Shiseido reportedly beat out competitors such as the Estee Lauder Companies and Unilever to buy the ‘clean’ beauty for $845m. This deal is expected to close by the end of this year.
Drunk Elephant founder Tiffany Masterson will continue in her role as Chief Creative Officer and assume the additional role of President, reporting directly to Marc Rey, CEO of Shiseido Americas and Chief Growth Officer of Shiseido.
This deal marks another large skin care acquisition this year, including L’Occitane Group’s $900m purchase of ELEMIS and Unilever’s $500m deal for Tatcha.
“Shiseido sees great value in Drunk Elephant and is well placed to continue to cultivate the brand growth under the Shiseido umbrella. The potential [of the brand] has only just been scratched,” a spokesperson from Shiseido told CosmeticsDesign-Asia.
The clean consideration
Drunk Elephant was launched in 2012 by Masterson and is considered one of the pioneering ‘clean’ beauty brands on the market that advocated ingredient transparency in the industry.
Since then, the brand has garnered cult beauty status its products which are free of ingredients it deems to be “suspicious”. This includes essential oils, drying alcohols, silicones, chemical sunscreens and fragrances, dyes and sodium lauryl sulfates.
Once a niched category, the demand for clean beauty is rapidly growing, not just in North America and Europe, but in Asia as well.
According to Shiseido’s market forecasts, the clean space was estimated to grow at a CAGR of 9% from 2018 to 2020, outstripping the overall growth of the general cosmetics market.
“This acquisition enables us to strategically strengthen our presence in the rapidly expanding global clean’ category led by the younger generation of consumers in the United States. The addition of this brand to our made-in-Japan prestige portfolio, including Shiseido and Clé de Peau Beauté, will further strengthen our core prestige skin care business,” said the rep.
Room for growth
Aside from its home market, Drunk Elephant is currently in markets such as Australia, the UK, Singapore, Hong Kong, the Philippines and China via the cross-border e-commerce channel.
The spokesperson said Shiseido will continue to strengthen the brand’s reach internationally.
“Drunk Elephant will be able to leverage Shiseido’s global platform and resources to expand into new and existing markets both in the Americas and internationally, including Europe and Asia.”
In particular, it sees huge potential in China where it has observed “high acceptance” of the clean beauty movement
Shiseido confirmed during a conference call held on Thursday that e-commerce will continue to be Drunk Elephants main marketing channel due to the issue of animal testing in China.
However, the firm said the company would “consider” expanding the brand’s presence though sales in physical stores while monitoring the regulatory developments in China.
With the addition of Drunk Elephant to its portfolio, Shiseido hopes to post double-digit growth in the Americas next year.
The company expressed confidence that there was still room for the brand’s growth in the Americas market.
“The penetration rate among consumers is still low and we believe there is potential for expansion both via physical retail and e-commerce routes. Also, Drunk Elephant is a skin care brand with a very high repeat rate. We believe the brand can grow more provided it attracts new consumers in the future,” said a spokesperson.
He added that with the prospect of expanding into Europe as well, the company is confident it will see sufficient return of investment.
Strengthening D2C engagement
This partnership will also enable Shiseido Group to reinforce its existing digital and social media presence, which has become essential for brands, said the spokesperson.
“As e-commerce and disruptive technologies increasingly influence and change buying behaviours, we are seeing a rise of Direct-to-Consumer brands. We believe the D2C model is successful, particularly for start-ups. While our retail channel strategy differs from that of start-ups, we are looking at driving D2C by growing our digital advertising strategy.”
