Rise in “trendy” beauty brand acquisitions as younger clientele becomes more desirable
Beauty conglomerate Coty Inc. agreed to pay $600 million for majority stake in Kylie Cosmetics, putting a $1.2 billion valuation on the brand. Coty’s shares rose as high as 4.9% to $12.49 in New York Monday. The makeup and fragrance giant will have overall responsibility for the portfolio, while Jenner and her team will lead creative efforts and communications. Coty hopes to revitalise their flagging beauty division with this deal, which is expected to close in the third quarter of fiscal 2020.
Coty’s calling the Kylie deal a “key milestone,” as they were under pressure from the $965 million writedown this year from the brands it bought from Proctor & Gamble in 2015. Equity research analyst, Linda Bolton Weiser, shares mixed sentiments about this deal by noting that buying a brand based on a person is risky. Bolton Weiser added that brands like Bobbi Brown are a prime example of how “sometimes the brand can’t outlive the person.” In July, Rakuten Intelligence shared that Jenner’s sales were declining as a result of a lack of loyal consumers. This could be explained by her formidable and impressionable social media presence and her symbiotic relationship with Youtubers and other social media influencers who promote her products online. This deal with a well-established international conglomerate seems like it could not have come at a more perfect time for Kylie Cosmetics. Thus, both Coty and Kylie seem to be benefitting from each other’s consumer base, as Coty gets to benefit from Kylie’s fame-based consumers and Kylie may be able to gain traction from consumers who aren’t one of her 151 million followers on Instagram.
Coty’s latest move comes as no surprise, as the biggest beauty companies have been targeting younger shoppers and acquiring trendy brands in hopes of reviving sales in the US. This past Monday, Estee Lauder Cos. also agreed to buy the remaining two-thirds of Have & Be Co., the South Korean Owner of Dr. Jart+ Cosmetics, for $1.1 billion – its first acquisition of an Asian beauty brand. Being one of the fastest growing skincare brands globally, Dr. Jart+ is expected to aid in ameliorating Estee Lauder Co.’s leadership position in skincare as well as expand consumer reach to the APac region, North America, the United Kingdom, and travel retail. The NYC-based cosmetic giant has also added other makeup brands like Becca and Too Faced to its stables and was also a final bidder for skincare brand Drunk Elephant, losing to Japan’s Shiseido Co. for $845 million in October.
