As recently discussed in a previous blog, acquisitions are constantly reshaping the global professional beauty landscape. Coty’s $1 billion acquisition of the personal care and beauty division of Hypermarcas is the latest move to shake things up, giving Coty an even stronger position in professional beauty, particularly in Brazil.
Coty has eyed Brazil since at least 2012, when the company made an unsolicited bid to acquire Avon, which had Brazil as its largest market. The company also failed multiple times at acquiring Brazil’s direct seller Jequiti. Coty finally made some inroads in 2013 by establishing a joint-venture with Frajo, a local Brazilian cosmetics distributor, but still desired a more potent move.
The acquisition of Procter & Gamble’s professional business will finally give Coty a sizable share, but still lacks local infrastructure (e.g., manufacturing plants, distribution centers, employees), which the cosmetics division of Hypermarcas provides. This will not only help Coty maximize the value of its newly acquired portfolio from Procter & Gamble, but also gain a roster of attractive brands, including Risqué (a leader in nail polish), Niasi (professional hair care), Monange (body and hair care), Biocolor (hair coloring), Cenoura e Bronze (sun care), and Óleo de Amendoa Paixão (body care).
With the devaluation of the Brazilian currency, this move costs 33% less in U.S. dollars than it would have only a year ago. Coty seems to realize that, despite Brazil’s current economic crisis, the country still offers potential. Brazil remains one of the largest cosmetics markets in the world, and growth is expected to return, sooner or later.
Let’s take a look at the impact this new acquisition has on the salon hair care and professional nail care markets that Kline analyzes regularly. With the earlier announced acquisition of Procter & Gamble’s professional beauty portfolio and its new purchase of Hypermarcas, the parent company of Niasi brand, Coty’s entry into the salon hair care segment is not minor. The acquisition places the beauty giant in second position in the global salon hair care market, with an over 12% share. This is still far behind L’Oréal, the industry leader, but it is definitely an impactful market entry.
If Coty’s appetite for acquisitions continues, it may increase its share and challenge L’Oréal, perhaps not globally, but definitely in some country and regional markets. A good example of this is the situation in Brazil. With the acquisition of Procter & Gamble’s and Hypermarcas’ brands, Coty becomes the second largest player on the salon hair care market, lagging behind L’Oréal by only eight share points.
In the global professional nail care market, Coty is already the leader, after it acquired the number one brand OPI back in 2010. The Brazilian market is very specific though, with international professional brands like OPI having a limited presence, partly due to the price difference with local players. Impala and Risqué, two local brands which are primarily retail brands, but with important penetration into the professional landscape, dominate this market. Risqué happens to be one of the brands in Hypermarcas’ portfolio, as well as the leader in the professional nail care market in Brazil, which automatically makes Coty the number one player in the Brazilian professional nail care market.
Coty’s recent restructuring announcement, which divides the company into three new business units, Luxury, Consumer, and Professional, underscores the firm’s intent to lead in each of those sectors. We will continue to monitor Coty’s evolution, as well as other important and up-and-coming brands in the forthcoming editions of our Salon Hair Care Global Series: Market Analysis and Opportunities and Professional Nail Care: Global Market Brief report series, scheduled for publication in early 2016. Focusing on market size and growth, key and new trends, challenges, changes in distribution, and business opportunities, these reports offer smart insights not found anywhere else. To request a sample, please contact our team.
Written by Agnieszka Saintemarie, Project Manager, Consumer Products Practice with input from Sérgio Rebêlo, President, Factor de Solução, Kline’s exclusive affiliate in Brazil