For more than $2.5 billion, L'Oréal acquired premium cosmetics brand Aēsop, its largest acquisition to date. On September 1, a reporter from Beijing Business Daily learned from the relevant person in charge of L'Oreal that L'Oreal has completed the acquisition of Aēsop. There are two statements about L'Oréal's acquisition in the industry, one is the industry buying and buying trend, which can both sufficient product lines and increase performance. Another theory is that when the market has news that "Kering may take back the YSL Beauty brand operation rights in the future", L'Oréal needs to take action to deal with the possible impact of the news once it comes true, and the acquisition of Aesop is due to the above considerations.
The largest acquisition is not worth it
According to public reports, L'Oréal's acquisition of Aēsop cost US$2.525 billion (about 17.37 billion yuan), its largest acquisition to date. As early as the bidding stage, analysts estimated that Aēsop's market value could be around BRL 9 billion (about RMB 12.2 billion).
Traded at a high price of more than 17 billion yuan, "is it worth it" is the question thrown by the industry to L'Oreal.
It is understood that Aēsop was founded in 1987, the brand promotes organic concepts based on natural plant skin care, and combines the "sane" life philosophy of internal and external conditioning. In 2016, it was fully acquired by the Brazilian beauty group Natura & Co. It is worth mentioning that the brand is one of the few brands under Natura & Co. that is still growing.
According to financial report data, Aēsop's sales in 2021 reached 3.5 billion yuan, a year-on-year increase of 33.4%; In 2022, Aēsop's net revenue in the first three quarters was 2.499 billion yuan, a year-on-year increase of 8.1%. In addition, the earnings report also mentioned that even in Europe, where the macroeconomy is not optimistic, Aēsop still shows high-single-digit growth.
Based on the brand's inherent growth potential, bidders continued amid news in October 2022 that Aēsop was to be sold. Including Shiseido, L'Occitane Group, private equity giants CVC Capital Partners, LVMH and others. Now that the boots are on the ground, L'Oréal has taken them under its wing at a price that exceeds its valuation, which shows the importance it attaches to the brand.
Jiang Han, a senior researcher at Pangu Think Tank, told Beijing Business Daily that this is a considerable investment. The Aesop brand has a good reputation and brand influence in the high-end cosmetics market, and its product quality and unique product line are also one of the reasons for its popularity.
Aesop is included in L'Oréal's high-end cosmetics division and is considered to be a billion-dollar brand club that can squeeze into L'Oréal's high-end cosmetics division. Cyril Chapuy, President of L'Oréal Group's Fine Cosmetics Division, said: "We welcome the Aesop brand to L'Oréal Group's Luxury Cosmetics Division, and we firmly believe that in the future, the Aesop brand will join the billion-dollar brand club of L'Oréal Group's Fine Cosmetics Division, making a significant contribution to the growth of the Fine Cosmetics Division. ”
It's better to incubate yourself than to buy incense?
Throughout the history of L'Oréal's development, the buy-buy-buy strategy has to be mentioned.
Among the billion-dollar brand clubs mentioned by Cyril Chapuy are L'Oréal Paris, Lancôme, Saint Laurent, Armani, Kiehl's, Garnier, Maybelline, La Roche-Posay and others. Among them, Lancôme, Saint Laurent, Armani, Kiehl's, La Roche-Posay, etc. were acquired by L'Oréal. In addition, L'Oreal's fire of Shurico, Helena, etc. are also acquired by L'Oreal. And these brands are gradually becoming the support point for L'Oréal's performance growth over the years.
And this is also considered to be the main line in L'Oréal's decades-long development history, acquisition is the main line.
Public data shows that since 2020 alone, L'Oréal has completed nearly 10 acquisitions. These include the acquisition of Japanese high-end skin care brand Takami, American natural skin care brand Thayers Natural Remedies, French perfume brand Azzaro and others.
L'Oréal is not alone.
Looking at the development of the entire beauty industry, buying, buying and buying seems to have become a consensus, and brands such as Estée Lauder and Shiseido have been making strategic acquisitions in the past two years.
In 2022, Estée Lauder acquired fashion brand Tom Ford at a sky-high price. In 2021, Estée Lauder announced the acquisition of a majority stake in Deciem Beauty Group Inc., the parent company of The Ordinary, for approximately $1 billion. It is understood that the group owns beauty brands such as The Ordinary, Niod, Hylamide, Chemistry Brand, Hif and Loopha. Shiseido acquired American influencer skincare brand Drunk Elephant in 2019. In 2022, it acquired the British prebiotic skin care brand Gallinée and others.
In Jiang Han's view, by acquiring mature brands, cosmetics giants can quickly gain new market share and enhance their competitiveness in the market. At the same time, cosmetics giants can further enrich their brand portfolios by acquiring established brands, meet the needs of different consumers, and increase revenue. In addition, certain established brands may have unique technologies and intellectual property rights that are very valuable to cosmetics giants to help them develop new products and services, accelerate the introduction of new products and improve market competitiveness by acquiring existing products and technologies.
Make up for high-end personal care shortcomings
Behind the continuous acquisitions of giants, it is undoubtedly adding to the competitiveness of their own brands in the market, and as brands continue to acquire and expand their camp, the degree of competition is intensifying, especially in the Chinese market.
Hongmu Ye, CEO of L'Oréal Group, said: "The Aesop brand has a unique approach to combining elements of urban ambience, lifestyle and luxury experiences, and knows how to grasp the current trends. We look forward to unlocking the brand's tremendous growth potential in China and beyond, building on its unique DNA and values." ”
The Chinese market has always been one of the main markets for giants such as L'Oréal to compete. For the subsequent development of emerging brands, the continuous expansion of the Chinese market is one of the follow-up strategies.
It is understood that Aesop only officially entered the Chinese offline market at the end of 2022. At the end of 2022, Aesop opened Chinese mainland first physical store on Dongping Road in Shanghai. A month later, Aesop opened a second store in Chinese mainland and added a perfume category.
It is understood that Aesop is mainly a high-end personal care brand, and is also involved in part of the fragrance business. In L'Oréal's brand camp, there is no high-end personal care brand that can stand alone, and Aesop's arrival makes up for L'Oréal's lack of product lines.
Wu Daiqi, CEO of Shenzhen Siqisheng Company, said that Aesop is a natural plant skin care brand from Australia, to a certain extent, it is the type lacking in L'Oreal's high-end skin care products. "The brand is about to enter the Chinese market in a big way, and to some extent, it can also form a strong competition with the functional skin care brands in the Chinese market and the traditional Chinese medicine natural plant skin care brands that Chinese companies are best at." Wu Daiqi added.
In fact, from the current development of L'Oréal, Aesop's participation is indeed needed.
From the current competition of giants, the high-end perfume fragrance business is becoming the focus of the layout. This business has also become the support for the growth of the performance of various brands. For example, Shiseido, which has popular perfumes such as Serge Lutens and Narciso Rodriguez, saw a 12% increase in net sales of fragrance business in 2022 compared to last year. Estée Lauder, which already owns strong fragrance brands such as Aerin Beauty, Jo Malone, Le Labo, Kilian PARIS, and Frederic Malle, a fragrance publisher, grew 29% and 28% respectively in the second and third quarters of fiscal 2022. At the same time, Estée Lauder also released a signal that it will promote its other high-end perfume brand Le Labo to enter the Chinese market, coupled with Estée Lauder's acquired Tom Ford, Estée Lauder's competitiveness is constantly strengthening.
On the other hand, L'Oreal, although its fragrance business became the fastest growing category, with an increase of 22.8%, but the fragrance portfolio YSL, Armani and other authorized beauty brands, especially YSL Beauty, it is reported that Kering recently revealed that it may withdraw the brand operation rights in the future. This is a great uncertainty for L'Oréal, and L'Oréal needs a stable brand to compensate for this uncertainty.
Beijing Business Daily reporter Guo Xiujuan Zhang Junhua