• by Sarah Mahoney  @mahoney_sarah, June 13, 2008

Americans are hooked on multitasking lotions: A new report from Packaged Facts reports that sales of cosmeceuticals--cosmetic products that offer some additional benefits--are expected to reach $16 billion in 2007, and $21 billion by 2012. And while crows-feet-phobic Baby Boomers are certainly a large part of the market, Gen X and Gen Y shoppers are also fueling the trend. Even babies are on board: $35 infant moisturizers are among the hot sellers, the report notes.

"The assortment of cosmeceutical products is constantly broadening," says Timothy Dowd, senior analyst and author of the report. "While the term once only included things like anti-aging serums, it now covers lipsticks made with sunscreens, shampoos that soothe the scalp, and even eye cosmetics that offer skin benefits."

Procter & Gamble, with its Olay brand, has fueled growth, "pushing line extensions to the hilt," he says. "Among the cutting-edge products are things like home skin peels and microdermabrasion products, all positioned primarily as anti-aging products."

In anti-aging body products, Johnson & Johnson continues to be strong, and L'Oreal, he says, steadily gained market share from P&G with the launch of new Garnier body products last year.

In the months ahead, Dowd predicts that marketers will begin to place a much greater emphasis on organic claims. "Forget natural," he says, "it's too vague. And as the industry pushes to self-regulate, I expect to see those claims increasingly used as a marketing ploy."

In the same vein, he expects marketers to increasingly push the envelope on the nature of the benefits products promise. "We'll begin to see more and more claims that are potently medical," he predicts, as well as an increase in claims of stress reduction and cancer prevention. "I even expect to see products begin to claim to have aphrodisiac properties--if cosmeceuticals can help with so many other problems, why not that? It's the next logical evolution."

Sales of skincare products, the largest cosmeceutical category, rang in at $8.9 billion in 2007. In the 2003 to 2007 period, cosmeceutical sales had annual gains of 4% to 7%, for an overall gain of 25%. Among the fastest-growing channels: Web sites, TV infomercials and shopping networks.