Thursday, April 22, 2010

L'Oreal Acquires Essie Cosmetics

After much speculation, L'Oreal USA has purchased Essie Cosmetics, one of the biggest, chicest names in the nail care industry, reports WWD. Purchase price was not disclosed, however due to Essie being a "specialized brand", industry analysts estimate that L'Oreal paid between $50-60 million for the company.

Essie Weingarten, who founded Essie, and her husband Max Sartino, CEO of the company, signed multi-year deals with L'Oreal and will stay on with the brand.

Analysts believe this deal offers several growth opportunites for Essie such as expansion into cosmetics, increasing the brand's international presence, and it allows Essie to tap into L'Oreal's vast salon network distributions to boost domestic growth. This deal also helps L'Oreal increase its market share of the nail polish market, which currently stands at 9.2% according to an article at Crain's New York Business.

I have several concerns: I hope that the quality of the product won't suffer. I'm also concerned about the possibility of the Essie brand branching out into cosmetics. L'Oreal already has a brand portfolio that covers cosmetics (i.e. L'Oreal, Lancome, Maybelline, Shu Uemura...etc.). However, what's missing from their portfolio is a brand that exclusively addresses foot and hand care needs. Keeping Essie as solely (no pun intended) a nail and hand care brand will help them compete against Coty which controls 45% of the market.

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