Why Did Estee Lauder Decide To Acquire Becca Cosmetics?

+5.42%
Upside
154
Market
163
Trefis
EL: Estee Lauder logo
EL
Estee Lauder

In a move to expand its portfolio of color cosmetics, Estee Lauder on October 21st, signed an agreement to acquire Becca Cosmetics. Though Estee Lauder has been recently acquiring premium fragrance and skincare companies, this is its first acquisition in the color cosmetics department post 2010, when it had acquired Smashbox. The global premium beauty giant is said to have paid around $200 million for Becca that generated revenues worth $80 million in 2016. Estee Lauder’s acquisitions of small to mid-sized companies in the recent past include By Kilian, Glamglow, Frederic Malle, Le Labo, and Rodin Olio Lusso.

  • Color cosmetics seem to be a growth generating segment for the beauty company. Its fiscal 2016 (year ends in June) results reflected that net sales of makeup reached close to $5 billion with a 9% year-on-year growth. In comparison, its skincare segment didn’t display any growth for the fiscal year 2016.
  • Instead of the usual color cosmetics such as lipstick or eyeshadow, Becca’s unique selling points are its primers, foundations, blush, highlights, and concealers. Also, instead of the usual Caucasian skin tones, the brand is known for its products catering to a rich diversity of skintones. Along with the rise of social media and in particular Youtube tutorials, the market for such complexion related products has surged. Since one of the most important focuses for Estee Lauder is the millennial clientele who are the top followers of the Youtube channels, Estee Lauder is sure to win a significant chunk of this audience through Becca which is already popular among this clientele.
  • Estee Lauder’s management has assured that the brand will maintain its unique identity and continue launching innovative products that it is so well known for. Becca’s website even states that the formulas for their products catering to diverse skin tones will remain unchanged post the acquisition, as will the cruelty free nature of its products.
  • Estee Lauder envisages to expand Becca’s reach through its own global presence around the world. Around 55% of Becca’s customers identify as non-Caucasian, while the majority of its customers are concentrated in North America and Europe. This speaks volumes about Becca’s growth opportunity in the rest of the world if it is allowed to expand its geographical reach. Estee Lauder will be a perfect parent company to help it do that. To give some context, out of Estee Lauder’s ~$11 billion revenues in 2015, only $2.2 billion was contributed by the Asia Pacific segment.
  • According to our estimates, Estee Lauder currently enjoys around 12% share of the global makeup market which is expected to exceed 13% by the end of our forecast period. Smashbox and MAC are some of its best selling brands in this category so far. Becca might help grow the company’s global makeup market share with its unique and diverse range of products.

Editor’s Note: We care deeply about your inputs, and want to ensure our content is increasingly more useful to you. Please let us know what/why you liked or disliked in this article, and importantly, alternative analyses you want to see. Drop us a line at content@trefis.com

Have more questions about Estee Lauder? See the links below.

Relevant Articles
  1. What’s Next For Estée Lauder Stock After 10% Gains Post Q2 Results?
  2. What’s Next For Estee Lauder Stock After A 19% Fall Yesterday?
  3. Will Estee Lauder Stock Rebound To Its Pre-Inflation Shock Highs?
  4. Cross-Sector Comparison: Is Estee Lauder A Better Pick Over LLY Stock?
  5. What’s Next For Estee Lauder Stock After A 17% Fall In A Month?
  6. Should You Buy Estee Lauder Stock After A 36% Decline Since 2021?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Estee Lauder

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

Get Trefis Technology