Brazilian giant Natura in deal talks with Avon; Puig invests in Indian and South American botanical brands; Amazon tracks sales trends to create private label skincare range; and duty-free sales in China reach US$5.9 billion.
Brazilian giant Natura in deal talks with Avon
Avon has been struggling over the past five years. Yet for all its woes, it remains the fifth largest beauty company in the world with revenues of US$5.5 billion in 2018 and is the global number two in direct-selling after Amway. Back in 2012, Coty made an unsolicited offer of US$10.7 billion, but Avon refused to start discussions.
In 2016, Avon separated its business into two arms – the US, Canada and Puerto Rico as New Avon and the global-facing Avon Products headquartered in London. A month prior to the appointment of current CEO, Jan Zijderveld, in February last year, rumours circulated that a group of Avon's private equity investors were calling on the company to consider a sale. Last September, news circulated that Brazilian giant, Natura, who own Aesop and bought The Body Shop from L'Oréal in 2017, was interested in a buyout.
Late last week, Natura announced in a securities filing that it is in deal talks with Avon. Natura has been pursuing an aggressive expansion strategy in recent years and 54 per cent of its group sales are now international. Brazil is Avon's second largest market after the US and will also greatly extend Natura's global reach. Sources are reporting that the ultimate end-game of the deal is to reunite the privately-owned Avon North American business with the publicly traded Avon Products.
Puig invests in Indian and South American botanical brands
Puig is the sixth largest player in the global fragrance market with sales in excess of AUD$3 billion. The fast-growing Spanish company has a stellar stable of licensed and owned fragrance brands, including Paco Rabanne, Jean Paul Gaultier, Carolina Herrera and Nina Ricci. Over the past four years, Puig has acquired renowned niche fragrance brands, Penhaligon's and L'Artisan Parfumeur, and signed a longterm agreement with French shoe king, Christian Louboutin, just over 12 months ago.
Puig's star brands are sold in more than 150 countries, including Australia, and the company has the muscle to springboard brands onto the world stage. Emerging markets are viewed as major growth areas and in late 2016 Puig acquired a 35 per cent stake in Grupo Granado, the Brazilian manufacturer and retailer of premium beauty brands, for US$155 million. The stake expanded Puig's footprint in the world's fourth largest beauty market and there are plans to expand internationally.
Puig has reached out to South America again by taking a minority stake in Loto del Sur, a Colombian prestige beauty company which specialises in bath and body, skincare, fragrance and home scents based on local botanicals. On the other side of the world, the multinational has also made an investment of AUD$20 million in Kama Ayurveda, a leading Indian Ayurvedic brand, with the option to up its stake. Global expansion is on the cards for both companies.
Amazon tracks sales trends to create private label skincare range
As we reported recently, Amazon and Walmart are trying to poach digital advertising dollars from Facebook and Google with the argument that as mega-retailers they know what people actually buy. Amazon seems to have followed this line of reasoning with the launch of its new private label skincare range – Belei. The online giant has revealed little about the R&D development of the 12 SKU lineup, but there's plenty to suggest that it's based on hot commodity trends and ingredients –from its clean beauty free-from claims to the use of on-trend actives such as hyaluronic acid, Vitamin C, retinol, ferulic acid, peptides and charcoal.
The post-consumer recycled packaging of the serums, micellar water, mask, sunscreen and eye cream closely tracks the stylish minimalism of leading premium prestige and clean beauty brands. Prices are a lot cheaper, though, ranging from US$9 to US$40. The timing is perfect as well. Worldwide, private label beauty and personal care ranges from leading drugstore and supermarket chains are aggressively going after the big brands to gain a larger share of the cosmetic market and beauty is one of the online giant's most-purchased categories. Australians are avid buyers of private label products, reports Nielsen, and growth is over four times that of branded products.
Duty-Free sales in China reach US$5.9 billion
Far more Chinese tourists travel within their own country than venture abroad – a total of 5.5 billion trips by contrast to 149.7 million outbound travellers. Over 20 per cent of domestic tourism is weekend travel and family trips account for 46 per cent of total in-bound travel. Like those who head overseas they spend up big. China's duty-free sales reached US$5.9 billion in 2018, reports the China Duty-Free Group, who operate 200 stores nationwide, the most duty-free outlets within a single country in global travel retail.
Major government initiatives are encouraging Chinese consumers to buy their preferred luxury beauty and fashion brands without leaving the country through major duty-free developments, many of which are technically "off shore". Autonomous regions such as Hong Kong and Macau have duty-free outlets in MTR rail and bus stations and hotels and then there's Hainan. China's smallest and most southernmost province is made up of a string of islands in the South China Sea and its duty-free stores racked up sales of US$1.5 billion in 2018. With government backing, Chinese duty-free and travel retail sales within China have a growth rate that far outstrips the rest of Asia and consumers have no need to worry about the authenticity of what they buy.
Snippets from the Wires
- According to Nielsen, 54 per cent of Australians say they have changed their spending habits to save on household expenses over the past year. But 62 per cent and 59 per cent, respectively, are prepared to pay more for products that are eco-friendly and sustainable or contain organic or all-natural ingredients. Beauty and personal care sales in supermarkets account for over 12 per cent of the total market and haircare is the category most consumers are willing to pay a premium for.
- There's been a huge proliferation of new and old names in the niche fragrance sector. But the two largest consumer markets are Russia and the Middle East, says French fragrance retailer, Francois Henin.
- A recent report from Afterpay revealed that only 41 per cent of Australian Millennials have a credit card. In the US, the percentage is even lower at 33 per cent. Sephora has announced it will launch its own credit card in select markets in three different options – Sephora Credit Card, Sephora Visa Card and Sephora Visa Signature Card. In a bid to boost sales, cardholders will be automatically enrolled in the company's Beauty Insider Program and Visa Signature members will receive extra sweeteners such a travel extras.
