Last month Bloomberg reported that P&G was looking to divest some of its beauty brands as it looks to sharpen its focus and while nothing is confirmed as yet the combined value of the businesses potentially being sold could make it the consumer giant’s highest divestment yet.
The assets reportedly include fragrance brands, such as Gucci and Hugo Boss, the professional and retail hair care businesses of Wella and Clairol, and the Max Factor and Cover Girl colour cosmetic brands.
While this partial dismantling of P&G’s beauty empire ends an era of the company’s impressive growth trajectory in personal care, it sets the stage for exciting growth opportunities for strategic and financial buyers, says Kline.
Looking at the fragrance businesses P&G currently owns a number of prestige lines of high-end fashion offerings and this could be lucrative for anyone willing to take up the mantle, according to Susan Babinsky, head of Kline’s Management Consulting practice in consumer products.
“Brands also generate substantial sales in international markets, where P&G needs to rely on distributors to reach retail customers. There are indeed opportunities for further international growth and synergies, which can be realized with certain buyers,” she says.
Hair care opportunities
Looking at hair care, it is Clairol and Wella that have been touted as the brands that may be moved on.
Clairol was acquired by P&G back in 2001 and substantially improved P&G’s offering, although it has lost market share in recent times.
“It benefits from strong consumer awareness and heritage in the category,” according to Carrie Mellage, head of Kline’s Market Research & Reports practice in Beauty, and Babinsky adds that “in terms of value and growth, we believe that the Clairol equity is a great one with a positioning that appeals to women globally.”
“By focusing efforts on the space that Clairol does indeed own, the brand has the opportunity to revitalize growth.”
Meanwhile, Wella was bought in 2003 for $7 bilion and was significant for “its sheer size and because it gave P&G a solid number two position in the global professional hair care industry,” according to Kline’s Eric Vogelsberg, head of the firm’s M&A practice.
Today, Wella continues as the clear number two player “with strong footholds in Europe and the hair colouring category in particular,” says Mellage, who agrees with Babinsky that the brand has growth potential in professional hair care, particularly in developing country markets.
Colour cosmetics potential
Elsewhere, in colour cosmetics Cover Girl and Max Factor are the two brands that seem to have caught the eye.
Cover Girl continues today as a highly successful brand with a share of about 20% of the $6 billion US mass market, but it has lost ground in particular to L’Oréal, “which has grown substantially via its own L’Oréal Paris brand and its acquired Maybelline brand,” according to Kline’s annual industry report Cosmetics & Toiletries USA.
“The opportunity is to build this brand franchise globally,” says Babinsky. “P&G was unable to accomplish that. Cover Girl does have a differentiated position, but has perhaps become too reliant on celebrities to promote the brand.”
On the other hand, Max Factor is much more important internationally, having exited the US in 2009. Today, Max Factor is sold in Europe, Asia, and Latin America, where it continues to be recognized for its heritage as one of the original make-up artist brands.