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Last year was difficult for many emerging economies and the trend is set to continue for 2016. But of the

BRICs, it looks like Brazil is up against the toughest challenges. Business there has been far from easy for some time, with the devaluation of the real, price increases and higher taxes all taking their toll on consumer spending. However, it appears the situation is going from bad to worse given the current political dysfunction in the country and the prospect of a return to rampant inflation. Key Brazilian industry players have said

they are bracing themselves for lower growth in 2016. The question is how foreign companies will deal with this situation while

simultaneously fighting lower growth in other emerging countries and a still lackluster economy in Europe. It was reported that US-based retailer Walmart is considering closing up to 30 stores in Brazil due to the country’s economic woes. While closing doors or shrinking operations may be a last-resort measure, less investment, more price promotions and offering more generous credit facilities are likely to be prominent features in the market this year in a bid to get Brazilians to spend again.

The battle for Brazil The buzz 2News roundup

Netwatch 6 Social media monitor

Interview 7Puig coo Javier Bach

Insight 9M&A analysis

Store visit 14 Galeries Lafayette Haussmann’s new ground floor beauty space, Paris

Oonagh PhillipsEditor in [email protected]

www.bwconfidential.com The inside view on the international beauty industry January 7-20, 2016 #123

News headlines daily on www.bwconfidential.com @BWCbeautynews

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News roundup

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At a glance...

Strategy

Direct-sales firm Avon has confirmed it is to partner with Cerberus Capital Management in a bid to turn itself around. The two companies have signed a partnership worth $605m through which they claim will drive enhanced focus on international markets, revitalize Avon’s North American business and deliver long-term value to shareholders.Through the deal, affiliates of Cerberus, which specializes in company turnarounds,

will make a $435m preferred stock investment in Avon Products Inc. Meanwhile, Avon North America will be separated into a privately held entity into which Cerberus will invest $170m in exchange for an 80.1% ownership stake. The deal has been approved by Avon’s board of directors and is expected to close in spring 2016.Cerberus plans to invest in marketing and recruitment, simplifying business processes

and updating the product portfolio of the Avon North America business, which includes operations in the US, Canada and Puerto Rico. Steve Bosson, currently vp of finance and business operations for the company in North America, will become leader of its transitional team, while Pablo Muñoz, president of Avon North America, will leave on January 4. Cerberus plans to name a new ceo for Avon North America.Following the announcement, critics suggested that Avon had practically given away

its North American business—the sale of an 80% stake for $170m effectively values the firm’s business in the region at only $212m.Activist investor group Barington Capital, which owns 3% of Avon’s outstanding share

capital, issued a statement saying: “Cerberus clearly recognizes, like us, that Avon is an extremely valuable brand. The Avon board apparently does not—it has sold 80% of its North American business and a 16.6% stake in the Company at what we believe are ‘fire sale’ prices.”

Private-equity firm Catterton, LVMH and Groupe Arnault, LVMH chairman and ceo Bernard Arnault’s family holding company, have agreed to combine their private-equity activities within a joint entity, to be called L Catterton. The partnership will combine Catterton’s North and Latin American holdings with LVMH and Groupe Arnault’s L Capital and L Real Estate franchises, which are active in Europe and Asia. L Catterton will be 60% owned by its partners and 40% by LVMH and Groupe Arnault. It will be the world’s largest global consumer-focused investment firm, according to the company. The transaction is expected to close early this year. Both vehicles have significant beauty holdings—Catterton recently took Steiner Leisure private, and also owns CoverFX, Intercos and Strivectin, while L Capital controls Chinese facial mask brand Marubi. n n n

Stay informed with our daily news headlines on www.bwconfidential.com

n Avon North America to go private with Cerberus deal

n Catterton, LVMH and Groupe Arnault create global investment firm

n L’Oréal to acquire Raylon Corp assets

n Pola Orbis restructures international operations

CONFIDENTIAL CONFIDENTIAL CONFIDENTIALCONFIDENTIAL CONFIDENTIAL CONFIDENTIAL

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n n n L’Oréal USA has signed an agreement to acquire assets of Raylon Corporation, a full-service wholesale distributor of salon professional products. The acquisition will expand L’Oréal’s professional distribution division, SalonCentric’s coverage of salon professional products in Pennsylvania, New Jersey, Delaware, and portions of Maryland, West Virginia and New York, representing around 3,500 salons.L’Oréal USA has been purchasing salon distributors since 2007 to better control its

brands and prevent diversion. L’Oréal created SalonCentric as a distributor of salon professional products in 2008; it operates in 48 US states.

Japanese company Shiseido has pulled out of its joint venture in Turkey. Shiseido sold its 51% share in Shiseido Kozmetik Anonim Sirketi to its joint venture partner Vepa DıS Ticaret Limited Sirketi. Subsequent to the new agreement in Turkey, Vepa becomes Shiseido’s distributor there. Shiseido has been pulling out of direct business in certain international markets as part of its Vision 2020 strategy, preferring to entrust its brands to key distribution partners. In other news, Shiseido announced that it has purchased the Serge Lutens trademark.

Shiseido began negotiating the purchase of the trademark in March 2015. The deal is intended to enable Shiseido to invest more heavily in the brand, which will include the opening of boutiques in major cities worldwide. The brand is currently sold in 2,000 outlets in 35 countries. Shiseido began working with Serge Lutens in 1980 and Lutens created his own brand in 2000.

Japanese beauty group Kosé plans to establish a subsidiary in Brazil to import and sell its products there. The company said it tentatively plans to register the new subsidiary, which will be wholly owned by the Japanese firm, in March 2016. Kose do Brasil will be based in São Paulo, with Kiyoto Nagahama as its ceo.

Japanese firm Pola Orbis Holdings is restructuring its international operations to drive its overseas expansion and improve synergies between its brands on global markets. Effective January 1, the company established three separate international divisions. The global strategy division, the global business division, charged with international business for the Pola and Orbis brands, and the overseas brand division, under which its international brands Jurlique and H20+ fall. The structure replaces the company’s global business division and separate international arms for Pola and Orbis.

People

US-based Coty has appointed Andraea Dawson-Shepherd to the newly created position of senior vice president corporate affairs. Dawson-Shepherd will lead Coty’s communication and corporate affairs agenda and will report to Coty chairman and interim ceo Bart Becht. Dawson-Shepherd has held senior communications positions at Carlsberg Group, RB (formerly Reckitt Benckiser) and Cadbury Schweppes.

Brazilian beauty company Natura has appointed Andrea Figueiredo Teixeira Álvares as chief marketing officer. Figueiredo Teixeira Álvares was most recently responsible for leading a division of PepsiCo Latin America. n n n

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Millennial women are the heaviest buyers of beauty products in the US, according to a study by analytics firm TABS Group. The firm found that women aged 18 to 34 are twice as likely to be heavy buyers of make-up (defined as purchasing more than 10 types of product a year), and account for 47% of all heavy buyers in the category. This contrasts with most consumer-products categories, which principally target women aged 35-54. Some 28% of all heavy buyers in the study said that YouTube was very important in choosing which cosmetics to buy. In terms of brands, the study found that MAC and Urban Decay are increasing their awareness and penetration, catching up with traditional prestige brands Estée Lauder and Clinique. Mass brands Maybelline, Cover Girl, Revlon and L’Oréal remain the leading brands in terms of awareness, penetration and favorability.

Prestige skincare in France was forecast to see promising sales this Christmas, according to NPD. The market-research group reported that skincare was the best-performing prestige beauty category in 2015, with value sales up 1% in the period to end November to reach €461m. This represents an additional €4.5m compared with 2014. The overall prestige beauty market in France declined 0.7% over the period, with

fragrances down 1.5% and make-up sales up 0.7%. NPD said skincare benefits from an attractive price positioning, with an average price of €50 compared with €59.14 for a fragrance. In addition, small-format skincare products (less than 30ml) provide consumers with an entry point to well-known brand names.Key products for the holiday season include gift sets, men’s skincare (which represent

7% of the total skincare market in December), anti-aging, moisturizers and bodycare. Targeted skincare products, such as those for the eye area or lips, were predicted to do well, as were cleansing brushes, lotions and masks.NPD outlined that communication

campaigns focusing on radiance and beautiful skin rather than just anti-aging also furnishes the category with more positive associations, especially for gift giving.In terms of brand, NPD said the top-five

skincare lines in the year to November were Clarins Multi-Intensive Haute Exigence, Clarins Multi Regenerant, Dior Capture Totale, Estée Lauder Advanced Night Repair and Sisley Sisleÿa.Some 12% of the skincare market’s

sales in France are done in the month of December. Elsewhere in Europe, prestige skincare saw

growth of 2% in Italy in the year to November, and an increase of 3% for both Spain and the UK. n n n

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The

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n n n Launches

French brand Sisley has updated its bestselling Sisleÿa product, originally launched in 1999, with what it describes as a “3D anti-aging formula.” Sisleÿa L’Intégrale Anti-Age will replace the existing Global Anti-Age product in the brand’s offer on February 15.As well as targeting genetic and environmental factors that affect the way the skin ages,

the new product will also act against lifestyle factors like smoking, lack of sleep and diet. In the new formula, lindera extract works to resynchronize the skin’s bio-rhythms, Persian acacia extract promotes optimal energy production in the cells to fight against cellular fatigue, and a yeast and soya bean extract works to protect cellular DNA, the brand says.The new Sisleÿa is available in normal and extra-rich versions, and is priced at €350 for a

50ml jar. Sisleÿa has consistently been the brand’s bestselling anti-aging product since its launch and in 2014 sales of the product grew 8%, according to Sisley.

Shiseido-owned BareMinerals is introducing a major new skincare franchise in January. The Skinsorials line is designed to awaken the skin and maintain its health and vibrancy. The line includes SkinLongevity Vital Power Infusion serum, based on Japanese superfood chomeiso or “long life herb” from the island of Okinawa, as well as four cleansers and four moisturizers for different skin types and needs. The launch this month in the US is supported by a TV, print, digital and social media

campaign. An international rollout in Europe and Asia will follow from July.Skinsorials replaces the brand’s existing skincare offer, which launched in 2011.

French fragrance brand Annick Goutal (Amore Pacific) is adding a new fragrance to its offer in February. Rose Pompon is inspired by a fictional centifolia or “cabbage” rose, and was created by Camille Goutal and Firmenich perfumer Philippine Courtière. The new EdP hits markets worldwide on February 1, priced at €97 for 50ml and €104 for 100ml.Annick Goutal is also adding to its skincare line, which relaunched in October. In

February it will introduce three new products to the line: a body scrub, face mask and scented candle, with prices ranging from €58 to €60.

Trade shows

French fashion trade show Tranoi, taking place in Paris from January 23-25, will introduce a niche fragrance area for the first time. The Tranoi Parfums “show within a show” will feature more than 20 fragrance brands, including Absolument Parfumeur and Liquides Imaginaires. Tranoi has partnered with Italy-based distributor Intertrade for the event.

Comunication

L’Oréal-owned Kérastase has recruited supermodel Anja Rubik to be the new face of its Visions of Style campaign. Rubik will feature in a series of 10 photos showing different hairstyles created with the brand’s new reshapeable heat lotion L’Incroyable Blowdry. The product will launch in February and is the first item to feature L’Oréal’s patent-pending reshapeable microwax technology. n



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BW Confidential reports on what’s being said about beauty on social networks

Social media monitor

Visitors to NYX Cosmetics’ first stores in California, US have compared the experience and layout to Sephora, while the absence of in-store exclusivities or loyalty programs disappointed some.

Charlotte Tilbury’s first store in London has received praise from writers who love its vintage Art Deco interior, as well as features like the social media wall.

Beauty subscription sites continue to attract attention as newcomers like fragrance subscription service Scentbird (pictured) or men’s-themed Gentleman’s Box offer new concepts or more flexible choices and better deals.

Bloggers have reported an onslaught of new products and packaging inspired by Pantone’s new trend shades for 2016, but readers are also expressing a lack of interest in the concept.

Recent reports about popular Instagrammers losing followers after showing unglamorous selfies or unmasking the reality behind the perfect Instagram shots has led many bloggers to react, criticizing the ‘unreal’ worlds created on social media.

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Puig coo Javier Bach talks to BW Confidential about industry challenges and the company’s strategic priorities

Moving up

How are you progressing with your aim to be number three in the fragrance market by 2020?We are growing share, and we are growing ranking. With the integration of Gaultier we expect [to continue on] that path. Our ambition is to be a leading company in the fragrance arena with a market share [that makes] our business model sustainable. With the incorporation of Jean Paul Gaultier and the plans we have for the coming years, we are on track to reach [our] objective. [in 2013, Puig announced its objective of having a 12% share of the global fragrance market by 2020].

How is your business performing?Overall, business is positive. 2015 has been a year of stronger innovation; we had the launch of Olympéa for Paco Rabanne, which has been very successful, and L’Extase for Nina Ricci. We have also reinforced our efforts in terms of investment behind our existing business to keep gaining share. In general, all regions are growing. One special case has been Brazil where we saw the economic and political crisis impacting our business. Moreover, it has been a year of increased exchange rate volatility, especially in Latin America, but the dollar is helping and the overall effect will be positive.

How are the recent changes in China impacting your business?Since we are mostly focused on fragrances, our business in China is still proportionally smaller than other players in the industry. What we have seen in China is a change in the market, with e-commerce taking a bigger part of the pie, and that’s interesting to understand how the market is evolving for fragrances. We still see a lot of outbound travelers buying, but it has moved from Hong Kong to other areas like Korea and Japan. It’s interesting to follow the behavior of the Chinese consumer. Probably the most difficult part right now has been to assess how much e-commerce is taking of the whole pie. Cross-border trade has become a big reality, so the question is how is this going to impact brick-and mortar retailers’ interest in further developing the category in China.

What major challenges do you anticipate over the coming year?Currency volatility is one of the challenges everybody is facing. We have rarely seen these kinds of ups and downs. Another phenomenon is the [segmentation] of the offer. There is very clearly a trend towards niche and premium brands. Third is consolidation; recent moves from our competitors will have an impact in the industry.

How are you structuring your portfolio in response to the market segmentation you describe?With the acquisition of Penhaligon’s and L’Artisan Parfumeur, we have established ourselves in the niche segment, while with brands like Prada, Valentino and Comme des Garçons, we have structured our premium segment. In prestige, we have Paco n n n

Puig coo Javier Bach

Puigl Key brands: Prada, Valentino,

Comme des Garçons, Nina Ricci, Carolina Herrera, Paco Rabanne,

Jean Paul Gaultierl Net sales 2014: €1.51bn

(+0.6% vs 2014)l Net income 2014: €177m

(+0.8% vs 2014)l International sales: 86%

of total l Global fragrance market

share 2013: 8.6%

“

”Puig coo Javier Bach

Consumers have reacted positively to a more premium offering. [...] Niche, for us, is something that we are going to treat exclusively and very slowly



Inte

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w Puig coo Javier Bach

s Puig has been working on the segmentation of its offer

n n n Rabanne, Carolina Herrera and Nina Ricci. Jean Paul Gaultier will strengthen that segment. Every segment has different dynamics in terms of growth, how to develop the brands, branding, storytelling and retail. This segmentation of the offer is accelerating.

How do you see the niche category developing?It will depend on how the different players understand the category and want to drive it. There could be a risk of commoditization if people want to extract value from it with a short-term perspective. There will most probably also be a Darwinian process by which only those brands with a clear equity will survive. In any case we see it as a clear opportunity and a reality that is developing. Consumers have reacted positively to a more premium offering. Niche, for us, is something that we are going to treat exclusively and very slowly, we want to pamper it.

What are your expectations for travel retail?Travel retail is a growing channel. The number of passengers is growing year-on-year, and in that sense we have to look across any temporary turbulence. For us, it’s a key strategic channel. More and more, we have to differentiate from the local market, and use a focused approach to travel retail as a branding platform.

What is needed to boost sales in travel retail?You don’t want to experience the same thing everywhere. The experience you have and the mood of the consumer in an airport is not the same as when you are downtown or in a shop close to home buying something on a more regular basis. In that sense, understanding how the consumer behaves and what they expect and how you can excite them in different situations is very interesting. The big challenge in airports is penetration, how many people are entering the stores and actually buying.

How do you plan to develop your own travel-retail offer?We have a differentiated approach for our different brand clusters in the channel. The offering we have in each airport is something that we will tailor-make by location. All this is adding complexity, but it is the name of the game now. Some other categories are doing a greater job at innovating than ours, for instance when you see the spirits category in travel retail, it’s very interesting. We have to keep innovating and thinking out of the box and try to excite consumers and give them real experiences. n

s The 2015 launch of Olympéa from Paco Rabanne has been a success for the company

”Puig coo Javier Bach

Currency volatility is one of the challenges everybody is facing. We have rarely seen these kinds of ups and downs. Another phenomenon is the [segmentation] of the offer. There is very clearly a trend towards niche and premium brands

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From both a brand and retail perspective, major deals over the past year are set to have a lasting impact on the market. The M&A activity of 2015 was significant,

from Coty’s proposed acquisition of 43 of P&G’s beauty brands—thereby almost doubling its sales—and Dufry’s takeover of World Duty Free, which followed its acquisition of Nuance, to CVC Capital Partners’ purchase of Germany perfumery chain Douglas, and Walgreens Boots Alliance’s announcement that it would acquire US rival Rite Aid. Another major deal was Cerberus Capital Management’s $605m bailout of Avon, announced in December, which will take the company’s North American business private.Such mega-deals are game changers and likely to impact the industry as a whole

when it comes to competition as well as negotiating power. But given their size, they are likely to be one-offs, according to industry observers, and say little about the overall M&A landscape.Another significant move over the past year has been Unilever’s expansion into

prestige beauty through its acquisitions of Kate Somerville, Dermalogica, Murad and Ren. Observers suggest the company is likely to continue to invest in the category over the coming months and years.According to Brand Growth Management principal Kelly Kovack, part of the boom

in M&A activity over the past two years has been due to potential acquirers—whether strategic or financial—having sat on their cash through the recession. “There has been a lot of money sitting on the sidelines,” she says. “And there have been a lot of great brands that have come into their own and are finally at a revenue point where they are acquisition targets.”

Deals get smallerDespite these major acquisitions, in general, observers say deals are getting smaller. This is partly because there are fewer large targets available on the market due to the consolidation trend of the past few years. “There are only a limited number of brands [that] will be available to be sold by their corporate owners, as it would mean a radical change of strategy,” comments M&A firm Ohana & Co managing partner Ariel Ohana. “As a result, most transactions will continue to be on companies that are still founder- or private equity-owned, which in turn suggests companies with sales from $15m to $250m.” n n n

The year 2015 was a busy one for mergers and acquisitions, with a slew of deals set to change the face of the industry. BW Confidential analyzes the impact of recent acquisitions on the market and what’s set to come in M&A in 2016

Buying in

M&A analysis

“You will see more [acquisitions] where larger companies are acquiring service providers or creative agencies to bring capabilities in house quickly

”Brand Growth Management principal Kelly Kovack

Number of beauty deals Jan-Sept 2015 vs Jan-Sept 2014: 64% growth in number of deals: 52%Source: Intrepid Investment Bankers

Beauty’s major deals in 2015


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n n n Indeed, analysts highlight Unilever’s strategy as of particular note. “It is an interesting strategy,” Ohana comments. “It will continue to acquire medium-sized companies, but at a certain point, it will probably have to look at bigger acquisitions.”But the trend for smaller deals is also down to the cyclical nature of the industry.

“The pendulum has swung back and you’re seeing strategic buyers lowering their bars in terms of sales level,” says Steve Davis, managing director and head of the beauty and personal care practice at Intrepid Investment Bankers, who sees Estée Lauder Companies as a prime example of a company that in the past sought out larger deals, but has recently made smaller acquisitions, like those of Rodin Olio Lusso, Le Labo, Editions de Parfums Frédéric Malle and GlamGlow, all announced at the end of 2014.And the success of certain indie brands, largely thanks to retailers like Sephora

and Ulta, has made the category attractive to both strategic buyers envious of these brands’ high growth rates and for private-equity firms looking for returns. According to Brand Growth Management’s Kovack, interest is likely to turn to even smaller brands in coming years. “You’re seeing incubator funds popping up in the beauty space,” she says, adding that they are looking at much smaller investments in brands with sales starting from $2m. “The horizon to scale a business like that looks very different, but if you have the appetite for it, the potential for returns is huge,” she comments.

Seismic center for M&As shifts to the USWhile in recent years, much of the industry’s attention had been towards driving deals in emerging markets, in 2015, attention turned towards the US, where the market has been most dynamic, Ohana observes. “The US is at the center of the M&A world at the moment. If you look at other regions, the market remains active, but no more so than in previous years,” he says. “The only exception concerning the BRICs is Coty’s acquisition of Hypermarcas, which is significant, but most of the activity has been in the US.”This is due to the US market’s

appetite for innovation and entrepreneurship, observers note, as many of the smaller brands to arrive on the market, particularly in make-up, have been created there, and consumers are n n n

Main supplier acquisitions in 2015 Date Target company Acquirer PriceJuly 2015 Lucas Meyer Cosmetics IFF €238mAugust 2015 Induchem Givaudan N/ASeptember 2015 Pinova Holdings Symrise $397mTo close January 2016

Topline Products PSB Industries N/A

Source: BW Confidential

Main niche and indie brand acquisitions in 2015 Date Target company Acquirer PriceMarch 2015 Kevyn Aucoin Manzanita Capital N/AJune 2015 Mallygirl Beauty Visions N/AJuly 2015 Tata Harper Alliance Consumer

Growth$5-15m (est.), minority investment

September 2015 Sonia Kashuk Target N/ASeptember 2015 Clive Christian EME Investments N/ANovember 2015 Nudestix Alliance Consumer

GrowthN/A, minority investment

Source: BW Confidential, Brand Growth Management

”

“The pendulum has swung back and you’re seeing strategic buyers lowering their bars in terms of sales level

Intrepid Investment Bankers md and head of the beauty & personal care practice Steve Davis


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n n n more open to using new brands. Over the past year, acquisitions have included Too Faced’s purchase by General Atlantic, Beauty Visions’ buyout of Mallygirl and Manzanita Capital’s deal to take over Kevyn Aucoin.Another aspect that characterizes several recent deals is their cross-category

nature, with retailers in particular becoming increasingly active in purchasing brands. Walgreens Boots Alliance’s purchase of Liz Earle is one example, while Target also bought the Sonia Kashuk brand. “I think retailers buying into brands is a trend to watch for the coming years. Retailers are looking for a model for in-house brand development, and an acquisition is one means of doing this,” Ohana observes.

Bringing new capacities in houseStrategic buyers are also beginning to look beyond brands in their acquisitions, snapping up tech firms, for example, to bring certain expertise in house. Coty announced plans to buy digital marketing specialist Beamly in October, while on another level, Elizabeth Arden Red Door Spa bought in-office beauty services specialist Manicube. “I think you will see more of this kind of acquisition, where larger companies are acquiring service providers or creative agencies to bring capabilities in house quickly,” Kovack observes. “From an M&A perspective in the beauty space this is the first time technology has really become part of the equation; it’s almost a whole new category for M&As.” Due to a finite number of brands coming up for sale, buyers are likely to dig further into such categories.There have also been plenty of deals between suppliers. “You’re seeing M&A

happen on the supply side almost in the same frenzied way that you’re seeing it on the brand side,” says Kovack. Giants Dow Chemical and DuPont announced they were to merge in December, while PSB Industries bought Topline Products and MWV merged with RockTenn to create WestRock last year. In ingredients, Symrise bought Pinova Holdings, and Givaudan acquired active ingredients manufacturer Induchem, to name just a few deals.

Who’s buying in?On the acquirer side, meanwhile, one company that has accustomed the industry to making regular investments has been largely absent from the marketplace this year—market leader L’Oréal. The firm closed its purchase of Niely Cosmeticos in Brazil, announced in September 2014, and purchased The Body Shop’s Australian franchise operations, but did not announce any major new investments. As for other players, observers suggest Coty and Unilever are likely to continue

to make acquisitions, as well as Estée Lauder Companies and potentially Puig. Interparfums, which finalized its purchase of Rochas in June, recently announced it was looking at potential targets as it continues to compensate for the loss of the Burberry license. Intrepid’s Davis also predicts that companies that have been largely absent from the market in recent years could soon be looking to make acquisitions again, citing Japanese firms Shiseido and Kao as examples.Private-equity firms are also expected to maintain their interest in the beauty

category, which they see as relatively recession-proof, competing with n n n


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n n n strategic acquirers for the hottest assets, particularly in the US.Looking ahead, industry observers suggest that M&A in beauty will continue

to be strong in 2016. “We are expecting a very strong M&A year on the beauty care side for 2016, obviously subject to the economic environment,” says Davis.“If the global economic context remains similar to this year—that is with

growth in the US, stagnation in Europe and strong, but slowing growth in Asia—there is no reason for things to slow down,” says Ohana. “Both strategic buyers and private-equity firms are continuing to seek out targets.”Appetite for deals looks set to continue within make-up, although demand

is expected to pick up in skincare and especially niche fragrance, where new brands are expected to come onto the market. “The niche fragrance business is a place where you will see more activity, and it will also be on a smaller scale because a lot of the niche brands are not at that $20-30m mark that is the usual sweet spot for acquisitions,” says Kovack. “There are a lot of opportunities, and there are a lot of fantastic brands out there.”“Make-up will continue to be interesting in the US,” Ohana comments. “In

Europe, there are not many targets, so I think it will be more skincare and fragrances, and we can expect more transactions in niche fragrances.”And while Coty is not expected to fully integrate P&G’s portfolio until the

second half of 2016, some observers suggest that when it has done so, this could potentially result in a few interesting brands coming onto the market. Watch this space. n

Coty/P&G After months of rumors, Coty announced in July that it would acquire 43 beauty brands from Procter & Gamble for $12.5bn, leaving P&G with just Olay, Pantene and SK-II as its beauty holdings. The deal, described as the biggest of the decade, is expected to close in the second half of 2016, and is set to more than double Coty’s sales.

Coty/HypermarcasCoty surprised the market in early November when it announced another acquisition—that of Brazilian manufacturer Hypermarcas’ beauty business, in a deal valued at $1bn. The acquisition is expected to close by March, and will give Coty a foothold to expand its operations in South America, where historically it has struggled to compete.

Unilever/Kate Somerville, Dermalogica, Murad and RenUnilever went on a buying spree in 2015, snapping up Kate Somerville, Dermalogica, Murad and Ren between March and July in a bid to gain a foothold in the prestige skincare category. While the acquisitions were all relatively small compared with the size of their new parent company (with sales of $240m, Dermalogica was the largest), observers have largely praised a coherent strategy and expect Unilever to go on making acquisitions in the segment. n n n

Beauty’s latest acquisitions



n n n Walgreens Boots Alliance/Liz EarleAnnounced in July, Avon’s sale of the Liz Earle brand to Walgreens Boots Alliance for $215.5m highlights a growing trend for retailers to buy into the branded beauty space, and follows the acquisition of Soap & Glory in 2014.

Walgreens Boots Alliance/Rite AidThis deal valued at $17.2bn is expected to close in the second half of 2016, and will bring 4,000 Rite Aid stores to Walgreens’ US portfolio, which currently stands at more than 8,000.

Steiner Leisure/Catterton PartnersPrivate-equity firm Catterton Partners announced it had closed its acquisition of Bahamas-based Steiner Leisure, owner of the Elemis and Bliss brands, in early December for $925m, taking the company private. Catterton has been active in the beauty space for several years, and includes CoverFX, Intercos and Strivectin among its current holdings.

Dufry/World Duty FreeDufry became the world’s largest travel-retail operator via its acquisition of World Duty Free, giving it a 24% share of the airport retail market globally. It follows the purchase of Nuance in 2014. The deal is expected to have broad implications for brands worldwide.

Puig/Penhaligon’s and L’Artisan ParfumeurPrivately owned Puig announced in January 2015 that it had acquired these two storied niche fragrance brands from Fox, Paine & Company for an undisclosed sum, bolstering its presence in the booming high-end fragrance market.

General Atlantic/Too FacedInvestment fund General Atlantic snapped up a majority investment in US make-up brand Too Faced from prior owner Weston Presidio in June for an estimated $500m. Founded in 1998, the brand was reported to be one of the biggest “indies” on the market.

Interparfums/RochasIn June, Interparfums closed its deal to buy the Rochas brand, including its fashion activity, for $108m excluding inventory, from P&G. The company has been bolstering its portfolio since the loss of the Burberry license in April 2013. While most of its activity is through licensing, it recently said it remains on the lookout for further acquisition opportunities.

CVC Capital Partners/DouglasCVC Capital Partners announced in June that it would acquire German perfumery chain Douglas, the European market leader, in a deal estimated at €2.8bn. The announcement came just days after Douglas revealed plans for a stock market listing that were subsequently scrapped.

M&A analysis

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Galeries Lafayette Haussmann’s new

beauty spacel Opened: Oct-Dec 2015

l Location: Boulevard Haussmann, Paris

l Size: 400m2 (4,306ft2)l Special features:

A focus on niche and exclusive brands including several, like Fresh

and Too Cool for School, making their French debut

French department-store operator Galeries Lafayette has opened a new beauty space within its Haussmann flagship focusing on giving its customers a more experiential

beauty offer with a mix of major international brands, niche labels and exclusives.The 400m2 (4,306ft2) ground floor space, between the store’s main beauty area under

its famous cupola and an accessories and jewelry area, is now dedicated to 14 different brands ranging from accessible to ultra-exclusive, with a focus on offering an experience different from that found elsewhere.“They are all brands that have a story to tell. Our customer is looking for differentiation,”

explains Galeries Lafayette deputy beauty director Caroline Fournier. As such, each brand has a relatively large space to assert its identity and visual codes. “These are brands that, in order to be legitimate, need to be able to fully express their concept,” she adds.Spaces range from MAC’s expanded 50m2 (538ft2) shop-in-shop to LVMH-owned

Fresh’s 13m2 (140m2) corner, its first French point-of-sale. South Korean make-up brand Too Cool for School makes its French debut, while Shiseido-owned Nars, which has limited distribution in France, completes the color cosmetics offer. Haircare is covered by Estée Lauder Companies-owned Bumble & Bumble and Aveda, which offer express services as well as products for sale. French vintage-style apothecary Buly signs its second point-of-sale with a store-in-store. Ex Nihilo and Memo are also exclusives, among the niche and high-end fragrance labels alongside Serge Lutens, Annick Goutal, Atelier Cologne and Yves Saint Laurent’s Le Vestiaire des Parfums.The area, which opened progressively between October and December, replaces stands

for more mainstream fragrance labels, which have now been grouped together in a multi-brand space. “We realized we could no longer compete by offering brands that are available in broad distribution, often at a discount,” Fournier explains. “We’re really happy with the initial results, which have driven incremental sales and are in line with our expectations,” she adds. n

Galeries Lafayette has honed its beauty offer with a new space focused on experience and discovery

Haussmanian home





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s Galeries Lafayette’s new ground floor beauty space stocks a mix of major international brands, niche labels and exclusives

s Several brands, including South Korea’s Too Cool for School, are making their French debut at Galeries Lafayette’s new beauty space

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