What L’Oréal’s Aēsop Acquisition Means In The APAC Consumer Markets Industry

French cosmetic giant L’Oréal is making waves in the luxury beauty industry by acquiring Australian brand Aesop from Natura &Co. In a billion-dollar deal worth $2.53 billion, L’Oreal seeks to expand its global presence in high-end cosmetics and has set its sights on China. This move further establishes L’Oreal’s reputation as a top player in the beauty market and is its most sizable acquisition to date. As L’Oreal continues to move upmarket, its purchase of Aesop will allow it to tap into a discerning customer base unaffected by economic instability.

BTI Executive Search China Consumer Markets Associate Director Monica Gong commented that incorporating Aesop as a premium lifestyle brand will significantly enhance the standing of the Luxury Product Division (LPD) in the Chinese market. The current trend in China is for luxury lifestyle brands rather than just cosmetics, and Aesop is positioning itself perfectly in this regard. Unfortunately, Natura may have a weaker potential for success in China, as evidenced by Avon’s lack of success, The Body Shop’s struggles with animal testing rules, and the absence of offline stores. Interestingly, Aesop’s Chinese staff come from a retail or luxury industry background rather than cosmetics, showcasing the company’s focus on providing a luxurious and unique customer experience.

While in Malaysia, BTI Executive Search Consumer Markets expert Clement Chong has his take on this acquisition. “L’Oreal further strengthens its Luxury portfolio by adding Aesop next to Lancome. From a business perspective, it’s logical and complements the current product line. Additionally, Natura’s brand positioning as a vegan beauty brand can propel L’Oreal further in the ESG sector. We know by now that L’Oreal acquires brands with huge potential to grow with their business. I anticipate the acquisition of Aesop would likely mean L’Oreal is well on the way of becoming a one-stop cosmetics centre for consumers if they are not already.” said Clement Chong.

“For Natura, it’s not a secret that Natura is a growing business. There are many ideas in the pipeline. Aesop is one of the brands that was growing by double-digits. As it is, Aesop is already marketed at a Luxury brand pricing to the consumers. Historically, compared to Lancome’s acquisition by L’Oreal in 1964, Lancome started as a fragrance brand and was affordable! Over the years, L’Oreal had grown Lancome into one of the top-tier cosmetics brands, advised as unsuitable for new cosmetic users due to its product potency and strength. Can we presume the same might happen to Aesop? I believe they stand a perfect chance.” added Clement Chong.

When asked why L’Oréal made this move, he said it was purely strategic. Aesop fits into L’Oréal’s Luxury brand vision and direction. The added USP of being a Vegan Beauty Product brings L’Oréal not one but numerous benefits. Areas he anticipates growing within the organisation would be (in a sequence of timeframe):

1. Strengthening and expansion of their Luxury Portfolio
2. Opportunity to tap into China’s market – Aesop is currently active in China. To clarify, some of L’Oréal’s brands face restrictions in China, such as ITC, while Lancome and Kiehls are fully approved in the same market. The acquisition is timely because Aesop just penetrated China in Q4 of 2022 – it’s an opportunity for L’Oréal and Aesop.
3. Environmental, social and governance (ESG) sustainability

Clement foresees changes in Malaysia likely related to workforce and workforce managing Aesop. “More retail outlets of Aesop’s in larger and more luxurious malls in Malaysia. On top of that, there may be opportunities within the Principal and non-Principal end of the market, such as in e-Commerce agencies,” he added.

Jiraprapa (Tunyong) L., the Consumer Market expert in BTI Executive Search Thailand, shared, “Aesop’s unique brand identity, commitment to natural ingredients, and sustainable practices resonated with consumers seeking high-quality, ethical skincare products. By adding Aesop to its portfolio, L’Oreal was able to cater to this growing demand and increase its market share in the luxury skincare segment. The acquisition allowed L’Oreal to expand its portfolio in the premium skincare market and gain access to a new customer base. Aesop has a loyal following and a strong reputation for quality and innovation, making it an attractive addition to L’Oreal’s portfolio of brands.

She said the acquisition signalled L’Oreal’s commitment to incorporating ethical and sustainable practices into its operations. Aesop’s focus on using natural ingredients and sustainable sourcing aligned with L’Oreal’s sustainability objectives and helped to reinforce the company’s image as a leader in ethical and sustainable practices in the beauty industry.

The acquisition was part of L’Oreal’s broader strategy to expand its presence in high-growth markets, particularly in the Asia-Pacific region, where Aesop has a strong presence. The acquisition allowed L’Oreal to increase its regional market share and tap into Aesop’s expertise and established distribution network.

She also said it was a strategic move to enhance its presence in the luxury skincare market. Aesop was known for its unique store experience, premium products, and commitment to sustainability, which resonated with customers seeking high-quality, natural skincare solutions.

L’Oreal was driven by a combination of strategic and financial objectives, including expanding its portfolio, accessing new customer segments, reinforcing its commitment to sustainability, and expanding its presence in high-growth markets.

According to Jiraprapa, this development will likely significantly impact the local consumer market as it expands the product offerings and heightens competition. Furthermore, the acquisition is expected to attract a new customer segment that values premium, natural skincare products.

The talent market in Thailand may foresee new career opportunities within Aesop and impact talent retention within both Aesop and L’Oreal. The recruitment agencies that specialise in the consumer markets, particularly in product development, marketing, and distribution, could see increased demand for their services due to competition and consolidation within the industry.

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