In modern business civilization, capital is the wind vane, especially in fashion, especially the beauty industry.
Capital with a keen sense of smell often reveals the development trend of the industry in the first place, and in the past 2022, the capital flow in the beauty field has outlined a clear new global beauty pattern and laid the groundwork for the direction of the industry in 2023.
Despite the market headwinds of inflation, energy crisis, and rising raw material prices, beauty investment and financing in the international market remain active as a whole. Large companies with deep pockets can consolidate their ability to resist risk and continue to grow in a volatile market through investment and acquisition, while weakly established independent brands can use the power of capital to achieve rapid business expansion.
These strategic choices are also linked to the stalling of IPOs brought about by high interest rates and falling valuations, and when the era of inflated valuations ends, a large number of well-funded mature companies may create a buyer's market.
China's beauty industry, which has faced many setbacks in the past year, has also shown resilience and vitality, with large groups actively investing abroad to accelerate their expansion plans in categories, brands and markets, gradually maturing from a single main brand to synergy. The upstream and downstream companies in the beauty industry that have completed market accumulation in China's economic take-off are actively seeking to go public, and the new development space brought by large-scale financing will also bring new changes to China's beauty industry.
As China's beauty industry recovers, the business environment gradually improves, and market confidence gradually recovers, the investment and financing boom of the past few years may return, injecting new vitality into the industry.
Large groups accelerate the refinement of their brand portfolios
Late last year, the dust settled on the high-profile Tom Ford acquisition, which Estée Lauder paid about $2.3 billion for the $2.8 billion acquisition, the company's largest acquisition to date. Despite the recent decline in performance and downward revisions to future expectations, Estée Lauder has not abandoned its M&A plans, and Tracey Travis, the company's executive vice president and chief financial officer, said that it continues to actively look for brands that align with its portfolio strategy even with higher capital costs.
Estée Lauder acquires Tom Ford
This has also been a common choice for beauty giants over the past year, and another high-profile deal last year was naturally Puig's acquisition of a majority stake in Byredo, and although industry analysts believe that the brand has a reasonable valuation of $1 billion, adding this hot brand to the brand portfolio will undoubtedly greatly improve the company's growth expectations, just as Estée Lauder's executives are also very bullish on Tom Ford's contribution to overall performance.
Puig acquires a majority stake in Byredo
The acquisition of relatively niche and younger brands by large beauty groups helps them get a head start on the emerging track. P&G and Shiseido acquired microecological skincare brands Tula and Gallinée, respectively, and Clarins and L'Occitane acquired "pure" beauty brands Ilia and Grown Alchemist, respectively, to quickly establish a voice in new areas.
At the same time, the addition of new brands also means the opening of new markets.
In the case of the Korean beauty industry has been hit hard, Korean beauty companies that used to rely on the Chinese market have also begun to look for a new way out, turning their attention to the US market, Amorepacific and LG Life Health respectively acquired the American luxury skin care brand Tata Harper and the American mass beauty brand The Crème Shop to compete for market share in the United States.
Amorepacific acquires Tata Harper, an American luxury skincare brand
After establishing the development direction of the "beauty golden delta" in China, Japan and South Korea, L'Oréal Group has also stepped up its investment in the innovation power of these three countries, such as L'Oréal's first venture capital in Japan last year - a minority investment in Japanese personalized beauty company Sparty.
Puig, which has been active in the capital markets last year, also acquired a majority stake in Colombian natural beauty brand Loto del Sur and Ayurveda beauty brand Kama Ayurveda to expand its market in Latin America and India.
Unilever, on the other hand, is betting on the Southeast Asian market and officially entering this emerging market with huge potential through its venture capital investment in Indonesian independent beauty brand Esqa.
Puig acquires a majority stake in Ayurveda, an Ayurveda beauty brand
In addition, beauty giants are also transforming their overall strategies through large-scale asset adjustments, such as Estée Lauder's acquisition of Tom Ford, which is considered the beginning of its entry into the fashion and luxury space; Shiseido continued to consolidate its strategy for future Skin Beauty, following the sale of its personal care business and some color cosmetics brands to Henkel in the Asia-Pacific region. Unilever hopes to strengthen its health business by acquiring GlaxoSmithKline's consumer health business, but amid many criticisms, even if it spends 50 billion pounds, the acquisition has not succeeded, and even led to Unilever's senior figures and the restructuring of the group's business structure, especially showing that the lack of targeted and brutal acquisitions can no longer be a good strategy for large groups to face the new era.
Looking at the capital market last year, it can be found that luxury beauty is still one of the most concerned tracks, and as more different types of enterprises upstream and downstream of the industry chain join the battle, the competition in this field will become more intense.
Founder of Violet Grey, Cassandra Grey
Last year, Farfetch announced that it would acquire high-end beauty retail platform Violet Grey, which will not only launch the beauty category, but also Violet Grey founder Cassandra Grey will incubate and promote the development of new brands as a co-founder of NGG Beauty.
In particular, the beauty industry may usher in a heavyweight competitor - Kering. After Kering's managing director, Jean-François Palus, publicly stated that "all options [related to the beauty business] are open," the possibility of the luxury giant's return to the beauty world sparked a lot of discussion. If Kering does have this plan on the agenda, then its takeback of outsourced operations or acquisitions of other beauty companies and brands may already be in the pipeline.
International beauty giants bet on China's innovative power
In the global beauty industry, China is no longer just a key consumer market and manufacturing powerhouse, and the innovation power from China has begun to become a new target for multinational beauty groups.
With the rise of beauty companies with both local strength and vision, international beauty giants have begun to expand their investment in China, and this investment is also moving towards incubation, cooperation and co-creation. In the past few years, L'Oréal, Shiseido, Unilever, Beiersdorf and other companies have invested or incubated nearly 100 projects in China through direct or indirect means.
Last year, L'Oréal and Shiseido's investments in China were particularly eye-catching.
L'Oréal established its first investment company in China, Shanghai Meifang Investment Co., Ltd., dedicated to investing in innovative beauty technology, and the company's first venture capital target was a local high-end perfume brand, echoing the rise of local perfume brands in China in recent years.
L'Oréal invests in local high-end perfume brands
Shiseido also set up a special investment fund in China, Ziyue Fund, and the first investment was invested in Jiangsu Chuangjian Medical Technology Co., Ltd., a recombinant collagen biomaterials company, betting on the potential track that many domestic companies have already entered.
Fueled by new technological trends such as digital technology, artificial intelligence, biomedicine, and big data, China is becoming an aggregation place for new technologies, new products and new models in the beauty industry. Investing in Chinese up-and-coming companies is also the only way for foreign beauty giants to accelerate the localization process, and such investment may become a strategic choice for more and more overseas beauty companies in order to continue to cultivate the Chinese market in today's increasingly diversified and personalized beauty needs.
China's beauty group embarks on the road of investment and expansion
Following Yixian E-commerce and Yumei, two more Chinese companies acquired overseas brands last year, taking a step further on the road to internationalization.
As an important domestic brand agent, Shuiyang began to become the owner of its cooperative brands, and the beauty group with brands such as Yunifang acquired a 90.05% stake in Evidens de Beauté for a total transaction value of about RMB 330 million. Chinese beauty brand Ushopal acquired British luxury skincare brand Argentum, which also invested in French salon brand Juliette Has A Gun.
Shuiyang acquires 90.05% of Evidens de Beauté
Although the competitiveness and influence of domestic brands are becoming stronger and stronger, it is undeniable that the earliest batch of rising brands are mostly low-end, in the high-end market, the voice of domestic products is not enough, through the acquisition of overseas luxury beauty brands is a "shortcut" for local beauty companies to go high-end and internationalization.
It is also worth noting that both companies play the role of "service providers", and Ruo Yuchen also invested tens of millions of yuan in domestic skin care brands last year, and in the capital market, beauty brand service providers are gradually coming to the forefront.
Although there is no foundation for developing brands, these companies have rich experience in brand operation, especially for overseas brands can provide a strong boost, on the other hand, the decline of e-commerce dividends, shrinking development space for agency operations has led to their performance decline, through investment acquisition to transform brand owners is also their way out to find new growth space, as the brand matrix of these companies continues to grow, beauty service providers may rise to become a new pole in the competition of Chinese beauty brands.
Chinese beauty brand group Ushopal acquires British luxury skincare brand Argentum
Other local beauty groups naturally did not lag behind in this trend of investment expansion, and began to increase investment in cutting-edge brands, and in the selection of investment objects, they paid special attention to making up for their own shortcomings, such as Bethany investing in makeup brands with Winona as the main brand, while Shanghai Jahwa, which mainly focuses on personal care and skin care tracks, entered the fragrance field through investment.
At the same time, these companies have also set up investment funds to better grasp the new market trends, accelerate the expansion of brands and category matrices, this asset strategy that has been widely adopted by international beauty giants has now become a weapon for local enterprises to develop themselves, which shows that Chinese large enterprises have stronger strength and are moving towards a mature stage.
Chinese beauty companies have ushered in a wave of listings
Although the enthusiasm of capital for China's cutting-edge start-up brands declined last year due to the macro environment, on the other hand, mature companies that have completed years of market accumulation have sought to go public, opening the next stage of development and stirring up the competitive landscape of China's beauty industry.
Hanshu's parent company, Shanghai Mei Shares, is listed on the Hong Kong Stock Exchange
In terms of revenue, the revenue of Shanghai Mei and Juzi Biotechnology, which were successfully listed on the Hong Kong Stock Exchange last year, reached 3.619 billion yuan and 1.553 billion yuan respectively in 2021, and the revenue of Huanya Technology and Silkia, which have submitted prospectuses to the Shenzhen Stock Exchange, reached 2.157 billion yuan and 1.65 billion yuan, which can compete with major Chinese beauty listed companies such as Marumi and Lushang Development. As these companies further expand their financing through listing, there will be more possibilities for their future development.
In addition to beauty brands, a number of upstream and downstream enterprises in the industry also opened the road to listing last year, packaging materials manufacturers Bai Xinglong and Zhongrong Printing, raw material enterprises Yaxiang Fragrance, e-commerce service provider Aoki Co., Ltd. successfully listed, beauty OEM Bawei Co., Ltd. entered the Beijing Stock Exchange listing guidance period, e-commerce service providers Larami, Dataju Zhilian and Tiantu Investment focusing on the beauty track hit the IPO of the Shenzhen Stock Exchange.
As an important manufacturing base and consumer market in the global beauty industry, supply chain enterprises have ushered in a development dividend period in the context of economic globalization, but as many brands have begun to pay attention to the integration of upstream and downstream capabilities of the industrial chain, the development of some supply chain enterprises has encountered bottlenecks, and listing and financing may bring them new growth opportunities. WWD