said youth culture is a big driver. Data from the World Bank showed that in 2022, 25 percent of the 132 million-plus population was age 14 and below, compared to 18 percent in the U.S. and 12 percent in Japan.

“The majority of our population is quite young,” said Martinez. “Because of a very young population and a very aspirational culture, people hear what’s going on in the U.S. They’re very aware of Kylie Jenner’s makeup line and Pat McGrath being a superstar makeup artist because of the proximity to the U.S., so when these products finally get here, they’re excited.”

Among the categories doing particularly well is fragrance. Launched less than a year ago in Mexico, Killian Paris, for example, has quickly become one of the top 10 luxury fragrance brands in Mexico, according to Circana.

Local brands are having success, too. Xinú, a niche Mexican fragrance brand founded by Veronica Peña, Ignacio Cadena and Héctor Esrawe, currently has four stores in Mexico and is eyeing international expansion.

“There are many niche perfume brands that have got to Mexico in the past five years,” said Peña. “The Mexican consumer is more interested than ever in perfume and in beauty, in general,” she said. “In our particular case, the Mexican consumer feels very proud about our project, because it really makes you feel good about a Mexican project when you enter the space and you see the quality of our products. We make everything from scratch.”

As for the overall economy, William Jackson, chief emerging markets economist at Capital Economics, believes there are several reasons to be quite optimistic.

“It has seen relatively strong growth in the last few years. In particular, the labor market looks strong — the unemployment rate is low and wages are growing rapidly, which has improved the outlook for consumer spending,” he said.

“Moreover, the country enjoys a strong relationship with the U.S. and there are deep trading links between manufacturing sectors in the two countries,” he continued. “And there are hopes that Mexico may be a beneficiary of some of the geopolitical schisms that we’re currently seeing in the global economy, in which manufacturers move their production out of China and into friendlier geographies such as Mexico.”

But as with everything, there are always risks. In the case of Mexico, there are concerns over what effect the recent election could have on the business environment and, at 11 percent, interest rates are very high.

Mexico’s central bank also recently downgraded its annual GDP forecast from 2.8 percent to 2.4 percent. And Mexico’s National Institute of Statistics and Geography published figures showing that household consumption grew by 2.9 percent in the year to April, the lowest level in the past three months.

But, according to Jackson, perhaps the biggest risk is of a more protectionist trade policy shift in the U.S. after the November election. 

“Mexico is more dependent on U.S. demand than any other major economy,” he said. “That’s usually a point of strength given the U.S.’s strong growth record. But if the U.S. were to impose a universal import tariff (that included Mexico), it would also be the most severely affected economy.”