This year is likely to be a big year for the European natural cosmetics industry with a surge in investment activity envisaged, according to Organic Monitor. Investment is expected to pour into natural cosmetic companies from various sources, with private investors, private equity firms, venture capital firms and large cosmetic companies all looking to invest in natural and organic cosmetic companies.
The natural & organic sector is seen by some as the future of the cosmetics industry, whilst others are attracted to the high margins.
Mergers and acquisitions have already had a major impact on leading natural cosmetic companies. Neal's Yard Remedies has opened two new London stores since it was acquired by a private investor just over a year ago. The British chain of natural cosmetics is poised to have over 30 outlets in the coming years. After integrating Sanoflore into its Active Cosmetics division, L'Oréal plans to take the brand international. For the first time, an organic cosmetics brand will be introduced in mainstream retailers on an international scale.
Investment in non-European companies is also flowing into Europe. Australian company Jurlique is looking to expand in Europe since it was acquired by JH Partners last year. The private equity firm aims to make Jurlique the leading Australian brand of natural cosmetics in the international market.
Organic food retailers and mainstream retailers are also pumping capital into natural cosmetic brands and products. Organic food supermarkets, drugstores and even discounters in Germany have already launched natural cosmetics under their private labels and retailers in other European countries are following suit. The launch of bnatural has given Tesco the distinct honour of becoming the first British mainstream retailer with Soil Association-certified private label cosmetic products.
Organic food companies are also not sitting quietly. Leading organic food brands like Duchy Originals and Alnatura have already developed natural and organic cosmetic product ranges. Hain Celestial, the world's largest organic food company, is likely to have most impact on the European market since its acquisition of Avalon Natural Products last month. Hain Celestial already owns the Jason Natural brand, which is highly successful in the UK. Hain is likely to build synergy between these brands and expand distribution into mainland Europe. An acquisition of one or more European natural cosmetic companies is possibly on the cards. The American company has deployed a similar strategy with non-dairy products and vegetarian foods. It acquired a number of leading brands in North America and Europe and consolidated them to develop marketing & distribution synergies.
Hain Celestial acquisitions are putting it in direct competition with large cosmetic companies like L'Oréal and Estée Lauder. L'Oréal's plans to make Sanoflore into a mega organic brand follow in the footsteps of Aveda. Aveda institutes have been set up across the globe since it was acquired by Estée Lauder in the late 1990s.
Investment in the natural and organic cosmetics industry is en vogue. It is finding suitable partners that remains the major challenge. Large cosmetic companies are looking at mergers & acquisitions as a market entry route, organic food companies & retailers are investing to develop new products for existing customers, whereas the financial community is investing for financial returns. Whatever the motives for investing, the pace of change in this dynamic market makes sitting on the fence no longer a strategic option.