2019 on track to be another record-breaking year for beauty buyouts; Euromonitor reveals the top 10 definitions of beauty; Sub-Zero Waste - The key beauty and personal care macro trend for 2019; Post-Christmas sales binge to reach $18.3 billion.
2019 on track to be another record-breaking year for beauty buyouts
The beauty and personal care industry is a rare corporate beast. It is dominated by a high number of global multinationals with multi-brand portfolios and ever-increasing bottom lines. Buyout activity shifted into high gear in 2015, with acquisitions spiking to 85-plus in contrast to the previous annual norm of 40 to 50 transactions. The main catalysts of the boom have been the growth of direct-to-consumer channels such as e-commerce and the use of social media to reach existing and potential customers.
Fears of a beauty acquisition bubble surfaced at the beginning of 2018, but it proved to be another record-breaking year. By July, PitchBook Platform reported that investors had poured US$464 million into the startup space alone in the first six months of the year. Q1 deal volume rose 21.7 per cent as L'Oréal bought another two brands, TPG took minority stakes in Anastasia Beverly Hills and Rodan + Fields, and UK-based The Hut Group snapped up a string of brands including Eyeko.
Deal volume dipped slightly in the second quarter, but was still 9 per cent up on the same period in 2017 as L'Oréal, P&G and The Hut Group continued to open their corporate wallets. The main takeaway was the fairly equal mix of acquisitions between major industry players such as L'Oréal and P&G and private equity-backed buyouts from L Catterton, the investment arm of LVMH, Tengram Capital and Eurazeo's US$60 million investment in Pat McGrath Labs, says Intrepid Investment Bankers. The year-end results are still being collated, but Q4 2018 needs to deliver 24 acquisition and merger deals to eclipse 2017 results.
Analysts are predicting another record year for 2019 because the major multinationals are still on the hunt for indie brands and technology leaders to fuel growth and innovation. Many changed tactics in 2018, though. Over the past six months, there has been an upsurge of interest in incubators or funds, including Shiseido's investment in actor Will Smith's Dreamer Fund, L'Occitane's launch of the Obratori incubator and L'Oréal stake in Sillages Paris through its new venture capital arm, BOLD. Valuations for hot targets will remain high and competition fierce, says Intrepid, as private equity firms and industry giants are still prepared to pay three to four times annual sales to get the brands they want.
Euromonitor reveals the top 10 definitions of beauty
According to Quartz, a guide to the new global economy, there's a lot of good thinking in the annual flood of end-of-year trend predictions. But, sadly, much of it can get lost amid the novelty lists, clickbait and last minute call-outs to fill December and January pages and websites. Euromonitor's annual global beauty survey digs much deeper and tracks cosmetic trends and the buying behaviours of over 20,000 male and female consumers in 20 major countries worldwide. This year's top 10 definitions of beauty are very focused on wellness and health, rather than passing fads such as magnetic eyelashes and crystal-infused skincare.
Sales of inner beauty boosters such as health tonics, hydration drips, ingestible skincare and beauty supplements have soared into the billions of dollars, says Euromonitor. The vocabulary of beauty marketers has also changed to celebrate diversity, the acknowledgment of flaws and the changing definitions of beauty, says the researcher.
- Looking healthy - 53.3%
- Hygiene/cleanliness - 51.3%
- Being comfortable in your own skin - 46.6%
- Inner confidence - 42.9%
- Looking presentable - 38.2%
- Looking your best - 36.6%
- Embracing yourself - 30.6%
- Keeping a youthful appearance -28.6%
- Simplicity - 28.6%
- Honesty - 21.2%
Sub-zero waste - The key beauty and personal care macro trend for 2019
Sustainability has been one of the strongest trends in the global beauty and personal care industry over the past few years. At the big end of town, L'Oréal, Henkel, Unilever and P&G have made huge efforts to reduce their environmental impact by focusing on every aspect of the supply chain, reducing the use of plastic and radically altering packaging choices. Smaller brands and companies have focused on ethical and eco-friendly product development and manufacture.
But such initiatives are only a beginning, reveals Mintel's latest report – Sub-Zero Waste: 2019 Global Beauty and Personal Care Trend. According to the data tracker, beauty brands and manufacturers will have to take their sustainability strategies to new levels as environmentally-conscious consumers worldwide look for ways to decrease waste in all aspects of their lives, including their beauty and personal care routines.
Sub-zero waste is not just a trend, it's a movement towards a ground-shaking new archetype for the beauty and personal care industry, says Sharon Kwek, Senior Innovation and Insights Analyst, Mintel Beauty and Personal Care. "Some companies are already discussing completely removing packaging from the equation. Whether reducing or eliminating waste altogether, if brands don't change their approach now, they will become insignificant".
It's a global groundswell, says Mintel. Close to half of US natural and personal care consumers say they live sustainably and 64 per cent of Australians say they would be willing to pay more for sustainably-sourced products. Consumers will expect more ambitious endeavours at every stage in the beauty supply chain, adds Mintel, and the drive to sub-zero waste will transform the beauty and personal care market over the next five years and evolve in ways even we can't predict over the next decade.
Post-Christmas sales binge to reach $18.3 billion
Anyone who braved the seething crowds in Pitt Street Mall and Bourke Street Mall on Boxing Day will have no trouble believing that the 24 hours after Christmas Day remains the biggest day of the year for retail discounts. The Australian Retailers Association (ARA) and Roy Morgan Research predict that the post-Christmas sales binge for the period from December 26th to January 15th will see the nation's consumers fork out $18.3 billion.
Recent legislative changes allowed South Australians to hit the shops for the first time on Boxing Day this year for an estimated $133 million retail therapy spend. The national "bill" for Boxing Day is predicted to come in at $2.5 billion, says the ARA, with NSW and Victoria leading the way at $790 million and $786 million, respectively. Queensland and WA are estimated to spend $409.8 million and $216.9 million. The ARA and Roy Morgan's annual research estimates a rise of 3.1 per cent in this year's post-Christmas sales ending early next week.
Snippets from the Wires
- Japanese beauty exports enjoyed another record year in 2018, cracking the 500 billion yen (US$4.53 billion) barrier for the first time. Other Asian countries accounted for 90 per cent of export revenues, led by China ( 34.9%), Hong Kong (25.9%), South Korea ( 10.3%), Taiwan and Singapore ( both 7.3%).
- The US prestige beauty market continues to perform strongly, says the NPD Group. Sales reached US$4.1 billion in Q3 – up 7 per cent on the same period in 2017. Makeup sales rose 1 per cent to US$1.9 billion, skincare revenues climbed 15 per cent to US$1.3 billion and fragrance enjoyed a 6 per cent jump to US$783 million.
- Australia's leading cosmetic buyers, brands, professionals and media keep track of the dizzying change in the beauty industry by attending the key global cosmetic trade shows. The two must-visits in the early part of the year are Cosmoprof Worldwide in Bologna, scheduled from March 14th to 18th, and in-cosmetics Global, to be held in Paris from April 2nd to 4th.
