Here’s Why The Global Beauty Leaders Might Be Focusing On Acquiring Makeup Companies
The global beauty leaders, L’Oreal and Estee Lauder, seem to be focusing a lot on the makeup segment currently. Their increasing number of acquisitions in this segment seems to be a testament to that fact. For example, since its 2010 acquisition of Smashbox, Estee Lauder had not acquired any cosmetics companies so far until October 2016, when it agreed to buy Becca Cosmetics for around $200 million. In November, Estee Lauder announced its decision to acquire yet another U.S. based cosmetics company, Too Faced, for $1.45 billion. A few months back, L’Oreal announced the decision to acquire U.S. based prestige beauty company, I.T. Cosmetics, for $1.2 billion.
Greater Makeup Market Share
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It seems that the beauty leaders are striving to gain greater shares of the global beauty market, which is currently estimated to be around $65 billion. The global makeup market is estimated to be growing at a CAGR of close to 3.5% between 2016 to 2023.
Competitive Advantage
It is noteworthy to mention that these beauty companies are trying to expand their portfolio of products and distribution channels of offerings through these acquisitions. For example, both the brands that Estee Lauder acquired are either not focused upon traditional makeup products or on sales through traditional channels. Becca is known for its highlighters, foundations, shimmers, and other such complexion enhancing products catering to diverse skin tones, while Too Faced is one of the top 8 makeup brands in the specialty multi-channels in the U.S.
L’Oreal’s acquisition, IT Cosmetics, is touted as one of the most rapidly growing U.S. prestige beauty brands and it teams up with the leading plastic surgeons in the country to provide women with over 300 innovative makeup and skincare products.
All these brands seemed to have some unique selling points which might offer competitive advantages to their parent companies.
U.S. Market Focus
All the current makeup company acquisitions by the two beauty giants seem to be U.S. based. The U.S. makeup market is one of the largest in the world and is estimated to be growing at a CAGR of 3.8% between 2013 to 2018 to reach close to $9 billion in 2018. Currently, the U.S. mid-tier departmental stores seem to be lagging behind in terms of sales. Hence, acquiring companies which have better reach through alternative channels, and also brands that are popular with the U.S. clientele, do seem like good ideas.
Millennials
Millennials seem to be the largest and the fastest growing beauty users across the world. Hence, the beauty leaders seem to be interested in companies that specifically target millennials be it through their innovative products, through YouTube vloggers, or through their social media reaches.
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