Tricks or Treats? The Age of Luxury Acquisition.
Okay, Halloween has passed but we have officially entered my favorite time of the year. It's the holiday season; when leaves change and the weather gets cold enough to wear a sweater all day. Pumpkins adorn doorsteps and themed lattes become everyday purchases and scented candles invoke that feeling of yes.
It’s also a time of change. We have entered another period of transition. And right now, it’s amazing how the world of luxury has shifted so drastically. First, Barney’s goes bankrupt and now LVMH bids on Tiffany and Co.? Is no one safe?
Retail is constantly changing, but such is the way of the world, isn’t it? Change is the only constant, and fashion is going through a difficult time as one of the fastest-growing luxury industries, global prestige beauty, is booming. Luxury seems to remain in a constant state of evolution as brands acquire others and luxury powerhouses are formed and shaped. For starters, Shiseido just acquired Drunk Elephant (DE).
For like, $845 million.
Which is amazing in its own right. There are seven companies that own the majority of your favorite skincare brands. Only. Seven. L'Oréal, Johnson & Johnson, Shiseido, Unilever, Estée Lauder Companies, Coty, and Proctor & Gamble make up the list, with 182 beauty brands and counting under their ownership. This means that the few standalone companies privately owned are rare and special in their own right. Just this past June, Unilever acquired Japanese-inspired, luxury skin-care startup Tatcha for a reported $500 million, making it a deal valued at roughly five times sales. So, to see a small brand like Drunk Elephant being sold for this much is pretty huge, especially when large corporations are looking to acquire smaller, popular brands to add to their portfolios and bottom line.
But, honestly, by the popularity of the brand alone it makes sense...because...well, let me tell you, Drunk Elephant is the truth.
I’ve probably used those exact words verbatim in a verbal conversation. Also, that very sentence might be in another article on this blog. Either way, my redundancy is only due to the fact that I stand so firmly by that statement. Everything I have used I have loved. Literally, the only thing I dislike is the price tag, and somehow I still suck it up and shell out the money because their products work! And that, to me, is a quality not all brands possess. Seriously, I don’t know how to stress enough how melanin-rich skin requires a different set of ingredients and care, and somehow this brand seems to work universally. For the first time ever I think I can say this brand is actually for all skin types, and that, in itself, is a feat.
And I think one of the reasons DE works so well is because of its “clean” ingredients. Formulated without what creator Tiffany Masterson calls the “suspicious six” ingredients: essential oils, drying alcohols, silicones, chemical sunscreens, fragrances and sodium lauryl sulfate.
And Shiseido has apparently taken notice.
The Japanese multinational corporation is one of the oldest cosmetics companies in the world and has acquired one of my faves for just short of one billion dollars. In one of the largest beauty acquisitions of the decade, Drunk Elephant joins other brands within the portfolio including their namesake, Shiseido, NARS, Laura Mercier, and bareMinerals among others. The acquisition marks the boom of the beauty industry, which had sales of roughly $500 billion overall, and where makeup had historically driven sales, the industry has seen a recent growth in skincare.
Fueled by the popularity of brands such as Drunk Elephant, Glow Recipe, and Glossier, consumers are much more knowledgeable of their skin’s needs. Companies market themselves as your favorite “brand-next-door,” targeting millennials and Gen-Z’s who are more focused on authenticity. If it doesn’t speak to us today, and even more so the younger generation, we don’t buy.
And such is the reason LVMH has targeted Tiffany.
Much of the brand’s lackluster sales have been attributed to many things, including their drop in sales from tourists amidst the Trade Wars as well as the company's inability to modernize and fully connect with today’s younger generation.
It’s scary. (See what I did there?). Well, it can be. Tiffany stock went up a whopping 57% after LVMH announced it’s interest, so maybe this is the revival it needs? Just last year I performed a social media audit of the jeweler, and another thing it’s seriously lacking is diversity. The brand is still very old-fashioned and extremely conservative; it’s missing that relatable wow factor. We all know the Tiffany Blue Box, but is knowing enough to maintain sales?
Time will have to tell.
Analysts say Tiffany would fit well into LVMH’s portfolio. The luxury goods empire is already home to Moët, Hennessy, Louis Vuitton, Céline, Givenchy, Christian Dior, Bulgari, Sephora, Fenty and more to make up their 75 brands across 17 houses. If acquired, Tiffany and Co. would not only become the first non-fashion American brand in the LVMH portfolio, but it could possibly, under new guidance, be able to modernize both its image and merchandise.
As for now, I’m here for it. Maybe this is the revival that Tiffany needs. Not all brand acquisitions are bad, right? I mean, some of them can be for the betterment of the company, yes?
Drunk Elephant went through with their acquisition because now, they will be able to leverage Shiseido's global platform and resources to expand. Shiseido reach will now give DE access into new and existing markets, both in the Americas and internationally, throughout Europe and Asia. TIffany, if they accept LVMH’s offer, will be able to leverage similar reach and capital to rebrand itself and, most importantly, boost sales.
Maybe this is a deal Tiffany and Co. needs to take.
Again, we shall see.
All I know right now is that tonight is a full moon and the holiday season is upon us. These quarter sales will dictate whether or not the induction of new brands into old houses will have been a treat or a straight-up trick, and I don’t think we’ll have to wait too long to find out.
What are your thoughts about LVMH acquiring Tiffany and Co.? Are you here for it, or totally against it?