LONDON, United Kingdom — Puig has acquired a majority stake in Charlotte Tilbury, bringing one of beauty’s hottest brands under the same roof as Jean Paul Gaultier, Carolina Herrera, Dries Van Noten and other fashion labels.
The deal instantly makes Puig a player in the cosmetics space. If the group can successfully scale its new brand, it could pave the way for more acquisitions, analysts say.
“The group’s ambition to become a top 10 beauty conglomerate is no secret,” said Ariel Ohana, co-managing partner at independent investment bank Ohana & Co.
Financial terms of the deal were not disclosed. However, media reports in April valued the maker of Pillow Talk lipsticks and Magic Cream moisturiser at over $1 billion. BDT Capital Partners, which advised Puig on the deal, is a minority investor, and Tilbury herself will stay on as chairman, president and chief creative officer with “a significant minority stake.” Demetra Pinsent, the brand’s chief executive, will also stay on.
Tilbury, a British makeup artist with a big social media presence, founded her namesake line in 2013. Known for her work with top fashion brands and magazines and friendships with A-list celebrities like Kate Moss, Kim Kardashian and Jennifer Anniston, her products developed a loyal following almost overnight. Today, the brand, which has branched into fragrance and skin care, is sold in over 150 countries worldwide. Sales grew 33 percent to £101 million ($125 million) in 2018, according to a UK regulatory filing, and the brand turned a small profit that year.
Charlotte Tilbury was also one of the largest independent beauty labels on the market, making it an attractive acquisition target. Luxury conglomerates and consumer-products giants have been buying up prestige beauty companies over the last few years, often spending hundreds of millions of dollars to buy the sort of buzz with young consumers that they couldn’t generate with their own brands. Puig is thought to have beat off competition for Charlotte Tilbury from consumer giant Unilever.
It’s likely that a tie-up with the family-owned Spanish group would allow Tilbury to retain more control over her brand. Plus, as Puig’s only major beauty brand, the group would be able to devote more time and attention to nurturing the company through its next stage of growth. Unilever has a large beauty and personal care portfolio, which mostly includes mass brands, and Charlotte Tilbury could easily get lost among bigger, more lucrative peers.
“[Puig] has always inspired me with … its respect for founder-led brands like mine,” said Tilbury in a statement. “I feel like I’m home.”
For Puig, which hit €2 billion ($2.2 billion) in revenue last year, the acquisition will significantly boost the group’s presence in the beauty market. It sells nail polishes and lipsticks for shoe designer Christian Louboutin, but is best known for its extensive fragrance business, holding the licenses for luxury names like Commes des Garçons and Prada. Its fashion portfolio includes Carolina Herrera, Jean Paul Gaultier, Nina Ricci, Paco Rabanne and Dries Van Noten.
Beauty products are high-margin, high-volume and tend to attract increased consumer interest during recession periods when shoppers trade down high-priced luxury items for less costly ones — known as the “lipstick effect.” Thanks to the coronavirus pandemic, luxury fashion's outlook is looking bleak, and Puig’s core fragrance business has been especially hard-hit. With one of the worst recessions in decades looming, an established name like Charlotte Tilbury, which has a strong brand equity and large following, is a great starting point for Puig to begin releasing its ambitions in the beauty space.
Still, Puig is entering an increasingly tricky market — especially in the West, where high-end makeup sales overall have been in decline (Tilbury is one of a handful of brands that have defied the trend). The pandemic is also keeping many intended customers in their homes, leading some to speculate that demand for beauty products will shift in unpredictable ways.
“The long term fundamentals for beauty are still good, so we expect continued M&A in the space,” said Ohana.“However, while some trends remain, the pandemic is causing a shift in others,” he added, noting that with few independent colour cosmetics companies left, skincare, haircare and digital-first DTC brands will dominate activity.
Names that boast millions Instagram followers, like Kim Kardahisan (KKW), Rihanna (Fenty), and, of course, Charlotte Tilbury, have the advantage of “a trusting, ready-made audience who are willing to repeatedly purchase their products above commercial brands such as L’Oréal,” said Shan Hanif, founder and chief executive of Genflow, an agency that builds brands for influencers.
This week reports surfaced that Coty was in talks with Kardashian, just months after it acquired a 51 percent stake in Kylie Cosmetics for $600 million. In May, Coty prioritised its Kylie Cosmetics investment by offloading Wella, Clairol, OPI and other ageing brands to investment firm KKR in a deal worth $4.3 billion.
With Tilbury off the market, the beauty deals pipeline may slow, at least until the economic effects of the pandemic are better understood. A few influencer-driven, buzzy labels still operate independently, including KKW, Ouai, Huda Beauty and Pat McGrath Labs. The circle of potential buyers with large enough pockets to bid on these high-valuation businesses is small. Nevertheless, a slowing economy might give the likes of Estée Lauder Companies, L’Oréal, Unilever and P&G the chance to acquire high value assets for less.
“Buyers who have cash are able to set the tone,” Bahige El-Rayes, a partner at consulting firm Kearney’s consumer practice, told BoF in May.