www.bwconfidential.com The inside view on the international beauty industry June 12-25, 2014 #94 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL Comment Inside The buzz 2 Retail buys News roundup etail consolidation continues apace. The news that Netwatch 6 RSwiss travel retailer Dufry will buy The Nuance Group created shockwaves in the industry. The deal is Beauty blogger review the biggest acquisition that the travel-retail sector has ever seen and furnishes Dufry with a strong leadership Interview 7 position, in the form of a 15% share of the global airport La Prairie vice president Asia retail market. Its nearest competitor is WDF, with an 8% Peter Stockdale share. The deal is significant for beauty. Perfumes and cosmetics will emerge as the largest product category for Insight 10 the combined company, representing 33% of sales. Retail in Brazil Suppliers are often wary of these mega mergers and view one less player to deal with as automatically meaning reduced negotiating power. They also Show review usually question where savings will be made and fear that there will be less Luxe Pack New York 14 investment in-store, as money is poured into the acquisition process, expansion China Beauty Expo 15 and integration. Still, several brands told BW Confidential that they don’t expect this deal to Store visit 16 make such a big difference to their day-to-day business, and that they have Sephora, São Paulo, Brazil gotten used to operating in an increasingly consolidated retail landscape. However, suppliers may have a lot more to get used to in the future, as consolidation both in the domestic market and in travel retail is likely to intensify. Indeed, one ceo from a major brand told BW Confidential last week that in the next five years, there will probably only be around two or three main retailers to deal with in the US and Europe. The balance of power looks set to shift once again. Oonagh Phillips Meet the BW Confidential Editor in Chief team at: [email protected] l MakeUp in Paris, June 12-13 l Beyond Beauty Paris, September 9-11 News roundup At a glance... n Dufry to acquire The Nuance Group n Coty signs distribution deal with Li & Fung for China, discontinues TJoy The buzz n Douglas to divest 38 stores in France as part of Nocibé acquisition n Shiseido to roll out major skincare launch Stay informed with our daily news headlines on www.bwconfidential.com Travel retail Swiss travel retailer Dufry is to acquire the world’s sixth-largest duty-free and travel- retail company, The Nuance Group, for Sfr1.55bn ($1.73bn). The Swiss group says the combination of the two companies will confirm Dufry’s position as the worldwide leader in the airport retail industry, with a global market share of 15% and a presence in 63 countries, 239 airports and a network of 1,750 stores. The Nuance Group operates retail space in 66 locations across 19 countries in Europe, Asia and North America, and more than 350 stores. In 2013, Nuance reported sales of Sfr2.1bn ($2.3bn) and an adjusted EBITDA of Sfr156m ($173.9m). “The acquisition of The Nuance Group by Dufry is a transformational deal, not only for Dufry, but also for the travel-retail industry. The scale and breadth of our business will be changing the scope of the travel-retail industry,” commented Dufry ceo Julian Diaz. Dufry claims the geographic presence of Nuance will strengthen its positions in strategic markets in the The Dufry Nuance deal in figures Mediterranean, where it will now have a leading position, • Dufry will buy Nuance for Sfr1.55bn ($1.73bn). The deal will North and Central Europe, Asia, the US and Canada. be financed with Sfr1bn ($1.1bn) in equity and Sfr550m The group says that combining the two companies will ($613.3m) in new debt provide a differentiated proposition when competing • The combined group will have a 15% share of the global airport retail market for concessions, and provide a solid foothold to secure People • The combined group’s sales come to Sfr5.56bn ($6.2bn) renewals and win new contracts in strategic areas. • Perfumes & cosmetics will account for 33% of the combined Dufry expects an improvement in gross margin through group’s sales, the largest product category for the group increased purchasing power and the integration of • Combined group sales by region: EMEA & Asia: 46%; Nuance’s purchasing into both its supply chain and Americas: 44%; Australia: 9%; other: 2% logistics platform. Strategy US-based Coty has signed an agreement with Hong Kong–based consumer-goods and distribution group Li & Fung to distribute some of its mass brands in China, including Adidas, Rimmel, and Playboy. Coty said it would oversee development, production, marketing and brand-building activities, while taking advantage of Li & Fung’s broad distribution in the mass channel. Coty also announced that it would discontinue Chinese brand TJoy, to focus on its international power brands, which it says have more growth potential in China. Coty bought TJoy in 2010, with the aim of using the company’s distribution platform to develop its mass business. However, much of TJoy’s management team left following the acquisition, which kept the group from putting together a strategy for the company. n n n www.bwconfidential.com - June 12-25, 2014 #94 - Page 2 CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL CONFIDENTIAL News roundup n n n German group Henkel is strengthening its professional haircare business in North America with the acquisition of haircare brands SexyHair, Alterna and Kenra, from US investment company TSG Consumer Partners. Henkel will pay €270m for the three brands, which together reported sales of €140m in 2013. North America is Henkel’s single largest market, according to the company. The buzz In a bid to boost its skincare business, Swiss group Nestlé is to acquire aesthetic dermatology brands Restylane, Perlane, Emervel, Sculptra, and Dysport from Canada- based Valeant Pharmaceuticals International for $1.4bn in cash. Nestlé already commercializes the brands in markets outside the US and Canada. Nestlé plans to operate the brands through Galderma, which it is in the process of acquiring from L’Oréal. In February, Nestlé announced it would extend its activities to include the specialized medical skin treatment category, through the creation of Nestlé Skin Health. The company’s foundation is to be Galderma. American investment company TSG Consumer Partners has sold its share of skincare brand Perricone MD to UK-based fund Lion Capital. According to TSG Consumer Partners, the brand’s product sales and earnings have more than doubled in the past three years. TSG acquired its stake in Perricone MD in 2006. US-based Elizabeth Arden has signed a fragrance license with Wildfox Couture, a vintage-inspired women’s designer brand. Arden says the deal is an opportunity to expand its designer fragrance portfolio. The brand’s first fragrance will launch in spring 2015 and will be distributed globally. Wildfox is distributed in more than 30 countries. Retail German retail group Douglas has agreed to sell 38 stores in France to obtain approval for its acquisition of French perfumery chain Nocibé. France’s competition authorities announced that the takeover deal would be given the green light on the condition that the doors are divested. Douglas, owned by Advent International and the Kreke family, signed a deal to purchase Nocibé in February. Douglas operates 179 stores in France directly and through franchises, while Nocibé has 466 stores. The French authorities identified 32 areas where the combined group’s market share was deemed too large. Of the 38 stores, Advent will be required to divest 13 doors and terminate 25 franchising contracts. Following the takeover deal, Douglas will become France’s largest perfumery chain, in terms of store numbers. Sephora is the country’s number-one chain in sales. n n n News roundup n n n Hong Kong’s chief executive Leung Chun-ying has said that there could be a 20% cut in mainland China visitors to the territory, a move that would have a large impact on retail spending there. Visitors from mainland China have been the growth engine for Hong Kong’s retail economy in recent years, as they look to purchase products that are cheaper than at The buzz home. In 2013, there were 40 million mainland visits to Hong Kong. It is not clear how restrictions on travel permits would be imposed or if the crackdown would be on multiple- entry permits. The government could also reduce the number of cities where mainland Chinese can obtain travel permits. People IFF ceo Doug Tough is to step down from his role of ceo of the company in September, but will remain as chairman for an undetermined period. Tough will be replaced by Andreas Fibig, president and chairman of the board of Bayer HealthCare Pharmaceutical. Fibig has been on IFF’s board of directors since 2011. French packaging company Groupe Pochet has appointed Tristan Farabet managing director and member of the board. Farabet was previously ceo of Coca Cola France. French beauty company Sisley founder Hubert d’Ornano has published a book called La Beauté en Partage (or “Sharing beauty”, in French), which tells the story of his life, and of the brand’s creation. D’Ornano, born in Poland, writes about the evolution of Sisley, from its French origins to its construction as a global brand. Launches Japanese group Shiseido is coming out with a major new skincare launch this fall, based on stimulating the skin’s immune system, which it says is a new category in beauty. Called Ultimune, the product is the fruit of 20 years of research and claims to stimulate the skin’s defenses so that it is able to resist, protect, regenerate and strengthen against harmful aggressors, thereby slowing down the aging process.