Regarding this acquisition, Henkel has stated three objectives: firstly, to complement the existing portfolio by addressing the white spot in the premium retail segment, secondly, to lead a step-change for Henkel Consumer Brands business in China, and thirdly, to to significantly strengthen the footprint of Henkel Consumer Brands in the Chinese hair care market.
Regarding the significant transformation of Henkel’s consumer business in China, on January 25th of this year, Henkel inaugurated a new Asia Research and Development Center for its consumer brands in Shanghai, China.
The owner of Schwarzkopf plans to utilize the 100 million RMB investment in the R&D center to create products tailored specifically for diverse Asian markets, drawing insights from consumer habits. This is the company’s largest center in the Asia-Pacific region, spanning over 2,500 square meters, and the newly established facility follows the design principles of “innovation, digitization, and sustainability.”
Six dedicated areas have been established to cater to various functions, encompassing the consumer center, advanced research, product development, packaging design, chemical and physical analysis, as well as product evaluation. The consumer center is crafted to simulate home environments and hair salons, serving as a space for consumer research to provide valuable input for product development.
David Tung, Regional President of Henkel Consumer Brands Asia, said, “This investment represents a pivotal milestone as the first Asia-based R&D center supporting product development and ingredient formulation for both business categories.”
For Henkel, this year’s two investment moves, one involving the establishment of a new research and development center and the other an acquisition, are both related to the Chinese market. This signifies Henkel’s shift towards seeking new growth opportunities, particularly in the world’s second-largest cosmetics market, China, amid the recent sluggish performance in its Beauty Care business.
Acquiring the hair care business to revitalize the sluggish Beauty Care segment
In recent years, Henkel’s Beauty Care business has been quite sluggish, prompting the company to resort to acquisitions to enhance its product portfolio and seek new growth opportunities in key markets.
According to Henkel’s latest financial data, in the third quarter of 2023, the Consumer Brands business unit achieved sales of 2,695 million euros, indicating a nominal decline of 7.6% compared to the same period last year. However, there was a 6.2% organic increase in sales, primarily fueled by a double-digit surge in prices. In contrast, there was a decrease in volumes.
The Hair business segment saw a reported decrease of 2.5%, while organic sales grew by 8.9% in the third quarter. Within this segment, the Consumer business achieved double-digit growth, propelled by the Hair Styling and Hair Care categories. The Professional business demonstrated robust organic sales growth.
Looking at five years, Henkel’s Beauty Care business has consistently shown weakness. In 2018, the sales revenue for Henkel’s Beauty Care business was 3.95 billion euros, and from 2018 to 2021, it experienced four consecutive years of decline. By 2020, the growth rate was a mere 2.6%, only recovering to the 2018 level, with a nearly 200 million euro gap remaining from 2018.
In the face of the drag on the overall performance of the company due to the underperformance of the Beauty Care business, Henkel has initiated strategies such as acquisitions and entering new markets to seek fresh growth opportunities.
In 2022， Henkel agreed to purchase Shiseido’s Asia-Pacific Hair Professional business, which includes prominent Professional brands like Sublimic and Primience, associated with the licensed Shiseido Professional brand. Shiseido Professional is an exclusive salon brand providing high-quality products for professional hairdressers, including hair care, hair color, styling items, and perm solutions. As part of the collaboration with Henkel to enhance business expansion, Shiseido will maintain a 20 percent stake in the legal entity based in Japan.
In the fiscal year 2020, the targeted business for acquisition recorded sales of approximately 100 million euros and had a workforce of over 500 employees, showcasing robust research and development capabilities. The business has a widespread presence across numerous countries in the Asia-Pacific region, with Japan, China, and South Korea being the key markets in terms of sales share.
This transaction represents another strategic move in fortifying Henkel’s Hair Professional business in recent years. In 2014, Henkel acquired three U.S. companies: Sexy Hair, Alterna, and Kenra. Subsequently, in 2017, Henkel successfully concluded the acquisitions of Nattura Laboratorios and the North American Hair Professional business of Shiseido.
Henkel’s Professional Hair Care division boasts prominent market standings in diverse global market segments. Ranking among the top three beauty companies globally, the business presents an extensive array of hair care, styling, and coloring brands tailored exclusively for hairdressers. Notable brands in their portfolio include Schwarzkopf Professional, Bonacure, Igora Royal, and Authentic Beauty Concept.
These acquisitions are significant manifestations of Henkel’s leadership in the transformation of its consumer brands business in China. The acquisition of Vidal Sassoon China, similar to the acquisition of Shiseido’s hair care business in the Asia-Pacific region in 2022, represents a transformation in the Chinese market. This aligns with Henkel’s establishment of a new Asia research and development center in Shanghai in January this year.
Haircare industry becomes a new investment focus
According to data from Fortune Business Insights, the global haircare market was valued at $916.0 billion in 2022, and it is expected to grow from $995.3 billion in 2023 to $1,474.9 billion by 2030, with a projected compound annual growth rate (CAGR) of 5.8% during the forecast period.
In a previous analysis of major investment and acquisition deals in the beauty industry for 2023 by CHAILEEDO, out of 80 significant transactions, 12 were related to haircare. Companies such as Unilever, Procter & Gamble, and L Catterton, an LVMH-backed private equity firm, have invested in haircare brands.
