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Published on March 1, 2021 by Holly Porter

What’s been happening in the commercial world this week? Read on to find out!

A Look at The Beauty Industry

This week Estée Lauder Companies announced it will take a majority stake in Deciem Beauty Group, a rise from 29% to 76%. This marks an expansion away from its beauty and hair-focused brands into skincare given Deciem owns skincare brands Niod, Loopha and The Ordinary. The news comes only weeks after competitor L’Oréal announced that skincare was the only category that grew in its beauty portfolio in 2020. The acquisition is also beneficial for Deciem who will now have access to Estée Lauder’s global distribution and supply chain resources.

In 2019, Business Insider claimed that the beauty industry was worth $532bn. The US is the largest market with a 20% share, followed by China with 13% and Japan with 8%. Before the pandemic, Forbes projected that the compound-annual-growth-rate could mean the industry would exceed $800bn by 2025. However, the pandemic has proved problematic for the industry. McKinsey & Company have estimated that the global beauty market has experienced a 20-30% decline, meaning the loss of in-store sales has not been offset by online sales. A Premise survey revealed 17% of women have stopped wearing makeup completely and 66% of women are wearing less than before the outbreak. 39% of these women said face masks were a key factor in deciding not to wear makeup. It is unclear how quickly the industry can recover, especially with the longevity of mask-wearing.

Skincare was the only subsector which grew on account of the pandemic. Notable performances include the sales of skincare products with blue light protection, which increased by 170%. Hand masks have seen a growth of 606.4%, hand soaps have seen a growth of 438.4% and body wipes have enjoyed a 378.5% growth. The global skincare market is currently worth $145.3bn but is expected to rise to $185.5bn by 2027. However, Forbes’ beauty industry-wide prediction may need to be revised.

Who are the main players in the beauty industry?

7 major multinational manufacturers own 182 of the world’s most notable beauty brands:

  • Estée Lauder Companies – Deciem will join 24 other makeup, beauty and fragrances companies including Aveda, DKNY, La Mer, Aramis, Bobbi Brown, Clinique, MAC Cosmetics, Jo Malone, Michel Kors, Rodin, Tom Ford Beauty and more.
  • L’Oréal – owns 39 companies including Yves Saint Laurent, Garnier, Kiehls, Viktor & Rolf, Lancôme, essie, Urban Decay, Maybelline and more.
  • Johnson & Johnson – the American multinational corporation owns 9 brands including Rogaine, Neutrogena, Johnson’s, Roc, Le Petit Marseillais, Aveeno and more.
  • Unilever – the British consumer goods company has an expansive beauty and personal care portfolio comprised of 38 brands including Dove, Pears, Caress, simple, V05 and more.
  • Procter & Gamble – the American multinational consumer goods corporation owns 9 household-recognised beauty brands including Olay, Head & Shoulders, Herbal Essences, Pantene, Gillette and more.
  • Coty – the American multinational beauty company owns 33 beauty brands including Sally Hansen, ghd, Rimmel, Beyoncé, David Beckham, Clairol, OPI and more.
  • Shiseido – the Japanese multinational personal care company owns 30 beauty brands including Laura Mercier, Avène, Benefique, bareMinerals, NARS, D&G and more.

This list is restricted to beauty brands only – many of the megacompanies also own deodorant, toothpaste, sun cream etc. brands.

Another emerging big player is LVMH who have embarked on a series of recent acquisitions meaning the conglomerate now owns Benefit, Marc Jacobs Beauty, Sephora Fenty Beauty, Kenzo, Fendi, Guerlain, Acquia di Parma, Christian Dior, Givenchy and more. It should be noted that some of these are owned under LVMH’s Kendo brand.

The Future of the Industry

  • With the general trend in favouring environmentally friendly products, the beauty industry must make sure to capitalise on this. A Bloomberg report revealed that the beauty industry produces 120 billion units of unrecyclable packaging per year. Many consumers would like to see greater sustainability. Olay is market-leading in this respect after launching a refillable skincare product that sold 1.26million units.
  • Most brands have ceased animal testing but this has become increasingly important to potential customers. Furthermore, consumers have expressed an interest in vegan products. Aveda has responded and is currently in the process of removing honey and beeswax from their range so they can launch 100% vegan products.
  • Anti-pollution skincare products have begun to launch on the market. With 90% of the population worldwide exposed to pollution, anti-pollution makeup and skincare products could become more popular.
  • If mask-wearing becomes part of our day-to-day life, eye makeup may replace lipstick.
  • The beauty industry may also see a growth in CBD (cannabidiol) products as many of the world’s most popular brands unveil CBD skincare solutions such as CBD soap bars, shampoo and lotions. Colgate is a global example of this after launching a CBD lip balm.
  • The Halo Code. A Stylist survey revealed that 58% of black students felt they were discriminated against in schools due to their hair. The Halo Code is a campaign pledge which explicitly protects students who come to school with natural hair associated with their racial, ethnic and cultural background. Unilever is the first major owner of beauty companies to adopt the code and is working with brands to develop more tailored hair-care products.
  • Social media is instrumental in powering the beauty industry. 80% of makeup brands report using Instagram for their campaigns, followed by 46% on Facebook, 36% on YouTube, 24% on Twitter and 12% on LinkedIn. Business Insider estimated that $15bn will be spent on global influencer marketing by 2022. Interestingly, independent makeup brand Huda Beauty has enjoyed the greatest success on Instagram with 48.1m followers. Watch this space to see whether Huda Beauty accepts any acquisition offers from the 7 major beauty companies.

These are suggestions but interesting to consider nonetheless.

Talking points: In an industry worth billions, do you think it is acceptable for so few companies to own the vast majority of brands? As a consumer, what factors impact your purchasing decisions?


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Amazon Go to Open UK Store this Week

This week, Amazon Go is expected to open its first UK store in Ealing, West London. The new store will sell groceries without tills, using ‘just walk out’ technology. In-store cameras and sensors track what customers take from the shelves, charging them when they leave via the Amazon mobile app. If successful, the online giant will continue to open 30 stores in the UK, largely in transport hubs, where they can attract busy commuters who need to pick up items on the go.

In the US, Amazon has already launched 27 stores, firstly in Seattle, followed by Chicago, San Francisco and New York City. The flagship store revealed several problems with the technology including the sensors’ inability to track objects which had been moved around the store, instead of remaining on its original shelf.

The first Amazon Gos also attracted some legal attention based on cashless stores discriminating against low-income people, who may need to pay with food stamps. This led to Philadelphia and New Jersey passing legislation to ban cashless stores and retailers. San Francisco stores now accept cash for those who do not have the app.

Amazon is not the only company to operate a cashier-less store. Start-up Standard Cognition Corporation offers a package of cameras and software using similar AI-powered technology to charge customers on exiting a store. The unicorn (a privately held start-up company valued at over $1bn) is currently partnering with Arizona-based convenience store Circle K in a trial run. Standard differs from Amazon’s approach because they have eschewed shelf sensors, focussing purely on cameras. This will cut the price of installing the technology for potential supermarket customers. Standard is predicting a 100-store roll-out by the end of 2021. Circle K’s parent company Alimentation Couche-Tard is the world’s fifth-largest convenience store operator, so Standard Cognition’s technology certainly has scalability.

The UK’s Compass Group (a multinational contract foodservice company) is reportedly testing both Standard Cognition and Amazon Go’s technology. The Compass Group is reportedly assessing the technology’s maturity and scalability before installing their favoured approach in office canteens across the country. There is currently no timeframe for this roll-out.

It is likely the pandemic has fuelled the launch of a cashless store, so as to avoid any infection transmission via the handling of cash. However, the successful installation of autonomous supermarkets could be one of the largest contributors to technological unemployment, dealing a much harsher blow than self-service checkouts.

Talking points: How will AI change the job market over the next decade? What kind of jobs are most at risk?

5,000 Asda Jobs At Risk

This week, British supermarket chain Asda announced a major restructuring which could put 5,000 jobs at risk. 3000 of these are non-store jobs with 1,100 store management roles under consideration. Other changes include proposed cuts in cash management ie. fewer cashiers, to reflect the move to more online as opposed to in-store shopping. Asda is also likely to close its two online-only stores in Dartford and Heston, which would see the loss of 800 jobs.

However, the restructuring will see significant investment in Asda’s online offering. Management has suggested this could generate 4,500 online-based jobs. Despite this, the GMB Union has been highly critical of the move, noting Asda workers’ turbulent few years with a failed Sainsbury’s takeover, working the pandemic frontline, the Issa Bros acquisition and now a huge restructuring. The National Officer for the GMB Union has pointed out that the company is profitable and therefore does not need to enforce redundancies.

Read more about the Issa Brothers acquisition of Asda

In the three months to December 2020, 1.75 million people in the UK were unemployed, a rate of 5.1%. The Band of England predicts that this could peak at 7.75% in mid-2021 as the longer-term effects of the pandemic become clearer. The Office of National Statistics (ONS) has reported that the 18-24 age group has seen the greatest decrease in pay-rolled employees, down by 287,000 from February 2020 to February 2021. Any decisions must be considered against this bleak backdrop and taking into account the composition of Asda’s workforce.

Talking points: What could the government do, particularly during Wednesday’s budget announcement, to protect workers at a time when unemployment is rising?

 

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