Within the chemical industry, the personal care ingredients segment has traditionally been seen as a key growth area for manufacturers of specialty chemicals. The combination of factors that make this market attractive include its robust size and the above-average, sustainable growth rates. However, a specific segment of the personal care ingredients industry is considered by many as even more attractive active ingredients.
This segment’s higher profit margins and close to double-digit growth has attracted many ingredient manufacturers over the last two decades. Succeeding in this specialty niche requires a particular set of skills (notably claim substantiation, which is a key). Consequently, acquisitions have been the preferred route for entering the segment, continuing to drive consolidation of the supplier base. Some of the major examples include the acquisition of Sederma by Croda in 1997 and Laboratoires Serobiologiques by Cognis in 1999. Many other transactions happened in the early 2000s, including Engelhard’s acquisition of Collectica and the Collaborative Group in the 2004/2005 timeframe. Most of these were specialty chemical companies acquiring an active ingredients supplier. This move allowed companies such as International Specialty Products, Lubrizol, or Seppic to widen their existing personal care ingredients portfolio with high value active ingredients.
This acquisition model has long been a typical strategy, but we see it changing lately with flavors and fragrances companies expanding their participation in the personal care value chain by acquiring companies in active ingredients, notably in the botanicals sub-segment. While this is not a new phenomenon (Dragoco was acquired in 2003 and is now part of the Symrise group), it has significantly increased in the last two years with the acquisition of Soliance and Induchem by Givaudan (respectively in 2014 and 2015), and the acquisition of Lucas Meyer Cosmetics by IFF in 2015. The latest of these acquisitions is by Takasago International Corporation, which expanded its Natural Material Portfolio through the acquisition of U.S.-based Centre Ingredient Technology, Inc.
The model is now very different. While the two flavors and fragrances giants were selling products to the personal care business, it was by no means a key business for them. However, these acquisitions are rather a natural development of their product portfolio to what can be considered as the finest natural ingredients: botanical actives. They are reshaping the active ingredients competitive landscape by becoming new competitors that are not primarily specialty chemical companies, removing some larger players (acquisition targets) from the market. The base of participants remains fragmented, with attractive, small to mid-sized, privately held companies still available, as well as others whose current ownership (corporate) does not appear to be committed to the business.