Entering 2024, giants in the cosmetics industry seem to be particularly feeling the “chill.” Following companies like Estée Lauder, Shiseido, and Unilever, Germany’s Henkel announced further layoffs in its restructuring of the Consumer Brands business. Last year, Henkel had already announced the elimination of 800 related positions.
CHAILEEDO found that in the past three months alone, at least 10 beauty-related companies have announced layoffs, covering areas from retail terminals to brands, and even upstream raw material companies. The cosmetics industry has also experienced a wave of layoffs.
International companies lay off employees intensively, with half of the top ten global beauty brands affected
CHAILEEDO has found that currently, the disclosure of layoff information is mainly concentrated in foreign-funded enterprises, possibly due to the fact that it is not yet the Chinese financial reporting season. In terms of company types, this wave of layoffs in the industry covers a wide range. It includes brand-side companies like Estée Lauder Company, the US premium skincare brand Matter of Fact, upstream raw material companies like Evonik and BASF, as well as retailers like Macy’s.
Among the companies that have publicly disclosed specific layoff numbers, Estée Lauder has the highest number. According to their financial report, as part of their profit recovery plan for fiscal years 2025 and 2026, they plan to lay off 3% to 5% of their workforce, affecting an estimated 1,800 to 3,000 employees.
In terms of geographical distribution, this wave of layoffs is deeply influenced by geopolitical and economic factors. For example, BASF and Evonik, two German chemical giants, have both announced layoff plans in an effort to save costs. Evonik plans to lay off a maximum of 2,000 employees worldwide by 2026, with approximately 1,500 of them in Germany. Henkel currently has a global workforce of 33,000, so this round of layoffs accounts for 6% of the total number of employees.
When explaining the layoffs, BASF stated that it had to further reduce costs and lay off employees due to the structural increase in energy prices in Germany and the low-demand environment for chemical products. CHAILEEDO has learned that Germany is currently facing challenges such as high energy prices, supply chain tightness, weak domestic and international demand, insufficient investment, labor shortages, and inadequate infrastructure.
Shiseido Group announced on its official website that it will offer early retirement plans to approximately 1,500 employees in Japan who meet specific age and tenure criteria from April 17 to May 8. The number of employees taking early retirement accounts for approximately 3.7% of Shiseido’s global workforce. Some analysts have pointed out that whether due to concerns about health or resistance to corporate social responsibility in light of issues such as Japan’s nuclear wastewater discharge, the weak performance is forcing Shiseido to undergo transformation.
In addition, The Body Shop and the US premium skincare brand Matter of Fact have laid off all employees within their business scope due to bankruptcy or closure.
It is worth mentioning that CHAILEEDO has also discovered that among the aforementioned companies that have announced or planned layoffs, four of them are among the top ten global beauty brands for the first half of 2023, namely Estée Lauder, Shiseido, Unilever, and Kenvue. The Body Shop was also part of one of the top ten global beauty brands, Natura & Co, but it was sold by the latter in November 2023.
Reducing costs and increasing efficiency” becomes the sole proposition.
In fact, since the outbreak of the pandemic, the global economy has been in a prolonged slump, and consumer habits have been reshaped. As a result, global beauty giants have made adjustments and reforms to their businesses, resulting in layoffs of varying sizes. In 2020, for example, the world’s largest beauty conglomerate, L’Oreal, restructured its Luxe division in the U.S., closing some offline stores and shifting focus to e-commerce, resulting in the reduction of approximately 400 positions.
As we enter 2024, the lingering effects of the pandemic continue to impact the pace of economic recovery, and the “layoff wave” is still spreading across various industries.
According to data, in the first two months of 2024 alone, at least 48 large listed companies have announced layoff plans to sustain their livelihoods. In February alone, at least 18 companies announced layoffs.
In the e-commerce industry closely related to beauty, several giants have announced layoff plans. For example, luxury fashion e-commerce platform Farfetch announced a 30% reduction in costs through layoffs. Amazon, after laying off 18,000 employees in 2023, focused on developing AI technology and reducing costs, announcing the continuation of layoffs of hundreds of people in February 2024. Lazada, a cross-border e-commerce platform under Alibaba, also announced plans to lay off 2,000 people.
The reasons for layoffs vary among these companies. Some are due to the continued decline of their businesses, while others are influenced by the overall downturn of specific industries or internal management restructuring. However, comparing the financial data of these companies reveals that layoffs are often accompanied by financial alarms.
For example, Estée Lauder has seen a continuous decline in revenue and profits for seven consecutive quarters. As a result, Estée Lauder expects that layoffs and broader restructuring plans will increase operating profit by $1.1 billion to $1.4 billion in fiscal years 2025 and 2026.
As for the Shiseido Group, although they stated in their layoff announcement that offering “early retirement” plans to employees is based on the recovery of the Japanese economy after the COVID-19 pandemic, where people have more opportunities to consider new career choices and reassess work and life plans.
However, Shiseido also expressed that the estimated financial impact of this measure has already been included in their annual forecast. According to Shiseido’s 2023 financial report, its net sales amounted to approximately 973 billion yen, an 8.8% year-on-year decrease, and operating profit dropped significantly by 39.6% to approximately 28.1 billion yen.
CHAILEEDO has learned that the Consumer Brands business of Henkel was formed in January 2022 through the merger of the Cosmetics/Personal Care and Home Care businesses. Since its establishment, the first round of restructuring and integration plans has resulted in the elimination of approximately 2,000 positions, saving Henkel at least 275 million euros in costs annually.
According to Henkel’s 2023 financial report, the total sales of the Consumer Goods Division amounted to 82.8 billion Chinese yuan, a 3.3% year-on-year decrease. However, due to price increases and measures such as restructuring and cost reduction, the adjusted operating profit of the division reached 1.115 billion euros, a 22.5% year-on-year increase.
It is evident that Henkel has tasted the benefits of cost reduction from the previous round of layoffs. With the continued implementation of the restructuring plan, it is expected that by the end of 2026, Henkel will achieve a total savings of approximately 4.2 billion yuan through a series of cost-cutting and efficiency-enhancing measures, including layoffs.
Advertising adjusts course, seeking high-quality growth
It can be seen that in the current challenging environment, reducing operating costs to maintain company profits and stop bleeding is undoubtedly a common factor in the layoffs of beauty companies.
However, CHAILEEDO has found that improving management and operational efficiency to achieve higher profits has not had a significant impact on the market valuation of the aforementioned companies. Instead, it is seen as a reasonable response to market changes. A typical example is the Estée Lauder Company. Despite announcing layoffs while experiencing a decline in revenue and profits, its stock price still rose by 12.05% on the second day of the financial report release (February 6).
In addition, the Shiseido Group has stated that it will concentrate its activities on brands, products, and touchpoints with high growth potential and profitability. Unilever also announced a reduction in positions in the personal care brand marketing team in Singapore, stating that some personal care positions will be transferred from Singapore to major Asian markets.
As pointed out by an industry perspective, from an organizational perspective, most of the employees laid off in current companies are those who are far from the front line or have poor performance on the front line. The front line is the place closest to the company’s business, customers, competition, and money, and it is in these areas that companies are increasing their investments.
For example, Shiseido recently announced a collaboration with a renowned Japanese university’s advanced life science research institute to cultivate the next generation of research leaders and foster a new culture in Shiseido’s research field.
At the same time, looking at the beauty companies that have undergone layoffs, most of them have focused on the Chinese market.
According to public reports, Estée Lauder mentioned China 30 times in its latest earnings conference call and attributed the decline in performance over the past few quarters to China. Fan Jiayu, President and CEO of Estée Lauder Company China, has also stated that Chinese consumers have always been the company’s main growth driver. She emphasized the group’s confidence in China’s long-term development, continuous investment in the Chinese market, and more China-led research and development projects in the future.
Estée Lauder also emphasized that its profit recovery plan, including layoffs, will empower the Chinese team to better adapt to the development of the Chinese market.
In addition, BASF CEO Martin Brudermüller stated in a statement, “We will focus the Ludwigshafen site on supplying the European market. At the same time, we are advancing our business in regions of the world that offer more dynamic growth and attractive investment conditions.” BASF also openly stated that there is no expected growth momentum in Europe, and most of this year’s investments will flow to its Verbund plants in China.
With two flowers blooming, each showing its branch, it is not difficult to see that faced with an increasingly competitive market environment, beauty giants are reevaluating themselves and moving towards a more promising direction through cost reduction, business restructuring, and resource reallocation. As the giants go into battle with a leaner approach, focusing their efforts on one market, one field, a new round of competition in the global beauty industry has begun.”
