Japanese cosmetics makers will increasingly seek international targets that have a solid millennial customer base in order to compete with global majors.
The millennial generation is one of the largest in history and a force to be reckoned with as the generation enters its prime spending years. M&A targets may include cosmetics players with an edge in digital marketing, IT, and/or e-commerce.
In January, Shiseido announced its acquisition of California-based startup MatchCo for an undisclosed sum. MatchCo provides customized foundation based on individual skin tones, which can be scanned and sent through a mobile application.
KOSE is also looking at targets, particularly companies that have product lines or brands targeting people in their 20’s-30’s and/or the elderly, according to one industry expert.
Majors like Estee Lauder and L’Oréal have already been penetrating the millennial market. Estee Lauder acquired New York-based makeup firm BECCA Cosmetics for an undisclosed sum in October 2016 and California-based makeup brand Too Faced Cosmetics for $1.45 billion in November 2016. L’Oréal acquired New Jersey-based IT Cosmetics for $1.2 billion in July 2016.
These acquired firms are popular among millennials and are understood to have a strong presence in digital marketing, such as through the use of SNS, and robust online sales, according to a previous report by Mergermarket.
There were 97 deals globally in 2016 valued at around $16.1 billion in the Consumer (other) category, under which cosmetics fall, according to Mergermarket data. Both deal volume and value in this category slightly decreased from the 112 deals totaling $20.3 billion that were logged in 2015.
Cosmetics companies always look to appeal to a younger generation, but the pressure is now greater as their traditional markets are becoming increasingly competitive and saturated, says Kensaku Takase, Partner at Baker & McKenzie.