Beauty trends: Five key M&A deals

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Return to Law à la Mode: Issue 28

The beauty industry, much like the wider fashion industry with which it often works hand in hand, thrives on its promise to sell the tools for individual enhancement and expression. Trends, as they exist in beauty, are often limited to certain demographics, and dramatically different products, looks and regimes are typically trending at the same time. When it comes to the business of beauty, it is precisely this fact − the diversity of the beauty industry's consumer base and therefore of the products it demands − which has rendered the beauty industry fertile ground for M&A activity. Acquisitions in this space have been increasing steadily year on year and, in particular, the appetite of major corporates for acquisition as a key strategy for growth shows no signs of slowing.

Below we highlight five recent acquisitions, and the trends they demonstrate in the wider beauty industry.

  1. In January 2019, L'Occitane announced its acquisition of British luxury skincare brand Elemis for a total of USD900 million. Clearly Elemis is a well-established luxury skincare brand, with a strong presence in the professional skincare and well-being “experience” spaces as well as among individual consumers − hence the considerable purchase price it commanded. The acquisition is no doubt L'Occitane's effort to strengthen its foothold in the premium skincare sector, which is experiencing strong demand for reliable, scientifically backed products which are luxurious in texture, scent and packaging, from brands which put dermatology at the core of their offering, as opposed to luxury fashion brands with a side-line in beauty, which once dominated the premium skincare landscape. Historically, demand for such products came principally from older consumers with a higher disposable income in search of a luxury experience, whereas demand is now exploding across emerging markets, particularly in Asia, which brands such as Elemis can clearly leverage.

  2. In July 2018, Proctor & Gamble acquired First Aid Beauty (FAB) for an estimated reported (although unconfirmed) price of USD250 million. A relatively recent entrant to the market, having been founded in 2009 − although commanding an impressive cult following among beauty bloggers − FAB targets specified skin issues such as acne, dryness, dullness, redness and aging, and the brand offers a commitment to use only "clean" ingredients and to avoid ingredients on a specified list of so-called no-no products. It is one of a number of growing beauty brands which seek to offer an affordable solution to the increasing consumer preoccupation with health and wellness, by marketing everyday skincare products used by the average consumer, but with the promise of tangible health benefits (a trend mirrored across other consumer goods sub-sectors − for example, the seemingly ceaseless demand for all-natural, supplement-heavy and health-giving products across the food and beverage sector).

  3. In another clear example of major corporate interest in this particular trend, in June 2018 Unilever acquired a 75 per cent stake in Equilibria, an Italian personal care and wellbeing business, for an undisclosed sum. Equilibria also occupies the natural and health-enhancing personal care space, marketing skincare products, hair care products and even beauty and general wellness supplements. Although not yet particularly well known outside of Italy, Equilibria offers Unilever's personal care division a clear consolidation opportunity in the fusion sub-sector of beauty/healthcare, which looks set to continue its growth trajectory.

  4. Moving away from the health and wellness theme and towards the more aesthetically focused is L'Oréal's acquisition of Pulp Riot, the professional hair color brand, in May 2018. Launched in 2016, Pulp Riot's growth and influence within the professional hair industry can be credited almost entirely to its social media presence, where its high-impact, strong-pigment product line has simultaneously fed into and profited from the Instagram generation's preoccupation with aesthetic perfection, where products live and die by how well they photograph. This acquisition demonstrates not only the prevalence of such products among a particular subset of beauty consumers, but is also a clear snapshot of the appeal of cult beauty brands already successfully leveraging the marketing opportunities presented by social media and its influencers to major corporates with funds available for acquisition; as opposed to relying on in-house R&D, which would be comparatively slow to reach the desired audience.

  5. Finally, L'Oréal's acquisition of Canadian company ModiFace (completed in March 2018) is, of all the acquisitions cited, the one which is likely to most profoundly influence the beauty consumer's purchasing experience in the near future. ModiFace has been influential in leading the industry's race to use augmented reality technology, which seeks, at its core, to enable consumers to use an app offering various tools to try products before purchasing. Prior to its acquisition by L'Oréal, ModiFace's technology had been used to develop the AR offerings of key competitors such as Estée Lauder. Accordingly, the deal gives L'Oréal (the largest personal care business in the world) a clear competitive edge.

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