10 billion, the lipstick brother was sold

Source: Investment Community (ID: pedaily2012) Author: Yang Jiyun Yang Wenjing

The dust settled.

The investment community has learned from L Catterton that it has reached a definitive agreement with Percassi, the founding family of Italian beauty brand KIKO Milano ("KIKO"), in a deal to acquire a majority stake in the brand. In short, KIKO was sold to L Catterton.

In the beauty industry, KIKO has always been known for its affordability and affordability, and it has swept Italy with its high cost performance. After entering China in 2018, KIKO gradually gained a firm foothold in the Chinese beauty industry, ranking first in the search ranking of its popular lipstick brands. Flipping through the makeup bags of many girls, "Who doesn't have a KIKO in their lipstick harem?"

Backed by LVMH, the world's largest luxury group, L Catterton bought an affordable lipstick at this time, which is surprising.

01

Just now, the largest consumer PE shot

Buy an old makeup brand

More details of the transaction flowed out.

Under the definitive agreement, L Catterton will buy a majority stake in KIKO, while the Percassi family, the founding family of KIKO, will retain a significant stake in the company, and founder Antonio Percassi will continue to serve as president.

Retrospectively, as early as October 2023, there were rumors that KIKO had hired a financial advisor to open its investment to the outside world. Since then, PE giants have made a move, and in addition to LV Kateng, Advent (Advent Capital), Carlyle (Carlyle) and KKR have also appeared on the list of potential buyers.

In February of this year, L Catterton began exclusive negotiations with the Percassi family. Until today, the two parties reached a deal, and LV Kaiten officially acquired the long-established Italian beauty brand.

It is worth mentioning the change in valuation. According to local media reports in Italy in February this year, the overall valuation is about 1.5-2 billion euros, based on 13 times the 2023 EBITDA (earnings before interest, taxes, depreciation and amortization, about 130 million euros) of the KIKO brand. Initially, the Percassi family planned to sell the brand at a valuation of 2 billion euros.

But according to people familiar with the matter, the deal values KIKO at about 1.4 billion euros (about 10.9 billion yuan).

Back to buyer L Catterton. This is a private equity investment fund under the French luxury giant LVMH Group, focusing on consumer goods investment and mergers and acquisitions, and is also the world's largest consumer PE, with a global management scale of more than 230 billion.

In the field of global beauty and personal care, L Catterton has more than 30 rich investment experience, including Italian beauty product ODM/OEM manufacturer Intercos, British high-end skincare brand Elemis, Japanese organic mineral beauty brand ETVOS, Swedish sustainable hair care brand Maria Nila, and Israeli beauty technology brand ODDITY.

Commenting on the sale, Nik Thukral, Partner at LV Kateng's flagship buyout fund, said: "We have always admired KIKO's unique style, exquisite craftsmanship and broad reach across borders. It is a great pleasure to work side by side with Antonio Percassi and the Percassi family. ”

Arabella Caporello, Partner at LV Keten Europe, added: "KIKO's scale, brand strength, affordability and unique product selection combine to give the company a unique brand positioning in the international market. LVKaten will leverage its extensive experience in helping leading European brands expand, and will work with KIKO CEO Simone Dominici and his team to tap into the company's tremendous growth potential. ”

With the introduction of L Catterton's investment, KIKO is aiming for a global business, as Antonio Percassi, co-founder of the KIKO brand, explains, "L Catterton will leverage their expertise in the cosmetics sector, global business opportunities and talent network to accelerate KIKO's global expansion." ”

02

The road to the rise of the king of affordable makeup

Lipsticks sold out

Behind KIKO is a European giant, Percassi.

Speaking of the Percassi family, they hail from the northern Italian town of Bergamo and develop and manage a franchise retail network of well-known brands such as Nike, Jordan, Victoria's Secret, Starbucks, Gucci, Yves Saint Laurent and many more. The Percassi Group, which operates its own brands such as KIKO Milano, Womo and Bullfrog, owns Atlanta FC in sports and is also involved in real estate development, with 9,000 employees worldwide.

The story of the KIKO brand began 26 years ago. The founder, Antonio Percassi, was a football player who galloped on the field, and in 1997 he and Stefano Percassi founded the makeup brand KIKO in Italy, which gradually became the No. 1 national makeup brand in Italy due to its diverse product choices and affordability, and was known as the "king of makeup cost performance".

How did a little-known makeup brand start?

Cheapness and cost-effectiveness are of course the primary reasons. Most of the makeup prices in KIKO stores are a few euros, and the expensive ones are only a dozen euros, because of their price is widely favored; KIKO products themselves are colorful, there are many color numbers, and the choices provided to users are very diverse; in addition, KIKO stores are simple to set up, simply around makeup, showing professionalism, and the stores are often next to Sephora, which naturally brings some people.

However, KIKO's development has not been a smooth road, and it has already experienced a "sell-out" before. It was January 2018, and KIKO USA filed for bankruptcy protection in Delaware due to difficulties in brick-and-mortar retail operations, and announced the closure of its New York headquarters.

The bankruptcy of KIKO USA left the group in debt with a debt crisis of 200 million euros, and the group had to sell its 33% stake to British private equity fund Peninsula Capital for 80 million euros, which was later increased to 38%.

The "defeat" of the United States did not affect the expansion of KIKO. Since then, KIKO has focused on the Asian and Middle East markets and strengthened its cooperation with e-commerce platforms – and it was in 2018 that KIKO entered the Chinese market.

How popular are KIKO's lipsticks? It is rumored that before Armani launched its full line of makeup products, they used KIKO makeup backstage on their fashion shows.

After entering the Chinese market, KIKO's lipsticks have been used by countless beauty bloggers Amway, with a low price, only 100 yuan each, and it is better to choose a lot of color numbers, high color rendering, full color, and moisturizing and delicate texture, and the quality is not inferior to big brands, especially sought after by young users. At present, KIKO mainly has online sales channels such as Taobao and Douyin in China, and the price of a single product ranges from 60 to 220 yuan.

When it first entered China, Shuiyang Co., Ltd., the parent company of Yu Nifang, was responsible for KIKO's brand agency business. According to the data, KIKO has refreshed a new record for the opening of Tmall Global Makeup, and its sales volume in the first half of the year ranked among the top 5 Tmall Global makeup brands, among which the popular lipstick brand search ranked first, which can be called the "first brother of lipstick".

Looking at the makeup industry, Revlon, which is also known for its cheap and easy to use, has gone bankrupt, and Estee Lauder's Too Faced has closed its Tmall futures store, and these brands have different situations. Now, with the acquisition of L Catterton, what awaits KIKO?

03

Parity, the next inflection point for consumption?

L Catterton, who was born in a luxury luxury family, bought an affordable lipstick, which is curious enough.

From a macro point of view, with the current global economic fluctuations, many established companies have gone bankrupt and sought to sell, so a number of companies in the undervalued stage have emerged. In other words, the time has come for super PEs to buy high-quality assets, and KIKO is the target chosen by L Catterton.

As for why it is an affordable beauty brand, it is not difficult to understand. Under the wave of consumers' pursuit of big-name replacement, "Lipstick Brother" has shown great temptation. And the affordable brand has also become the most concerned direction of consumer investment.

This inevitably reminds people of the lipstick effect. In the 30s of the 20th century, the concept was put forward during the Great Depression in the United States, which refers to the fact that in the case of economic downturn, people will turn to buy relatively cheap luxury goods such as lipstick, in order to seek a kind of psychological comfort, also known as the "low-price product preference trend".

Not long ago, Proya released its latest financial report. In 2023, Proya's revenue will reach 8.905 billion yuan and its net profit will reach 1.194 billion yuan, ranking first in local cosmetics in one fell swoop. Like KIKO, Proya has always been seen as affordable beauty, and its performance is soaring against the trend at this time.

A similar scene is that relying on high quality and low price, Temu, a subsidiary of Pinduoduo, is invincible on the other side of the ocean.

"It's a natural evolution of economic and commercial development. In the solemn view of Maixing investment partners, the decline in prices and the sinking of consumer goods can also be regarded as a consumption upgrade in another segment.

"The so-called cost performance, in the end, must be the internal efficiency of the enterprise is high enough, in order to reduce the cost and expenses, so as to reduce the price, which does not mean that the brand has to sacrifice product quality, and even to a certain extent, the quality is steadily improved, so that consumers can enjoy a better experience. ”

Not long ago, Wei Zhe of Jiayu Capital also shared another concept - valence ratio. He believes that "after pricing, the corresponding performance, function, value, and quality are achieved to the extreme, even if my peers catch up with my price, but I continue to improve in performance, I can still crush the other party." ”

In the past few years, consumer investors have often talked about one company – Uniqlo. To a certain extent, UNIQLO just meets such conditions: compare the price with the clothing brand of the same quality, and compare the quality with the clothing brand of the same price. On closer inspection, UNIQLO was born in Japan's "lost 20 years", and it was that era that made a great company a great company.

Coming back to the present, the global economic slowdown may be the right time for the inflection point of consumption. When everyone's consumption habits change with the decrease in income, there will undoubtedly be a new batch of high-quality and low-cost giants. On the back side of the crisis, there is a turning point.

[The author of this article is reprinted with permission from the investment community and entrepreneurs.] If you need to reprint, please contact the WeChat public account (ID: pedaily2012) for authorization. ］