On May 6th, Henkel officially announced that it had completed the acquisition of P&G's Vidal Sassoon brand and its related hair care business in Greater China.
According to the official website of Henkel China, this acquisition includes shampoo, conditioner, styling and care products. The Sassoon brand achieved sales of over 200 million euros (equivalent to RMB 1.56 billion) in the Chinese market in the fiscal year 2022/2023. Through this acquisition, Han Gao aims to enhance its competitiveness in the hairdressing business and accelerate performance growth.
The addition of Sha Xuan will also complement existing brands of Henkel such as Syoss, Schwarzkopf, and Persil, jointly forming Henkel's consumer brand map in Greater China and even the Asian market. Han Gao stated that this acquisition will help fill its gap in the high-end hair care field and meet the needs of Chinese consumers by providing a complete set of innovative hair care product combinations.
Regarding the specific channel handover plan and acquisition amount between Procter&Gamble and Henkel, Henkel has not been publicly disclosed. Previously, some media quoted Bloomberg as saying that Procter&Gamble sold its Sassoon China business for $1 billion. A reporter from Blue Whale Finance sent an email and called Han Gao China for an interview, and received an exclusive response: "The price of this acquisition is about 280 million euros. By leveraging our capabilities and advantages, we will re launch our products and expand our product line after business integration. We will achieve economies of scale throughout the entire value chain, thereby further leveraging synergies. We will now focus on preparing for the integration process." It can be seen that there is a significant gap between the acquisition amount and the amount reported by relevant media, and we do not know whether the final transaction amount is lower than P&G's expectations. However, it is an undeniable fact that Sha Xuan's performance has been under pressure in recent years, and the growth rate has slowed down.
In addition to the acquisition of Sha Xuan, Han Gao has also made other acquisition actions in the past few years to strengthen its product line and market position. On the contrary, for large groups like Procter&Gamble, it is also a common strategy to improve overall performance by divesting non core or underperforming businesses. In the beauty industry, mergers and acquisitions and divestitures are the norm, but they also mean that a new round of restructuring and reshuffling is quietly taking place.
Cut from the official website of Henkel China
By relying on Sha Xuan to improve performance, Han Gao expects an organic growth rate of 4% this year
On February 1st, Henkel announced that it had reached an agreement with Procter&Gamble to acquire the Sassoon brand and its hair care business in Greater China. On the day Han Gao announced the acquisition, Procter&Gamble sent a notification letter to the Chinese distributor team, informing them that the transaction agreement would be signed on January 31, 2024, and the entire acquisition case would be completed by the end of June 2024. That is to say, the business that was originally planned to be handed over within 5 months has now been completed in just 3 months.
In fact, Han Gao has high expectations for the newly acquired Sha Xuan brand.
According to the exclusive response of Han Gao China to Blue Whale Finance reporters, the acquisition price of 280 million euros is calculated to be approximately 2.18 billion yuan. Combined with Sha Xuan's annual sales of 200 million euros in Greater China, the acquisition price paid by Han Gao seems not to be high.
"We are delighted to have the opportunity to incorporate this powerful brand into our product portfolio," said Dong Wanqing, President of the Consumer Brand Business Department of Henkel in Asia. "I firmly believe that this acquisition will further consolidate our authority in the hairdressing field. The addition of Sha Xuan will promote the development of Henkel's consumer brand business in Asia to a new level, and also reflect our long-term commitment to this highly dynamic market."
It is worth mentioning that Han Gao Group's acquisition in the hairdressing field did not begin recently.
In February 2022, Henkel signed an acquisition agreement with Shiseido, with the goal of Shiseido's professional hair care business in the Asia Pacific region. The business covers key brands such as Sublimic and Premience under Shiseido's professional hair care, with product pricing mainly in the range of 150 to 800 yuan and annual sales exceeding 100 million euros (approximately RMB 770 million). On July 4th of the same year, Han Gao successfully completed this acquisition.
In addition, the acquisition history of Han Gao can be traced back to an earlier period. In 2017, Henkel completed the acquisition of Nattura Laboratories and Shiseido's professional hairdressing business in North America. In 2014, Henkel acquired SexyHair, Alterna, and Kenra in the US market. In 2000, Han Gao acquired Yamahatsu Industries, a Japanese hair and cosmetics professional company, including its branch in China.
This series of acquisitions reflects Han Gao's strategic intention to continuously deepen its professional position and market influence in the field of hair care products. As the world's second-largest company in the field of professional hair care, Han Gao is indeed a good "mother-in-law".
According to the financial report, the sales revenue of Henkel in the fiscal year 2023 was 21.514 billion euros (approximately 168.07 billion yuan), a year-on-year decrease of 3.9%; Adjusted EBIT (pre interest and tax profit) of 2.556 billion euros (approximately RMB 19.968 billion), a year-on-year increase of 10.2%; The overall organic sales increased by 4.2%.
Previously, when releasing its 2022 financial report, Han Gao had anticipated an organic sales growth rate of 1% to 3% for the fiscal year 2023, and an adjusted EBIT of 10% to 12%. From the results, organic sales exceeded expectations, and the adjusted EBIT met expectations.
Taken from the financial report of Hankou High School
Looking at the sub sectors, the sales revenue of the consumer goods business department was 10.556 billion euros (approximately RMB 82.465 billion), a year-on-year decrease of 3.3%, while organic sales increased by 6.1%; The adjusted EBIT was 1.115 billion euros (approximately RMB 8.71 billion), a year-on-year increase of 22.5%. Compared to the previous year, the department's prices increased by 12.4% and sales decreased by 6.3%.
Among them, the hair business achieved significant growth, mainly in the styling and coloring business, as well as strong growth in the professional hair salon business. This part of the business had sales of 3.075 billion euros (approximately RMB 24.022 billion) last year, with organic sales increasing by 8.9%.
At present, Han Gao's hairdressing business has begun to take shape. In the mass market, Han Gao has silk Yun positioned in the middle and low price range; In the mid to high priced professional market, Schwarzenegger occupies a place; In the high-end market, there is a Shiseido professional hair salon brand. Although Shaxuan is positioned as a mid to high end market, its daily chemical products for consumers are relatively affordable in the price range of 20 to 100 yuan. There is currently no definitive information on the adjustment of future Sha Xuan product lines and pricing strategies.
It can be foreseen that after acquiring Sha Xuan, Han Gao's hair business is expected to further improve, regardless of whether it aims to build high-end products, which will affect the overall performance of the company. Han Gao Group expects an organic sales growth rate of 2% -4% in 2024, with an adjusted EBIT (pre interest and tax profit margin) of 12% -13.5%, and an adjusted sales return rate of 11% -12.5% for the consumer brand business department.
P&G is not the only company to lose weight as its net profit has fallen below double digits
From the perspective of natural year statistics, Procter&Gamble's revenue exceeded 600 billion yuan for the first time last year. However, in reality, based on the annual performance changes in 2023, the major players in the daily chemical and beauty industry have also failed to avoid the impact of the industry's slowdown in performance and shrinking profits.
From the perspective of revenue, Procter&Gamble's growth rate in all four quarters last year was in single digits; From the perspective of net profit, Procter&Gamble experienced a decline in Q2 in the fourth quarter of 2023 (i.e. Q2 of fiscal year 2024), marking the first double-digit decline in Q2 net profit for Procter&Gamble in nearly five years.
The financial report for the third quarter of the 2024 fiscal year (January 1, 2024- March 31, 2024) shows that the company's Q3 net sales were $20.2 billion, a year-on-year increase of 1%. Excluding acquisitions, asset divestitures, and foreign exchange impacts, the organic sales growth rate was 3%, slightly lower than analysts' expectation of 3.7%.
Driven by the price increase strategy, Procter&Gamble's net sales have increased, with the North American market accounting for more than half of its revenue. However, in the Greater China region, Procter&Gamble's organic sales declined by 10% year-on-year in the quarter, with sales of high-end skincare brand SK-II falling by 30%.
For two consecutive quarters, the high proportion of decline has forced Procter&Gamble to strengthen its crisis awareness. At present, the typical case of "slimming down" by divesting brands such as Sassoon and Gillette is. In fact, Procter&Gamble has had multiple business streamlining efforts in its history. In 2014, faced with slow growth, Procter&Gamble took measures such as selling, stopping production, or naturally phasing out, divesting 90 to 100 peripheral brands with annual sales of less than $100 million. In 2017, Procter&Gamble further announced that it would cut over 100 brands.
In addition, Procter&Gamble's streamlining behavior is not limited to brand sales. In December 2022, Procter&Gamble closed its official Tmall flagship store of its high-end skincare brand Snowberry. In April of the same year, Procter&Gamble ceased operating the high-end beauty equipment brand OPTE in China for only two years. In September, P&G's First Aid Beauty also closed its official flagship store of Tmall, and emptied the flagship store of the Tiktok platform.
This approach of slimming down by divesting assets that are detrimental to performance growth has become a common strategy for large groups in the beauty industry. Apart from Procter&Gamble, other beauty groups are also undergoing similar business adjustments.
For example, Unilever announced in December 2022 that it would sell its Elida Beauty business to private investment firm Yellow Wood Partners, with the transaction expected to be completed by mid-2024. Elida Beauty was founded in 2021 and is part of Unilever's personal care department. It has over 20 non core brands, indicating that Unilever has divested multiple brands in one go.
In February 2023, Unilever also sold its affordable shampoo and skincare brand Suave's North American business to Yellow Wood Partners. Unilever aims to focus on developing 30 core brands by selling non core businesses.
Shiseido has also sold multiple brands in recent years, including skincare brands such as Za Jirui and Pomeranian, high-end makeup brands such as BareMinerals, Buxom, and Laura Mercier, as well as 10 popular personal care brands and professional hair care businesses such as Shanke, UNO, and Shuizhimiyu, with the aim of focusing more on the high-end skincare market.
Overall, the giants in the beauty industry are reshaping the global beauty market through mergers and acquisitions and divestitures. This series of "buying" and "selling" not only reflects their keen insight into current market dynamics, but also reflects their strategic planning for future development direction.
By divesting businesses that do not align with long-term growth strategies or perform poorly, beauty groups can release capital and reallocate it to areas with greater potential and profitability. The optimized allocation of these resources enables them to concentrate more energy and funds to cultivate strong brands that can bring innovation and growth.
At the same time, by acquiring brands with strong market position and influence, beauty companies not only expand their product portfolio, enhance technological strength, and expand global markets, but also build stronger and more diversified competitive barriers. But whether this "buy" and "sell" can achieve a "win-win" depends on the operational ability of the "new owner".