Analysts give thumbs-up to Revlon turnaround, AHAVA sells majority stake for US$76.3 million, fragrance giant extends skincare footprint, and China remains a goldmine for beauty.
Analysts give thumbs-up to Revlon turnaround
Like many industries, the beauty biz is undergoing polarisation. Giants such as L'Oréal, Coty and are getting bigger and nifty niche brands are carving out a larger market share. Middle-sized household names such as Revlon and Elizabeth Arden, however, have been squeezed because of their relatively small size in contrast to the major players.
That's a real advantage these days says the Trefis Team. Revlon has become more flexible and is reacting more quickly to market trends notes the US analyst. With global sales of US$2 billion, the company's Brand Revival Program under the banner tagline - Love Is On - has not only increased visibility. The strategy has allowed Revlon to give the flick to under-performing brands and products. Smart acquisitions such as the buyouts of The Colomer Group, the leading professional haircare company, and the CBBeauty fragrance distributor over the past two years will also boost the bottom line going forward.
"The company seems to know how to survive in the cut-throat beauty industry" says the Trefis Team. "The business of beauty is currently about understanding the consumer's psyche, adapting to the changing consumer demand, and continuous innovation and startegic moves. Revlon clearly understand these rules".
AHAVA sells majority stake for US$76.3 million
Fosun International has been targeting Israel. In June, the largest privately-owned company in China bought a controlling share in Israeli insurer, Phoenix Holdings. Gaon Holdings which owns 15.72 per cent of AHAVA has announced the sale of a 51 per cent majority stake in the skincare brand for US$76.3 million.
Gaon did not name the buyer but insiders have fingered Fosun International which has been making major investments in banks, real estate and insurance over the past year. In fashion, Fosun has also invested in Folli Follie, the jewellery and watch company, and St John, the US knitwear brand. Negotiations will continue for the next three months but the deal will give AHAVA, based on Dead Sea minerals, a major springboard into the Chinese beauty market. The other major shareholders remain private equity firm Shamrock Israel Growth Fund and Kibbutz Mitzpe Shalem.
Fragrance giant extends skincare footprint
Diversification is the name of the game when a company reaches a certain size. Givaudan, the world's largest manufacturer of flavours and fragrances, pulled in revenues of AUD$6.46 billion last year. Founded in 1895 as a perfumery company, the Swiss juggernaut bought rival Quest International in 2007 and Nestle sold its 10 per cent stake in the company in 2013 for US$1.3 billion. A year later, Givaudan took its first big step into the skincare actives industry with the purchase of Soliance, a major French maker of skincare actives.
In a move that's become a pattern for the major fragrance companies such as the recent acquisition of Lucas Meyer by IFF, Givaudan has acquired Induchem. The Swiss actives manufacturer sells a huge range of ingredients to skincare companies worldwide, including Australia. With annual sales of AUD$36.6 million, Induchem specialises in anti-irritation, moisturising, tanning acceleration, cell regeneration and exfoliation actives.
According to Gilles Andrier, CEO of Givaudan: "Induchem is a second key step, after the acquisition of Soliance, towards our ambition to make Givaudan a significant player in the Active Cosmetics business. induchem brings strong complementary capabilities to Givaudan and will greatly contribute in achieving our 2020 ambition to become a key player in this fast-growing business".
China remains a goldmine for beauty
Speculation about how the current slowdown in China will affect the luxury market is at fever pitch. After enjoying double digit growth for over 10 years, the luxury goods market in China dipped 1 per cent in 2014 to US$18 billion reports Bain & Co. The global jitters are justified because so many brands have become overly-dependent on Chinese shoppers. But the Fortune Character Institute, the Shanghai publisher of the annual China Luxury Report, expects the Chinese taste for luxury to continue, especially when it comes to buying overseas. Countries in the euro zone, Japan and Australia could even do better because of the weakening of their currencies.
As far as the beauty market is concerned, China posted its lowest growth last year since 2005. Low only for China, of course, at 12.3 per cent. The country is now the second largest cosmetics market in the world after the US and 2014 was a benchmark year primarily because it also showed how the Chinese market has matured.
Until last year, major multinationals such as Unilever, P&G, L'Oréal and dominated the Chinese beauty scene with a 60 per cent market share. In 2014, the Chinese turned more to Korean brands because of their cheaper price points and the belief that they were more suited to Asian complexions.
Chinese women are also following the rest of the world in choosing derm-style skincare which addresses common concerns such as acne and sensitivity. Eau Thermale Avène, the French pharmacy brand owned by Pierre Fabre, is the number one dermo-cosmetic brand in China, as it is Japan and Europe. The anti-ageing cosmeceutical market has also been growing strongly.
There's still massive opportunity for growth in China says Euromonitor. Competition from local companies such as Shanghai Jahwa, Proya and Marubi is concentrated at the lower end of the market and Western brands still enjoy the edge of being viewed as high quality and more safe. Seventy per cent of beauty and skincare products in China are sold in department stores and supermarkets but online sales are growing at a galloping clip. According to Euromonitor's China Cosmetic Market Report 20-14 -2017, the Chinese cosmetics market will maintain growth of at least 12 per cent over the nex three years.
Snippets from the wires
- Many recent men's and women's fragrance launches have sported metallic packaging and it's not because Christmas is fast approaching. According to research by Perfumer's Workshop International, leading brands want consumers to "see fast and buy fast". Gold, silver, steel and pink packaging prompt both sexes to stop and sniff, especially younger buyers.
- Following his successful foray into fragrance, is entering the eyewear market. The Lebanese couturier has signed a 9 year deal with luxury maker Safilo, with the first collection debuting in January 2017. Global eyewear sales for fashion brands reached US$13 billion in 2014.
- Marchesa's gorgeous designs have been lighting up the runways since 2004. In 2013, the US luxury fashion brand partnered with Revlon to launch nail appliques and nail grooming tools. Earlier this year, Marchesa released a jewellery line with licensing partner NWH. What's next? A shoe collection says co-founder Georgina Chapman, the wife of movie mogul Harvey Weinstein.
- The Ulta beauty chain in the US added 20 new stores in Quarter 2 to end the period with 817 stores. The company's sales increased 19.4 per cent to US$877 million for the period - up from US$734 million in the same period in 2014.
- St Tropez have sold more than 450,000 bottles of its latest release Gradual Tan in Shower Lotion in the UK since its release in May.
- Chanel is the top-performing prestige beauty label on YouTube reports digital marketer Pixability. With 440,000 subscribers, the "magic brand" has more than double the numbers of its closest competitors - Dior with 210,000 subscribers and Burberry with 189,000. The "Marilyn and No 5" video racked up 13 million views.
Newsletter image: Instagram.com/ahava
