Thursday, February 25, 2010

Higher Investment in Personal Care Companies

A sharp rise in investment activity involving natural personal care companies is expected in 2010.

According to Organics Monitor’s new Strategic Insights report, which looks at investments, mergers and acquisitions in the global natural personal care industry, improving economic conditions and easing of capital restrictions are making investors target this high growth sector once again.

Until the financial turbulence began in 2008 the natural personal care industry was a favourite of the investment community. However, Organics Monitor reports that after an 18-month lull period, major deals have restarted, for example, the acquisition of Bare Escentuals by Shiseido in a $1.7 billion deal and the completed purchase of Kibio by Clarins this month.

Organic Monitor director Amarjit Sahota said: “We would not say that natural personal care companies were resilient during the recession, however most companies continued to show growth in 2008 to 2009 albeit at lower growth rates than previous years.

Many companies were reporting growth of above 20% a year but experienced single-digit growth in 2008 and 2009. So we would say natural personal care companies were affected by the recession, but not as badly affected as other personal care companies.”

Organic Monitor predicts further deals as investors are once again pursuing natural personal care companies.

It said that investors are attracted by high market growth rates and profitable product categories and explained that European companies are expected to be involved in major deals in 2010 because of the lack of “investable” companies in North America.

The report stated that the most successful natural personal care companies are those that receive investment and continue to operate as separate entities. Aveda and Burt’s Bees are cited as such companies that have continued to show positive growth. In comparison, those that have been acquired and integrated into larger corporations have not realised their growth potential.

The statement from Organic Monitor said: “A major reason is that natural personal care companies are typically small enterprises with strong ethical values which do not always fit well into larger profit-driven organisations”.

Sahota added: “Increased investment in natural and organic personal care companies will benefit the professional beauty sector by giving more financing to brands that currently focus on this sector. This financing will provide capital for new product development, product improvements and ingredients. It will also provide capital to new start-ups that are developing professional beauty products and provide more funding for marketing and distribution to companies that supply salons and spas.”

By Kate Donovan
February 22, 2010

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