Nestlé considering L'Oréal stake sell-off; latest retail figures point to increased Christmas beauty spend; Ulta Beauty posts strong double digit growth in Q3; and Marc Jacobs to debut affordable fashion label.
Nestlé considering L'Oréal stake sell-off
The death of Liliane Bettencourt, L'Oréal's biggest shareholder, in September 2017 stirred speculation that the 45 year old agreement between the French titan's founding family and Nestlé could be up for review. The pact prevented the Bettencourt family, who own 33 per cent of L'Oréal, and the Swiss food giant from raising their respective stakes in the world's largest cosmetics company. Just before it was due to expire in mid-March, Jean-Paul Agon, the chairman and CEO of L'Oréal, announced that if Nestlé was looking to sell its 23 per cent shareholding worth a massive US$27.4 billion, L'Oréal could fund the buyout.
The L'Oréal stake accounts for 10 per cent of Nestlé’s market capitalisation. When Ms Bettencourt died, CEO Mark Schneider told investors that the company's approach to the investment is "currently not changing". There's been a shift in thinking, it seems. Nestlé chairman Paul Bulcke has confirmed that discussions about the L'Oréal stake have become "something active on the board's agenda".
Mr Agon also revealed earlier this year that L'Oréal had 1.8 billion euros (US$2.05 billion) in cash and could sell its investment in French drugmaker group Sanofi to acquire Nestlé’s shares. If that's not enough, he added, we have many letters from banks that have said that they would love to lend us some money.
Latest retail figures point to increased Christmas beauty spend
The warmer weather nearly always leads to a spike in retail sales, which is why beauty companies traditionally launch 60 per cent of new products from September to February each year. The October retail figures from the Australian Bureau of Statistics rose 3.56 per cent year-on-year and the Australian Retailers Association (ARA) predict that retailers can expect to experience a busy festive season. "As we lead into Christmas, October is the third consecutive month with year-on-year growth topping 3.5 per cent", notes Russell Zimmermann, ARA Executive Director.
Pharmacy, cosmetics and toiletries recorded strong growth of 2.8 per cent in October, which the ARA tapped as remarkable. The Other Retailing category, the official term for online sales, saw the strongest growth of 5.5 per cent as consumers trawled e-commerce sites for gifts. “We have noticed that consumers are increasing their basket size online to prepare for the rush that occurs in the lead-up to the festive season", says Zimmermann.
Fashion was another crowd-pleaser with strong growth of 4.84 per cent. Household goods and the furniture category were also hotspots, recording growth of 3.22 per cent and 4.1 per cent, respectively.
All states with the exception of the NT were in a buoyant buying mood. Victoria led the pack for the fifth month in a row (+6.39%), followed by Tasmania (+5.7%), the ACT (+4.7%), Queensland (+4.1%), South Australia (+2.42%), NSW (+2.1%) and WA (+ 0.63%).
Ulta Beauty posts strong double digit growth in Q3
The leading Australian pharmacy groups, Priceline and Chemist Warehouse, keep a very close watch on Ulta Beauty in the US, the drugstore chain that morphed into America's largest specialist beauty retailer. The company's net sales spiked 16.3 per cent in Q3 to US$1.6 billion – up from US$1.3 billion for the same period last year. The debut of Kylie Jenner's make up collection, double digit growth from M.A.C and a major uplift in skincare and suncare sales were the four major drivers behind the bullish performance.
Online sales also soared, increasing 42.5 per cent to US$170.7 million over the period and now represent 11 per cent of Ulta's total revenues. The retailer opened 42 new stores in Q3 to reach a nationwide US network of 1163 locations. Like Priceline, Ulta's robust loyalty program – Ultamate Rewards – has been pivotal to its success. The 30.6 million members are beauty junkies and account for a huge 95 per cent of its total revenues. The latest quarterly results take Ulta's net sales for the first nine months of the year to US$4.59 billion – up from US$3.9 billion for the same period last year.
Marc Jacobs to debut affordable fashion label
Targeted at girls and women aged 18 to 24, Marc Jacobs Daisy fragrance is a global blockbuster and has birthed an army of flankers. The US designer has also enjoyed giddy success with his cosmetics brand, which recently hit global headlines when Priyanka Chopra chose to wear one of the lipsticks in a deep fuchsia shade for her wedding to Nick Jonas. Jacobs is taking another tilt at the youth market with a new affordably priced fashion label called "The Mark Jacobs".
The first collection is slated to debut in Pre-Fall 2019 and an image "leak"on Instagram shows such items as corduroy pants, brightly coloured rugby shirts and accessories. Official publicity material will be released next May and there will also be a glam runway element. The launch also opens doors for Coty, Marc Jacobs fragrance licensee, to build on the worldwide success of its scents from Miu Miu, the youth-oriented diffusion label of Prada.
The designer has launched a cheaper label before – Marc by Marc Jacobs – which folded in 2015. The timing could be better this time around and the news has thrown cold water on the speculation that Jacobs is thinking of stepping down from the namesake brand.
Snippets from the Wires
- Chanel has been the runaway winner among the international luxury brands opening beauty boutiques in Australia and New Zealand. The prestige fashion house has just opened its 15th beauty boutique across the two countries at Westfield Parramatta in Sydney. The new store is also the third standalone in Australia to incorporate a dedicated eyewear salon.
- The number one weapon in any retailer's armoury is trust. The nation's major pharmacy groups have it in spades reveals the latest Roy Morgan customer satisfaction award. Australia has one of the highest percentages of cosmetics sold in pharmacies in the world – an average of close to 20 per cent of the total beauty market – so the results are a big plus for the beauty industry. Discount Drug Stores scored a satisfaction rating of 91.4 per cent, followed by Priceline at 90.4 per cent, Amcal/Amcal Max at 90 per cent and Chemist Warehouse at 89 per cent.
- This year has seen many major beauty multinationals investing in startups, rather than fork out huge sums of money for fledgling brands that may or may not go on to bigger things. The win/win approach helps both parties. The startup gets a leg up from the multinational's marketing, research, digital and retail expertise and the established player gets a slice of the action if the company is commercially successful. L'Oréal's new corporate venture capital fund, BOLD, has made its first investment in Sillages Paris, a French startup which offers an online service to create customised perfumes based on artificial intelligence and machine learning.
