Unilever, which has been on an acquisition tear since 2015, reported impressive fourth-quarter earnings for 2017 on Thursday. Its profits rose 17 percent to roughly $8 billion, while its sales increased 2 percent to $67 billion.
In the last year alone, the company added 11 new companies to its portfolio, many of which fall into the personal care category. That includes Hourglass Cosmetics, Living Proof and Carver Korea, as well as Sundial Brands’ four hair and skin-care properties: Nubian Heritage, Shea Moisture, MCJW Beauty Culture and Nyakio.
So far, this expansion is paying off: all together, its personal care category grew 3 percent to $26 billion in 2017.
Add to that the company’s increasing speed of innovation, said CEO Paul Polman, and Unilever is on track to be “[more] competitive, in light of fast-changing consumer and technology trends.”
Although it’s unclear if the company plans to continue beefing up its personal care arm, we’ve highlighted three other key beauty learnings from the call, below.
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1. Unilever’s prestige beauty business is booming.
Although Unilever’s largest personal care brand is the mass-market Dove, the juggernaut is quickly becoming a more formidable competitor in the prestige space. Kate Somerville, the skin-care line it acquired in 2015, grew in double digits, as did some of its newest acquisitions: Hourglass Cosmetics and Living Proof hair care. Dermalogica, another acquisition from 2015, was also said to perform well, according to CFO Graeme Pitkethly.
2. Expect a Murad brand revamp this year.
In 2015, Unilever also acquired the clinical skin-care brand Murad. Although it’s sold at select retailers like Sephora, the brand is largely known for its presence in salons and on infomercials. This year, that’s going to change, perhaps to better align it with the larger prestige category. Explaining a sales decline for the brand, Pitkethly noted that it’s restructuring its sales profile “by reducing the brand’s dependence on the infomercial channel.”
3. New beauty business models have higher costs.
While Unilever reported that its brand and marketing investments were down in 2017 by 60 basis points, and its overhead costs reduced by 10, Polman made it clear that most of those savings would have to go toward its recent acquisitions. Their business models, he said, “have a higher proportion of cost and overheads than traditional models.” Dermalogica, for example, requires the creation and expansion of its special skin-care professional training centers, while others, he said, thrive off of special pop-ups and activations to build brand awareness.
