Beauty Deals: Investment + M&A Report Edited Preview

YEAR 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 landscape 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 crisis, there is still a long road ahead. The pandemic 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 consumers 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 beauty 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 38 319 58 309 37 54 297 35 51 140 281 33 33 49 132 267 32 46 123 30 44 117 28 42 43 111 40 102 106 97 37 38 92 88 81 84 72 77 68

236 198 205 211 218 227 154 159 165 174 182 190 141 148 134

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 1Includes 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- • secured Series B funding to fuel Kosas ation in essential retail. This, coupled with a lio, leading a €10MM Series B investment growth. The round was led by Stripes tremendous bout of innovation and reinven- in French mom and baby personal care with participation from existing investors. tion of the category, has created excitement brand Joone. 2020 projections had the business tri- in what has been a staid category. pling to $50–$60 million in retail sales. • Personal care brand Beast raised $3 million 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 The traditional back-aisle per- Note: It remains to be seen if the P&G acqui- Personal Care: million in equity crowdfunding on sonal care category is undergoing a rapid sition of Billie will go through. The Federal Crowdcube, achieving 170% of tar- evolution, with taboo-breaking brands tack- Trade Commission plans to file suit to block get. The company had previously raised ling period care, sexual wellness, menopause, the deal. The complaint alleges that the pro- around €8.8 million through angel inves- posed acquisition would allow P&G, the market-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 sign, healthcare, and consumer products. Capital and followed by Y Combinator. Purpose-Driven Brands: Simply selling products 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 purpose-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- • L’Oréal signed an agreement to acquire from existing investors Temasek, Pavilion tainable lifestyle marketplace Goodee Capital, and Jungle Ventures. closed a $1.5 million Series 2 seed round the Japanese company Takami Co owned 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 majority 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 strategic 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 personal care products online, closed a new €3 brand Rationale. 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) are becoming 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 growing 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 increasing 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 that what 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-beauty 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 1Includes travel retail sales DEAL 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 from and 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 explore 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-commerce and 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- Projected Shifts in the Global Beauty Category Mix Are Expected to Last Post-COVID-19

CATEGORY DEVELOPMENT IN BEAUTY; % SHARE OF RETAIL SALES 20211

CHANNEL MIX PRE- AND POST-COVID; % SHARE OF RETAIL SALES

Note: Due to rounding, numbers presented may not add up precisely to 100 SOURCE: FORECASTS FOR GLOBAL BEAUTY RECOVERY BY REGION, CATEGORY AND CHANNEL, REFLECT MCKINSEY PERSPECTIVE, MGI MACRO- ECONOMIC SCENARIOS AND NPD, NIELSEN, IRI, AMAZONG STACKLINE AND PUBLICLY REPORTED COMPANY FINANCIALS FOR Q1 AND Q2 2020 1E-commerce includes all online sales (i.e., marketplace, brand.com, retailer.com) 5Direct includes MLM (middle-level marketing) 2Grocery includes convenience stores, forecourt retailers. and supermarkets 6Other channels include hair salons, home shopping, apparel 3Mass, club retailers include discount/warehouse and hypermarkets specialty, vending, etc. 4Beauty specialist retailers does not include any retailer.com; these are included in e-commerce INSIGHTS What the Experts Are Saying

Financial sources expect strategic buyers haven’t slipped as evidenced by large industry. Digital has actually become more to return to M&A in 2021 looking for what multiples paid by acquirers. L’Oréal purchased urgent, because so many companies have they don’t currently have—growth, and solid Thayers Natural Remedies for $400 million brands that are brick and mortar focused,” e-commerce operations. While big-beauty and Puig acquired Charlotte Tilbury for $1.2 Vennette Ho, Managing Director at Financo, buyers are predicted to be looking for billion. Both deals revealed in June reached said to WWD. “The fastest way of doing that potential targets, they are also expected to EBITDA (earnings before interest, taxes, and the most effective way of doing that is be more selective about potential targets depreciation and amortization) multiples in M&A.” than they have been in the past, especially the high teens to twenties.” given the major write-downs many have had Michael Toure, founder and CEO of Toure to take on some of the biggest acquisitions. “That’s all very consistent with what we have Capital, told WWD that most strategics They’ll also be evaluating portfolios with seen in the past, which was kind of a surprise tend to be reactionary versus visionary with some divesting of non-core or slower-growth to us,” said Zhang. She added, “But we’re glad acquisitions. The trend of strategics moving assets. Quasi-strategics looking to build to see that people are still willing to pay for downstream to look at and consider buying platforms and SPACs provide alternative the right brand.” Strategic buyers have looked or investing in smaller and smaller beauty paths to monetization for potential sellers. past near-term disruption, and Zhang expects assets—often before private equity firms or them to continue to be aggressive in pursuit other investors get involved—is expected “COVID has added to the pressure from of accretive assets. In line with rising trends, to continue going forward. Lauder took a demand going to a very concentrated they’re hunting for brands that are digitally minority stake in the parent company of Dr. number of winning brands,” Francesca Di focused, have better-for-you merchandise, Jart+ in 2015 before buying it outright in Pasquantonio, Head of Global Luxury Equity and are mission driven. 2019, and now, the brand is a key driver of Research at Deutsche Bank, told Vogue growth, adding 3 percent to sales growth in Business. “This creates the conditions that are “They’re going to have to go and buy the most recent quarter. favourable to selling to others, merging with businesses that are digital, that are growing others or joining forces to be able to scale, and that have global potential. It was probably “I can’t think of one strategic today that is but also to leverage expertise or talent.” hard to do this year,” Ilya Seglin, Managing not looking at something they would not Director at Threadstone LP, told WWD. “Next have looked at four or five years ago,” Toure In the third quarter, deal volume almost year, I think it’s going to be a necessity.” said. “Why would they wait for the company returned to historic levels, Nini Zhang, to have gone into the hands of one or two Director of Luxury, Beauty, and Apparel “COVID-19 has really shined a light on new private equity firms for a minority or majority at Credit Suisse, told Beauty Independent, trends and in many ways accelerated the deal before investing themselves? That’s why “Throughout the pandemic, brand valuations change that was already happening in the you see more and more strategics going into venture land, going into incubators, doing product innovation pipelines and calendars minority deals, acquiring companies on the are all keys to successfully competing in smaller end of the spectrum.” the COVID environment. The need to react quickly and be decisive, to build culture in “We will likely see continuing M&A and/or a a remote work-from-home environment. brand creation spree in 2021,” Ben Cavender, These are all key challenges senior executives Managing Director at China Market and founders needed to address this year. Research Group, told Business of Fashion. Nobody has ever operated a business in the Some Chinese investors will be local players midst of a global pandemic before. Everyone looking to diversify or use international was learning on the job. The need to surround brands as a point of differentiation; others yourself with great people is critical at any will be more opportunistic firms looking for time, but really important in this environment. bargains on strong brands in distress due to Also, the need to succeed in digital channels tumultuous conditions in the US and Europe. has never been more important for brands.

True Beauty Capital Founder and Managing “The M&A market has gotten very active Partner Rich Gersten told CEW, “Increased post-Labor Day. Investors are paid to invest, competition among investors for fewer and the beauty category is still very attractive brands, and the high valuations being paid from an investment perspective—especially and sought after by sellers were the main with the expanded definition that includes challenges that beauty and personal care ‘wellness.’ I would expect 2021 to be active. investment firms faced coming into 2020. We will see if valuations hold up or pull back Unfortunately, I am not sure that dynamic has a bit. I would expect the latter, but I have not changed much since COVID started, at least seen signs of it yet. for high performing brands. What perhaps has changed is the increased desire for DTC “Growing brands always need capital, even in businesses and the lack of interest in brick & good times. There is no shortage of smaller mortar businesses. emerging brands seeking capital as scaling a brand is working capital intensive. We are long “COVID merely accelerated trends (such term investors seeking uniquely positioned as e-commerce penetration, Amazon entry brands with authentic founder stories. I have into beauty, shift from department store no regrets about launching True Beauty and to specialty, etc.). Brands that pivoted to have never been more sure of the decision to digital channels or that were proficient there do so, regardless of the COVID environment have benefited. Skincare and haircare are and the business disruption created by it.” categories that have benefited vs makeup and fragrance. “Entrepreneurs are the heroes of the U.S. Photo: Elena Koycheva economy in my view,” Jeff Mills, Managing “Good operators do well in both good and Partner of Main Post, told Beauty Independent. bad times. The ability to pivot strategy, cut “They’re the ones who take the big risk and back operating expenses, and streamline take the leap to do something different.” INSIGHTS Search

Spate is the machine intelligence platform Haircare: The highest growth product is in search volume in December, it wasn’t predicting the next big consumer trends in shampoo, with +288.4K searches. Overall, enough to reach 2019 levels. beauty and wellness. The platform analyzes the hair and scalp treatments category is more than 20 billion search signals to iden- seeing the strongest growth with +315K Fragrance: The highest growth product is tify (1) shifts in consumer behavior and de- searches (+243.7K searches for hair oil). perfume with +164.9K searches. Overall, mand, (2) emerging brands in the space, Consumers continue to value hair health the perfume products category is seeing and (3) how to position products based over styling products. the strongest growth with +186K search- on consumer needs. Spate was started by es and the home fragrance accessories cat- two ex-Googlers who started Google’s Skincare: The highest growth product is vi- egory with +170K searches. Following its Trendspotting division, and uncovered tamin C serum, with +102.3K searches. 2019 trendline almost perfectly, fragrance trends such as turmeric, face masks, and Overall, the face serum products category ended the year on a high note as body fra- eyelash extensions. is seeing the strongest growth with +187K grances including perfume and cologne searches (+23.3K searches for hyaluron- gained consumer interest, but candles lost Spate analyzed over 20 billion search sig- ic acid serum and +22.8K searches for ni- their momentum. nals from February 16, 2020 to January 2, acinamide serum). The skincare category 2021 to identify new shifts in consumer is seeing slightly declined search volume beauty routines through lockdown. compared to 2019, but in general skincare products are still valued by consumers. Unfortunately, this December saw lower search volume for hair, makeup, and skin- Makeup: The highest growth product is eye- care than the year before. The only catego- liner with +82.9K searches. Overall, the eye- ry seeing increased consumer interest com- liner products category is seeing the stron- pared to 2019 is fragrance, which has been gest growth with +85.4K searches, and the popular since lockdown began. Overall, the lip plumper products category with +48.8K beauty industry still has not experienced a searches. Another month of low search recovery in search volume, indicating that volume for makeup highlights consum- the whole of retail might be seeing a gener- ers decreased interest in the category. al slowdown in December. While there was an overall upward trend INSIGHTS Top Trending in Beauty That Are Predicted to Last

AVG. MONTHLY AVG. MONTHLY TRENDS YoY GROWTH TRENDS YoY GROWTH SEARCH VOLUME SEARCH VOLUME smiley face nails 4,180 977.8% hemp face mask 1,050 185.0% apple cider vinegar gummies 91,570 600.3% niacinamide 199,560 181.5% peeling solution 5,940 585.3% soap brows 35,000 173.1% brow lamination 160,410 583.9% knotless braids 420,180 171.5% zinc gummies 2,390 440.8% allulose 45,780 168.4% niacinamide serum 20,680 376.3% waterless dry shampoo 1,870 167.5% bath scrubber 3,280 332.4% ethyl alcohol 40,730 166.9% bakuchiol serum 3,510 309.6% sweat shaper 5,170 162.0% salicylic acid serum 6,390 304.5% spin bike 15,690 161.3% butterfly nails 119,800 280.1% encapsulated retinol 1,000 160.9% korean side bangs 2,860 259.2% quercetin 69,140 160.8% e girl hair 7,690 242.9% fungal acne 136,590 160.3% hd wig 20,670 240.1% magnesium ascorbyl phosphate 4,070 158.3% alpha arbutin 17,700 239.0% led face mask 13,080 157.9% cow nails 20,010 236.4% anti stress pills 16,040 157.8% salicylic acid cleanser 19,830 218.5% postbiotics 1,140 157.1% arbutin 24,090 208.8% hair plopping 25,480 155.2% sea moss 615,840 198.3% knotless twist 5,410 154.7% hand weights 65,230 190.1% elliptical 23,350 153.1% freckle pen 6,260 185.3%

Ranked by YoY growth, Google Search US, Dec 2020 INSIGHTS The 2020 Social Media Trends That Will Shape Beauty in 2021

Tribe Dynamics is a San Francisco-based soft- most people could agree on one thing: 2020 and environmental justice. In a charged polit- ware company that helps beauty, fashion, and was stressful. So it’s no surprise that self- ical climate, brands’ core values proved vital lifestyle brands drive and measure high-im- care practices took on renewed importance to their success on social media. Black-owned pact digital earned media at scale. Earned for influencers and consumers eager to bol- makeup brands, in particular, saw widespread Media Value (EMV) is Tribe Dynamics’ pro- ster their physical and emotional well-being influencer support during June’s Black Lives prietary metric for measuring the online en- at a challenging moment. As a result, beau- Matter protests, with UOMA Beauty closing gagement of digital content. ty brands that supported content creators’ 2020 up an impressive 69% in EMV from the self-soothing rituals enjoyed a boost. Clean previous year. Meanwhile, sustainable cos- From the COVID-19 pandemic to a global body care brand Nécessaire, for example, in- metics brands like Kosas and ILIA benefited reckoning around racial justice and a histor- creased its EMV by 228% year-over-year in from mounting enthusiasm among eco-con- ic US election, the events of 2020 sent shock 2020 thanks partly to an uptick in conversa- scious bloggers—the two brands achieved re- waves around the world, as individuals and tion surrounding influencers’ bath and show- spective 176% and 201% EMV growths from communities sought comfort and connec- er routines. More traditional beauty brands 2019 to 2020. As socially and politically con- tion amid political and economic turbulence. also began accommodating their fans’ need scious Gen Z gains online influence and pur- Like many pre-pandemic norms, the old rules for quality me time: in November, Kylie Skin chasing power, brands that demonstrate a of beauty were broken (is a morning makeup rang in an at-home holiday season by launch- genuine investment in meaningful causes are routine really necessary when you don’t leave ing the Rose Bath Collection, which fea- likely to see an even more pronounced edge the house?) and new ones were put in place tured a body scrub, bubble bath, bath salts, this year. (hello, bath time). With 2021 now under- and scented candles. Buoyed by its first-ev- way, there’s no question that 2020’s shake-up er departure from facial skincare, the brand More Brands Will Harness TikTok’s will help set the tone for the year to come. achieved a 61% month-over-month EMV Marketing Potential: The revolution may Drawing on how brands performed in Earned growth. With the COVID-19 pandemic’s shad- not have been televised, but 2020 was on Media Value (EMV)—Tribe Dynamics’ propri- ow still looming, and political unrest continu- TikTok. While many of 2019’s biggest social etary metric for quantifying the estimated val- ing in the US, self-care looks to remain a cen- media stars dazzled their audiences with im- ue of digital earned media—in 2020, here are tral theme of beauty in 2021. maculately lit YouTube videos and filter-hap- three ways influencer marketing in the beau- py Instagram Stories, last year the fast-grow- ty space will likely continue to redefine itself Influencers Will Align with Values-Driven ing platform proved particularly well suited in 2021. Brands: Demonstrations didn’t just sweep to capturing the unpolished realities of life the streets in 2020; across social media plat- at home and sharing much-appreciated mo- Influencers Will Embrace Beauty as Self- forms, content creators rushed to take a stand ments of humor. Beauty brands who tapped Care: In a year marked by political division, on issues ranging from public health to racial into TikTok’s young, rapidly expanding au- dience reaped the benefits: skincare brand CeraVe, for example, owed its 116% year- over-year EMV growth in 2020 largely to its relationship with TikTok skincare guru Hyram Yarbro, who championed a range of CeraVe products in viral videos. Similarly, e.l.f.’s myri- ad initiatives on the platform, including a first- of-its-kind #EyesLipsFamous TikTok reality TV show, helped fuel the brand’s 20% EMV increase from 2019 to 2020. After an astronom- ical surge in popularity in 2020, TikTok’s users are as engaged as ever, and savvy brands will swiftly meet creators and consumers where conversations are happening.

The past year proved both trying and trans- formative for individuals, communities, and businesses around the globe, and amid challenging circumstances, the beauty industry underwent significant and necessary change. While it’s tough to be certain what 2021 will bring, by understanding how influencers and consumers adapted to 2020, brands can kick off this year well-equipped to navigate new territory and emerge ahead.

Photo: DISRUPTIVO INVESTORS New Players in the Investment Landscape

Beauty and wellness has been a hotbed for French group Pierre Fabre for an undisclosed has expressed a commitment to an M&A investment and M&A activity for years, but sum. strategy, acquiring gummy skincare compa- the pool of potential investors and strategic ny Sundaily earlier this year and sexual well- buyers has expanded while SPACs have giv- Ipsy Chief Executive Officer Marcelo ness band Sustain Natural in August of 2019. en start-ups an alternative way to go public. Camberos said they will also look for more Grove founder and Chief Executive Officer For brands looking to raise capital, the uni- acquisitions in the subscription commerce Stuart Landesberg told WWD that the com- verse of potential investors has never been sector: “For us, it’s about really just creating pany may continue to acquire more consum- more diverse. an undisputed leader in subscription, where er brands, noting that the economic shut- we have such a large percentage of the mar- down caused by the coronavirus pandemic BRANDS ket.” The brand acquired Miami-based rival has made for a challenging environment for BoxyCharm Inc., merging the top two beau- small brand founders. “Access to capital is e.l.f. Beauty shared with WWD they could be ty subscription services in a $500 million deal. going to get harder, it’s harder to meet peo- in the M&A market looking for “small, tuck-in ple,” said Landesberg. “We’re well-positioned acquisitions” that bring the business into an Groupe Batteur made a significant minority [to acquire].” In September of 2019, Grove adjacent space of a new capability that could investment in spa pioneer Cinq Mondes and Collaborative raised $150 million in a Series leverage the team and infrastructure that has confirmed an appetite for external growth, so D funding with a valuation of over $1 billion. been built. The brand made its first acquisi- more acquisitions could be in the future. tion in February, snapping up clean beauty In an interview with WWD, The Hut Group brand W3LL People for $27 million. IEVA Group acquired L’Atelier du Sourcil, founder Matthew Moulding said regarding and founder Jean Michel Karam said there plans for future acquisitions, “Beauty brands Yatsen Global, the holding company for will be more acquisitions in the future. Karam for sure. We are there to invest in brands C-Beauty brands Perfect Diary, Little Ondine, is a microelectronics expert who previous- across the industry. We’ve got a relatively and Abby’s Choice, plans to use the pro- ly launched IOMA, the customized skincare small portfolio today, nothing like the scale of ceeds from $617 million in a US IPO, valu- brand acquired by Unilever. the big houses, so there’s lots and lots of road ing the company at $7.82 billion, for business for us to invest in small beauty brands, big operations, potential strategic investments RETAILERS beauty brands, hair care brands. We’re very and acquisitions, development of data ana- passionate about brands, and we think that lytics technology, product development, and Grove Collaborative, an online shopping we can make a massive difference to them. offline store network expansion. In October, destination that targets millennial customers We have a large M&A team that is constant- Yatsen bought skincare brand Galénic from with clean household and beauty products, ly trying to find brands. I’d be disappointed if we didn’t do more in that space.” Hot off Consumer VC firm Coefficient Capital raised acquire plant-based brands that do not com- a $7 billion IPO in September, the business its first fund of $170 million in March with the promise on performance and do not harm added Perricone MD, Dermastore, and two intent of investing in consumer brands able to the planet. The Craftory invested $20 million nutrition-based product suppliers to its port- weather a recession; fast-forward through the in Present Life. The first acquisition was One folio that includes Eyeko, Illamasqua, ESPA, rest of the year and the firm has placed some Ocean Beauty. SkinStore, RY, Glossybox, Lookfantastic.com, big bets on disruptive consumer trends. The and Grow Gorgeous, Ameliorate, Acheson & fund invested in digitally native men’s groom- NEW SUPPLY-SIDE PLAYERS Acheson, Christophe Robin, and Mama Mio. ing brand Hawthorne and wellness ingestible brand Hydrant, the Oatly oat milk business, Chicago private equity firm Core Industrial The Detox Market acquired Canadian e-com- Magic Spoon, a low-carb high-protein cere- Partners has closed a majority investment in merce business Clementine Fields in August. al brand, and spirits brand Haus. Arizona Natural Resources. This is the firm’s The company has quietly acquired other first beauty deal, but the firm has plans to Canadian beauty and wellness companies. Morphe has officially made the shift to a build out a major North American beau- In 2015, The Detox Market took over the op- multi-brand business and could be prepar- ty manufacturing platform through organic erations of Toronto Retailer Husk, and in ing for an IPO. Forma Brands (formerly known growth and future acquisitions. 2016 purchased the e-commerce company as Morphe Holdings) will be an incubator, cu- FreshFaced.ca. rator, and accelerator investing in and part- Kyle Shaw, founder of ShawKwei, said of their nering with like-minded brands with the goal ICS investment and acquisitions, “Over the PLATFORMS, INCUBATORS, AND FUNDS of accelerating and realizing each found- last 30 years, Sue [Nichols, founder and CEO, er’s vision by enabling them to leverage the ICS] has built ICS into a highly respected cos- Investors have poured almost $1 billion this strength, experience, and reach of the Forma metic packaging supplier supporting many year into companies that are buying up suc- platform. “When and if it does make sense, of today’s global brands. We will be work- cessful Fulfillment by Amazon (FBA) brands or the company could be a public coming with Sue to pursue strategic acquisitions on Amazon to try to build digital consum- pany, we want to be prepared to do that,” in Asia, US and Europe to increase the depth er goods conglomerates akin to Procter and Forma Brands Chief Executive Officer Myles and breadth of ICS’ already extensive capa- Gamble or Unilever. A growing ecosystem of McCormick said to WWD. “That’s the goal— bilities and customer offerings.” Amazon seller acquisition companies, often we want to be a company that’s capable.” referred to as seller rollup companies, are in- The new entity acquired Lipstick Queen from Shaw went on to discuss the timing of the investing in successful FBA Amazon business- Manzanita Capital in October and made an vestment, continuing, “We began engaging es, creating Amazon product portfolios that investment in Playa Beauty in August. with Sue in the fall of 2019 and have been are category agnostic. According to indus- impressed with ICS’ continued acquisition try analysts, independent Amazon merchants HatchBeauty co-founder Ben Bennett an- of new customers. Cosmetics and beau- made up more than $200 billion in sales this nounced the formation of a new business in ty packaging is a US$25 billion industry and year, and tens of thousands of them have rev- January 2020 called The Center with the in- ShawKwei has always been a long term inves- enues in excess of $1 million, creating an op- tention of incubating brands and making in- tor. This will be the first of multiple acquisi- portunity to roll up businesses with promise vestment. In November the group acquired tions as we build a global platform with Sue and scale them. During 2020, seven start- Make Beauty. and ICS.” ups in the US and Europe Thrasio, Heyday, Perch, Boosted Commerce, Razor Group, Present Life is a new global wellness and SellerX, and Heroes that launched or raised beauty company founded by Camillo Pane, capital in 2020. former CEO of Coty, conceived to create and BRAND PORTFOLIO

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END BRAND PORTFOLIO Perfect Diary Parent Company Yatsen Holding Has a $617 Million IPO

WHO: Founded in 2016, Guangzhou-based to have gross merchandising volume delisting of Chinese companies from the Yatsen Holding Limited is the holding com- (GMV) of 100 million yuan ($15.2 million) country’s stock exchanges if they don’t pany that owns the unicorn makeup brand on Tmall for each month in 2019 and the comply with regulators’ auditing rules. Perfect Diary as well as Little Ondine and first nine months of 2020. • In October Yatsen bought skincare Abby’s Choice. Leveraging its digitally na- • The company says it has a fan base of 48 brand Galenic from French group Pierre tive direct-to-customer business model, the million people and served 23.5 million Fabre for an undisclosed sum. company has built a platform with core ca- direct-to-consumer customers in the pabilities that disrupt every part of the tradi- first nine months of 2020. About 91% tional beauty industry value chain and deliv- of gross sales in that period were gener greater value to its customers. It reaches erated through online channels such and engages customers directly both on- as WeChat and Tmall. Yatsen also has a line and offline, with an expansive presence network of more than 200 offline retail across all major e-commerce, social, and stores. content platforms in China. • According to its prospectus, Yatsen swung to a net loss of 1.2 billion yuan WHY: The company plans to use the pro- ($170.4 million) in the first nine months ceeds from the IPO for business operations, of 2020 from net income of 29.1 mil- potential strategic investments and acquisi- lion yuan ($4.4 million) a year earlier. Its tions, development of data analytics tech- revenues increased to 3.27 billion yuan nology, product development, and offline ($497.5 million) from 1.89 billion yuan store network expansion. ($287.5 million) over the same period last year. DETAILS: • Morgan Stanley & Co. LLC, Goldman Sachs (Asia) LLC, and China International • Yatsen Holding sold 58.75 million Capital Corporation Hong Kong Securi- American depositary shares at $10.50 ties Limited are acting as joint book-run- each. The shares closed at $18.40, ners for this offering. Tiger Brokers (NZ) giving the company a market value of Limited, China Renaissance Securities $7.82 billion and raising $617 million in (Hong Kong) Limited, and Futu Inc. are a US initial public offering. acting as co-managers for this offering. Photo: Perfect Diary • According to Yatsen’s disclosures, Perfect • The IPO comes as US regulators push Diary was the only color cosmetic brand ahead with a plan that could lead to the

QUARTER 4 COLOR COSMETICS

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END COLOR COSMETICS Point King Capital Takes Minority Stake in Esmi Skin Minerals

WHO: Makeup Cartel is the parent company told WWD. “We are actively working through • Founder and CEO Evette Hess will con- to Esmi Skin Minerals and Poni Cosmetics fiscal 2021 budget planning with Evette and tinue to run the business. and claims to be Australia’s fastest-growing the team and we are looking at how we can • Point King Capital made a $10 million cosmetics brand, founded by industry veteran continue to invest in talent, in marketing … investment in Beauty Chef last October Evette Hess with the desire to create unique and then international is a focus … with mul- and also has BYBI in its portfolio. professional makeup and skincare products tichannel distribution.” that were easy to use, quick to apply, and deliver fast results. “We were able to communicate transparently when the pandemic started on what was the Point King Capital provides long-term growth right structure for everyone to move forward,” equity to global consumer and financial McKay said. “The unprecedented crisis that services companies. PKC is supported by we’re experiencing provided us with a real-life a discrete group of investors consisting of scenario for how we work through our invest- best-in-class global entrepreneurs, and so- ment partnership.” phisticated family offices. DETAILS: WHY: The capital injection is expected to help Makeup Cartel expand its existing businesses • According to the Australian Financial Review, across channels and expand internationally. Point King Capital is investing $10 million to acquire a “meaningful minority” position IN THEIR OWN WORDS: “Our main focus alongside CEO and company founder has really been Australia,” Hess told WWD. Evette Hess and her husband Josh. “We wanted to really perfect the relationship • Terms of the deal were not disclosed. with the customer in a local way, and then • According to WWD, Esmi is said to make once we achieved a standard we’re satisfied up the vast majority of the Makeup Cartel with, really put our wings out—going into the revenue and is on track to do about $15 U.S. market is definitely on the radar.” million in sales for 2020. • Product sales are primarily from Australia, Global expansion is one of the things that but the brand also sells in Russia and New the Point King team plans to help with, McKay Zealand, and ships to the US and Canada. Photo: Esmi Skin Minerals

QUARTER 2 FRAGRANCE

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END FRAGRANCE Patina Brands Takes Minority Stake in Perfumer H

WHO: Perfumer H is the British fragrance day’s consumer market. In the spirit of our house created by perfumer Lyn Harris in philosophy, our investment is meant to fuel 2015 in an uncompromised desire to pio- the continued execution of that approach at neer naturals back into perfumery. her pace, not influence it.”

Patina is an investor and active advisory “We are inherently attracted to brands who house, secured by a global beauty holding over-index on consumer resonance and company, that intends to strategically align thoughtful creation, even if it runs count- with beauty brands that strongly resonate er to the early-stage investment communi- with the consumer values of today. Each ty’s traditional emphasis on pace of growth,” member of the founding team arrives with Brady Donnelly, founder and Managing Di- expertise in an area integral to success in rector at Patina, told Beauty Independent. today’s market; collectively, these strengths “We’re willing to forego those traditions in enable the team to provide comprehensive, order to support a vision we sincerely be- one-stop support for the growth of its port- lieve to be singular and calculated, and we folio brands. strongly believe that to be the case with the brand Lyn and Christophe have set out to WHY: The investment will support the build.” brand’s ongoing global expansion at the tail end of its strongest year to date. DETAILS:

IN THEIR OWN WORDS: Ransley Carpio, • Patina Brands took a minority stake in founder and Managing Director at Patina, Perfumer H. said from their perspective, “Lyn and the • The brand is reportedly coming off its Photo: Patina Brands brand embody the intuition and intention best year (FY19 closed 3/31/20). we seek in strategic partners. Her approach • Prior to investing in Perfumer H, Patina to product development, her hyper-selec- backed Brooklyn-based sexual wellness tive retail strategy, and her singular London brand Maude and Stockholm-based fra- flagship each represent the kind of mea- grance brand 19-69. sured, patient approach rarely found in to-

QUARTER 4 FUNDS + PLATFORMS

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END FUNDS + PLATFORMS Morphe 2.0: Forma Brands — an Incubator, Accelerator, and Curator

WHO: Forma Brands (formerly known as footprint with over 4,000 points of sales ment and growth of founder and influenc- Morphe Holdings) will be an incubator, ac- with leading specialty retailers and a prolific er-led beauty brands. I am extremely proud celerator, and curator of next-generation global influencer network. of what our entire global team has accom- beauty brands. The multi-category platform plished, as well as our ongoing partnership will focus on serving Millennial and Gen Z Curator: Select third-party brands and prod- with Morphe’s founders, and I am energized audiences and addressing opportunities in ucts that will appeal to Gen Z and Millennial to leverage the platform we have developed the marketplace within the broader beauty consumers at Forma’s 50+ global Morphe into new brands, new categories, new con- landscape, including color cosmetics, skin- stores and global e-commerce sites. Morphe sumers and new geographies to celebrate care, body care, haircare, and health & well- has proven this omnichannel approach by all forms of beauty.” ness. The company will continue to build its partnering with third-party, next-genera- portfolio through a three-pronged strategy: tion brands such as Beauty Bakerie, Iconic “We are thrilled by the progress of the past London, and P.Louise to provide them with year despite the current environment, a re- Incubator: Create original brands from the the opportunity to be discovered through- sult of the work Myles and his team have ground up that seamlessly fit into the grow- out Morphe’s global retail and e-commerce accomplished in building a leading global ing Forma portfolio and address unmet network. Morphe’s brand website has had beauty platform and portfolio with Forma,” needs, desires, and opportunities in ad- over 90 million unique visitors and over 200 said Andrew Ferrer, Managing Director dressable markets with existing and new au- million visits over the last year. at General Atlantic and Board member diences. These incubator brands will be cre- of Forma Brands. “At General Atlantic, we ated both in-house as well as in partnership WHY: Forma Brands realizes the growth partner with high-growth, innovative glob- with other entrepreneurs across music, en- strategy first announced through its part- al brands and are impressed by the pace tertainment, and beauty to create brands re- nership established with General Atlantic, a at which Forma has scaled across channels, flecting their creative expression. leading global growth equity firm. geographies, and categories. We look forward to the opportunity ahead to address Accelerator: Invest in and partner with IN THEIR OWN WORDS: “The launch of the unmet needs of Gen Z and Millennial like-minded brands with the goal of acceler- Forma Brands realizes our vision for trans- consumers.” ating and realizing each founder’s vision by forming our business into a multi-brand- enabling them to leverage the strength, ex- ed, multi-category portfolio of next-genera- DETAILS: perience, and reach of the Forma platform. tion beauty brands,” said Myles McCormick, This includes providing world-class glob- Chief Executive Officer of Forma Brands. • General Atlantic took a 60% stake in al product and brand development, supply “Forma builds on the success of the Morphe Morphe Cosmetics at a $2.2 billion val- chain, and e-commerce capabilities—paired brand and demonstrates our approach uation in August 2019. with access to a broad global distribution and capabilities to accelerate the develop-

QUARTER 3 HAIRCARE

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END HAIRCARE True Beauty Ventures Makes Inaugural Investment in Aquis

WHO: Aquis is run by husband-and-wife platform that leverages decades of deep in- bold version of yourself without sacrificing team Britta Cox and Suveen Sahib. Brit- stitutional investing and industry experience the integrity of your hair,” Suveen says. “This ta launched the first high-tech towel that to help brands at all stages quickly realize is why True Beauty Ventures is such an excit- blends science and technology with effort- their true potential. In an exclusive partnering, natural partner for us. Rich and Cristina less simplicity. The brand believes women ship with North Castle Partners, a leading are pioneers in the beauty investment verti- invest too much time, effort, and money on consumer private equity firm, True Beauty cal, with an amazing track record of building their haircare, with suboptimal outcomes. Capital will also pursue investment opportu- winning playbooks together with a deep un- Haircare ought to be simpler, faster, and nities that require at least $10 million of cap- derstanding of hair care and omni-channel more sustainable. They are engineering ital in the beauty and personal care sectors. relationships. We believe these characteris- haircare solutions that protect the natural tics are key to our scaling strategy and focus integrity of the hair and help it stay healthy. WHY: Capital from this investment will sup- on innovation driven outcomes.” To further prove their mission that hair dam- port Aquis’ continued growth, the rollout of age can be undone for good, scientists at K18Peptide, marketing, and new product in- “We are so excited to grow and deepen Aquis mapped the entire keratin genome novations, as well as new key hires. our leadership bench with True Beauty Ven- to launch a hair repair treatment called tures,” says Britta Cox, co-founder. “We are IN THEIR OWN WORDS: “We could not K18Peptide that not only repairs compro- all about rethinking hair habits, and ques- be more thrilled to make AQUIS our ini- tioning what we’ve always done. We know mised hair, but restores bleached, colored, tial investment. The growth momentum of and chemically treated hair in a more per- that wet hair is weak hair, which is why we pi- the core hair accessories business and the oneered products that dry your hair faster manent way and with fewer, cleaner ingre- strong potential for the K18Peptide brand dients. while maintaining lustrous hydration that re- position the Company favorably for long- sults in healthier, stronger, more vibrant hair True Beauty Ventures was founded in 2020 term success in the hair care industry,” com- that lasts.” with a dedicated focus to finding, partner- mented Rich Gersten, co-founder & Partner ing with, and scaling emerging brands ex- of True Beauty Ventures. “Hair continues to be one of the fastest-growing categories within prestige clusively in the beauty, wellness, and per- Suveen Sahib, co-founder & CEO, ex- sonal care industries. The team will invest up beauty, even in the post COVID-19 environ- pressed his excitement about partnering ment,” added Cristina Nuñez, co-founder & to $5 million in brands with at least $2 mil- with True Beauty Ventures and the growth lion in revenue. True Beauty Ventures is the Partner of True Beauty Ventures. “We believe prospects for the brand. “We are commit- AQUIS is poised to be a leader in the ho- emerging growth fund of True Beauty Cap- ted to creating cutting-edge technologies ital, a beauty-focused strategic investment listic hair health movement with their dedi- that allow you to be the most authentic, cated commitment to high-tech innovation,

QUARTER 3 HEALTH + WELLNESS

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END HEALTH + WELLNESS Nourished Raises £2MM in Seed Funding

WHO: Founded in October 2019 by Melis- “We believe that the innovation underpin- sa Snover, Nourished is a DTC supplement ning this product has significant potential to subscription service. Customers take a short change the way the world thinks,” says Ricky questionnaire about lifestyle choices and DeLandro, Senior Managing Partner at Ap- goals. Based on the answers, the compa- ater Capital, who is clearly excited. “It de- ny selects the active ingredients best suited serves its place within the toolkit to accel- to the individual customer’s objective. The erate the Fourth Industrial Revolution and vegan gummy tablets are manufactured us- unlock value. Full stop.” ing 3D printing technology containing a “stack” of seven different vitamins and nutri- Marius Swart, Head of Digital Strategy and ents, taken from a list of 28. Operations at HenkelX Ventures, is equally gushing. “We are excited to be part of this WHY: As for Snover herself, she believes the special seed investment round for Nour- funding will enable the business to undergo ished and are looking forward to collaborat- a step-change in its growth, outlining plans ing with Melissa and her team,” he says. for new product development and international expansion. DETAILS:

IN THEIR OWN WORDS: “Securing seed • Nourished raised £2MM in seed fund- funding is no mean feat, but it’s a necessi- ing from venture capital firms HenkelX ty for any entrepreneur or business owner Ventures and Apater Capital, as well as a looking to bring a brand or product to mar- number of business angels. ket,” Melissa Snover, founder of Nourished, • This capital raise was reportedly the larg- said. “With the monies raised, our goal is to est seed round raised in the UK by a fe- optimise operational efficiencies, particu- male entrepreneur. larly in relation to production, develop ex- • Nourished is part of the Rem3dy Group citing new product lines and ultimately ex- founded by Snover to pioneer person- pand the business internationally—starting alized health solutions across nutrition with a USA launch later this year.” and medicine. Photo: Nourished

QUARTER 3 MEDIA

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END MEDIA Allured Business Media Acquires Creative Age

WHO: Allured Business Media is a fami- into the professional salon and spa markets. ly-owned trade media company founded We look forward to collaborating with Deb- in 1921 and dedicated to the beauty and orah Carver and building on her vision for flavor industries since 1960 with the pur- these brands,” commented Allured Presi- chase of The American Perfumer magazine. dent Janet Ludwig. Its portfolio of brands includes professional spa publication Skin Inc., fragrance and fla- Deborah Carver said, “I have complete con- vor formulation brand Perfumer & Flavorist, fidence that Allured Business Media is the cosmetic business brand Global Cosmetic right home for the Creative Age titles. Al- Industry, and cosmetic science and technol- lured’s publishing capabilities, expertise ogy brand Cosmetics & Toiletries, along with in webinars, shows and other digital/social events Face & Body, World Perfumery Con- platforms will provide the titles greater lat- gress, Beauty Accelerate, and Flavorcon. itude, helping clients succeed in the evolv- ing marketing landscape. I look forward to Creative Age was founded in 1971 by CEO working with George and Janet to affect the Deborah Carver. In 1990, Carver redefined changes they envision.” Creative Age as a leading media source for the professional beauty industry and DETAILS: launched NAILPRO, followed by DAYSPA, • Allured Business Media acquires Cre- Beauty Launchpad, and MedEsthetics. ative Age. No financial details have IN THEIR OWN WORDS: Allured CEO been disclosed. George Fox noted, “We have a vested inter- • Many Creative Age staff will remain after est in all things beauty here at Allured, and the transition, including editors, sales this gives us the opportunity to build our managers. and CEO Deborah Carver. breadth in beauty and personal care to in- • The acquisition was brokered by John clude so many more touchpoints in profes- McGovern of Grimes, McGovern & As- sional spa and salon.” sociates. Photo: Creative Age “We are excited to bring on these highly re- garded new brands and expand our reach

QUARTER 3 MEN’S + GROOMING

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END MEN’S + GROOMING Edgewell Acquires Cremo for $235 Million

WHO: The California-based Cremo was WHY: The company will complement an important addition for Edgewell as we founded by Mike Boone and Kyle Schroed- Edgewell’s portfolio of insurgent brands leverage the expertise of the CREMO team.” er in 2005 with a mission to create the best such as Jack Black and Bulldog by unique- shaving cream possible that was accessi- ly serving specific consumer profiles, and Matthew Biggins, Cremo’s President and ble to everyone. The brand is grounded in therefore increasing Edgewell’s penetra- Chief Executive Officer, added, “This is a sig- old-fashioned value, quality, performance, tion in the growth categories within men’s nificant milestone for CREMO, a brand that and customer care with products designed grooming. The transaction is aligned with we built to embody quality with profession- to simplify the grooming experience. The Edgewell’s core growth strategy of acquir- al-grade characteristics. Combining with brand now consists of nearly 75 SKUs across ing selective, fast-growing, and profitable Edgewell provides us the ability to bolster beard, hair, shave prep, and skincare cate- brands that increase its presence in attrac- our strong store channel presence in the gories, with masstige positioning across tive segments. U.S. while positioning us to capitalize on at- e-commerce and mass retailers like Target, tractive channel and geographic expansion Walmart, Walgreens, and Rite-Aid. IN THEIR OWN WORDS: Rod Little, opportunities. We are excited to join the Edgewell’s President and Chief Executive Edgewell global brand portfolio and look Edgewell is a leading pure-play consum- Officer stated, “We are excited to announce forward to leveraging our compelling brand er products company with an attractive, di- this agreement to acquire Cremo. The and social media presence with the bene- versified portfolio of over 25 established men’s grooming category remains a strate- fit of Edgewell’s platform and demonstrat- brand names such as Schick and Wilkin- gic focus for Edgewell and this acquisition ed capabilities in the grooming category.” son Sword men’s and women’s shaving sys- will help us accelerate growth and strength- tems and disposable razors; Edge and Skin- en our position in the fastest-growing cat- DETAILS: timate shave preparations; Playtex, Stayfree, egories in men’s grooming. We are acquir- • Edgewell Personal Care Company en- Carefree, and o.b. feminine care products; ing a profitable, growing business with an tered into a definitive purchase agree- Banana Boat and Hawaiian Tropic sun care established presence that is well diversified ment to acquire Cremo for $235 million products; Playtex infant feeding; Diaper Ge- across grooming categories, yet has signifi- in an all-cash transaction. nie; Bulldog and Jack Black male skincare cant opportunities for expansion. We are ex- • Matthew Biggins, Cremo CEO, spent and grooming products; and Wet Ones tremely impressed with the CREMO brand 10 years as a marketer/brand manager moist wipes. The company has a broad and its positioning and expect it to contin- at Nestlé USA before joining the brand global footprint and operates in more than ue to resonate over the long term with con- in 2015 when it consisted of just shav- 50 markets, with approximately 6,000 em- sumers. The organization’s consumer-cen- ing cream and was doing $2.5 million ployees worldwide. tric brand-building capabilities will also be in sales.

QUARTER 3 PERSONAL CARE

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END PERSONAL CARE L Catterton Takes $15 Million Stake In Public Goods

WHO: Public Goods launched in 2017 and and expansion into more marketing chan- DETAILS: makes its own brand of products with a sus- nels, with a focus on driving customer ac- tainable bent, like personal care, but also quisition. • Public Goods received a $15 million in- a small range of pantry and household vestment from L Catterton. goods. The brand also offers a $59 per year IN THEIR OWN WORDS: “Excitement is re- • According to Crunchbase, the business membership that gives users a discount on verberating throughout the Public Goods raised $6.8 million prior to the L Catter- products that the business claims brings the team,” said Morgan Hirsh, Public Goods ton investment. cost down to wholesale prices. So far this Founder and Chief Executive Officer. “We’ve • The company has experienced signifi- year, with the demand for online shopping always had a big vision, and we’ve been cant growth as demand for e-commerce and products accelerated by the pandem- able to accomplish a lot with our small, rises, with sales increasing more than 5x ic, Public Goods said sales have increased highly dedicated team. As we look to the since February 2020. more than five times since February. future, L Catterton has the capital, resourc- • Public Goods just landed its first retail es, and experience to help us achieve our distribution deal with CVS launching in With approximately $20 billion of equity next phase of growth and deliver more of 2,000 stores. capital across seven fund strategies in 17 of- the high-quality products and benefits that • The company is looking to expand its fices globally, L Catterton is the largest con- our members have come to expect.” product range and categories including sumer-focused private equity firm in the a line for pets in the coming weeks. world. L Catterton’s team of nearly 200 in- “Public Goods’ model capitalizes on sever- • In 2016 Hirsh raised $100,000 of seed vestment and operating professionals part- al compelling trends including consumers’ money, half of which came from Fer- ners with management teams around the heightened focus on healthy living and a chak, and launched the company as world to implement strategic plans to fos- preference for clean, sustainable, and ethi- Morgans. ter growth, leveraging deep category in- cally sourced products,” said Chris Roberts, • In March 2017 investor Skip Battle, CEO sight, operational excellence, and a broad Partner at L Catterton Growth Fund. “With of Ask.com gave Morgans $300,000 for partnership network. Since 1989, the firm a broad product offering and demonstrat- a 10% share in the company, which was has made over 200 investments in leading ed demand across a wide range of person- used to rebrand the company as Pub- consumer brands. L Catterton was formed al care and household essentials, Public lic Goods and connect with crucial ad- through the partnership of Catterton, LVMH, Goods has differentiated itself as a one- visors. and Groupe Arnault. stop-shop and offers an accessible and af- • A few months later the team launched fordable solution to members across the its first Kickstarter campaign for Pub- WHY: The L Catterton investment further ac- country. We are pleased to be working with lic Goods with a fundraising goal of celerates Public Good’s growth by support- their talented team to attract new customers $20,000. Within 38 days of its launch, ing the rollout of new product categories and expand its product offering.” more than 10,000 people had backed

QUARTER 3 PROFESSIONAL

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END PROFESSIONAL Glosslab Raises $3 Million for Membership-Based Nail Concept

WHO: Glosslab was founded by former to work with people who had experience in hedge fund executive Rachel Apfel Glass building and selling companies, as well as in 2018 to modernize the manicure expe- creating membership models. rience with a focus on hygiene and efficien- cy. Its two NYC locations in Flatiron and the DETAILS: West Village feature technology-enhanced services such as online booking, cashless • Glosslab raised over $3 million in its first payment, and contactless check-in and fundraise from Andy Stenzler, co-found- checkout. Glosslab has offered an unlimited er of Rumble Boxing, Sean Rad, membership model ($125/month for unlim- co-founder of Tinder, co-founder of ited manicures + pedicures). This spring the F-ckJerry Elliot Tebele and his F-ckJerry brand launched an e-commerce site with partner and creator of What do you three nail kits priced from $25-$35. Meme? Ben Kaplan, and serial start- up investor M.J. Bas (Revolut, Elysium WHY: The funding will be used to open Health, Mural). additional NYC locations and launch new • The business claims its two existing products in the first quarter of 2021, through locations are back to profitability, but its direct-to-consumer channels and undis- they have not returned to pre-coronavi- closed big-box retailers. rus revenue levels because they are re- quired to operate at 25% capacity. IN THEIR OWN WORDS: “We see products • Glosslab currently has 1,000+ members as a huge category for us,” Rachel Apfel signed up in its unlimited service pro- Glass, Glosslab CEO and founder, said. gram. “We’re trying to take a piece of this industry • In 2021 the brand plans to launch a pol- and ask ourselves how we can make it bet- ish line and manicure and pedicure kits, ter.” followed by a full line of hand and foot care. In addition, five new locations are Glass told Glossy the choice of investors slated to open across Manhattan. Photo: Dan Cristian Paduret was intentional and strategic, as she wanted

QUARTER 4 RETAIL

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END RETAIL Australian Online Beauty Retailer Adore Raises $192 Million in IPO

WHO: Adore Beauty was launched in 2000 tage of our opportunities as Adore Beauty • In September 2019, Morris and Height by 21-year-old Melbourne student Kate embarks on its next phase of growth as an sold a 60 percent stake in the business Morris and her partner James Height out ASX-listed company.” to Sydney-based private equity firm of Morris’ garage, with $7,157 in start-up Quadrant Growth Fund. capital loaned from Height’s father. Today “The IPO provides the company with a great • Quadrant is selling 40 percent of its Adore Beauty sells 11,000 products from opportunity to strengthen its competitive holding for $137.2 million and will retain 230 brands in professional, prestige, niche, advantage by continuing to improve upon a 32.5 percent holding marking its first and masstige. The retailer has 590,000 ac- its core capabilities and continue to grow exit from its growth fund. Quadrant has tive customers and 18.5 million users across the business,” said Adore Beauty Chair agreed not to sell more shares until the its Australian and New Zealand websites. Justin Ryan. “I am excited about the future company releases its FY 2021 results. prospects of Adore Beauty and am pleased • Adore’s founders Kate Morris and IN THEIR OWN WORDS: “My co-founder to have the opportunity to welcome new in- James Height will earn $45.9 million James Height and I created Adore Beauty vestors to share in this exciting journey.” each by selling 40 percent of their hold- in a garage in Melbourne with a clear pur- ings. Their individual stakes will fall from pose—to create an empowering beauty “It’s a terrific company, it’s well-managed, it 19.3 percent to 10.8 percent each. The shopping experience that would make our has diligently built up a dedicated following founders’ remaining shareholdings will customers feel confident and fabulous,” over two decades, all the metrics are great,” also be escrowed to prevent further said co-founder Kate Morris. said analyst Gaurav Sodhi, Deputy Head sales, but for unspecified time periods. of Research at InvestSmart Group. “I think • Skincare is the company’s biggest cate- “We are a proudly values-led company em- there’s a very good chance that this hits a gory, accounting for 57 percent of sales. bodied by 183 talented and passionate em- billion [Australian] dollars. There are so • The pandemic fueled sales, which are ployees who have contributed to our suc- many ways for this company to grow,” Sodhi up 65.5 percent over 2019 and fast- cess through their passion, hard work, and added. tracked the company’s IPO plans. tenacity. • Active customers are forecast to grow DETAILS: 79 percent in 2020, from 404,033 to “As we have done for our first 20 years, we 724,459. are focused on sustainable growth and • Adore raised $192 million or $4.80, a • Revenue is forecast to increase 76.3 per- building a high-quality business over the share giving the business a valuation of cent to $158.2 million, with net profit af- long term. We believe that by staying true to $464.4 million—3.9 times the company’s ter tax tipped to nearly triple from $1.4 our customers, brands, values and vision, we forecast calendar 2020 sales of $112.4 million to $3.5 million in 2020. Much of can weather the challenges and take advan- million. its profit growth is expected to come

QUARTER 4 SKINCARE

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END SKINCARE Shinsegae International Acquires Swill Perfection

WHO: Founded in 1998, Swiss Perfection Shinsegae International Cosmetics division • Shinsegae International also plans to is a luxury skincare brand from Switzerland. head Gil-Han Lee said: “The takeover will lay leverage Swiss Perfection’s global dis- The products contain the brand’s propri- the foundation for Shinsegae Internation- tribution network to speed up the over- etary anti-aging technology, Cellular Active al to grow as a global beauty powerhouse. seas expansion of its own beauty brands IRISA. The brand is well established in high- We will continue to increase investments in such as Vidi Vici and Yunjac. end spa facilities, hotels, and personal clin- brands by aggressively looking for acquisi- • Shinsagae International Inc. recently an- ics in Europe, Asia, and the Middle East. tions of domestic and overseas labels with nounced the divestiture of the joint ven- high growth potential.” ture Shinsagae Intercos Korea Inc., sell- Shinsegae International began as a high- ing its stake to the Intercos Group. end fashion business under Shinsegae De- “It is optimistic to see that Chinese millenni- partment Store before launching the cos- als prefer luxury cosmetics. We plan to grow metics business in 2012 after acquiring local as a global cosmetics company with Swiss beauty brand Vidi Vici. The cosmetics busi- Perfection at the forefront,” Lee added. ness posted revenue of 62.7 billion won in 2017, which surged to 368 billion won in DETAILS: 2019. • Shinsegae International Co., Ltd. has ac- Shinsegae Department Store is a retail giant quired a 100% stake in Swiss Perfection. in Korea, with operations including large re- • Financial details of the deal have not tail franchise E-Mart, hotel business includ- been divulged but it is estimated to be ing 5-star hotel Westin, and the Shinsegae worth billions of won. Duty-Free store among others. • Shinsegae International plans to increase its revenue by transitioning Swiss IN THEIR OWN WORDS: “Luxury cosmetics Perfection’s distribution model from market is attractive as it boasts an average of wholesale to B2C as well as opening 5% annual growth. This acquisition will allow shops in major department stores and us to tap into the high-end skincare mar- duty-free stores both locally and glob- ket which is seeing fast growth,” a source at ally. It also plans to tap into China with- Shinsegae International said. in three years.

Photo: Swiss Perfection

QUARTER 3 SUPPLY SIDE

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END SUPPLY SIDE Firmenich to Acquire Les Dérivés Résiniques et Terpéniques from Ardian

WHO: DRT is a world leader in plant-based Tikehau Capital is an asset management and in new projects and enhance its sustainability chemistry. Founded in 1932, DRT special- investment group which manages €25.8bn approach. Firmenich has been an important izes in the development of gum rosin and of assets under management. The group strategic partner for DRT for many years turpentine extracted from pine resin. DRT’s invests in various asset classes (private debt, and would be uniquely positioned to bring head office is located in Dax, France, and real estate, private equity, capital markets DRT’s product development capabilities to sells its products around the world. DRT has strategies), including through its asset man- the next level. As a family-owned business a diversified product portfolio of more than agement subsidiaries, on behalf of institu- that is committed to innovation, Firmenich 300 ingredients addressing a variety of end tional and private investors. will provide a great environment for DRT’s markets. DRT operates 9 manufacturing colleagues.” facilities either directly or with joint venture IN THEIR OWN WORDS: “I am thrilled to partners. bring DRT’s unique capabilities for devel- Emmanuel Laillier, Head of Private Equity at oping sustainable ingredients to Firmenich. Tikehau Capital, added: “Tikehau Capital has Firmenich is the world’s largest privately This proposed combination builds on our supported DRT’s growth strategy and global owned perfume and taste company, founded business partnership of more than 30 years development for six years. We are today very in Geneva, Switzerland, in 1895. Renowned and our established track record of success- pleased to help bring DRT and Firmenich for its world-class research and creativity, as ful co-development in a long-standing joint together, which is a key step for the continu- well as its leadership in sustainability, each venture,” said Patrick Firmenich, Chairman of ation of its development.” year, Firmenich invests 10% of its turnover in the Board, Firmenich. “We thank Ardian and R&D to understand and share the best that Tikehau Capital for their strong stewardship “DRT would further strengthen our leading nature has to offer responsibly. Firmenich and we are delighted to welcome all DRT Perfumery & Ingredients business enabling had an annual turnover of 3.9 billion Swiss colleagues to Firmenich. We share the same us to offer our customers the world’s best francs at end of June 2019. passion for our customers, sustainability, as palette of renewable and sustainable in- well as strong family values.” gredients,” said Gilbert Ghostine, CEO, Fir- Ardian is a world-leading private investment menich. “DRT would bring new capabilities house with assets of US$96bn managed “Firmenich would be the ideal home for in health & nutrition, cosmetics, as well as a or advised in Europe, the Americas, and DRT,” said Thibault Basquin, Head of Amer- number of new markets, including adhesives, Asia. The company is majority-owned by its icas Investment and Managing Director at coatings and agriculture. This acquisition re- employees. It keeps entrepreneurship at its Ardian Buyout. “I would like to warmly thank inforces our presence in France, which is our heart and focuses on delivering excellent in- Laurent Labatut and his team for our part- second largest market where we have been vestment performance to its global investor nership over the past few years. Ardian has established for more than 120 years. I look base. enabled DRT to accelerate its growth, invest forward to partnering with all our customers

QUARTER 1 TECHNOLOGY

BEAUTY DEALS: M&A TRANSACTIONS - YEAR END TECHNOLOGY Digital Olfaction Technology Aryballe Raises €7Million

WHO: Based in Grenoble, France, Arybal- use of smell,” said Sam Guilaumé, Aryballe le combines biochemistry, advanced optics, CEO. “Our mission has always been to em- and machine learning to mimic the human power brands through the use of reliable, sense of smell. Founded in 2014, Aryballe quality data, and today, we’re seeing more released its first product, the digital nose companies using digital olfaction to design NeOse Pro, in early 2018. Fast, portable, improvements in the customer experience and sensitive to hundreds of odors, NeOse and generate additional revenue. Now, with Pro captures odor signatures for display and the support of our industry partners, we’re analysis via software solutions that enable well prepared to continue executing on better decision-making for R&D, quality that mission and take on this next stage of control, manufacturing, and end user expe- growth.” riences. With operations in France and the USA, Aryballe works with global leaders in DETAILS: automotive, consumer appliances, and flavor & fragrances. • Aryballe raised €7 million from new investors Samsung Venture Investment WHY: The new funding enables Aryballe to Corp (Samsung Ventures), Seb Alli- build out its manufacturing operations to ance along with existing investors Inno- meet accelerating demand for its newest vacom, Cemag Invest, Asahi Kasei, and high-volume, low-cost universal odor sen- HCVC. The round brings the company’s sor as organizations across the globe look total funding to date to €17 million. to enhance the capabilities of existing smart • In July 2019 Aryballe secured €6.2 mil- sensor networks. The team will also use the lion in funding led by strategic investors, new funding to double Aryballe’s current IFF, and Hyundai Motor Company, and headcount across engineering and product its historical existing investors. positions, and further support the industrial- • In 2016 the business raised a €3.1 mil- ization of its technology. lion seed round. • In 2019, the company saw 30% growth Photo: Aryballe IN THEIR OWN WORDS: “We’re dedicated in headcount, and as a result, more than to helping our customers and partners solve doubled its intellectual property portfo- meaningful industry problems through the lio.

QUARTER 3 THAT’S A WRAP.

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