Estée Lauder first dipped its toe in the mass market in 1997 when it acquired Jane Cosmetics, the original dedicated teen colour brand in the US.
At the time, Lauder had high hopes of gaining a foothold in the multi-billion dollar mass makeup market and using Jane Cosmetics as a pathway into China and India.
During Lauder’s seven year ownership, Jane Cosmetics reached annual sales of US$50 million and was available in thousands of Walmart and Target stores in the US. But under-investment and a flood of competitors saw sales dive 50 per cent and the brand was on-sold in 2004.
Estée Lauder is having another tilt at the mass market through a US$1 billion deal to acquire a majority stake in Deciem, the Canadian functional skincare player founded in 2013, whose portfolio of seven brands includes The Ordinary, NIOD and The Chemistry Brand.
The multinational bought a 29 per cent stake in Deciem in 2017 and will increase its holding to 76 per cent during the first stage of the acquisition to be finalised at the end of June.
The lofty price tag – Lauder’s highest-ever outlay – is based on Deciem’s total enterprise value of US$2.2 billion. Over the next three years, Lauder will acquire full ownership for a sum yet to be announced.
Deciem’s hero brand, The Ordinary, is available through Myer, Priceline, Adore Beauty, RY.com.au and other leading retailers in Australia and e-commerce, select speciality and freestanding stores in the US, the UK and Canada.
Deciem’s global sales reached US$460 million in the 12 months to the end of January this year.
What’s different from the Jane Cosmetics venture is that price sensitivity has moved to the fore during the Covid-19 pandemic, e-commerce and direct-to-consumer sales have boomed and The Ordinary, in particular, has been a key player in promoting ingredient transparency and education.
Skincare has also become more important for The Estée Lauder Companies, accounting for 58 per cent of overall sales in Q4 as makeup sales slumped.
We have built a truly special long-term partnership with Deciem over the past four years, notes Fabrizio Freda, president and CEO of The Estée Lauder Companies.
“Deciem is an exceptional company with its vertically-integrated model and portfolio of authentic brands with highly-effective must-have products and a uniquely transparent and engaging communication style.”