L’Occitane inks US$900mil Elemis deal in luxury skincare boom
The next American car recession has already started
HONG KONG: Luxury cosmetics firm L’Occitane International SA agreed to buy beauty and skincare brand Elemis for about US$900mil, its biggest deal on record as the maker of organic lotions looks to expand in the United States and United Kingdom.
The Hong Kong-listed L’Occitane agreed to buy the privately-held Elemis from Steiner Leisure Ltd, according to a statement from the companies Sunday. Steiner is a portfolio company of private equity firm L Catterton which focuses on consumer sector investments.
L’Occitane said the acquisition will help bolster the group’s growth globally, with plans to bring the Elemis marque that’s popular among millennial and Gen X consumers, into new markets. The deal is the latest in a spate of acquisitions of high-end skincare brands in recent years, with demand for premium, natural beauty products on the rise in Asia.
Shares of L’Occitane fell as much as 3.2% Monday in Hong Kong, narrowing its single-digit growth this year. It has headquarters in Luxembourg and Switzerland.
With the Elemis deal, L’Occitane is likely to reach its €1.7bil (US$1.95bil) sales target in two years, according to a Bloomberg Intelligence note Monday. L’Occitane could launch exclusive items for China, Hong Kong and the United States, the three markets which is driving most of its revenue growth to offset the slowdown in Europe, the note said.
“It is a major step forward for L’Occitane in building a leading portfolio of premium beauty brands,” chief executive officer Reinold Geiger said in a statement. “Elemis is well positioned for continued global growth.”
The deal is L’Occitane’s largest acquisition NEW YORK: These should be boom times for Detroit. Unemployment is at a half-century low, petrol is cheap and auto sales in the United States were near record levels last year. Yet American automakers are closing factories, cutting shifts and laying off thousands of workers. The industry is behaving like a recession has arrived.
In one segment of the market, it has. Detroit is in the grips of a car recession marked by the collapse of demand for traditional sedans, which accounted for half the market just six years ago. Buyers have made a mass exodus out of classic family cars and into sport utility vehicles. Familiar sedan models such as the Honda Accord and the Ford Fusion made up a record low 30% of US sales in 2018, and things will only get worse.
Sales of the passenger-car body style that’s dominated the industry since the Model T will sink to 21.5% of the US market by 2025, according to researchers at LMC Automotive, relegating sedans to fringe products. That leaves automakers with excess factory capacity that can turn out about 3 million more vehicles than buyers want. And overcapacity is precisely what spurred losses the last time a recession wracked the industry.
“You could classify this as a car recession,” said Jeff Schuster, senior vice-president of forecasting at LMC Automotive.
It’s a situation that promises to put a damper on the North American International Auto Show in Detroit this week, the last to be held in the chill of January. In a bid to re-establish relevance, the annual car conclave is moving to June next year and will be re-imagined as a chance for show-goers to drive new models in warm weather. The car dealers who organise the show hope the new format will entice notable dropouts – a group that now includes Mercedes, BMW and Audi – to return to an event that once commanded the full attention of the automotive world.
An optimist might seek solace in the better-than-expected profit prediction issued Friday by General Motors Co. But a deeper look at the numbers reveals that the biggest contribution to the company’s rosy forecast were cost-cutting plans – including closing five North American plants – which it said will help boost profit this year by as much as US$2.5bil.
The overcapacity plaguing US automakers is the equivalent of 10 excess plants, which would account for at least 20,000 jobs directly, and thousands more as it ripples through the suppliers and support services to the massive industry.
“GM has taken some actions, but they still have some well-underutilised plants,” Schuster said. “So we may not be done with this yet.”
One strategy for dealing with the collapsing car market in the past has been to stuff unwanted sedans into rental lots and other commercial fleets. That has only delayed today’s capacity crisis. Those lower-profit fleet sales have inflated the market, keeping US vehicle deliveries above 17 million for the last four years, even as sales to individual retail customers peaked three years ago.
“The car recession and the retail recession have already arrived in the sense that retail sales peaked in 2015 and have gone down ever since,” said Mark Wakefield, head of the automotive practice at consultant AlixPartners. “Cars have just been crushed.” — Bloomberg and follows Natura Cosmeticos’ purchase of The Body Shop from L’Oreal SA for about €1bil in 2017.
Unilever also acquired South Korea’s biggest maker of beauty products, Carver Korea Co, for €2.27bil in 2017.
Growth in the global beauty market likely grew 5% last year, driven by Asia demand, according to Bloomberg Intelligence. In Greater China, L’Occitane’s biggest sales market, Chinese consumer have shown a willingness to pay for premium and organic skincare and cosmetics products. — Bloomberg