2014 Beauty Acquisition Spree Continues, Plus Up-and-coming Players to Keep an Eye On

Cosmetics & ToiletriesAfter a lull following the global recession of 2009, merger and acquisition activity heated back up in 2013 and strongly continues into 2014. Among the most notable transactions so far this year are Henkel’s acquisition of three U.S. professional hair care brands, Sexy Hair, Alterna, and Kenra; Bayer’s purchase of Merck’s OTC and consumer care business, including Coppertone and Dr. Scholl’s; and L’Oréal’s purchase of NYX Cosmetics. The beauty industry has clearly emerged from the recession with a number of buyers that have significant cash on the books who are searching for attractive (and often smaller, niche) beauty brands and are willing to pay more than in previous years. As such, brands that were previously off the market are reconsidering availability.

Meanwhile, some firms have announced plans to focus on growing their core businesses and to strategically divest the rest. For example, Procter & Gamble recently announced it plans to eliminate about 100 minor brands that do not meet company criteria, which may affect some of its salon hair care and fragrances brands. Henkel has also announced plans to divest non-strategic business units.

While Procter & Gamble is restructuring, L’Oréal’s slew of deals continues to pay off. The firm’s first half results show rapid growth of its Luxury division, driven largely by the success of the brands it had acquired, namely Urban Decay (2012), Kiehl’s (2000), and Clarisonic (2011). With companies looking for acquisitions that fill gaps in their portfolio–geographically, demographically, or niche-wise–L’Oréal’s acquisition of NYX Cosmetics, which we profile in the “Minor Companies” section of our Cosmetics & Toiletries report, provides the company with a young, edgy brand and a stronger foothold in the makeup artist segment. It is the mass equivalent of Urban Decay, making the brand a perfect fit for L’Oréal.

The beauty industry today consists of many beauty brands, some well-positioned newbies and some well-established names. Buyers interested in broader product lines, faster growing segments, new technology, and geographic expansion are now seeking opportunities, searching for the brands with the greatest potential.

Kline identifies and profiles many up-and-coming players in our Cosmetics & Toiletries report, including those recently acquired, such as Blow Pro (Farouk), e.l.f. Cosmetics (TPG Growth), and Tarte (Kosé). The upcoming 2014 edition will once again bring out profiles of about 150 smaller marketers including assessments of each company’s business, sales data, and channel and marketing strategies.

The following companies will be profiled in the upcoming edition and are among those to watch:

BRAD BIOPHOTONIC – Products developed using bio-fermented ingredients stimulating living cells with ultraviolet light.

DERMALOGICA – Solid reputation and track record in the spas channel, as well as growing nicely in emerging countries such as Thailand and Indonesia.

DR. BRONNER’S – Classic bar and liquid soaps that are certified organic.

EOS PRODUCTS – Unique egg-shaped packaging and rapid distribution growth.

JOSIE MARAN — One of the first to market an oil product for the face.

JUICE BEAUTY – Natural cosmetics and skin care with a twist.

LUXURY BRAND PARTNERS – With its celebrity stylist heritage, high pricing, and award-winning products, the Oribe brand from this Miami-based firm is considered the “Rolls Royce” of salon products. In May, it rolled out R+Co, a more basic hair care range at lower price points.

OUIDAD – This curl specialist is making waves in the professional hair care market.

YES TO – This natural brand continues to grow in mass outlets while staying close to its (vegetable) roots.

ZO – The latest skin care brand by Dr. Obagi was one of the highest rated brands in our recent survey among physicians who sell skin care products.

 

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