P&G Tries Prestige Beauty Again After Previous Attempts Fail

  • P&G announced Friday that it is buying Tula Skincare, its third beauty deal in two months.
  • The CPG giant once had a large portfolio of beauty products, but in 2015 it sold 41 brands to Coty for $12 billion.
  • Analysts say the deals are part of a more focused strategy as P&G tries beauty again.

Procter & Gamble on Friday announced plans to acquire Tula Skincare, the third high-profile beauty acquisition announced by the CPG giant in the past two months.

In December, P&G bought Ouai, a hair-care line founded by Jen Atkin, a hairstylist-turned-influencer with Kardashian-Jenner connections. This news follows the brand’s acquisition of skincare brand Farmacy Beauty on November 15.

Tula, a probiotic-based skincare brand founded by gastroenterologist Roshini Raj, has launched direct-to-consumer and is now available at Ulta Beauty and QVC. According to a report from WWD, the L Catterton-backed brand will approach $150 million in net sales for 2021, making it twice the size of Farmacy and triple the size of Ouai.

The terms of the contract are not disclosed. P&G did not respond to Insider’s request for comment.

Prior to the recently announced acquisitions, Procter & Gamble ran a small beauty business focused primarily on mass-market brands including Olay, Head & Shoulders and Herbal Essences. The beauty category is P&G’s third-largest after fabric care and baby, women’s and family care — an umbrella category that consists of brands selling paper products like Tampax, Pampers and Charmin.

Beauty accounts for 19% of the company’s total sales and brought in $14.4 billion in 2021. P&G also owns premium skincare brand SK-II, which runs a very successful business in China and which analysts say is driving much of P&G’s current growth. in the beauty category.

The acquisitions represent something of a beauty makeover for Procter & Gamble. In 2015, giant CPG spun off much of its beauty business — 41 brands valued at nearly $12 billion — in a monster sale to Coty Inc.

“They were looking to get out of those channels where, frankly, they weren’t as confident in the competition,” Kevin Grundy, Jefferies’ chief executive, said of the sale. “What’s unique about prestige beauty is that industry leaders push trends, unlike CPG, where you react quickly to what the consumer wants.”

In the early 2000s, P&G oversaw an extensive beauty product portfolio comprised of a number of brands acquired over the decades, ranging from Cover Girl and professional hair care brand Wella to several fragrance licenses for celebrities like Naomi Campbell and designers like Dolce & Gabbana. and Escada.

The divestment was part of a broader attempt by P&G to streamline its business in several categories, which by the middle of the previous decade had become increasingly saddled with slow-growing brands. In 2014, a year before selling beauty products, P&G sold the Duracell battery brand to Warren Buffet’s Berkshire-Hathaway.

Despite the size and scope of its business, the beauty category was not a natural fit for P&G. The Cincinnati-based company didn’t necessarily have the marketing or creative resources at headquarters to compete with prestige powerhouses like L’Oréal in Paris and Estée Lauder in New York. When selling to Coty, P&G kept only a selection of mainstream beauty brands from the sale, including SK-II.

“I think they saw the appeal of the category more broadly but didn’t appreciate how difficult it was to win in this category, how fickle the consumer can be, how difficult it can be to fashion — especially around makeup and fragrance — and how strong the dynamics of the channel are,” Grundy said.

With new management in place – Alexandra Keith took over as general manager of beauty in 2017 and spearheaded the once-declining category’s return to growth – P&G looks set to dabble in a beauty portfolio again. wider.

Tula, Ouai and Farmacy are all popular beauty brands that have hit the market over the past five years and are coming to P&G with established consumer bases, creative leadership, direct sales channels and retail relationships. For its part, the CPG giant can lend its scale and reach to help with product development and international expansion while leaving the founders and original management in place to run the business.

This strategy is likely a better bet for P&G going forward, analysts told Insider.

“I think it will be a narrow portfolio focused on categories where they have a right to win, like skincare and haircare, with points of differentiation and clinical aspects instead of trying to catch the next fashion,” Grundy said.

One of the attributes shared by the three brands recently acquired by P&G is that they satisfy consumers’ desire for “clean beauty” – beauty products formulated without chemicals such as parabens, phthalates and others that consumers perceive as toxic or undesirable. Retailers from Sephora to Ulta Beauty to Target all have “clean beauty” programs in place consisting of ingredient protocols that participating brands are required to follow.

“Clean products are driving all the growth in beauty retail,” said Lucie Greene, founder of consulting firm Light Years. Other conglomerates are also focused on buying own beauty brands at this time. In December, L’Oréal acquired clean skincare brand Youth to the People.

There is no industry-wide definition of “clean beauty”, but consumer interest in healthier products has increased. The NPD Group tracked a 25% increase in sales of beauty brands presented as “clean” between January and September 2021. A report from the industry research group last year also found that 68% of consumers prestige beauty companies were looking for “clean” products. Ingredients.

“I don’t think a lot of consumers understand what ‘clean’ means, but it’s widely seen as desirable,” Greene said. This has led to what she calls “a clean beauty gold rush” from acquiring companies.

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