Legacy beauty companies are competing in an arms race to buy up the most buzzworthy, trendy and innovative brands.
Revlon is the latest to announce a new restructuring plan that puts the company’s individual brands at the center of its strategy, rather than retail channels. Revlon’s branches of business will be divided and organized into four categories: the Revlon brand, Elizabeth Arden (which Revlon acquired in October), fragrances and portfolio brands, which include Almay, Mitchum, Gatineau, SinfulColors and Pure Ice cosmetics.
Each division will have its own president and management team, and Revlon plans to hit $5 billion in sales in the next five years due to the restructuring. According to Revlon CEO Fabian Garcia, the goal is to meet the needs of customers, who are increasingly brand loyalists, rather than department or drugstore shoppers.
“This new brand-centric structure enables us to leverage the strength of our iconic brands, better focus on and serve beauty consumers, and quickly adapt to their changing behaviors and preferences,” he said in a statement. “Aligned with our strategy, the new brand-centric structure better positions us to grow and win across categories, channels and geographies, wherever and however our consumers shop for beauty,” he added.
Revlon is joining peers like Estée Lauder, Unilever and L’Oréal on a path to acquire independent beauty and skincare brands to build out a diverse brand portfolio. Not only are these companies acquiring these brands, but they’re also shifting their strategies to put the emphasis on these individual brands — which often come with a set of loyal and passionate consumers — and sell them through a broad variety of channels.
“Delivering a consistent, compelling experience across channels is critical to brand building,” said Marie Chan, partner at branding agency Vivaldi. “It’s extremely smart to organize marketing around a brand — not only will this allow for deeper consumer insights and brand knowledge, it will optimize global scale.”
Estée Lauder’s recent $1.4 billion acquisition of cosmetics brand Too Faced was the priciest addition in a string of seven acquisitions since 2014. Other newly Estée-owned brands include Becca Cosmetics, By Kilian, Rodin, Le Labo, Editions de Parfums Frédéric Malle and GlamGlow, in addition to a minority investment in Dr. Jart+. The company is rumored to be in talks to acquire Korean skincare brand Drunk Elephant in the near future.
“We’ve built a portfolio of fragrance brands and Korean skincare brands, and with Too Faced and Becca, we’ve put our focus on the younger consumer,” said Estée Lauder CEO and president Fabrizio Freda at the time of the Too Faced and Becca acquisitions.
Unilever has reached beyond its typical drugstore offerings to acquire higher-end skin and haircare brands, including Living Proof, Kate Sommerville, Ren and Dermalogica. In a $1 billion acquisition last summer, Unilever bought into Dollar Shave Club’s subscription-based business model.
L’Oréal describes its acquisition strategy, which the company traces back to 1967 with the purchase of Garnier and Lancôme, as a tiered business play to drive organic growth. L’Oréal’s branches span mass consumer products (they include L’Oréal, Maybelline, Nyx, Neily and Essie, among others), luxe products (Lancôme, Giorgio Armani, Kiehl’s, Urban Decay), professional products, (Kerastase, Redken, Carita) and active cosmetics (La Roche-Posay, Skinceuticals, Vichy).
Recent acquisitions have centered on the punchy independent beauty brands, like Too Faced, which have captured younger customers through strong social media strategies (the brand has 7.3 million Instagram followers), as well as on Korean skincare and beauty brands, like GlamGlow and Drunk Elephant, which have seen surging popularity in the U.S.
These beauty brands have grown organically through an understanding of how the modern consumer shops: online, or at least armed with a plethora of online reviews, and through a mix of multi-brand retailers like Sephora and Ulta, both of which bet on young brands by pulling them into their product assortments early on. According to a report done by L2, indie beauty brands have gained an advantage by growing with a consumer-centric, channel-agnostic business strategy that has “posed a challenge to traditional beauty retailers.”
The downside of big beauty buying up indie brands? They potentially lose indie cred. Retailers are then tasked with the responsibility of preserving the organic appeal of the brands they buy.
“While this is smart business strategy, I’m not sure these legacy brands are getting credit from customers — meaning I’m not sure many consumers are actually aware that their beloved niche brands are owned by these larger companies. It could be more of a turnoff than an asset,” said Jessica Navas, chief planning officer at Erwin Penland. “Big brand ownership suggests that these independent brands are going mass. [With these acquisitions], legacy brands are able to inherit a coveted niche audience — the key is to not mess it up.”