With the disclosure of Natura’s 2023 annual report, all major companies in the global beauty industry have now revealed their performance for the year 2023. The combined sales of the top ten companies over the past 23 years amount to USD 145.441 billion. From a revenue perspective, what changes have occurred among the top ten beauty companies globally? What trends are emerging in the global beauty market?
Procter & Gamble’s beauty business surpassed Estée Lauder for the first time in annual sales
In 2023, China, as the world’s second-largest cosmetics market, did not see a significant rebound post-pandemic. The overall consumer market remained sluggish, exerting a considerable impact on the global beauty industry. Looking at the past 23 years, the growth rates of major beauty conglomerates have slowed down overall.
From a revenue perspective, the top ten global beauty companies can be divided into four tiers. L’Oréal and Unilever belong to the first tier, and they are the only two beauty companies whose cosmetics business revenue exceeds $20 billion. In 2023, L’Oréal’s sales reached 41.18 billion euros ($45.03 billion), significantly ahead of Unilever’s 26.3 billion euros ($28.76 billion), which ranks second.
In the second tier are Estée Lauder and Procter & Gamble. Estée Lauder’s sales over the past 23 years amounted to $15.157 billion, a decrease of 7.33% year-on-year. Meanwhile, Procter & Gamble’s beauty business sales reached $15.186 billion, with a year-on-year growth of 3.89%. In this scenario of one company’s gain is another’s loss, Procter & Gamble’s beauty business surpassed Estée Lauder’s for the first time in a calendar year.
In 2021, as the effects of the pandemic began to wane, Estée Lauder experienced a rebound, with sales reaching $17.731 billion, a remarkable 24.95% year-on-year increase. Thanks to this surge in performance, Estée Lauder swiftly recovered from the pandemic and even exceeded its pre-pandemic levels in 2019 within a year. In 2021, Estée Lauder’s stock price soared to a historic high of $374 per share, with a total market value exceeding $130 billion. Meanwhile, Procter & Gamble’s beauty business sales in 2021 amounted to $14.716 billion, with a growth rate of 6.62%. The gap between the two exceeded $3 billion.
However, in 2022, due to the resurgence of the COVID-19 pandemic in China, Estée Lauder’s beauty business sales declined by 7.75% year-on-year to $16.356 billion, while Procter & Gamble only saw a decrease of less than $100 million, with a decline of 0.67%, which is less than 1%. The gap between the two in 2022 was $1.745 billion.
In 2023, due to the challenges faced by global travel retail, especially the duty-free market in Hainan, Estée Lauder’s beauty business sales dropped by 7.3% year-on-year to $15.157 billion. Meanwhile, Procter & Gamble saw year-on-year growth of 3.89% to $15.186 billion. With this trend of contrasting performances, Procter & Gamble’s beauty business surpassed Estée Lauder’s in annual sales for the first time.
In the third tier are the remaining six companies, among which LVMH and Beiersdorf have surpassed $8 billion each, with 8.271 billion euros ($9.04 billion) and 7.78 billion euros ($8.51 billion) respectively, and the gap between them is narrowing. Similarly, Shiseido and Coty are also narrowing the gap. Due to the impact of Chinese consumers boycotting Japanese cosmetics due to the timing of the Fukushima nuclear wastewater discharge, Shiseido’s sales in 2023 fell by nearly 9% to JPY 973.038 billion ($6.61 billion), while Coty’s sales surged by 14.07% to $6.01 billion. Kenvue and Natura, on the other hand, both have sales below $6 billion, at $5.768 billion and 26. 737 million BRL ($5.37 billion) respectively.
In terms of growth rates (reported), four companies are showing a downward trend, namely Estée Lauder, Shiseido, Kenvue, and Natura, while in 2022 there were only two. At the same time, throughout the 23 years, only Coty achieved a growth rate exceeding 10%, whereas in 2022 there were four companies with growth rates exceeding 10%, namely L’Oréal, Beiersdorf, LVMH, and Coty. This also indicates that the overall growth rate has slowed down in 2023 compared to 2022.
High-end products under pressure, dermatology becomes popular
Chaileedo’s analysis of the top ten performers reveals two main trends in the first half of this year.
Firstly, there has been a slowdown in the growth of high-end products.
Taking L’Oréal, ranked first, as an example, in 2022, the luxury products division of L’Oréal saw a year-on-year growth of 18.6%, ranking second among L’Oréal’s four business divisions, reaching €14.638 billion, accounting for 38.3% of L’Oréal’s total revenue in 2022, surpassing the consumer products division’s 36.6%, becoming L’Oréal’s largest business segment. However, in 2023, the revenue growth of L’Oréal’s luxury products division slowed to 2%, making it the slowest-growing division among L’Oréal’s four business segments, and its revenue share was also surpassed by the consumer products division, returning to second place among the four divisions.
As for LVMH, the global luxury goods giant, its beauty business revenue grew by 7% in 2023, but this was also the first time in the past five years, except for 2020 affected by the pandemic, that the growth rate fell below 10%.
In addition, although Beiersdorf’s cosmetics business achieved organic growth of 12.5% in 2023, sales of its luxury brands La Prairie and Chantecaille plummeted by 15.4% and 18.4% respectively in 2023. Beiersdorf attributed the decline mainly to the slump in tourism retail business.
Similarly, Estée Lauder, whose performance has been less than ideal in recent years, also saw a decline in sales of high-end products. In the fiscal year 2023, Estée Lauder’s skincare business revenue plummeted by 14%. Estée Lauder stated that part of the reason for the decline in the skincare business was the decline in its high-end product La Mer. In terms of makeup, net sales remained flat compared to the same period last year, with net sales of M·A·C and Clinique both increasing. However, overall, due to the poor performance of high-end brands La Mer and Tom Ford, there was no growth in net sales of makeup. Another high-end perfume brand, Jo Malone London, also saw a decline.
As for SK-II, the core brand of Procter & Gamble’s beauty business, it had previously seen sales growth exceeding 20% for multiple quarters. However, its performance decline has recently slowed down the upward trend of Procter & Gamble’s beauty business. In the fourth quarter of 2023, SK-II’s sales in Greater China plummeted by 34%.
For the decline in high-end business, tourism retail mentioned by these companies is one of the main reasons.
Beiersdorf stated that the main reason for the simultaneous decline of over 10% in sales of high-end brands La Prairie and Chantecaille in 2023 was the significant disruption caused by the “daigou” business to the Asian tourism retail market. Beiersdorf stated that, given the market situation, both brands promptly decided to use 2023 as a transition year to clear inventory and normalize inventory levels. Beiersdorf now hopes to address this issue through healthy inventory levels, product innovation, enhanced social commerce settings, and expansion of tourism retail business.
In recent years, Estée Lauder, deeply affected by tourism retail, once again stated in its latest financial report that Fabrizio Freda, CEO of the Estée Lauder Group, attributed the decline in performance to the slower-than-expected recovery of international flights, visa issuance, and group tourism in Asia, as well as the weak performance of high-end brands like La Mer in the Chinese and South Korean markets. Procter & Gamble also indicated that sales of SK-II were dragged down by the sluggishness in tourism retail.
In addition to the slowdown in the growth of high-end lines, another notable trend is the focused attention on dermatology.
In February 2023, Myriam Cohen-Welgryn, Global President of Active Cosmetics at L’Oréal, announced on her LinkedIn account that the L’Oréal Active Cosmetics division had officially been renamed the Dermatological Beauty. This division includes brands such as La Roche-Posay, Vichy, CeraVe, Decléor, and SkinCeuticals, as well as Skinbetter Science, a medical skincare brand acquired in 2022.
In 2023, the Dermatological Beauty division achieved sales of €6.432 billion, a significant increase of 25.5% year-on-year, once again becoming the fastest-growing division in terms of revenue for L’Oréal, while the other three divisions did not achieve growth rates exceeding 10%.
Under the Beiersdorf umbrella, the Derma brands Eucerin and Aquaphor achieved organic sales growth of 24.0% in 2023. Nominal sales increased to €1.3 billion.
In addition to L’Oréal, Shiseido also regards dermatology as the next growth driver for the group. On February 10th of this year, Shiseido launched its mid-term strategy “SHIFT 2025 and Beyond,” with the group identifying “Clean & Dermatology” and “Inner Beauty” as the next growth areas. Shiseido, on December 23, 2023, acquired the American dermatology brand Dennis Gross Skincare for $4.5 billion, demonstrating its commitment to dermatological science.
Furthermore, earlier this year, the Spanish beauty and fashion conglomerate Puig acquired a majority stake in the German luxury dermatological skincare brand Dr. Barbara Sturm. The financial terms of the deal were not disclosed, but sources close to the company indicated that Dr. Barbara Sturm’s retail revenue for 2023 is expected to reach $150 million.
From the performance in sales and the actions taken by major beauty conglomerates, it is evident that dermatological science will receive increasing attention and become the next important growth driver for these companies.
In 2024, capital is re-focusing on the beauty industry
In the past decade, the beauty industry has been undergoing constant change and innovation. Traditional beauty giants are re-evaluating their business structures in the face of challenges from emerging brands, shifting consumer behavior, and digital trends. Divestment is often seen as a strategic adjustment, helping to increase companies’ focus and flexibility to better adapt to market changes.
On one hand, these beauty giants may face the complexities of diversification and resource dispersion. By divesting certain low-growth or non-core brands, companies can focus more on their high-growth, high-profit core brands, thus improving operational efficiency and business concentration. On the other hand, divestment can also provide companies with capital for strengthening their core businesses through research and development, marketing, or acquiring emerging brands.
In 2023, beauty giants streamlined their businesses through divestments, including Unilever selling Elida Beauty to the Boston-based private equity firm Yellow Wood Partners LLC. Besides Elida Beauty, Unilever also sold its shaving business Dollar Shave Club in October. L’Oréal sold its organic cosmetics brand Sanaflor and subsequently ceased production of its upscale spa brand Decléor. Coty sold its hair care brand Wella, while Natura divested Aesop and The Body Shop within a year. The executive of Japanese beauty conglomerate Kao stated plans to divest 28 brands by 2024 as part of a broader cost-cutting reform.
By 2024, with the macroeconomic recovery underway, capital has begun to refocus on the beauty industry, leading to several significant mergers and acquisitions in less than three months. These include Puig’s acquisition of Dr. Barbara Sturm, L’Oréal’s investment in the Chinese perfume brand To Summer, as well as acquiring minority stakes in the Swiss longevity biotechnology company Timeline, the Swiss environmental startup Gjosa. L’Occitane acquired the Italian high-end home fragrance brand, Dr. Vranjes Firenze.
Mergers and acquisitions will continue to play a particularly important role in beauty conglomerates. Acquisitions are a necessary component of their growth promotion and maintaining competitive advantage strategies. While some significant acquisitions are driven by private equity funds, beauty conglomerates remain the main players in beauty industry mergers and acquisitions. Additionally, some corporate groups have established their early-stage investment departments, including Estée Lauder Companies’ NIV (New Incubation Ventures) and L’Oréal’s BOLD (Business Opportunities for L’Oréal Development).
In addition to mergers and acquisitions, the beauty IPO market has also begun to rebound in the first quarter of this year. This includes Puig preparing to go public in the first half of this year, Swiss dermatology group Gedeon Richter preparing to list on the Swiss stock exchange this month, planning to raise $23 million, and a German perfume retailer preparing to list on the Frankfurt Stock Exchange.
With the financial markets rebounding, mergers and acquisitions in the beauty industry are on the rise, with some beauty conglomerates actively engaging in strategic investments and acquisitions to maintain their competitive advantage, while some private equity funds are also investing in beauty companies. Additionally, beauty company IPOs are also starting to rebound, as the beauty industry is once again attracting attention from capital.
