Divesting underperforming businesses and adding high-potential categories and brands has long been the norm for beauty giants to actively metabolize, especially in the fierce competition after the epidemic. However, the group's top personnel shocks and business structure adjustments caused by the failure of the acquisition are rare. That's why Unilever's case deserves to be discussed.
On January 15, Unilever confirmed its intention to acquire GlaxoSmithKline's consumer health care business in an announcement, but after being rejected by GlaxoSmithKline and strong protests from the market, Unilever abandoned the acquisition plan and announced on January 25 that it would reorganize the company's business into a "simpler, more category-focused" structure.
GlaxoSmithKline's Consumer Health Division covers oral health, pain management, nutritional supplements and other products, and owns brands such as Comfort, Fenbide, Centrum and so on. In its announcement, Unilever called the division an "attractive leader in consumer health" and believed it would be "a strong strategic fit" in its process of reshaping its product portfolio.
Unilever sent three bids to GlaxoSmithKline, the most recent bid was £50 billion, but all were rejected, and GlaxoSmithKline said in its announcement on the 15th that Unilever "fundamentally underestimated the consumer healthcare business and its future prospects". Despite this, Unilever reiterated its interest in this sector in the announcement on the 17th.
GlaxoSmithKline plans to spin off the consumer healthcare business in 2022
Meanwhile, Unilever's series of actions have sparked much criticism in the market, with the stock price falling nearly 7% on January 17, and in an analysis released on the same day, RBC did not agree with this "strategic fit", arguing that the vitamin, mineral and supplement businesses of the two companies barely overlapped, and that Unilever had difficulty pushing GlaxoSmithKline's over-the-counter drugs to markets such as India, China and the United States, and generally faced the "risk of underinvestment and weak growth". Bernstein analyst Bruno Monteyne argues that "consumer health is not what some consider a high-growth industry", while Unilever's "lack of expertise" in oral care and over-the-counter medicines has limited cost synergies between the other two companies.
Amid the protests, Unilever said on Jan. 19 that it would not raise the £50 billion offer and that the acquisition was over.
Sunny Jain, President of Unilever Beauty and Personal Care
A week later, on 25 January, Unilever announced a major change in its corporate structure, restructuring its business into five divisions: Beauty & Health, Personal Care, Home Care, Nutrition and Ice Cream, and one of Unilever's management stars, President of Beauty & Personal Care, sunny Jain, also left in this restructuring, and his responsibilities will be split into two newly established departments, Beauty & Health and Personal Care. Fernando Fernandez, currently Executive Vice President of Latin America, will serve as President of Beauty & Health, responsible for hair care, skincare, vitamins, minerals and supplements, as well as the luxury beauty division, managing brands such as Ren, Dermalogica, Kate Somerville and Living Proof. Fabian Garcia, president of North America, was named president of the Personal Care division, responsible for skin cleansing, deodorants and oral care.
The news came out and the industry was shocked.
In the midst of the pandemic, beauty giants are accelerating their transformation to adapt to a stressful business environment.
Focusing on luxury skincare, the Shiseido Group sold three cosmetics brands BareMinerals, Laura Mercier and Buxom for $700 million in August, following the completion of the personal care business transfer in July, and more recently, the sale of popular skincare brands Za JiRui and Po Mei.
In February last year, the group unveiled its medium- and long-term business strategy ,"WIN 2023 and Beyond", mentioning that the future strategy of the Skin Beauty business is to strengthen mature high-end skincare brands such as Shiseido and CPB, as well as expand the business of new high-end skincare brands such as Drunk Elephant, Baum and Effectim, which will be launched in 2020 and 2021 respectively.
Shiseido will focus on the development of new brands Baum and Effectim
According to the financial report, Shiseido's performance improved last year, with year-on-year growth rates of 6%, 32% and 5% in the first three quarters, respectively, but it has not yet recovered to the level of 2019, and it is worth noting that Shiseido's growth rate in China has shown a downward trend. In the past two years, Shiseido has continuously strengthened its investment in the Chinese market, including entering the Shanghai Oriental Beauty Valley and cooperating with Boyu to set up an innovation investment fund, but the role of promoting its business has yet to be verified.
L'Oréal also further reflected the importance attached to the Chinese market at the strategic level of the company, announcing the adjustment of the group's regional structure at the beginning of last year, officially establishing the North Asia region, and upgrading Shanghai to the group's north Asia headquarters, emphasizing the driving role of the Chinese market. According to the financial report for the first three quarters of last year, L'Oréal China has maintained a "very high growth rate" in the past two years, with sales during the period increasing by 42.8% compared to the same period in 2019.
Nicolas Hieronimus told BeautyInc before taking over as L'Oréal's sixth global CEO last May that L'Oréal's goal in the post-pandemic era is to "continue to outperform the market", saying: "To outperform the market, you need to be a leader everywhere. ”
L'Oréal DIY hair coloring device Colorsonic and Armani online face designer services
This strategy has yielded remarkable results, with L'Oréal's sales of €27.99 billion in 2020, of which 39% came from skincare, 36% from premium cosmetics, Asia accounted for 35% of group sales and e-commerce accounted for 26.6%, with L'Oréal showing strong momentum in each of its hottest product categories, geographical regions and distribution channels. In the first half of last year, the growth rate of L'Oréal's sales has returned to pre-pandemic levels.
In addition, L'Oréal has also accelerated its technological transformation in the past two years, in addition to launching Beauty Technology Devices and applications such as Perso, Colorsonic, Coloright, Armani Face Designer, Kiehl's Online Skin Tester, Kérastase AI Smart Precision Meter, etc., and has also partnered with many technology companies to drive growth through innovation.
In the early days of the pandemic, Estée Lauder First shifted its focus to online channels and focused on its fastest-growing businesses, including the Asia-Pacific market, skincare and fragrances, while continuing its multi-engine development strategy, generating record sales of more than US$16 billion in fiscal 2021, with sales growing across all sectors and markets in the first quarter of fiscal 2022.
Estée Lauder also continued to optimize its brand portfolio, increasing its stake in The Ordinary parent company Deciem from 29% to about 76% last year, shutting down skincare brand Rodin Olio Lusso and beauty brand Becca, as well as designer fragrances.
Deciem brands
Of BeautyInc's top five beauty companies in the world by sales in 2020, P&G was the only one to see sales growth that year, with the beauty business growing 3 percent, driven by its broad portfolio of brands. Perhaps because of this, P&G has not undergone drastic changes in corporate strategy.
Alex Keith, CEO of Procter & Gamble's Beauty & Johnson Division, said in an interview with BeautyInc last month: "We will continue to support our brand while enabling it to support consumers and communities. She also said: "There are a lot of opportunities in skin care, hair care and personal care tracks, there will always be new and interesting consumers, especially more diverse consumer groups that require more diverse experiences, and I hope that we will boost growth through these areas." ”
P&G's newly acquired brands Farmacy and Ouai
As Alex Keith said, Procter & Gamble has further expanded its brand portfolio in the past year, including the launch of the sensitive skin care brand GoodSkin MD, and the launch of two Z-generation skin care and hair care brands DermaGeek and Nou in partnership with Walmart, and the continuous acquisition of natural skin care brand Farmacy from the end of last year to the beginning of this year, with a high-end beauty brand Ouai and a micro-ecological skin care brand Tula with a line of hair care, body care, fragrance and other product lines.
Perfume giant Coty also sees a huge opportunity in the skincare category, listing luxury skincare products and luxury cosmetics and China business together as the three pillars of the group's development, will release Kim Kardashian's skincare line, restart Kylie Skin and Philosophy, and has developed its skincare brand Lancaster by expanding the number of stores in Hainan, but the group has not yet released specific financial data for the skincare business.
After two years of exploration, beauty giants have gradually adapted to the "new normal" after the epidemic and found a breakthrough in sustained growth from emerging trends, but this road is still difficult.
Over the past two years, Unilever has spun off personal care brands Tigi, Monsavon, Caress, Timotei, Impulse, Q-Tips, dumped the tea business, and pocketed efficacy skincare brand Paula's Choice and three health companies SmartyPants Vitamins, Onnit and Liquid I.V., but analysts and shareholders agree that It needs to dispose of underperforming assets faster and move to hotter categories such as health, beauty and wellness.
Some business commentators also argue that Unilever panicked the takeover because it didn't acquire high-growth businesses as quickly as rivals like Nestlé.
Paula's Choice
In the face of negative feedback from the market, Unilever also said on January 17 that it would "substantially" expand its business in the health, beauty and hygiene sectors, which "have higher sustainable market growth rates and significant opportunities to drive growth through investment and innovation." It also said it would use its "strong presence" in emerging markets to accelerate growth while accelerating the divestiture of low-growth brands and businesses.
L'Oréal and Estée Lauder's business is mainly beauty, and both have many strong brands, have great influence in important beauty markets such as China and the United States, they bloom everywhere, and behind the strategy of icing on the cake is the strength of large groups to deepen the beauty market and the strength of collaborative operations.
While Shiseido relies on focusing on luxury beauty with more growth potential to save the decline, Coty wants to go further to the same high-growth skincare market after eating the dividend of luxury perfumes, and Procter & Gamble continues to enrich the brand portfolio of luxury beauty on the basis of the two aces of SK-II and Olay, which are strategic choices they make according to their own situation.
So why is Unilever chasing the health business?
Judging by Unilever's financial data, the company's food and beverage division has performed well after the outbreak, decelerating less than other segments in 2020, and the food and beverage division grew by 6% in the first quarter of 2021, when the beauty and personal care turnover decreased by 5%. In Unilever's 2021 financial report, the strong growth of functional nutrition has been specifically mentioned, alongside the luxury beauty department, while the growth rate of luxury beauty in the first half of 2021 reached 27%. It can be seen that Unilever plans to expand the health category and also hopes to take advantage of the opportunity to promote the growth of the company's performance.
However, as mentioned earlier, GlaxoSmithKline's consumer healthcare business is not well aligned with Unilever's existing business and is not necessarily the ideal choice for Unilever's plan.
After the initial chaos, the future development trend of the beauty industry has gradually become clear, and the beauty groups want to seize the opportunity in the high-growth potential market with strong strength, but how to measure their own operating conditions and choose the development strategy that suits them best is still an important challenge they need to face. WWD
(Thanks to Samantha Conti for his contribution to this article)
Written by Lee
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