Capitalizing on Shifting Consumer Behaviors and Technological Advancements to Scale Faster, Bigger and Better

The Beauty & Personal Care M&A market finished 2017 on a high note with over 100 transactions for the second straight year and is on track to hit the century mark again in 2018 with M&A activity up 9% over last year. Not only is volume strong, but the past two years witnessed increasingly outsized valuations for fast-growing, high-margin beauty care brands. In fact, there were more beauty care M&A transactions at valuations over four times revenue in the last 18 months than in the previous 15 years combined.

To build a successful beauty care brand, product quality and an authentic brand message that resonates with the consumer have always been and will always be “must haves.” However, with digital marketing, a category-wide shift to eCommerce, the power of social media, and a growing set of outsourced business solutions, successful beauty care businesses are now able to scale faster and more efficiently than ever before—and in turn attract private equity capital and interest from large, global strategic acquirers earlier and earlier in their brand lifecycle. So, what are some of the keys that have driven this better, bigger, faster phenomenon among beauty care brands?


Independent brands historically struggled to gain access to the retailer shelf, having to compete against the clout and resources of large, global, and diversified corporate mainstays such as Procter & Gamble and L’Oréal. eCommerce, and in particular directto- consumer (D2C) channels, now provide unlimited shelf space for new entrants, disintermediating the retail buyer and allowing beauty brands to control the brand message and pitch, directly to the consumer. While global eCommerce sales of beauty care products are expanding at a 16.7% rate (source: Technavio Global Online Beauty and Personal Care Sales Compound Annual Growth Rate 2016 to 2020), we are still in the early innings—as evidence, industry sources estimate only 10% eCommerce penetration in the Beauty & Personal Care sector, compared to 18% in Apparel & Footwear and 44% in Consumer Electronics. As Millennials and subsequent ‘digitally native’ generations account for a greater share of income and expenditures, the shift to online distribution in beauty care will only accelerate.


The biggest advantage that a new beauty brand maintains over larger, established companies is the ability to be a pure D2C brand, free from channel conflicts. A pure, ‘digitally native’ D2C brand benefits from:


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