Aesop-L’Oreal: $2.5 billion and worth it!

On August 30th L’Oreal CEO Nicolas Hieronimus’ glow was all natural as he announced the capture of Aesop for $2.54 billion – a tidy sum in a relatively barren year for corporate megadeals.  

Spa chic
Lancome and Garnier now have company in the bulging L’Oreal portfolio of cosmetics companies. While it may not be the biggest or most glamorous of its acquisitions (news of which broke in April) Aesop is a cash machine whose products have an enviable reputation.

Aesop was founded in Melbourne in 1987 by an unassuming hairdresser by the name of Dennis Paphitis, whose experiments with mixing essential oils and hair products at his salon gave him the idea to develop his own line. Aesop proved to be an instant hit with Australian consumers. Its winning formula? Quality, safe beauty products that respect the environment, packaged in an understated way and sold in stores as sober and uncluttered as the reception area of an upmarket spa.

In 2022, Aesop posted turnover of $500 million, up 21% from the previous year

And the popularity of the brand keeps growing. In 2022, Aesop posted turnover of $500 million, up 21% from the previous year. That’s the kind of performance that makes suitors take the private jet down under, checkbook in hand.

Inbuilt Asian customer-base
Another reason why L’Oreal was so keen is Aesop’s spectacular success in Asia, notably in China, which has become L’Oreal’s number one market over the past decade. The brand has greater market penetration and brand awareness there than in the West, a fact that Nicolas Hieronimus alluded to when announcing the capture of the company.     

“The Aesop brand, with its unique combination of urbanity, hedonism and undeniable luxury, taps into all of today’s ascending currents. We look forward to building on the brand’s unique DNA and values, as we unleash its massive growth potential in China and beyond.”

L’Oreal’s $2.5 billion dollar outlay for Aesop is the latest development in the cosmetics merry-go-round with Brazil’s Natura & Co, Aesop’s previous owner. Founded by Antonio Luiz Seabra in Sao Paolo in 1969, Natura acquired longtime L’Oreal target Avon in 2019, having bought the Body Shop from its French rival two years earlier.      

According to Fabio Barbosa, the CEO of Natura & Co, the sale of Aesop marked the start of a new phase in the group's development. "With a strengthened financial structure and a deleveraged balance sheet, Natura & Co can deepen its focus on strategic priorities, especially in its investment plan in Latin America. We will also be able to concentrate on further enhancing the business of The Body Shop and reorienting the presence of Avon International," he remarked.

The Aesop deal was L’Oreal’s second billion-dollar plus acquisition of a cosmetics brand in the space of a year, after last autumn’s purchase of Arizona dermatological products outfit Skinbetter Science, a firm which, despite only being in existence since 2016, already has annual revenues of $95 million.