How has Covid-19 changed the face of M&A for beauty businesses?

Coty is seeking support from beauty celebrity, Kim Kardashian. Credit: Postmodern Studio / Shutterstock.

With a big shake-up resulting from Covid-19, big players will be looking to partner with small, newer brands off the back of Covid-19 to keep their consumer base up. Brands that present a good-natured image by supporting ethically oriented practices are expected to do well, with the changing values from their consumers. With the recent pandemic pushing consumers away from brands they can’t trust, how can they show that the initiative is there to provide relevant day-to-day solutions?

Attractiveness is clearly an important priority for the global population, as a GlobalData’s 2019 Q3 global consumer survey showed that 71% of men and 79% of women agree that feeling physically attractive is either very important or important in creating a feeling of wellbeing or wellness. With so much time indoors, consumers may have spent more time watching online demonstrations from influencers instead of being sat in-store and offered samples or consultancies that serve as advertisements to potential customers.

The competition is tight between industry leaders who can no longer demonstrate their qualities in-store, due to distancing and public health restrictions. Coty is a key player in the industry that may have been adversely affected by the Covid-19 pandemic. Coty operates in the cosmetics and toiletries industry, which has limited prospects of growth following the crisis, where people are more concerned about health and safety.

This key player in the beauty industry is now seeking support from beauty celebrity, Kim Kardashian. Coty announced they would take up 20% of the eponymously named beauty product line owned by the reality TV star in a bid to bolster its positive influence without the presence of physical stores. This will increase market share with younger demographics who look up to influencers like the Kardashians and could help establish a new brand image that could be more fruitful post-Covid.

In targeting the psychological impact lockdown has had, UK health and beauty brand Superdrug partnered with My Online Therapy, the UK’s leading online therapy platform. This partnership is said to increase awareness and accessibility of mental health services to support the UK through the coronavirus pandemic. Having a connection to one of the UK’s first virtual psychology clinics will encourage consumers to associate the stores and their private labels with a service that helps their wellbeing. My Online Therapy’s service connects customers with registered psychologists via video, live chat or daily coaching. Having the brand serve as a bridge to a company like this could bring a considerable amount of aid in a time where loneliness is on the rise. That level of consumer insight is something that will be recognized and will likely bring people back as lockdown restrictions are eased.

Building consumer trust has become all the more important now that consumers have moved online and shoppers are therefore more likely to be looking for signs of trust and credibility in online reviews or company initiatives on this platform. L’Oreal’s 2020 Q1 financial results showed that even with a sharp 52.6% spike of worldwide e-commerce, they reported an overall -4.8% decline of sales. Figures like these show that the beauty sector cannot escape the economic impact of Covid-19. Despite the difficult economic outlook, consumer-targeting brands will increase their rate of closing mergers and acquisitions as the crisis stabilises, creating opportunities for defining their role in the new normal.

Going forward, new deals and partnerships that wouldn’t have even been considered before could come to light in a global economy that is re-evaluating financial health and reshuffling markets that had previously been fragmented.

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