The Hut Group acquisition of Cult Beauty adds to its 15-year ‘meteoric rise’ – expert

Last week, The Hut Group (THG) acquired premium British online retailer Cult Beauty for €324m (£275m) in a deal that would see the group take on Cult Beauty’s 1.7m customers, 1.6m Instagram followers and 300+ beauty brands – 200 of which were not currently stocked on THG platforms.

Onboarding a beauty portfolio of ‘emerging indie brands’​

THG said it was on track to migrate Cult Beauty onto its tech platform Ingenuity by the end of the year, integrating the array of beauty, skin care and hair care products from more than 300 prestige independent and emerging beauty brands, including Charlotte Tilbury, Drunk Elephant and Huda Beauty.

Matthew Moulding, executive chairman and CEO of The Hut Group, said Cult Beauty was an “exciting fit”​ for The Hut Group’s beauty division.

“Cult Beauty is frequently the partner of choice for emerging indie brands due to its personalised, content-led approach and enthusiastic consumer base who are continually seeking new, innovative solutions to complement their beauty routines,”​ Moulding said.

The Cult Beauty portfolio, he said, would become key in reaching more consumers across the UK, Europe and Asia in particular. THG said Cult Beauty was expected to contribute sales of around €70.8m (£60m) and an EBITDA of around €3m (£3m) for the remainder of FY 2021.

Analysis: A stand-out deal in a 15-year ‘meteoric rise’ for The Hut Group​

Neil Mason, research director for retail at Mintel, said the acquisition of Cult Beauty was “highly complementary” ​to THG’s existing portfolio and added to the group’s string of buys in the beauty and healthcare space, including Lookfantastic and Glossybox. Earlier this year THG also acquired US online retailer Dermstore, a subsidiary of mass retail major Target.

“This latest purchase of Cult Beauty by THG is yet another acquisition in the meteoric rise of the group over the last 15 years,” ​Mason told CosmeticsDesign-Europe.

And this expansion strategy, he said, would “no doubt” ​see further acquisitions in the coming years as the group continued to “increase its scale and global coverage”.​

Lia Neophytou, senior consumer analyst at GlobalData, added that the acquisition of Cult Beauty stood out compared to its other acquisitions in the space.

“Cult Beauty stands out from The Hut Group’s long list of acquired beauty brands and retailers given its commitment to curating products from emerging beauty players and its focus on trending items in the category. This is strongly evident as [THG] revealed that two-thirds of Cult Beauty’s brands are not currently offered by its websites, highlighting an opportunity for THG to capture spend from shoppers looking for ‘the next big thing’ in beauty’,”​ Neophytou said.

Thanks to the deal, she said THG stood to benefit from the 35% of global shoppers [Q2 2021 GlobalData survey] spending more time online more frequently as a direct result of the COVID-19 pandemic; particularly those regularly browsing social media and likely to use Cult Beauty to purchase items from smaller, independent brands.

Competition in online beauty set to stay dynamic​

However, Neophytou said that whilst THG was on track to become beauty’s biggest e-commerce player, it would still face competition in the coming months and years.

“The marketplace is not without competition and dynamism,”​ she said. “Giants like Amazon recently entered the beauty arena, and the emergence of new channels such as social media commerce will continue to change the way consumers interact with traditional beauty e-commerce retailers.”​

In January this year, GlobalData’s retail analyst Mahya Agorlou had suggested THG needed to deepen its consumer base by offering more own-brand and premium-end beauty products​ if it wanted to stay ahead of the competition after its “aggressive expansion strategy”. ​