‘The epitome of avant-garde beauty’: L’Oréal to acquire Natura &Co’s Aesop brand for €2.3bn

Set to close in the third quarter of 2023, subject to regulatory approvals, the deal would see L’Oréal acquire Aesop for an enterprise value of €2.3bn (US$2.525bn). Aesop's portfolio included a range of luxury beauty items, across skin care, hair care, body care and fragrance, and the brand had a number of specialised stores across the globe offering expert consultations to consumers directly in-store. 

Natura &Co acquired Aesop in 2012 and had since helped grow the Australian brand into 29 markets, 395 stores and increase gross sales over a decade (2012-2022) by €465m (US$509m). Last year, Aesop opened its first physical stores in China – a market set to be a clear focus under the new L’Oréal ownership.

Aesop combines ‘urbanity, hedonism and undeniable luxury’​

Nicolas Hieronimus, CEO of L’Oréal, said it was an exciting deal with great future potential.

“Aesop is the epitome of avant-garde beauty, whose products are not only made with great care and exceptional attention to detail; they are a superb combination of urbanity, hedonism and undeniable luxury,” Hieronimus said.

“Aesop taps into all of today’s ascending currents and L’Oréal will contribute to unleash its massive growth potential, notably in China and travel retail,” he said.

Cyril Chapuy, president of L’Oréal Luxe - the division Aesop would sit in - said the brand held a "very unique positioning on the global luxury beauty market" thanks to its "design-led brand essence", "highly efficacious and sensorial products", and "customer-obsessed retail philosophy".

"We look forward to welcoming Aesop’s CEO Michael O’Keeffe and his experienced and passionate teams to continue to grow together the brand’s remarkable potential, by carrying on cultivating its uniqueness and its values. We have great confidence that Aesop will join the L’Oréal Luxe Billionaire brands club and therefore contribute significantly to the growth of the division in the years to come,” Chapuy said.

Michael O’Keefe, CEO of Aesop, said it was certainly an “exciting day” for the luxury B-Corp certified beauty brand.

“With the support of Natura &Co, over the past decade, we have built Aesop into an admirable force in the luxury beauty space, with a powerful product proposition and a unique customer and retail experience. We now enter the next phase of our development and I’m confident that with L’Oréal’s partnership we will be able to bring our exceptional skin care products to even more people and continue to expand our brand globally,” O’Keefe said.

A refocus for Natura &Co on LATAM and Avon​

Fabio Barbosa, CEO of Natura &Co, said the divestment of Aesop marked a “new development cycle” for Natura.

“With a strengthened financial structure and a deleveraged balance sheet, Natura &Co, exercising strict financial discipline, will be able to sharpen its focus on its strategic priorities, notably our investment plan in Latin America,” Barbosa said.

“We will also be able to concentrate on continuing to improve The Body Shop’s business and refocusing Avon International’s footprint.”

Natura &Co finalised its acquisition of Avon back in January 2020 – a deal experts said created a global pure-play beauty giant and D2C leader.​ Avon joined Natura &Co’s existing portfolio of Natura, The Body Shop and Aesop.

Barbosa said Natura &Co was proud of the “remarkable success” of the Aesop brand under its leadership and was confident the growth story would continue under the ownership of L’Oréal.

The analyst’s view: Luxury, global and Gen Z push for Aesop​

Lia Neophytou, lead analyst of health and hygiene at market data specialist GlobalData, said L’Oréal was certainly well placed to build out the success story of Aesop.

“Targeted acquisitions of emerging and established players with engaged audiences have allowed L’Oréal to stay relevant in the rapidly evolving beauty industry,” Neophytou said.

“L’Oréal has employed this strategy to consistently align with shifts in consumer behaviour and preferences, and its latest acquisition of Aesop is no different.”

Whilst it may have been possible for L’Oréal to maintain a fresh and modern portfolio without acquisitions, she said this latest acquisition would reap quick benefits for L’Oréal because of Aesop’s “cult following, strong brand identity and reputation”, but it would also clearly propel global growth for Aesop, particularly in China – the brand’s newest foothold.

Under the deal, Aesop joined fellow luxury brands Lancôme and Kiehl’s in L’Oréal’s Luxe division which was highly appropriate, Neophytou said, given Aesop had become a “symbol of luxury” and was known for its “high quality formulations” and “modern, minimalist packaging”.

“Aesop’s clean aesthetic resonates with Gen Z and Millennial consumers, and although its products have a high price tag – a 500ml hand soap is £31 [€35] – it has broad appeal that enabled it to launch in various premium retailers. Aesop’s products will continue to resonate with the 38% of global consumers who associate high quality products and ingredients in the beauty and grooming industry with value for money, as identified in GlobalData’s 2022 Q4 global consumer survey,” the analyst said.

Morgan Stanley served as the lead financial advisor in the L’Oréal-Aesop acquisition, with Bank of America financial advisor and Davis Polk & Wardwell the main legal advisor to Natura &Co.