Beauty’s Buying Blitz: It’s the Early Aughts All Over Again

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\"BeautyIf it weren’t for the massive stack of 2015 promo calendars clogging our mailbox (thank you, Triple-A Termite Control and Super Shiny Carwash!), we’d bet our bottom dollar it was 2000 all over again.

At least this seems to be the case for the beauty business, which is currently on an acquisition spree, the likes of which we’ve not seen since the go-go early Aughts.

But before we dive into any serious tea-leaf reading, let’s recap the M&A landscape of the past year.

Acquisitions on Steroids

In 2014, L’Oréal Group snapped up a whopping six brands: three that are primarily skincare (Magic Holdings International, Decléor, Carita); two in hair (Niely Cosméticos, Carol’s Daughter); and one in makeup (NYX Cosmetics).

The Estée Lauder Companies, while less acquisitive, nonetheless swooped in with three third-quarter purchases, adding two fragrance brands to its portfolio (Le Labo and Editions de Parfums Frédéric Malle) and one in skincare, Rodin Olio Lusso.

On other fronts, Coty announced plans in October to acquire makeup brand Bourjois from Chanel in exchange for Coty stock.

And hurtling in the other direction is Procter & Gamble, which revealed in August that it would shed up to 100 underperformers, roughly half its vast CPG and beauty lineup. Of course when you have an $11B (yes, billion) powerhouse in a product like Pampers, a comparatively teensy $5M perfume brand should be pretty easy to shove out the door.

L’Oréal and Lauder, Neck and Neck

But while Coty and P&G are laying low on the acquisition trail and circling the wagons around their power brands, L’Oréal and Lauder are clearly duking it out, buying up a raft brands that run the gamut from chic, small and artsy to big bucks category-killers.

At first glance, especially for those who aren’t hyper tuned in to beauty markets outside North America, some of this acquisition news probably led to a bit of eye-rolling and plenty of frantic Googling. “Magic Holdings International? What the hell is that?”

But ask two L’Oréal and Lauder veterans – Andrea Robinson and Tina Hedges – to play armchair mind reader, and they both come to the same big-picture conclusion: Don’t kid yourself; these global megacorps know exactly what they’re doing.

In particular, L’Oréal’s purchase of Magic Holdings got a big thumbs-up. Based in China, it’s the undisputed Asian champ of face masks, a very specific type of beauty technology that L’Oréal was itching to get its hands on.

“L’Oréal has long been interested in transdermal carriers and wound therapy treatments as they relate to skincare,” notes Robinson, former head of Ralph Lauren Fragrances and Tom Ford Beauty, among several other brands. “This gives them an entrée to proprietary Magic science and presents a huge opportunity for market share and growth in China, where L’Oréal retains the number one position in skincare.”

And it certainly couldn’t hurt to bring that technology Stateside. “The once-sleepy face mask category has recently grown exponentially in the US, driven mostly by the success of GlamGlow,” says Hedges, who logged many years in the product development trenches of Maybelline and the Estée Lauder brand.

The other two skincare acquisitions – Decléor and Carita – will help the company shore up its distribution in the spa arena, arguably the one channel L’Oréal hasn’t fully conquered yet.

Hmmm…but aren’t these classics a little sleepy, especially in this Tweeting, ‘Gramming, 24/7 era? Actually, no. Decléor’s all-natural positioning is a boon for chemical-phobes, a rising consumer sector. And Carita has an old-world, haute couture cool that owes much to a storied past dating back to 1945, when its eponymous flagship salon opened on Rue du Faubourg Saint-Honoré.

Plus – allo! – they’re French.

“Decléor and Carita, though not buzzy, do capture the current trend of ‘French women know best,’” notes Robinson. “Think of all the books that have been published lately on that subject.” Case in point: Mireille’s “French Women Don’t Get Fat,” Guiliano’s entire oeuvre; or, more recently, “Lessons from Madame Chic” by Jennifer Scott.

\"BobbiTapping the Few Remaining Beauty Frontiers

In hair, the addition of Niely Cosméticos, the largest independent color and care company in Brazil, basically hands a potentially explosive beauty market on a platter to L’Oréal. As Robinson points out, plant sites also may have been part of the deal – always a coup for an interloper looking to ramp up production and thoroughly dominate a new local market.

But as much as the Niely buy makes sense for L’Oréal, the Carol’s Daughter purchase doesn’t appear to tick off any major M&A strategy boxes.

This acquisition is actually the one I understand least,” says Robinson. “L’Oréal has huge and deep roots in the haircare market. And as much as I like the brand, I’m not sure what Carol’s Daughter brings to the table. It does well in the black hair space, but are they adding anything to the technologies that Softsheen Carson already have?”

Hedges sees the Carol Daughter’s acquisition in a slightly more positive light. Not only will it help L’Oréal push further into the burgeoning multi-culti beauty sector (which L’Oréal expressly stated was its goal in acquiring the 11-year-old brand), as Hedges notes, Carol’s Daughter has a foothold in DRTV via a solid relationship with HSN, and a track record – albeit a bumpy one – in running its own freestanding stores.

But it’s in the makeup category that L’Oréal’s spending spree gets really interesting. Rumor has it the world’s biggest beauty company dropped a staggering $500M for NYX Cosmetics, a mass market color brand based in LA and lauded for its prowess in social media.

Since the very start of his tenure as head of L’Oréal USA – long before moving on to “the big job” in Clichy – Jean Paul Agon has been looking for a market block against MAC. And through not one purchase, but two, Urban Decay, which it scooped up in 2012, and NYX, he may have finally found the solution.

“Between Urban Decay and NYX, L’Oréal will increase its share of the lower price-point color market,” says Robinson. “And there’s lots of growth to be had globally for both of those brands.”

Now that we’ve broached the subject of MAC, let’s head up Fifth Avenue to check out what Lauder’s been up to, acquisition-wise.

For Lauder, circa Now, Artisan Brands are Where It’s At

Remember a decade ago, when Lauder really tried to embrace the mass market by snapping up the then-hot Jane Cosmetics, and later, incubating its own Kohl’s-exclusive Beauty Bank brands?

Well, that is soooo not where it’s betting the farm these days. In fact, its three new babies – perfume-makers Le Labo and Frédéric Malle and face oil cult fave Rodin – couldn’t possibly be more niche, more rarified, more…un-Kohl’s.

All three acquisitions fit neatly into beauty’s latest trend box: artisan. Like the last two major trend waves – makeup artist and derm – the artisan brands are typically personality-driven. But there’s a sense of real craft there, a shoe-cobbler-in-Venice vibe that one doesn’t get from the other waves.

Especially the makeup artist brands, which have been thoroughly pre-empted by tech-savvy tots like Michelle Phan.

In other words, you’re not likely to see some teenager in Wichita sitting in her bedroom whipping up an incredible fragrance or face oil and posting her “process” video on YouTube. (At least not anytime soon.) For true luxury products like these, the ingredients are too expensive and the mixology learning curve too steep.

Without question, Le Labo, Frédéric Malle and Rodin are in capable hands. “Lauder excels at taking a niche, or personality-driven brand, and creating a behemoth,” says Hedges. “From MAC to Bobbi Brown, and more recently Jo Malone, Lauder understands how to scale product craftsmanship without degrading the brand artistry, method or ingenuity.”

It also bodes well for these brands that they’ll all fall under John Demsey’s job description. As Lauder Cos. group president, Demsey oversees biggies like Estée Lauder, Bobbi Brown and MAC, but also the smaller, craftier La Mer, Jo Malone and Tom Ford.

Demsey, who has his finger so firmly on the pulse that Leonard Lauder has christened him the “Sponge In Chief,” undoubtedly played a major role in bringing Le Labo, Frédéric Malle and Rodin to the table. “He’s very tuned in to trendy products,” says Robinson. “These purchases are no surprise.”

What is a surprise? The fact that these arch rivals – the two companies that pretty much the entire beauty industry either emulates or wants to be a part of – are once again locked in a fairly fierce acquisition battle.

If chic and artsy is your product portfolio benchmark, Lauder is winning. But if sheer size is your yardstick, L’Oréal, already the biggest beauty player on the planet, is on its way to massive. And in staking their claims to the global market in such different ways, L’Oréal and Lauder are, once again, pushing the boundaries of what it means to be a modern beauty company. Nimble, powerful, forward-thinking. The bar’s been raised, and it’s sky-high.

Top Ten At a Glance

Estimated 2013 Turnover: $30+B
Star Brands: Essie, Garnier, Giorgio Armani Beauty, Kérastase, Kiehl’s, Lancôme, L’Oréal Paris, Maybelline New York, Ralph Lauren Fragrances, SkinCeuticals

Estimated 2013 Turnover: $21+B
Star Brands: Axe, Degree, Dove, Nexxus, Noxzema, Simple, St. Ives, Suave, Vaseline

Estimated 2013 Turnover: $20+B
Star Brands: Aussie, Cover Girl, Clairol, Frédéric Fekkai, Head & Shoulders, Olay, Old Spice, Pantene, Secret, SKII, Venus

Estimated 2013 Turnover: $10+B
Star Brands: Aerin Beauty, Aveda, Bobbi Brown, Bumble and bumble, Clinique, Estée Lauder, MAC Cosmetics, Smashbox, Tom Ford Beauty, Tory Burch

Estimated 2013 Turnover: $>8B
Star Brands: Bare Escentuals, Clé de Peau Beauté, NARS, Parfums Issey Miyake, Parfums Jean Paul Gaultier, Shiseido

Estimated 2013 Turnover: $7B
Star Brands: Advanced Techniques, Anew, Avon Makeup, Mark, Skin-So-Soft

Estimated 2013 Turnover: $6+B
Star Brands: Eucerin, Labello, La Prairie, Nivea

Estimated 2013 Turnover: $6B
Star Brands: Aveeno, Korres, Lubriderm, Neutrogena, RoC

Estimated 2013 Turnover: $>6B
Star Brands: Chanel-branded product only; no other franchise brands (Bourjois sale to Coty pending.)

Estimated 2013 Turnover: $>6B]
Star Brands: Bioré, Curél, Goldwell, Jergens, John Frieda, Molton Brown, Sensai



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