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Beauty and personal care industry poised for consolidation, shows AT Kearney data

By Deanna Utroske

15-Dec-2016
Last updated on 15-Dec-2016 at 22:36 GMT2016-12-15T22:36:25Z

Beauty and personal care industry poised for consolidation, shows AT Kearney data

The global management consulting firm published a report this month that considers the necessity and value of M&A activity as well as what the current industry growth pattern means for cosmetic and personal care companies of every size.

The AT Kearney 2016 Beauty and Personal Care M&A Market Study considers market share, the categories that have been acquired most over the past 6 years, and most thoroughly, what motivates these transactions—or what the acquiring companies are really gaining.

Market context

The beauty and personal care “industry is ripe for consolidation, and survival likely depends on acquiring or being acquired,” write Hana Ben-Shabat and Andrea Szasz in an item about the new report on the firm’s site.

To explain how the AT Kearney data elucidates this reality, they put the industry in context, noting that “the overall beauty and personal care market in the US grew by only 3 percent over the past five years,” and that the top three companies hold between 39% and 49% of industry market share across segments and categories.

Popular categories

The company’s report breaks down M&A transactions since 2010 according to product category: skin care and color cosmetics are the clear winners.

25% of these deals involved a skin care brand; and 23% involved a color cosmetics brand. In beauty, only 6% of the M&A activity over the past 6 years has taken place in the fragrance category.

In what AT Kearney classifies as personal care, hair care is the top performing category, accounting for 13% of M&A activity in the period covered by the study. “Other personal care” accounted for 12% of transactions and devices for 3%.

Value added

Ben-Shabat and Szasz identify “four drivers of beauty and personal care M&A” in their synopsis: access to consumers, access to innovation, access to distribution channels, and access to markets.

According to The AT Kearney 2016 Beauty and Personal Care M&A Market Study, 60% of acquiring companies buy beauty brands for access to consumers. “The most attractive targets are those that better harnessed the ability to read the attitudes and preferences of evolving or emerging beauty consumer segments,” explain Ben-Shabat and Szasz. With these deals, the acquiring brands are accessing new demographics or “[increasing] the share of wallet with current customers.”

20% of M&A activity is motivated by new access to innovation, 12% by access to distribution channels, and, 8% by access to markets.

“While the transactions in our study range from microcap acquisitions to billion-dollar ventures, a common thread remains: strategic buyers had more appetite to acquire in the BPC space than financial buyers,” observe Ben-Shabat and Szasz.

They therefore conclude that “making an art of the acquisition game will separate the best from the rest.”  

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