Sept 9, 2019: Elisabeth King reports on this week’s business news

Alibaba acquires rival Kaola for US$2 billion; Japanese print giant buys BASF's global pigments business for AU$1.86 billion; Experienced Capital takes 41 per cent stake in French beauty retailer and clean beauty brand; and Brazilian beauty titan purchases e-commerce platform Beleza na Web.

Alibaba acquires rival Kaola for US$2 billion
The stakes are high. According to Forrester, one of the world's most trusted research and advisory firms, China's online retail business will reach revenues of US$1.9 trillion by 2022. Based on the latest stats by Analysis, Alibaba's Tmall Global, which allows international and Australian cosmetic brands to showcase their wares to this massive market, accounted for 33 per cent of China's cross-border market in the first three months of the year, followed by Kaola with 25 per cent.

Founded by NetEase, one of China's largest mobile, desktop and Internet technology companies, in 2015 Kaola's core business includes beauty and personal care, fashions, home appliances, maternity and infant products. The company's massive growth exceeded 276 per cent in 2016 and 161 per cent in 2017 to become a fierce rival of Tmall Global, the largest shopping site in China.

In a bid to continue its dominant position in the Chinese e-commerce market, Alibaba Group will buy Kaola for US$2 billion. The combination of China's two leading cross-border behemoths will create an online retail empire as China's share of global online retail profits is expected to reach 64 per cent by 2022 - up from 57 per cent this year.

Japanese print giant buys BASF's global pigments business for AU$1.86 billion
There may be less action among the major beauty multinationals seeking to acquire trendy brands. But strategic acquisitions to boost geographical reach and a company's overall performance are on the rise. Think Beiersdorf's recent buyout of Coppertone and the acquisition of Dr Scholl's by Yellow Wood Partners.

Nothing semaphores luxury in colour cosmetics at all price levels than rich pigments. With the surging interest in J-Beauty, DIC Corporation, the Japanese chemicals and printing ink specialist, has acquired BASF's global pigment business - Colour & Effects - for AUD$1.86 billion. DIC operates in 62 countries and has had a subsidiary in Australia for over 60 years.

Not only does the buyout from BASF, the German heavyweight ranked as the largest chemical producer in the world with revenues of AUD$101.76 billion, strengthen DIC's presence in Europe and the cosmetic industry. The move will play a key part in helping DIC reach global revenues of AUD$12.96 billion by 2025. Following the sell-off, BASF retains its position as one of the world's most important suppliers of active ingredients, emulsifiers, surfactants, polymers and UV filters to the global cosmetic industry.

Experienced Capital takes 41 per cent stake in French beauty retailer and clean beauty brand
Private equity firms worldwide have become prime movers in beauty and personal care acquisitions over the past five years. Experienced Capital is a Paris-based investment fund specialising in premium brands in the fashion and beauty industries. In April, the company bought a 51 per cent controlling share in L: A Bruket, the Swedish natural and organic skincare brand.

The investor has taken a 41 per cent stake in the French beauty retail business and skincare range, Oh My Cream! Launched in 2012 by entrepreneur Juliette Levy, Oh My Cream! originally sold premium brands such as REN, Dermalogica and Tata Harper online before debuting its proprietary clean beauty skincare brand in 2017. By year's end, Oh My Cream! will extend its retail network in France to 15 locations and revenues are expected to reach 13 million euros (AUD$21.09 million). Backed by Experienced Capital, the company plans to quadruple sales through its digital ad store footprints. Details of the deal were not disclosed.

Brazilian beauty titan purchases e-commerce platform Beleza na Web
One of the other mega-trends that continues to surge in the beauty industry is direct-to-consumer online sales. Estee Lauder's spectacular growth in recent years has been fueled by e-commerce sales and the Asia/Pacific market and over 10 per cent of L'Oreal's global revenues are now attributed to online transactions. The explosive growth of major shopping events such as Black Friday, Cyber Monday and Singles' Day has also led to staggering increases in sales for the majors and niche brands, in Australia and worldwide.

Grupo Boticario, the second largest Brazilian cosmetics company with revenues of US$4 billion and over 4000 stores in South America, Japan, France, the UAE and the US, has acquired Beleza na Web, one of the leading online beauty retailers in Brazil. The e-tailer offers 17,000 local and international products and had revenues of US$70 million in 2018. One of the main aims of Boticario is to strengthen the sales of its own brands which offer 500 SKUs, in addition to other leading beauty names.

Snippets from the Wires

  • Australian beauty brands and retailers are increasingly using major Chinese social media and shopping platforms such as Weibo and WeChat to reach the local Chinese community and overseas consumers. Weibo has launched a new social media platform called Oasis, pitched as a cross between Instagram and Little Red Book (Xiaohongshu), China's most trusted social shopping platform. The target market is young consumers who love luxury fashion and beauty products.
  • British online fashion retailer, Boohoo, has lifted its full year revenue forecast following a sizzling Northern Hemisphere performance from its PrettyLittleThing and Nasty Gal brands. The company's previous guidance of 25 to 30 per cent has been raised to 33 per cent to 38 per cent.
  • Mintel's Mood to Order research reveals that 86 per cent of female urban Chinese consumers agree that using beauty products makes them feel confident. Well-being is also very important and many are also using products and services to help them stay in balance.