Global cosmetics giants push deeper into personal care with niche brand acquisitions, eye e-commerce
- Analysts say there is a trend among big beauty firms to consolidate numerous brands under their wings and move away from a single-brand model
Hong Kong-listed luxury cosmetics brand L’Occitane International’s US$900 million acquisition of premium British skincare brand Elemis points to the industry’s growing interest in niche premium brands and the e-commerce segment as an increasing chunk of purchases shift online, according to market analysts.
“Elemis has a strong reputation in anti-ageing and a strong heritage as a professional premium spa brand, along with a credible range of more functional hi-tech products,” said Pascal Martin, partner at OC&C Strategy Consultants.
He said that Elemis complements L’Occitane’s offerings and also brings with it a strong R&D base.
Mariana Kou Chung-yin, head of China education and Hong Kong consumer research at CLSA, said that she had noticed a trend among big cosmetics companies to consolidate numerous brands under their wings and move away from a mono-brand model.
“This trend is a result of the rise of e-commerce in recent years, which allows beauty groups to leverage the omni-channel distribution channels and drive more sales,” she said.
L’Occitane’s chairman Reinold Geiger said in a statement on Sunday announcing Elemis’ purchase from Steiner Leisure that this was the company’s largest acquisition since listing and a major step forward in building a group of premium beauty brands.
The deal pools together L’Occitane’s face care, hair care bath and beauty products and fragrances and Elemis’ moisturisers, eye care, serums, night creams and facial oils.
The French brand said the deal will help strengthen the group’s presence in the UK and US and boost its popularity among millennial and Generation X consumers.
Elemis, on the other hand, could utilise the group’s geographical presence to expand into new markets in Asia-Pacific, especially in Greater China, L’Occitane’s biggest sales market.
Analysts however are concerned if L’Occitane could materialise the synergy and enable the acquisition to benefit the whole company on execution.
“L’Occitane will need to create professional authenticity in a Chinese marketplace where there aren’t loads of branded spas apart from the presence of some premium Western hotel chains,” said Anthony Gent, partner at OC&C Strategy Consultants.
Beauty groups worldwide have captured headlines over the past few years as the number of mergers and acquisitions in the industry has soared amid the e-commerce and medical beauty boom.
In July 2015, Unilever acquired the Murad skincare firm founded by Dr Howard Murad for an undisclosed price. The previous month it bought Dermalogica, another high-end skincare brand driven by professional skin therapist and salon channels.
Last year, P&G bought First Aid Beauty, an American beauty brand that is popular among millennials.
Colgate Palmolive, on the other hand, acquired PCA Skin and EltaMD in 2017. Both brands are primarily sold through professional skincare channels and online, according to OC&C.
According to Dealogic, 210 acquisitions valued at around US$15.3 billion took place in the cosmetics and toiletries sector globally in 2017 and 2018.
