EDITED PREVIEW BEAUTY DEALS: INVESTMENT + M&A REPORT - YEAR END
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Y EA R END
BEAUTY DEALS:
INVESTMENT + M&A REPORT
EDITED PREVIEW
INTELLIGENCE BY:
IN COLLABORATION WITH:
This report was created in partnership with Synchronicity Ventures.
The shifts and findings related to the beauty and wellness land-
scape identified in this report are the result of category analysis
and the tracking of investment activity, including thousands of ar-
ticles and research conducted by the BeautyMatter editorial team
as well as intelligence provided by the BeautyMatter advisory arm.
Beauty Deals: M&A Transactions - Year End
BeautyMatter is a research-based content plat- Synchronicity Ventures, founded by Jorge
form and advisory practice founded by Kelly Cosano-Martinez, is an early-stage incu-
Kovack. No one has their finger on the pulse bator helping launch, build, and scale the
of the beauty and wellness space quite like next generation of great consumer brands.
we do. We’ve built a comprehensive frame- It focuses on pre-seed and seed stage, pur-
work to capture data, conduct research, and pose-driven brands tapping today’s changing
connect the dots. Our future-focused in- consumer values and behaviors to lead new
dustry insights and actionable solutions en- solutions that improve people’s life and well-
able bold decision-making and business im- being. Synchronicity Ventures incubates brands
pact. We help leaders stay connected and in three key verticals: Beauty & Wellness,
informed in a constantly changing world. Food & Beverage, and Consumer Technology.
Beauty Deals: M&A Transactions - Year End
FULL REPORT Contents INTRODUCTION 05 - 18 DEAL FLOW 19 - 22 INSIGHTS 23 - 32 INVESTORS 33 - 34 BRAND PORTFOLIO 35 - 49 COLOR COSMETICS 50 - 76 FRAGRANCE 77 - 85 FUNDS + PLATFORMS 86 - 100 HAIRCARE 101 - 122 HEALTH + WELLNESS 123 - 165 MEDIA 166 - 169 MEN’S + GROOMING 170 - 176 PERSONAL CARE 177 - 213 PROFESSIONAL 214 - 227 RETAIL 228 - 276 SKINCARE 277 - 310 SUPPLY SIDE 311 - 383 TECHNOLOGY 384 - 406 SYNOPSIS BY QUARTER 407 - 437
INTRODUCTION Year in Review As the dust begins to settle and we look to the vaccine to provide a way out of this cri- sis, there is still a long road ahead. The pan- demic delivered a core shaking blow to the world as we knew it—collectively we will emerge transformed. Whether this transfor- mation is a positive or negative will be largely defined by circumstance and perspective but make no mistake—our post-pandemic world will be vastly different. In a June McKinsey & Co. study, research found that 75% of con- sumers tried a new shopping behavior since COVID-19 started, with 73% of those who tried a different shopping method or brand intending to continue. For the past several years, the global beau- ty market has seen annual growth of around 5.5%, while the prestige segments’ rate of expansion has been higher at around 6% to 7%. Many industry watchers predict declines in the 20% range at least for 2020, although this varies by category, channel, and market.
INTRODUCTION
Just the Numbers: Year in Review
First Half 2020 Sales According to L’Oréal Es- Skincare vs Makeup: Although online beauty sales have surged
timates: amid the pandemic, this activity has not
• L’Oréal saw skincare sales up 1.1%, while been enough to offset the decline in in-store
• Global beauty sales 2019 +5.5% vs 2018. makeup declined 28% in the first half of purchasing while stores were closed, which,
• Global beauty sales first half 2020 -13% 2020. pre-COVID, accounted for up to 85 percent
to -14%. • Estée Lauder saw sales of skincare up 3%, of sales, McKinsey estimates. They predict
• Global prestige beauty sales 2019 +10% while makeup fell 61% in the most recent total e-commerce sales will rise to 19% of
vs 2018. quarter. total beauty sales in 2021, an increase of 36%
• Global prestige beauty sales first half CAGR from 2019. The ascendance of Amazon
2020 -23%. While the beauty sector is proving to be re- during this period is a testament to this shift
silient, recovery is contingent not only on and cannot be overlooked. The e-commerce
NPD US Prestige Category Sales Q3 Dollar the continuing impact of the pandemic, but behemoth is reportedly on track to capture
Sales and Growth, July-September 2020 vs also on whether purchasing power will hold $10 billion, or over 10%, of US beauty sales in
2019 up over the next year. Prediction on the time 2020 (up from $4 billion and under 5 percent
frame for a rebound seems to be, at least to in 2018).
some extent, tied to the online penetration
Makeup -31% and maturation of channels in the market. While brick-and-mortar retail was hard hit,
physical stores will remain important to the
Skincare -11% Global Beauty Market Rebound According to beauty sector; but how consumers shop,
McKinsey & Co.: where they choose to shop, and what they
Fragrance +1% buy may be very different. Success will be
• China: Rebounded in August 2020 with found in meeting consumers where they are
Hair +11% continued dynamic growth 8% to 10% in this new normal. Larissa Jensen, beauty in-
compounded annual growth rate (CAGR) dustry advisor at the NPD Group, believes,
expected in 2021. “While online sales have been strong, brick-
Nail +13%
• United States: Forecast to rebound next; and-mortar remains a key factor in the indus-
expected to return to growth by mid- try’s recovery.”
Body +17% 2021, with continuing growth of 3% to
4% CAGR through 2022.
Home Scents +21% • Western Europe and Japan: Expected to
face longer recovery, not reaching 2019
sales levels until late 2021 or 2022.
The Global Beauty Industry Has Been
Consistently Resilient .
GLOBAL BEAUTY INDUSTRY RETAIL SALES, $ BILLION
+5.0% +3.2% +4.1% +4.6%
500
477
455 51 Fragrances
436 49
418 47
400 45 72
383 43 70
367 42 67
349 40 63
332 38 58
319 37 54
309 35 51
297 33 49 140
281 33 46 132
267 32 44 117 123
30 42 43 111
28 40 106
102
38 92 97
37
84 88
77 81
72
68
227 236
190 198 205 211 218
148 154 159 165 174 182
141
134
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Note: Figures may not sum to listed totals because of rounding
SOURCE: EUROMONITOR
1
Includes bath, haircare, men’s shaving, oral care, shower, and adults’ sun care products; deodorants; and depilatories
Year-Over-Year Change in US
Q3 Sales by Category
SOURCE: NPD GROUP
The New Consumer
E-Commerce Penetration by
Category in the US
SOURCE: EARNEST RESEARCH
INTRODUCTION
Looking Back at Our 2019 Predictions
A lot can happen in 12 months. Heading next beauty leaders driving the continuation Clean Color: The overarching color cosmet-
into 2020, M&A activity in the beauty sector of smaller capital raises. The decade also be- ics category continues to struggle, and con-
had been on fire for several years, and while gan with a new environment—magical uni- sequently transaction activity will continue to
there was constant chatter of a beauty bub- corn thinking was replaced with investors be slow with the exception being the clean
ble, 2019 proved to be another strong year. looking for profitability and practicality rath- color segment. Formulation technology has
Everything seemed to get bigger—the invest- er than the high-flying bets on disruptors fo- evolved, allowing clean color brands to com-
ments, the deals, and without question, the cusing on growth before profitability. “Where pete on long-lasting wear, performance, and
exits. As of 21 November, beauty deal activity we are in M&A today, there’s a cautionary tale payoff. Clean color brands are going to be a
for 2019 had already outpaced 2018 by 19%, between the past and present,” said Andrew hot commodity in 2020, breaking out of their
according to investment bank Capstone Shore, Managing Director at Moelis. When niche status.
Headwaters. Strategic buyers, venture capi- the makeup category was strong, purchase
tal firms, and private equity companies had prices for brands went way up, Shore noted. The Activity: While the general color catego-
all been active, with many newcomers enter- “You found that every year, lower-quality as- ry continues to struggle, as predicted a bright
ing into the space. Beauty unicorns emerged, sets were sold at higher prices, and now stra- spot could be found in the category with sus-
there were a number of billion-dollar deals, tegics are being more selective.” tainably minded brands with clean formula-
some brands were trading for more than tions.
eight times revenue or 10 to 15 times earn- But no one could have predicted the turmoil
ings, and bets were made on the next crop of COVID-19 would unleash, creating a glob- The Deals:
indies with smaller capital raises in the $5–$10 al crisis sparing few industries. While this
million range. year will be one of the worst, with the big- • Ilia Beauty raised a Series B from
gest sales declines in history, the beauty in- Sandbridge Capital to fuel growth.
The consensus was the market would contin- dustry has shown resilience with decreas-
ue to be healthy, with many investment bank- es far less dramatic than that of many other • Kjaer Weis received funding from
ers reporting robust pipelines of beauty deals sectors. Even with all the uncertainty and dis- Waldencast, a dynamic new fund focus-
for 2020. Others didn’t expect 2020 to be as ruption of 2020, our 2019 predictions for the ing on early-stage beauty and wellness
robust as 2019 because the pool of mature year held true. Below were the predictions in brands.
independent brands of scale was quite small our Beauty Deals: M&A Transactions Year End • e.l.f. paid $27 million in cash for W3ll
while valuation expectations remained high, 2019: People, which was expected to do $7
predicting it could take two to three years million in net sales for 2020.
for the next crop of indies to surface as the• After 12 years of partnership, Kat Von D and body acceptance redefining the catego- tors and government funding. This latest
Beauty announced that founder Kat Von ry. With investment, indie brands will contin- raise brings Callaly’s total funding to £9.6
D sold her ownership stake and made ue to grow and take or create market share. million.
a full departure from the brand, making
Kendo the sole owner of the business. The Activity: Personal care fared well during • Female-led specialist investment fund
the shutdown given the category prolifer- Vaultier7 expanded its wellness portfo-
• Kosas secured Series B funding to fuel lio, leading a €10MM Series B investment
ation in essential retail. This, coupled with a
growth. The round was led by Stripes in French mom and baby personal care
tremendous bout of innovation and reinven-
with participation from existing investors. brand Joone.
tion of the category, has created excitement
2020 projections had the business tri-
in what has been a staid category. • Personal care brand Beast raised $3 mil-
pling to $50–$60 million in retail sales.
lion in a Series A round led by Callais
• Saie announced a seed funding round The Deals: Capital Management.
led by previous investor Unilever Ventures
with participation from Gwyneth Paltrow, • P&G bolstered its female grooming port- • Burst Oral Care closed a Series C fund-
G9 Ventures, and Stage 1. folio with the acquisition of DTC disrupt- ing round led by Goldman Sachs’ Growth
er female shaving and body care brand Equity Platform, GS Growth.
• La Bouche Rouge secured €2.5 million Billie.
($3MM) in funding from French public • Public Goods, the digitally native, mem-
investment bank Bpifrance along with a • Colgate-Palmolive acquired oral care dis- bership-driven, one-stop shop that offers
group of business angels. rupter Hello Products, a portfolio com- high-quality, sustainable essentials across
pany of Tenth Avenue Holdings, a New grocery, household, and personal care,
• Freck Beauty closed a round of seed York City-based private, diversified hold- received a significant strategic investment
investment led by Stage1 Fund and ing company. from the Growth Fund of L Caterton.
KarpReilly.
• Brüush closed an oversubscribed $6.5 • Beiersdorf and purpose-driven nat-
• Millie Bobby Brown purchased a majori- million Series A financing round, exceed- ural beauty brand Stop The Water
ty stake in her Gen Z clean skincare and ing its original $4.0 million target, led by While Using Me! joined forces. The two
makeup brand Florence by Mills from Gravitas Securities, followed by an an- Hamburg-based partners intend to joint-
beauty incubator Beach House Group nouncement that comedian and actor ly intensify the impact of sustainable skin-
that helped develop and launch the line Kevin Hart joined the brand as an inves- care and to further their commitment to
last year. tor and collaborator. climate and resource protection.
Note: It’s also worth noting La Bouche Rouge • Attn: Grace, the first subscription-based, • Clean deodorant brand Type:A raised
and Kjaer Weis are not only luxury product sustainable wellness brand for women as $2.4 million in seed funding led by
propositions, but they are also based on re- they age, secured an additional round of Marigay McKee and William Detwiler’s
fill concepts which have finally begun to gain $900,000 in pre-seed funding, bringing Fernbrook Capital Management, and is
traction. the total amount of funding to $2 million. launching in 1,500 Target doors.
• Period-care brand Callaly raised £1.7 Note: It remains to be seen if the P&G acqui-
Personal Care: The traditional back-aisle per-
million in equity crowdfunding on sition of Billie will go through. The Federal
sonal care category is undergoing a rapid
Crowdcube, achieving 170% of tar- Trade Commission plans to file suit to block
evolution, with taboo-breaking brands tack-
get. The company had previously raised the deal. The complaint alleges that the pro-
ling period care, sexual wellness, menopause,
around €8.8 million through angel inves- posed acquisition would allow P&G, the mar-ket-leading supplier of both women’s and • Early-stage venture capital fund Eutopia ics in Tokyo. The business generated sales
men’s wet shave razors, to buy Billie, a newer closed a €100 million round of funding of around €50 million ($60.95 million) in
but expanding maker of women’s razors, and and received B Corp certification. 2019 and continues its growth this year
thereby eliminate growing competition that despite difficult market conditions.
benefits consumers. Earlier this year the FTC • Producer and rapper Pharrell Williams
filed a similar claim over competition con- coupled his entrepreneurial spirit and ac- • LemonBox, the supplement compa-
cerns that prevented Schick owner Edgewell tivism with the launch of Black Ambition, ny selling American-style supplements
from buying Harry’s in February. an incubator for Black and Latinx entre- to Chinese millennials, completed a
preneurs launching start-ups in tech, de- pre-A round of $2.5 million led by Panda
Purpose-Driven Brands: Simply selling prod- sign, healthcare, and consumer products. Capital and followed by Y Combinator.
ucts is not enough. Consumers want brands • London-based fund The Craftory, which • Yatsen Holding Ltd., the parent com-
that stand for something that aligns with their invests exclusively in purpose-led con- pany of C-Beauty unicorn Perfect Diary,
beliefs. Activist brands like Beautycounter sumer brands, has now joined the ranks raised $617 million in a US IPO, valu-
and Milk Makeup will continue to be acquisi- of 3,200 businesses globally to be award- ing the company at $7.82 billion, and
tion targets for the strategics because of the ed B Corp certification. acquired iconic skincare brand Galénic
authenticity and community that are at the from French pharmaceutical and dermo-
core of these businesses. Note: This year we not only saw more funds cosmetic group Pierre Fabre.
launch with the focus of investing in pur-
The Activity: While most brands speak to pur- pose-led consumer brands, they are also be- • Dufry agreed to form a joint venture with
pose, for others their purpose is the reason coming B Corp certified. They are walking the Alibaba Group to partner in the Chinese
for being—it is a nonnegotiable. Consumers walk. travel retail markets.
have made it clear they expect brands to • Hyundai Department Group acquired
make a positive contribution to society. The Increase in Asian Activity: In 2020 strate- cosmetics material supplier SK Bioland
rise of B Corps will add a level of validation to gics in the region got more active in overseas for 120.5 billion won ($101.9 million),
these claims, rewarding those that can sub- deals. The Asia-Pacific region is the largest venturing further into the beauty and
stantiate values, claims, and commitments. skincare and cosmetics market in the world— healthcare market.
The shift from profit to purpose is just getting partnering with an APAC-fluent company is
started. an interesting and potentially lucrative way to • Shiseido announced a new joint venture
fuel growth. with Yaman Co. for skincare and beauty
The Deals: devices called Effectim Co.
The Activity: In addition to strategic activity • DFS Group took a 22% stake in Shenzhen
• Grove Collaborative, an online shop- in the region, the rising trend of homegrown Duty Free Ecommerce Co, which is ma-
ping destination that targets millenni- brands is driving venture capital’s interest in jority-owned by Shenzhen Duty Free
al customers with clean household and funding C-Beauty start-ups. Group.
beauty products, raised $125 million at a
$1.32 billion valuation. The Deals: • Indonesian start-up Social Bella secured
$58 million in a Series E funding round
• Canadian B Corp-certified home and sus- from existing investors Temasek, Pavilion
tainable lifestyle marketplace Goodee • L’Oréal signed an agreement to acquire
the Japanese company Takami Co owned Capital, and Jungle Ventures.
closed a $1.5 million Series 2 seed round
of financing led by BDC Capital. by Japanese doctor Hiroshi Takami, found- • South Korea’s Handsome diversified
er of two eponymous dermatological clin- into cosmeceuticals, acquiring a majori-ty stake in Cleangen. The brand signed a • ManiMe raised $6 million in venture cap-
deal to acquire a 51% stake worth 10 bil- ital funding led by Canaan Partners and
lion won ($8.2 million). The fashion com- Trinity Ventures.
pany plans to leverage the distribution
channel run by its parent group, Hyundai • Function of Beauty, a leading creator of
Department Stores, one of South Korea’s customizable hair, skin, and body care
three major department store chains. products, received a $150 million strate-
gic minority investment from L Catterton.
• South Korean beauty conglomerate
Amorepacific acquired a substantial mi- • Shampora, a platform that lets you create
nority stake in Australian luxury skincare and buy completely customized person-
brand Rationale. al care products online, closed a new €3
million investment round.
• Japanese beauty brand Etvos received
a significant investment from Groupe • Nourished, the UK-based customized
Arnault and LVMH-backed global pri- nutrition product that uses patented 3D
vate equity firm L Catterton’s Asia fund printing technology, raised £2MM in
for 125 million pounds ($161 million) seed funding.
from global pharmaceutical company • Customized skincare business Atolla
GlaxoSmithKline. closed a $2.5 million seed round led by
Lyra Growth Partners.
Beauty Tech: Shifting consumer preferences
have changed the relationship between con- Supply Side: Consolidation of smaller play-
sumers and products. The demand for trans- ers, especially those in the organic and nat-
parency, personalization, experiential retail, ural value chain, will remain attractive targets,
and community are all powered by technolo- as will those innovating on the sustainability
gy working in the background across the val- front like Sulapac. There is tremendous op-
ue chain of the category. There is no end to portunity for packaging companies capable
the need for tech innovation, so investment of commercializing and scaling sustainable
and strategic acquisitions will continue. materials. Other B2B-focused companies
working behind the scenes innovating fulfill-
The Activity: Below are brands grounded in ment technology, e-commerce experience,
technology facilitating personalization and and retail staffing will become interesting in-
customization. The pandemic has been an ac- vestments. The competition will heat up as
celerant, rapidly increasing the pace of inno- funds that are typically brand and consumer
vation and adoption of technology to bridge focused are now looking at these assets.
the gap between physical retail and digital. Photo: Toa Heftiba
Notes: Supply-side consolidation in contract
The Deals: manufacturing, ingredients, and packaging
continuted at a rapid pace. The pandemic
• Aryballe, the pioneer in digital olfaction, saw consolidation begin across the e-com-
raised €7 million in a new global fund- merce supply chain from technology to ware-
ing round from investors across Europe, housing.
North America, and Asia.INTRODUCTION
Decoding the Chinese Impact on Global
Beauty
In 2019, according to the investment bank lower lending rates for businesses. Data from promising results for beauty brands that got
Morgan Stanley, China’s share of the glob- China’s National Statistics Bureau indicated their China strategy right. The benefits of the
al beauty market could increase by 66% over retail sales figures increased 5% year-on-year market’s great resilience will help offset losses
the next five years, which represents a sales in November, faster than the 4.3 per cent rise in other markets.
increase of about $38 billion—nearly half of the month before. The International Money
all global beauty growth. The opportunity is Fund recently predicted the world’s second- As the recovery in China takes shape, import-
real, but it’s only getting more competitive. largest economy is forecast to expand 1.9% ant shifts in the economic landscape have
Success requires an understanding of the dy- in 2020, compared with growth of 6.1% surfaced. COVID-19 has been an accelerant
namic retail landscape, the nuanced market- last year. And China’s growth is expected for emerging trends, fast-tracking the future
ing ecosystem, and the wildly sophisticated to accelerate to 8.2% next year. While the that was already unfolding. McKinsey identi-
consumer. This year China went from being recovery in China is being widely reported, fied five such trends in its China Consumer
ground zero of the pandemic crisis at the be- analysis by China Beige Book International, Report 2021; while these trends are not lim-
ginning of the year to being the first and only a provider of independent economic data, ited to China, the Chinese market provides a
G20 economy widely reported to recover tells a different story, saying “China’s official crystal ball of sorts as to how these trends are
from COVID-19 with growth in 2020. As the numbers don’t add up” and that growth is unfolding and the long-term impact they will
first country to deal with the ravages of the uneven and nowhere near last year. have on markets and behaviors.
crisis, China has also been on the front line
of post-pandemic economic recovery and As most of the Western world struggles 1. Digitization – Digital tools become in-
changes precipitated by the pandemic. with the impact of the pandemic, McKinsey creasingly popular solutions, expanding
research indicates the beauty market in from B2C to B2B.
During the onset of pandemic shutdowns, China has already rebounded, reaching 2019
retailers and brands large and small spending levels in May/June. Markets such as 2. Declining Global Exposure – Rising im-
immediately embraced China’s technology Western Europe (down 18% in the first half) portance of domestic markets, technology,
and the market’s digital ecosystem to stay and North America (down 12% in the first half) and capital.
connected with their customers. In March will take longer to recover. Asia and specifically 3. Rising Competitive Intensity – Technol-
the government proclaimed they had control China may be perhaps the only beauty market ogy and agility drive winners to capture the
over the crisis, moving quickly to stabilize the to see gains in 2020, reinforcing beauty’s lion’s share of industry value.
domestic economy by implementing stimulus position as the sector’s main growth engine
in the form of tax cuts and lower interest and widening the gulf between Western and 4. Consumers Come of Age – Consum-
rates to recapitalize local governments, and Eastern beauty markets. China is delivering ers (especially younger consumers) arebecoming more prudent and health con- pandemic has inspired an unparalleled re- brands have launched this year. Bertelsmann
scious. bound in consumer confidence, according to Asia Investments said it has invested in a
McKinsey’s consumer sentiment survey. Net new Shanghai men’s brand, without saying
5. Private and Social Sectors Step Up –
optimism over the recovery of the economy how much, while others like SIG Asia and
The private sector plays a stronger socio-
in China has hovered around 50%, compared Redpoint Ventures have also placed sector
economic role, while the social sector rises.
with about 22% in the US, and in stark con- bets, according to domestic media reports
trast to the pessimism that pervades Europe, and start-up research database CB Insights.
Given China’s position as one of the few large
Australia, and Japan. From a global perspec-
markets to report growth, big beauty will con-
tive, Chinese consumers are most confident The Rise of C-Beauty. After decades of lag-
tinue to be reliant on the region, ramping up
they will be able to resume their daily rou- ging behind foreign rivals, “Made in China,”
investments, while smaller players will contin-
tines after the pandemic, with 60% indicat- is no longer a badge of derision. A boom in
ue to tap into the market opportunity through
ing they expect to do so within two to three domestic businesses has given rise to formi-
cross-border and travel retail (when we start
months. In comparison, a mere 13% of con- dable competition from C-Beauty brands,
traveling again) focusing on domestic duty
sumers in Germany, and 5% in Japan, expect with a distinct competitive advantage put-
free. The Chinese consumer and the mar-
their lives to return to normal within the same ting pressure on global rivals that depend on
ket’s digital ecosystem is arguably the most
time frame. the country for much of their growth. Fueled
sophisticated in the world. While the market
by increasing nationalism and prices typical-
may be fueling global beauty sales, make no
Follow the Money. China’s position in the ly lower than foreign brands, they also have
mistake—it’s equally competitive, and success
beauty ecosystem expanded beyond its the agility to keep up with the speed of in-
requires significant investment, strong local
borders in 2020. Multinationals and strategics novation. With “internet thinking” as part of
partners, and a long-term view.
have been fueling growth and creating their DNA, online connectivity with local cus-
competitive advantage through investment tomers is native to these concepts, and mar-
The Chinese consumer has matured and is
and M&A activity for years. This year investors keting that resonates for locals is intuitive. The
equally as sophisticated. Understanding the
have piled into domestic companies that are growth of online sales during the pandem-
constant evolution of behavior, trends, and
overtaking multinational rivals, doubling the ic has weakened multinationals’ advantages
market shifts is requisite, as is listening to the
combined value of China’s 500 top brands in distribution and marketing. “Chinese shop-
advice of local partners when it comes to
in the past four years to about $3.8 trillion, pers are showing stronger confidence in lo-
cultural context and the translation of market
according to marketing consultancy World cal brands,” Helen Wong of Qiming Venture
nuances. The backlash of cultural missteps
Brand Lab. Venture-backed Chinese beauty Partners, which has backed local start-ups
is swift and can have a profound impact on
brands and retailers are gaining traction. such as lingerie maker Neiwai and cafe chain
revenue and reputation. “The attitude of big
The most notable C-Beauty brand is Perfect Coffee Box, told Bloomberg. “The coronavi-
international brands is changing significantly,”
Diary, but emerging beauty retailers such rus is accelerating the trend as people stay
Wu Wenmi, founder of Wenzihui MCN,
as Wow Colour and The Colorist are giving home, watch livestreaming, and shop.”
an agency in Hangzhou that partners with
Sephora a run for its money by targeting the
Alibaba, told Bloomberg. “They are more
mid-end segment, and China’s male skincare These brands have not only taken market
humble now and willing to hear our opinions
market has seen a flood of domestic start- share from the likes of L’Oréal and Estée
of how to play the game.”
ups, tapping global investors for funds— Lauder in the hyper-dynamic beauty land-
six of the new brands raised more than 300 scape in China—they have global ambitions.
Chinese consumers are confident, optimis-
million yuan between them, the founder of Yatsen Holding Ltd., the parent company
tic, and ready to spend. The Chinese gov-
one brand told Reuters. According to media of C-Beauty unicorn Perfect Diary as well as
ernment’s effectiveness in its response to the
reports, at least 10 new Chinese male skincare Little Ondine and Abby’s Choice, is a grow-ing threat to strategics, jumping 75% since International estimates the men’s skincare The home fragrance category has reached a
its $617 million US IPO valuing the compa- business in China, excluding post-shave critical mass and become a post-COVID craze
ny at $7.82 billion in November. According to products, was already more than three times driven by the rapid expansion of international
Yatsen’s prospectus, which cites a CIC report, the size of the US market last year in dollar perfume brands and domestic labels. Tianle
China’s beauty market is expected to grow terms and more than twice the size of South Feng, the CEO of Double Horse Fragrances &
by $29.9 billion between 2019 and 2025, ac- Korea, with value growth through 2024 seen Flavors (who is also a Chinese perfume KOL),
counting for nearly 60% of the total growth easily outstripping both. told Jing Daily that the market has already
of the global beauty market during the same seen soaring sales before the pandemic hit.
period. The retail value of China’s fragrance segment “The home scent category was growing at
is projected to experience considerable an- around 35% for the past 3-5 years,” said Feng.
We’ve yet to see a Chinese beauty brand nual growth and expand from $1.18 billion in “Due to China’s skyrocketing property price
emerge onto the global beauty stage, but 2018 to $1.81 billion in 2023, according to in recent years, young consumers have been
Perfect Diary might be that breakthrough Euromonitor International, which noted that shifting their spending from bigger purchases
brand. In just four years Perfect Diary trails the market had surged 48.2% between 2014 to smaller ones that could concretely improve
only L’Oréal and LVMH in the world’s No. 2 and 2018. An influx of capital from big fra- their life quality, such as candles. People have
market for makeup. The domestic market is grance houses are a testament to the indus- become more demanding about sensory
still the focus, but Yatsen CEO Huang Jinfeng try’s faith in China. In 2018, CITIC Capital, a experiences in their homes.”
has made his global ambition for the business major state-owned investment company, ac-
known. The company threw its hat in the M&A quired the New Zealand natural fragrance The Reality of 2020. In a BeautyMatter
ring making its first acquisition in October, group Trilogy International Limited for its year-end webinar debriefing the Chinese
buying skincare brand Galenic from French strong China potential. beauty market, industry experts translated
group Pierre Fabre for an undisclosed sum. the spin. According to Julian Reis, CEO of
Fragrance is a relatively small and slow-grow- SuperOrdinary with a team of 200 in China,
The Amplification Impact. As China increas- ing category dominated by well-known in- the long-term view for China is strong in
es in importance for many beauty brands, we ternational brands. Still considered a non- general but most brands are not living up to
may see market trends spread beyond its bor- essential item by many Chinese consumers, the hype and are flat or even down. Recovery
ders more quickly than in the past as compa- the market value will continue to expand over is happening, but it is very category based
nies become more comfortable experiment- the next five years, driven by a growing diver- and specific, with a seismic shift happening in
ing with strategies that work in China in other sity in product offerings and consumers’ ap- the channels of distribution.
markets, such as livestreaming and private petite for premium and niche fragrances, ac-
messaging. China has fueled the growth in cording to Alice Li, a senior research analyst Singles’ Day on 11.11 set multiple sales re-
the skincare category over the past couple of with Mintel. “The Chinese fragrance market is cords. Alibaba generated $74.1 billion in
years and, to a lesser extent, in the color cos- expected to continue experiencing dynamic gross merchandise volume (GMV)—an in-
metics category; the same dynamics seem growth, mainly driven by premium fragrance, crease of 26% compared to 2019; and JD’s
to be creating opportunities in the fragrance which takes up about 80% of the total fra- 2020 promotions reached new highs of over
and men’s categories. grance market in China,” according to Kelly $40 billion, while its international business
Tang, an analyst at Euromonitor International. saw transaction volume in-creased more than
Mintel estimates the Chinese men’s skincare “There’s huge potential in the China market 120% year-on-year in the first 10 minutes.
market is forecast to hit 12.5 billion yuan as consumers are still in the elementary stage Charles Denton, Chairman and CEO of Erno
($1.90 billion) this year and expand 50% of wearing fragrances. Awareness of personal Laszlo, described Singles’ Day this year as a
to 18.5 billion yuan in 2025. Euromonitor grooming is also on the rise.” “bit of a bloodbath.” Denton revealed thatwhat fueled much of this growth for interna- The Future. All signs indicate that big-beau-
tional beauty brands is a dirty secret no one ty brands will continue to rely on the Chinese
likes to discuss—very deep discounts on sur- beauty market to fuel growth for the fore-
plus inventory that was built up around the seeable future as Western markets struggle
world and liquidated on Taobao. to get back to 2019 activity. Have big-beau-
ty brands become too reliant on China for
In effect, premium brands have been growth? Perhaps, but given the size of the
servicing the Daigou grey market through market and the indications that China is al-
legitimate distribution channels like Korean ready well on its way to a rebound, brands
Duty Free, providing a bit of control but are left with few options. There are no short-
creating a dynamic in which brands are having cuts, and wearing rose-colored glasses is not
to compete through their Tmall platforms going to help navigate what is sure to be a
with this product that ultimately ends up tough couple of years. China is certainly a
discounted on platforms like Taobao. This part of any global growth strategy but look
has led to the most extreme discounting ever beyond the spin and dig deep.
seen. Denton said some Korean brands were
discounting their products between 70% and
80%—the La Mers, L’Oréals, and Lancômes of
this world were discounted at unprecedented
50% discounts, causing interesting knockoff
effects. For example, if you look at the top ten
Singles’ Day rankings for the last five years,
in pretty much every year there were four
or five Chinese brands in the top ten. This
year because of the aggressive discounting
by international brands, only one domestic
brand, Winona, was left in the top ten.
China Beige Book shared with South China
Morning Post that their analysis continues
“to show a less-robust recovery than official
statistics, which are in many cases being
wildly inflated by downward revisions to their
2019 baselines.” Shehzad Qazi, Managing
Director, China Beige Book, warned, “Don’t
confuse the fourth quarter’s services recovery
with the ‘Chinese consumer is back’ narrative.
This is a business services—not consumer-
side—recovery. Retail sector data bear this
out even more clearly, with spending on non- Photo: Alibaba Group
durables sagging.”China’s Beauty Market Growth Expected to
Outpace the US, Japan, & Western Europe
BEAUTY MARKET SIZE YEAR-ON-YEAR PERFORMANCE VS. 20191, % SHARE OF BEAUTY MARKET
SOURCE: FORECASTS FOR GLOBAL BEAUTY RECOVERY BY REGION, CATEGORY, AND CHANNEL, REFLECT MCKINSEY PERSPECTIVE, MGI MACRO-
ECONOMIC SCENARIOS AND NPD, NIELSEN, IRI, AMAZON, STACKLINE, AND PUBLICLY REPORTED COMPANY FINANCIALS FOR Q1 AND Q2 2020
1
Includes travel retail salesDEAL FLOW
Word on the Street
Deal Talk in Fourth Quarter: buying Harry’s in February. In January of 2020, Six of the new brands raised more than 300
P&G announced its intent to bolster its female million yuan between them, the founder of
A handful of strategics, including Unilever, grooming portfolio with the acquisition of one brand told Reuters. Bertelsmann Asia
Shiseido, and Henkel, have publicly talked the DTC disrupter female shaving and body Investments said it has invested in a new
about divestitures. care brand. The complaint alleges that the Shanghai brand, without saying how much,
proposed acquisition would allow P&G, the while others like SIG Asia and Redpoint
Estée Lauder is once again open to acqui- market-leading supplier of both women’s and Ventures have also placed sector bets,
sitions, according to Tracey Travis, Executive men’s wet shave razors, to buy Billie, a newer according to domestic media reports and
Vice President and Chief Financial Officer, but expanding maker of women’s razors, and start-up research database CB Insights.
who spoke after the company’s most recent thereby eliminate growing competition that
earnings call. She said that at the start of the benefits consumers. Will P&G fight the suit or Investors have poured almost $1 billion this
pandemic, the company’s “focus was on cash back out like Edgewell? year into companies that are buying up
and managing cash,” but now that the bal- successful FBA brands on Amazon to try to
ance sheet is strong, the company would be China’s male skincare market has seen a build digital consumer goods conglomerates
open to M&A. “To the extent there was an as- flood of domestic start-ups tapping global akin to Procter and Gamble or Unilever.
set or a brand or a capability out there we felt investors for funds. Mintel estimates the A growing ecosystem of Amazon seller
could add accretively to the company, we’d Chinese men’s skincare market is forecast to acquisition companies, often referred to
certainly pursue it. There’s nothing right now hit 12.5 billion yuan ($1.90 billion) this year as seller rollup companies, are investing in
that’s imminent in the next few months, but and expand 50% to 18.5 billion yuan in 2025. successful FBA Amazon businesses, creating
certainly that’s something we’re always look- Euromonitor International estimates the Amazon product portfolios that are category
ing at in terms of what are brands or catego- men’s skincare business in China, excluding agnostic. According to industry analysts,
ries that can be accretive to the company’s post-shave products, was already more than independent Amazon merchants made up
profitable growth,” Travis said. three times the size of the US market last year more than $200 billion in sales this year and
in dollar terms and more than twice the size tens of thousands of them have revenues in
In early December the Federal Trade of the South Korea market, with value growth excess of $1 million, creating an opportunity
Commission announced it was filing suit through 2024 seen easily outstripping both. to roll up businesses with promise and scale
to block Procter & Gamble’s proposed According to media reports, at least 10 new them. During 2020, seven start-ups in the
acquisition of Billie. Earlier this year the FTC Chinese male skincare brands have launched US and Europe—Thrasio, Heyday, Perch,
filed a similar claim over competition concerns this year. Boosted Commerce, Razor Group, SellerX,
that prevented Schick owner Edgewell fromand Heroes—raised a combined $950MM to products, its portfolio of brands include company. Management will also look for
buy sellers trading on Amazon Marketplace. appliance maker Cuisinart and BaByliss, a more acquisitions in the subscription
CMC Holdings is the sole distributor of maker of hair-styling products. Rizzuto took commerce sector, he said. “For us, it’s about
Fancl’s products in Asia outside Japan, which Conair public in 1972 through an initial public really just creating an undisputed leader in
has been owned by Hong Kong-based Chris offering, taking the company private again subscription, where we have such a large
Chan and his wife since 1996. The business 13 years later. He died in 2017, when he percentage of the market.” Ipsy was valued at
operates more than 240 Fancl stores across was chairman of Conair’s board of directors. $800 million in a funding round in 2015 and
Asia outside Japan, including more than Consumer products company Spectrum has raised about $100 million to date.
190 in China, employs about 1,300 people, Brands partnered with private equity firm
and had annual revenue of more than $250 CVC Capital Partners in a bid for Conair in a As reported by Jing Daily, Yatsen Global, the
million last year. The company is also planning deal which could value the haircare tool maker holding company for the C-Beauty brands
the launch of an official e-commerce site. The at around $2 billion, including debt. This Perfect Diary, Little Ondine, and Abby’s
company hired Morgan Stanley to explore consortium is one of a number of interested Choice, entered a strategic partnership with
a sale in August, seeking more than $600 bidders in the company. Sensient Technologies Corporation, the
million for the asset. world’s largest manufacturer and marketer
The Manchester-based UK beauty e-tailer of colors, flavors, and fragrances. As a result
The business attracted interest from a number Beauty Bay, founded in 2000 by Arron and of the partnership, color creation labs will
of potential Chinese buyers including JD, David Gabbie, is reported to be working be opened in Shanghai, Guangzhou, and
Taobao, Tmall’s owner Alibaba, and Tencent, with investment bank GCA Altium to explore Singapore. In another partnership the
a key backer of Pinduoduo, Fosun, and its exit options. Following a successful IPO company partnered with the Korean beauty
Yatsen. Bloomberg reported on December for The Hut Group in September, a stock conglomerate Cosmax to build Asia’s largest
10 that Sequoia Capital China, Carlyle Group, market flotation could be the likely outcome, cosmetics production site, while committing
Blackstone Group, Bain Capital, and Citic but an outright sale is also a possibility. The another $20 million toward skin research labs.
Capital Holdings have been invited to proceed Gabbie brothers are the company’s main
to the second phase of bidding, according to shareholders. Beauty Bay’s sales soared Yatsen plans to use the proceeds from $617
people who asked not to be identified because more than 50 percent during the pandemic million in a US IPO, valuing the company at
the matter is private. It was also reported that as shoppers shifted beauty spend online $7.82 billion, for business operations, poten-
some of the suitors could consider teaming during lockdowns, netting £120 million on an tial strategic investments and acquisitions,
up with technology companies for joint offers. annualized basis, according to Sky News. development of data analytics technology,
The list of candidates are expected to be product development, and offline store net-
further narrowed around mid-January and Ipsy purchased Miami-based rival work expansion. In October Yatsen bought
call for binding bids by the end of February. BoxyCharm Inc. in October. The merger skincare brand Galenic from French group
CMC is seeking to conclude a deal in the first creates a combined business with more Pierre Fabre for an undisclosed sum.
quarter of next year. than 4.3 million subscribers and $1 billion
in revenue, according to the company. The Launchmetrics chief executive Michael Jais
Family-owned Conair, founded in 1959 by businesses will operate as separate brands expects more consolidation in the influencer
Leandro Rizzuto and his parents, has been in a merged company called BFA Industries, and content space over the next 24 months,
working with financial advisors to explore short for “Beauty For All.” The combined including the potential for additional acqui-
a sale. The company sells personal care company could go public in the next 18 sitions. “There are a lot of things that we can
products including tools and skincare in over months, said Ipsy Chief Executive Officer improve. It could be new verticals; it could
125 countries. In addition to its flagship Conair Marcelo Camberos, who will lead the new be new technology [recognizing emotions].AI will be completely different from the first- Nestlé is keeping its options open investor, and closed a $1.35 million senior
stage type of AI technology. Understand- regarding its stake in L’Oréal. Nestlé, the secured credit facility from Adam Pritzker’s
ing what drives emotion in digital will be key. second-largest shareholder in L’Oréal after Assembled Brands, a financing business, and
Analyzing the way your eyes move as a user. the Bettencourt family, wrote in its annual Agility Capital, a venture debt fund, in May.
Somehow AI can guess if you are getting review, “The board continuously monitors the High-end beauty retailing concepts have not
bored, if you are excited… For the brands, it’s returns and strategic options of our financial fared well in the M&A market in recent years,
important to know what kind of format and investment in L’Oréal.” Nestlé has divested and processes for SpaceNK, Feelunique, Cos
content they need to publish.” Launchmetrics the beauty category from its own portfolio. In Bar, and Cult Beauty have fizzled out.
acquired the Chinese influencer analytics October 2019, the group sold its Skin Health
platform Parklu in November, marking the business, which was renamed Galderma, to a In April it was reported Macy’s was looking
company’s second acquisition since it raised consortium including EQT, PSP Investments, for a buyer for the 171-store Bluemercury
$50 million in 2018, led by French state in- and a subsidiary of the Abu Dhabi Investment beauty business. According to WWD, the re-
vestment bank BPI. The company purchased Authority in a deal worth 10.2 billion Swiss tailer hired Goldman Sachs mid-March, be-
content creator IMAXtree late last year. francs, or $10.38 billion. fore the COVID-19 shutdown, to shop the
asset with private equity firms among the
Swiss drug company Lonza was said to be Leading Kuwaiti beauty e-commerce start- players interested.
considering a sale of its Lonza Specialty up Boutiqaat doubled its valuation last
Ingredients (LSI) unit, according to a report summer to $500 million when the group Vegan beauty start-up Thrive Causemetics
by Reuters. The sale was estimated to be worth received investment from an undisclosed is said to be working with Goldman Sachs
around 3-3.5 billion Swiss francs ($3.25–3.79 Gulf-based investment firm. According to Group Inc. to explore options including a
billion), with sources stating that UBS was a report published by Bloomberg in June, sale or public listing, people familiar with the
to send out information packages on LSI to Boutiqaat engaged Citigroup to “explore matter told Bloomberg in July. The company
companies such as Clariant and Lanxess, as strategic options.” Quoting anonymous was founded by entrepreneur Karissa Bodnar
well as private equity firms. sources, Bloomberg stated that the business in 2015.
is considering the possibility of a sale for part
Saudi Basic Industries Corporation (SABIC) of its business as well as securing investment. Reckitt Benckiser is reportedly preparing
was said to be mulling a possible IPO of its The same people “with knowledge of the to sell some of its non-core personal care
specialty chemicals unit. The division, which matter” said that Boutiqaat is hoping to brands, including Veet, Clearasil, E45, and
generates revenue of $2 billion a year, could achieve a valuation of between $700 million Scholl foot products. Reckitt is said to be
be listed as soon as 2021. to $1 billion. working with advisors, and information on
the assets has been sent out. The package of
A Look Back at Q1–3 Deal Talk: Luxury beauty concept Violet Grey brands could be worth as much as £1 billion
is exploring deal options, including ($1.3 billion) in a sale based on estimates of
Private equity group CVC Capital Partners fundraising, a handful of industry sources annual earnings before interest, tax, depreci-
is exploring options to sell or list German said in June. Multiple sources said Shiseido is ation, and amortization north of £120 million.
perfume and cosmetics retailer Douglas. looking to shed its stake in the business, and The brands don’t fit into the two main busi-
The buyout firm is working with Goldman one source said that Violet Grey is working nesses—health and hygiene—that have been
Sachs on a potential initial public offering or with investment bank Ohana. The business is Reckitt’s focus. The brands are cash genera-
a sale. No decision is imminent, and any list- expected to do around $15 million in sales tive and likely to appeal to private equity play-
ing would unlikely happen before the second for 2020. The company also has financial ers or strategics in the personal care space
half of the year. backing from Beechwood Capital, an early like Unilever, Beiersdorf, or Henkel. Accord-ing to sources, Beiersdorf and Henkel are in- NuFACE was said to have tapped Intrepid to
terested in parts of the package. evaluate options with $40 million in net sales
and $4 million in EBITDA.
Brands Exploring Options in 2019 – No
Deals Yet: Beautyblender has been rumored to be en-
tertaining options while focusing on expan-
Glossier is also one to watch as speculation sion through color cosmetics and is said to
swirls around a possible initial public offering. be doing $150 million in retail sales.
The brand raised $100 million in a Series D in
2019, pushing the brand to “unicorn” status Professional skincare business Envy Medical
with a $1.2 billion evaluation. was said to be on the market.
Erno Laszlo reportedly tapped Moelis to ex-
plore options fueled by growth in Asia.
Paula’s Choice reportedly has more than
$100 million in net sales, and is said to have
tapped Morgan Stanley to explore options.
Curology, the direct-to-consumer skincare
concept, was said to be working with Financo
on a transaction.
Deciem, the multi-brand beauty business,
is expected to be taken over in full by Estée
Lauder, who made a minority investment in
the company in 2017.
In August 2019 Foreo, said to have about
$200 million in EBITDA and between $750
million and $800 million in net sales, was also
said to be considering options and floating a
$1 billion price tag.
Lilly Ghalichi’s Lilly Lashes reportedly hired
Intrepid to explore investment options.
Dose of Colors, which industry sources said
had about $80 million in sales, was reported Photo: Jonas Lee
to be exploring options.INSIGHTS
A Look Forward to 2021
2020 has been an unprecedented year in all • Reinvention of the work model and pro- be positioned to take a leadership position in
dimensions. The year has challenged all prin- cesses the new market.
ciples we knew on how businesses and in- • Rediscovery of simple pleasures and lux-
vestments operate, and we’ve observed the uries In this context, early-stage companies and in-
year go from the deepest, sudden dip in the • Mainstream awareness of environmental vesting will boom with a high level of activi-
markets back in March to one of the most im- risks ty for two reasons. Firstly, there will be capital
pressive rallies in Q4 in both private and pub- • Importance of prioritizing racial and so- for early-stage investments given the check
lic markets with IPOs, SPACs, funding rounds, cial equality agenda sizes versus growth capital or private equity.
and valuations. This will have a clear impact • Home as new center of entertainment Secondly, this new market coming out due to
on the forecasts for 2021, and how execu- and social life COVID will present a great seeding ground
tives, founders, and investors will approach • New ways of socialization and communi- for new ideas and brands that will become
the coming year. cation major players in a few years—we cannot for-
get that some of the most iconic companies
1. Consumers have experienced deep shifts Now the key question these shifts raise is: of the 2010s were all children of the 2008 cri-
in their values and behaviors, many here to Which of these changes are here to stay and sis (Airbnb, Uber, Glossier, Drunk Elephant,
stay become permanent, and which ones will be etc.). We’ve been telling entrepreneurs of-
just temporary? ten in the past months that challenge always
It is clear that 2020 introduced a major shift brings opportunity, and we have in front of us
of unprecedented dimension in consumers’ 2. We are entering a new innovation cycle one of the best markets to start a new brand.
trends and behaviors, both geographically What these entrepreneurs need to keep in
and temporally. Many of these trends were From extensive conversations with investors, mind, and what will change in early stage,
already happening before 2020, but COVID executives, and founders, most businesses is the need to have more sound and robust
exponentially accelerated their adoption. have suffered major losses in revenues and proven concepts, with clear strategies, road-
investment in 2020 and will take some time to maps, and unit economics to drive sustain-
Some of the main shifts are: come back to levels of business pre-COVID. able growth. This is what early-stage inves-
• Delocalization from major urban areas At the same time, many entrepreneurs and tors are going to be looking for. Lastly, there
• Need to reconnect with nature investors are thinking about what changes is also the possibility that we may see a new
• Increased priority of health and preven- in consumer behaviors and attitudes post- type of deal in the market that we called “dis-
tive care COVID are going to be fundamental and will tressed venture,” meaning start-ups that have
• Adoption of digital technology and be here to stay, and how brands out there will solid proven concepts but that run out of cash
e-commerceand that will probably be acquired at low pric- a deal or not, are in a wait-and-see position. ples. When you build consumer tech prod-
es. This concept seems counterintuitive to the There has been a lot of capital in the market ucts, e.g., Instagram or Spotify, scalability is
idea of venture capital, but this market is go- in recent months into VC and PE with new exponential and the marginal product cost of
ing to be the catalyst for this type of deal. freshly raised funds and the firms are ready to scaling the customer base is practically zero.
deploy them. They are just waiting to see and However, when you are selling physical prod-
In beauty, categories like wellness and skin- make decisions based on two factors: what ucts, there is always the hard reality of cost,
care will hold up well because consumers brands are taking the necessary measures including product and logistics. For this rea-
are still not spending in other categories to come out of the situation as winners, and son, our approach over the last few years has
and they want to at least treat themselves at what brands are not, and where they can get been always to focus not on profitability but
home, while color is now suffering as no one a great deal for assets that are worth it. on unit economics and healthy unit margins.
needs it to go to work, go on dates or dinner, If your brand has healthy net margins (60%
etc. However, once we are out of the current In terms of valuations and multiples for range), then you can highly likely build a prof-
lockdowns, people are going to flock into the brands, this is going to be determined by their itable business. The other principle we have
street, go back to work and their social life, ability to pivot and adapt during this year to always questioned is the idea of large teams
even in a stronger manner than before, prob- the new reality. In particular, how quickly they and organizations that comes from tech and
ably just avoiding large gatherings such as can build both their own DTC and e-com- digital products. Throughout our experience,
concerts or sporting events. If this is the case, merce with their retail partners. Physical retail we have seen brands running efficient busi-
we are going to see a strong comeback of will still suffer importantly this year, and we ex- nesses with very lean structures. If you focus
makeup and color, in which case brands like pect to see steep declines in foot traffic prob- on these two principles, with healthy unit eco-
Anastasia will fare well off this situation. With ably with permanent effect given the shift to nomics and low fixed costs, then you can nav-
this said, we are going to see a major peak of e-commerce, not just coming from lockdown igate a situation like COVID easily, as the only
bankruptcies in the market, mainly driven not but from a more fundamental consumer be- thing that it requires is adjusting your variable
by category but by the fact that companies havior change avoiding crowds of people in- costs (mainly marketing in many cases) to see
out there are in shock or trying to run busi- store and being more comfortable with shop- things through.
ness as usual, and not adapting to the new ping online. Therefore, it’s critical for brands
reality and are not going to make it. This is that built their success and exit on a strong Lastly, we also expect that investors will val-
going to create a great opportunity for inves- physical retail to use this time to shuffle their ue brands that are nimble and flexible and
tors and corporates to acquire good-quality strategy, organization, and resources to sup- that can adapt quickly to the changing so-
brands and assets at a deal if they are cash port DTC and e-commerce. This will define cial and economic landscape, as changes in
rich and liquid. the impact on their valuations, and if they the market and volatility are much faster and
leave this situation as winners or losers. extreme now than they were just a few years
3. This will be an investor market with a ago. This may have an impact in how some
boom in activity We also see a transition from a “growth at all investors structure deals to be more perfor-
cost” to a “sustainable growth” mindset was mance based versus straight-up acquisition.
For smart investors, 2021 is going to become already underway before COVID, and the cur- But again, none of this is new, and smart in-
a perfect market where you can get access to rent situation has just accelerated that. For a vestors have been looking at things this way
cheap capital and deploy it in great deals with long time, I have been a challenger of the for the last year or two. It is just going to be-
strong underlying assets. We are going to see idea that investors and founders can apply come now the mainstream way of thinking for
a boom in the number of deals and a steady venture capital principles to consumer cate- investors in the industry.
decline in valuations and multiples. All inves- gories like wellness and beauty. The reality is
tors, no matter if they were in the middle of that investors cannot apply the same princi-You can also read
