Kline explores P&G's beauty divestiture

THE speculated divestiture by Procter & Gamble of some of its beauty products is fueling industry analysts to explore future scenarios for the beauty market.  

 

The partial dismantling of the P&G beauty empire, which could include small yet prestigious fragrance brands such as Gucci and Hugo Boss, substantial professional and retail hair care categories Wella and Clairol, and the legendary Max Factor and Cover Girl color cosmetic brands, is seen as ending an era in the company's impressive growth in personal care. Global market research and management consulting firm Kline & Company also sees the development as setting the stage for exciting growth opportunities for strategic and financial buyers.

 

Kline’s perspective on three categories included in P&G's divestitures covers hair care brands such as Clairol. 

 

According to Carrie Mellage, head of Kline's Market Research & Reports practice in Beauty, the brand is a distant number two to L'Oreal in retail hair colorants but is "benefiting from strong consumer awareness and heritage in the category."  

 

Susan Babinsky, head of Kline's Management Consulting practice in consumer products, said that the Clairol brand has the opportunity to revitalize growth by focusing efforts on the space that it does own. 

 

Kline experts also discuss Nioxin and Wella, the latter a leading player in professional hair care with a strong position in hair colorants. The brief analysis also covers important brand assets such as the two popular color cosmetic brands Cover Girl and Max Factor, and P&G’s line of prestige fragrance brands.

 

Sally Beauty Holdings is seen as one of the potential buyers. Investment firm Sterne Agee notes the value in the company’s purchase of the P&G beauty brands since the latter is already the largest supplier of Sally Beauty’s beauty products. Acquiring one or more P&G brands would be "highly accretive" to Sally Beauty's margins. Becoming a sole distributor of a particular product will allow Sally Beauty significant pricing power in key categories.

 

Senior research analyst Ike Boruchow recommends the Wella Color Charm and Clairol Professional brands as the two best fits. The hair color brands generate about $200 million in annual retail sales. Sally Beauty accounts for $150 million of this total.