Jan 27, 2020: Elisabeth King reports on this week’s business news

Helen of Troy acquires Drybar business for US$255 million; UK fashion stalwart Ted Baker enters the beauty market; major growth in all regions lifts full year results for Beiersdorf; and premium cosmetic market to reach US$199 billion by 2025.

Helen of Troy acquires Drybar business for US$255 million

Visitors to the US consider Drybar salons a godsend when bad hair days strike. Founded in 2008 as one of the first specialist blow dry brands in the US, the national network now exceeds 90 locations. Under the tagline - No Cuts. No Color. Just Blowouts - the company has spearheaded a sector that is growing at 12 times the rate of regular hair salons in the US.

Helen of Troy, the beauty electrical company behind Revlon and Bed Head by TIGI, have acquired the Drybar business  for US$255 million. As part of the all-cash deal, the company will also own the worldwide license to America's premium blowdry franchise. We can see excellent upside potential for growth in the product lineup, continued retail momentum and door expansion with key customers, and the expected expansion of the Drybar salon footprint both in the US and internationally, says Julien Mininberg, CEO of Helen of Troy.

UK fashion stalwart Ted Baker enters the beauty market

Things haven't been looking good for Brit fashion brand, Ted Baker. The company issued four profit warnings in 2019 and posted its first half year loss in two decades in October. Two senior executives, CEO Lindsay Page, and Executive Chairman David Bernstein also recently resigned.

In a bid to diversify from its core men's and women's fashion business, Ted Baker has launched its first cosmetics line. The ambitious 59 SKU range called "With Ted" is rolling out globally online on January 31st and then in select UK stores a day later. There will also be a pop-up in London's trendy Covent Garden - titled Ted's Townhouse -  to boost hype around the launch.

The prestige collection is very fashion-oriented from the lip colours in satin and matte finishes to eye quads, blushers, bronzers and highlighters. We have worked with the best labs and used the latest innovations in textures and pigments, says Gail Dobinson, Global Head of Marketing and Communications for Ted Baker. The move could revive the brand's popularity in Asia, long a major focus, where sales slipped in double digits last year.

Major growth in all regions lifts full year results for Beiersdorf

Beiersdorf has two major goals for 2020 - leveraging growth momentum and gaining market share. The German multinational looks to be on target, following its preliminary full-year sales results for 2019. Across the entire portfolio, sales rose 5.8 per cent to 7.65 billion euros (US$8.45 billion) by contrast to 2018.

Organic growth across all major geographic regions lifted Nivea sales by 3 per cent and La Prairie continued its powerhouse performance with a 20 per cent rise in sales over the period. Western Europe continues to contribute the majority of Beiersdorf's sales, but Eastern Europe enjoyed a major upswing.

The multinational bought US sunscreen brand Coppertone last May for US$550 million to boost its North American presence. The popular brand also contributed to global growth in 2019 with hope of more to come. Last August, Beiersdorf took aim at the indie beauty market with the launch of OSCAR&PAUL, a corporate division similar to L'Oréal's technology incubator which also invests in start-ups.

Premium cosmetic market to reach US$199 billion by 2025

The wellness trend, social media and specific skin concerns have become major drivers of growth in the global premium cosmetic market, says Grand View Research, whose data is used by some of the world's leading academic institutions and Fortune 500 companies. According to the researcher and consultancy firm, the worldwide premium cosmetic market will reach US$199.2 billion over the next five years - a CAGR of 7.6 per cent.

Increasing consumer preference for higher quality cosmetics and skincare in emerging countries, where imported and branded cosmetics are keenly sought-after, has become a key pillar of growth in the sector. The Asia/Pacific region will continue to be the fastest growing market for prestige cosmetics, mainly driven by China and Japan, adds Grand View Research. E-commerce is predicted to be the fastest growth channel through to 2025. Yet offline - as in bricks-and-mortar stores - will continue to be the largest distribution channel going forward because of tech advances such as in-store AR and VR trials which improve customer service and personalisation.

Skincare will retain its dominance as the largest premium cosmetic sector, says the data tracker. Not only to meet consumer demand for improved skin tone and texture, but also because of the growing demand for products formulated to treat acne and scarring, freckles and other forms of hyperpigmentation. Global makeup sales are also expected to enjoy fast growth over the next five years as more brands develop waterproof and sweat-proof products to combat the effects of hot and humid climates, notably in Asia.

Snippets from the Wires

  • Homegrown cosmetic brands in China are rapidly increasing their share of the domestic market in the mass category, impacting mainly South Korean imports. The Chinese are still looking to the Asian trendsetter for prestige brands, as they do with French, American and Japanese brands. LG Household & Healthcare, one of South Korea's Big Two alongside AmorePacific, is kicking goals with its luxury skincare line, The History of Whoo, which is expected to reach sales of three trillion Korean won (US$2.56 billion) this year.
  • Johnson & Johnson's consumer health division, including Neutrogena, Aveeno, Johnson's and Listerine, clinched global sales of US$13.89 billion for the full-year 2019. The multinational's total sales for the period were US$82.1 billion. Neutrogena was a standout in beauty with a global sales uplift of 6 per cent.
  • L'Occitane has reported a sales jump of 6.3 per cent for its Q3 FY2020. Sales rose to US$639.6 million for the quarter, taking nine month revenues to US$1.44 billion. The UK showed the fastest growth, with a major contribution from the rejuvenated Elemis skincare brand. China was also a hotspot with sales jumping 32.4 per cent in Q3.