This New Trend Followed By The Beauty Leaders Has Its Advantages As Well As Its Pitfalls
The two leaders of the beauty business, L’Oreal (annual revenue of ~$30 billion) and Estee Lauder (annual revenue of ~$11 billion), are currently following a trend of acquiring beauty brands known for their unique specialties and fan followings and building those brands independently to grow their respective companies.
Over the recent past, Estee Lauder bought Becca Cosmetics, famous with its makeup products like shimmers and highlighters among its diverse user base and social media followers, and Too-Faced–one of the fastest growing makeup brands in the specialty-multi and online channels, and a favorite among American millennial beauty users. Estee Lauder paid almost $1.5 billion to acquire Too-Faced. Other than these, Estee Lauder’s acquisitions over the last couple of years include small to mid-sized companies such as: By Kilian, Dr. Jart+, Glamglow, Frederic Malle, Le Labo, and Rodin Olio Lusso. According to rumors, the company may be planning on acquiring Korean skincare brand, Drunken Elephant in the near future.
L’Oreal, on the other hand, spent almost $1.2 billion to buy U.S. based prestige beauty company, I.T. Cosmetics last year and towards the end of 2016, it decided to acquire three active cosmetics brands — CeraVe, AcneFree, and Ambi from Valeant for $1.3 billion. In July 2016, L’Oreal announced the decision to buy luxury perfume brand, Atelier Cologne.
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The trend currently is to buy brands that fulfill some of the following criteria:
- Popular among the millennials
- Niche brand appeal
- Help the company in gaining market shares in matured markets such as North America
- Innovative product formulation
- Caters to a diverse beauty user base thus providing the opportunity for global expansion
- Has an impressive digital following or is backed by popular beauty bloggers
This brings forth the disadvantage of the brand’s uniqueness being lost under the umbrella of a gigantic beauty company. One of the things that these big beauty leaders need to keep in mind is that they need to maintain the authenticity of the brands in order to keep growing their user bases. Most of these independent brands are popular because of the uniqueness of their products and brand appeals. Hence, it is extremely crucial to preserve that niche appeal rather than transforming the acquired brand into just one of the many brands under the big beauty company’s umbrella. The customers or fan followings for these brands are mainly attracted by their authenticities and hence it is crucial to retain the brand in its pure form and not mold it into something to suit the beauty giant’s brand image.
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Have more questions about Estee Lauder and L’Oreal? See the links below.
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