Cosmetics giant L'Oreal makes maiden acquisition in India

The company has bought Cheryl's Cosmeceuticals in a bid to strengthen its professional products division

French cosmetics & beauty giant L’Oréal has taken the plunge into the mergers and acquisitions space in the country with the acquisition of Mumbai-based Cheryl’s Cosmeceuticals, a professional skin-care products and treatment company.

Founded in 1986 by Oscar & Cheryl Pereira, the company reaches 10,000 salons in India and has a turnover of Rs 20 crore. L’Oréal did not disclose the size of the deal. But analysts estimate the deal size to be not more than Rs 30-40 crore.

The acquisition is expected to strengthen L’Oréal's professional products division, which targets salons and beauty parlours.

Jean-Christophe Letellier, managing director, L’Oréal India said, “This is an attractive opportunity for us, as it broadens our offering to include skincare products and services. We already had expertise in haircare. We now complete our product offering with the new acquisition.”

L’Oréal derives 20 per cent of its Rs 1,580-crore India turnover from the professional products division, which has three brands — L’Oréal Professionnel, Matrix, and Kerastase.

It is the leader in this space in India reaching 40,000 salons, followed by Procter & Gamble, which has brands such as Wella and Sebastian.

Letellier says the company is open to further acquisitions in other divisions as well such as consumer products and luxury & active cosmetics (active cosmetics are products that are only available in pharmaceutical stores). The company derives 70 per cent and 10 per cent of its revenues from these units.

The latest acquisition would also help the company in its goal to reach a turnover of Rs 7,000 crore by 2020 — a vision articulated by L’Oréal's chairman & chief executive officer Jean-Paul Agon on his trip to India earlier this year.

The company, Agon had said, would do this by localising products, pushing distribution, and looking at cutting-edge India-specific innovations driven by its new research & innovation centre in Mumbai. He had also not ruled out the possibility of acquisitions to increase turnover.

Towards this end, L’Oréal recently refurbished its shampoo range, changed packaging and is now focusing its attention on affordable products. The company ranks number three in shampoos after Hindustan Unilever and Procter & Gamble. In hair colour, L’Oréal is the leading player, while in men's and women's skin care, it ranks number two.

The move to drive affordability in India is also linked to L’Oréal's objective of reaching one billion consumers in the next decade. This number is expected to be achieved with the help of markets such as China and India, the first and second-most populated countries on the globe, also among the world's largest consumption markets.

“Our endeavour is to universalise beauty by targeting not just the top end of the market, but also the growing middle class with products that take into account Indian needs,” Agon had said. “In about 10 years, we are looking to reach 150 million consumers from India alone,” he added.