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Industry Breakdown

Updated: Sep 6, 2019

If you walk down the beauty aisle at a store, your first impression may be that there are countless beauty brands. When I was first looking for a job in the cosmetics industry, I would get recommendations from friends and family about brands to look into. When I would look up the brand online, I would often find that it was owned by one of a few top companies, usually Unilever or L'Oréal.

Similar to many industries, the cosmetics industry is consolidated into a few major leaders. I found the graphic below in the Insider article "These 7 companies control almost every single beauty product you buy" to be very helpful in illustrating the point. As you can see below, many of the top cosmetic brands are owned by these companies, ranging from mass market brands you can find at the drugstore to luxury brands to niche offerings available in different channels such as the dermatologist's office or the hair salon.

The graphic is a snapshot in time from 2017, but the landscape is constantly changing through mergers and acquisitions. For example, Johnson & Johnson has since divested RoC and acquired OGX haircare, Neostrata skincare, and Dr Ci:Labo, a Japanese skincare brand. Unilever now owns Murad, Hourglass, and Tatcha.

In the past few years, there has also been a great influx of independent brands. The barriers to entry into the market have come down. With the help of the internet, it is now easier than ever to build a following with social media and connect with a contract manufacturer to create formulas. Many independent brands have grown into billion dollar companies such as Glossier, The Honest Company, and Drunk Elephant.

Top celebrities have also seen the opportunity to convert their fan base into customers. Celebrities have been involved in launching fragrances for a long time, but the push into skincare and cosmetics seems to be a newer phenomenon. Rihanna's Fenty Beauty, launched via LVMH's Kendo Brands in 2017 has been very successful. Lady Gaga just announced the launch of her brand Haus Laboratories on Amazon Prime Day. Gwyneth Paltrow's Goop brand launched a skincare line. Miranda Kerr has an organic skincare brand Kora Organics. Seed Beauty has also made a name for itself as the manufacturer of Kylie Jenner's Kylie Cosmetics, Kim Kardashian's KKW, and ColourPop.

Overall, the industry seems to be having a renaissance of small brands. However, this doesn't mean that the trend of giant conglomerates will change. Many newer brands, including some listed above, have been the topic of acquisition rumors. Some companies are targeting an IPO of their own, but many will likely become part of the industry giants. As consumers, a crowded market seems to be beneficial. It means more competition, more options, and more time spent wandering the aisles of Sephora.

Thanks for reading my take on the industry today! If you have any questions about the industry landscape, mergers and acquisitions, or indie brands, please leave a comment below!

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Alex Blackstone
Alex Blackstone
20 Ağu 2019

There are several advantages! One is the ability to segment the market. Having several sub-brands allows a company to have offerings at a variety of price points and retailers for different audiences without creating confusion or cannibalizing existing products. Another reason is your thoughts about economies of scale. When working with manufacturers or suppliers of raw materials or packaging components, a larger contract generally equates to lower prices. The large companies may also buy a brand for a specific purpose such as getting into a new distribution channel, product type, or market. Thanks for your question!


Interesting...are there any advantages to a large conglomerate owning so many sub-brands Perhaps with economies of scale when manufacturing?

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