L’Oréal’s pending $1.68 billion acquisition of YSL Beaute shows what trade buyers can do when they make their minds up. It is certainly a lot of money in anyone’s language, especially at a time when most of the world’s financial pundits are forecasting doom and gloom. So why might this be a good time for L’Oréal to splash out?
L’Oréal is keen to grow its sales line faster and strengthen its grip on the top end of the market at the same time. Acquiring YSL will add significant scale to L’Oréal’s prestige business, more than 50% by our count, and provide a useful new sales franchise with the Yves Saint Laurent brand. The latter complements L’Oréal’s existing portfolio of high end names such as Lancôme, Armani, Ralph Lauren, etc., and does so without upstaging them, which is something L’Oréal has allegedly been worried about when considering the acquisition of rival brands in the mass sector.
Ideally, from L’Oréal’s point of view, a U.S. focus would have been nice (70% of YSL’s sales are in Europe), but the opportunity was probably too good to pass up. Ironically, it would have suited Estée Lauder down to the ground, solving two problems at the same time, by giving Lauder much needed scale in both Europe and the fragrance category at a stroke—but the deal was evidently too rich for Lauder.
The deal potentially leaves Clarins without the tie-up with YSL Beaute that was being talked about recently, whereby YSL would take a 30% stake in Clarins. This in turn puts prestige skin care company, Clarins, back in the scuttlebutt stakes. As it probably does smaller French rival, Sisley, privately owned and famously “not for sale.”
Department Store Tie-Up
News of a probable tie-up of some of the leading department store players in Germany, France and Italy is making the rounds in Europe. Germany’s Karsdat is said to be considering a link with France’s Le Printemps and Italy’s Rinascente. Le Printemps is already owned by a consortium which includes Maurizio Borletti (Rinascente) and Deutsche Bank, and it looks as if a purchasing link—if nothing more—will be made with Karsdadt’s owner, Arcandor AG.
The tie-up is potentially significant in a number of ways. Firstly, it would give companies selling to the prestige channel in Europe yet more consolidation and pricing pressure to contend with, over and above that already exerted by the two largest European perfumery chains, Douglas and Marionnaud.
Secondly, it increases the overall weight and importance of European department stores generally, which have not enjoyed the same clout as in the U.S. Even if the latter may have been on the wane in North America of late, U.S. department store chains are still more significant to prestige manufacturers than their counterparts in Europe.
And finally, we don’t think it’s any coincidence that all this is taking place after Italian Paolo de Cesare took over as CEO of Le Printemps last September. De Cesare came from P&G, where he was president of global skin care. Having had a multi-country career, he clearly has an international perspective, as well as knowing the power of cross-border scale when it comes to dealing with suppliers.
No to Nanoparticles?
The UK’s organic certification body, the Soil Association, has entered the nanoparticle debate by banning nanoparticles from its certified products and calling for a freeze on their use in all cosmetics. Nanoparticles are now used in a whole range of cosmetic applications, from anti-aging creams to mineral makeup and sunscreens. L’Oréal has hit back, saying “We use only nanoemulsions and nanopigments, which are proven to be absolutely safe.”
On the other hand, the technical director of the London Centre for Nantotechnology is quoted as saying “Some cosmetic formulas are safe as the nanoparticles used are too big to penetrate the skin.
But a few major companies are starting to use smaller particles to achieve better colours or functionalities, and we don’t know yet if these are truly safe or not” (our italics).
Although we are a commercial consultancy, not a technical one, we have to admit to being distinctly uncomfortable on this issue. After all, who wants nanoparticles running all around one’s body? We think the majors would be well advised to come clean on this one, sooner rather than later, taking a pro-active stance and explaining things clearly to the consumer. One thing is certain, the issue won’t go away any time soon.
On a lighter note, we think the latest ads for L’Oreal’s Vichy Lipo-Metric anticellulite lotion are certainly eye catching, as well as being a strong demonstration of the subject under consideration. The print ad (at left) uses body painting to paint a pair of jeans over a naked female form, albeit the jeans are a size too small, leaving cellulite showing at the extremities.
The TV ad is even more compelling, with the model running her hand down one side of her hips, causing ripples of cellulite to run down in front of her fingers—needless to say, the ad has already found its way onto You Tube. The product? Yes, of course, the product...well that sells at a mere $35 for 200ml, worth every penny.
Sweden’s Pharmacies for Sale
Amazingly, to free-market eyes, Sweden’s pharmacies have always belonged to the government. But not for much longer, because an enquiry has just concluded that they should be de-regulated and sold off in batches of stores, by the end of 2009. When the prohibition on chain ownership of pharmacies in neighboring Norway was lifted a few years back, 70% of the then independents were snapped up within months. So the scene looks set for some folks to make a killing in Sweden before too long.
J&J Pushes Rogaine
Now that J&J owns Rogaine (ex Pfizer), one of the few hair products clinically proven to reverse some hair-loss, it’s using its consumer marketing skills to make the product more user friendly. Hitherto, the liquid Rogaine product has been a special purchase, messy and time-consuming to use, but the introduction of a foam applicator has been helping grow sales. Now J&J is mounting a new ad campaign in the U.S. aimed at getting younger men and women to use the product regularly, with the slogan “Use it or lose it.”
Given that hair loss is one of the biggest worries for both women and men in most of the developed countries in the world, it will be interesting to see how this campaign may develop internationally.
Regis to Enter Skin Care
Interesting to see that Regis, the world’s largest consolidator of hair salons, with some 12,416 salons and revenues of $2.6 billion, is now expanding into skin care. Regis is acquiring PureBeauty and BeautyFirst, specialist hair and skin care outlets, offering salon services as well as retailing finished products. Should be highly significant for any skin care manufacturers contemplating new channels.
Keep Your Chin Up
Finally, our attention was drawn recently to some visually striking technical support data for a new ingredient from Croda’s Sederma division in France. It’s called Ovaliss, and claims to counteract the appearance of double chins. To back up the claim, Sederma cites the results of a 25-person clinical trial, and importantly, Sederma doesn’t just quote figures, it actually demonstrates the ingredient’s benefits visually (see photo).
As consumer marketing people, we always prefer evidence you can see, touch or smell, so we applaud Sederma’s efforts. If finished products that use this new ingredient really deliver as per the photo, then the folks at Sederma deserve all the success they get.