Updated: Sep 7, 2022
Clean beauty is one of the trends in these two years.
Following the entry of Mamonde into clean beauty, Amore Pacific recently made a bid to acquire a clean beauty brand in the United States with a transaction amount of about RMB 851 million(about $122.9 million). In addition, CHAILEEDO found that 17 acquisitions or investments were launched by Chinese local and international head players this year. This also presents a new trend in the industry.
17 acquisitions in 8 months, head players open a new game
Looking back at the history of beauty giants such as L’Oreal, Estee Lauder and P&G, acquisitions are their regular practice for expansion. Compared with the establishment and cultivation of innovative brands, the acquisition of brands is straightforward. The market insights and loyal consumers accumulated by the acquired brands will be directly used by the acquirer.
When Chinese companies reach a certain level, they also join the snapping-up war by acquiring high-end brands to further enrich the product mix and drive the brand upward.
In this year’s recurring epidemic and the overall environment is downward, the beauty sector did not truce. According to the incomplete statistics of CHAILEEDO, a total of 17 acquisitions/investments (including a pre-acquisition) were launched from 11 international giants and 4 Chinese head enterprises such as L’Oreal, Estee Lauder, Shiseido and others this year. The total amount exceeded 30 billion yuan(about $4.3 billion), and investment acquisitions are unveiled every month.
Unilever and S’Young have made the most frequent acquisitions. Unilever acquired a majority stake in the U.S. hair care brand Nutrafol and invested in Chinese natural skincare brand Shanchuan in February and May this year but the amount of both acquisitions and investments have not been disclosed. S’Young also acquired the French high luxury brand EviDenS and light luxury brand PierAuge Chinese business to fill the blanks of the company’s high-end market and increase the company’s profits.
From the point of view of the acquisition amount, Estee Lauder is reportedly in talks to buy the Tom Ford brand for $3 billion. If the transaction goes smoothly, it is expected to become the largest acquisition in the history of Estee Lauder Group.
The next is the acquisition of Swedish fragrance brand Byredo by Spanish perfume giant PUIG Group. The deal is valued at about 1 billion euros.
In terms of brand categories, skincare brands have become the main acquisition targets. Skincare as the core brand accounted for 9 of the above cases or 52.9% of the total categories.
Along with the gradual penetration of scientific skincare concepts, the new generation of consumers is paying more and more attention to product ingredients and efficacy. The market scale of efficacious skincare is expanding. According to public information, the industry estimates that the global skincare market will grow at a CAGR of 4.7% to reach $169 billion by 2025.
Global brands flock to China with their characteristics
CHAILEEDO has found that the actions of acquisition/investment from international giants and head brands this year mainly show the following characteristics.
Clean beauty is sought after. From the above statistical cases, we can find that four of the brands acquired all focus on the concept of natural, non-additive, naturally nourishing products, i.e. positioning in clean beauty. For example, Tata Harper, an American skincare brand acquired by Amore Pacific, features clean, natural, additive-free, green and organic skincare products.
Grown Alchemist, the Australian skincare brand that L’Occitane Group is interested in, also focuses on natural skincare. This acquisition also means that L’Occitane will further expand in the clean beauty sector.
While the clean beauty industry is still controversial due to the lack of clear definitions and regulatory standards, the share of this segment has been growing as consumers become more aware of cosmetic ingredients and more health conscious. According to the CHAILEEDO report, the global clean beauty market size will be about RMB 41.469 billion(about $6 billion) in 2021, up 10.48% year-on-year. It may reach a 100-billion market in the next decade. With the head companies scrambling to layout, the clean beauty market may rapidly usher in a major explosion in the near future.
Synthetic biology is the focus. Along with technological advances, synthetic biology has climbed to global fever and is known as one of the key technologies that will change the future of humanity. More and more companies are focusing on this emerging field and are actively making moves. This year, Shiseido invested in the Chinese company Trautec, which focuses on the research and development of recombinant collagen based on synthetic biotechnology.
Laying out high-end to create new growth points. Despite the repeated local outbreaks in the first half of the year that put pressure on the retail market, international giants and Chinese top enterprises also find new incremental growth by tapping potential brands and introducing them to the Chinese market.
The acquisition of Tata Harper by Amore Pacific is likely to be a major increment to China’s performance as well although it is laid out in North America. Jinpyo Lee, chief strategy officer of Amore Pacific, said, “With the addition of Amore Pacific’s R&D capabilities and infrastructure, we expect Tata Harper to achieve significant expansion in the Western European and Asian markets.”
In recent years, high-end skin care has become an important engine driving the growth of cosmetic products such as L’Oreal, Estee Lauder and P&G. Aware of this, S’Young has acquired two high-end brands in a row within a month to drive performance growth. Among them, EviDenS enters the Chinese market in 2019 and grow sales in China by more than 700% in 2020. Recently, S’Young International opened a high-end beauty collection store brand “SHUIYANGTANG”, which also reflects the group’s high-end strategy.
Start the 2.0 era of snapping-up war
The “snapping-up war” in the cosmetics industry is becoming more and more intense. In the past two years, with the Chinese market and the outbreak of Chinese local brands, foreign beauty groups began to cooperate and incubate. From the acquisition of foreign brands in favor of Chinese companies and innovative brands to tap Chinese companies, the 2.0 era of snapping-up war completely started.
As early as 2020, the international giants began to see a positive trend of local emerging brands. In 2020, L’Oreal launched the BIG BANG beauty technology creation camp in the Chinese market. Unilever’s incubator also debuted in China. In 2021, Beiersdorf launched the gas pedal program NX China in the Chinese market. Shiseido also launched the first international beauty group in mainland China with a special investment fund.
In May this year, L’Oreal Group and Shiseido even announced the establishment of the first investment company in China to do VC direct investment in China and the first investment in Shiseido China has been landed.
Local Chinese head companies are also catching up. For example, Shanghai Jahwa established a brand incubation center in 2021 to serve and invest in outstanding Chinese emerging brands with “Chinese genes, digital intelligence, beauty and health”. Recently, Shanghai Jahwa has invested in the fragrance brand Qi Jie He Zi, which is also the first time Shanghai Jahwa invested in the fragrance field.
Right now, investment and acquisition of Chinese and international potential beauty brands, ingredients companies, and beauty technology companies have become the key in the battle for the brand. As L’Oreal North Asia President and CEO of China Fabrice believes, China will be the leader in the new round of global beauty technology explosion.