Consumer sector comment – December 2016 – Razing the stakes

Whilst many men still won’t admit to using beauty and grooming products, they are becoming more knowledgeable about them, and are paying more attention to their looks. Male grooming is one of the fastest growing categories within personal consumer goods, with sales increasing 5% per annum, and the market now worth over €45bn.

However the market is challenging. Whilst with women, the more beauty products the better, there is still a stigma that beauty and skincare products will somehow make a man less masculine. Men therefore don’t shop in the same way as women. Women are more than happy to have numerous brands on their shelves, whereas men tend to shop first by brand, and then by product. Social media is less effective as men do not typically tweet or Instagram about their beauty regime. Different market dynamics mean that within men’s grooming, an established brand holds a lot of power.

Just last month, American consumer products company Edgwell Personal Care (Edgewell), owner of well-established, leading razor brands Wilkinson Sword and Schick, purchased UK leading men’s grooming and skincare brand, Bulldog – a small deal for the US conglomerate – in a bid to continually press beyond category conventions. Bulldog fits Edgewell’s criteria of a leading brand with the capability of expanding internationally, with Bulldog having already established distribution in more than 17,000 locations.

Edgewell’s portfolio of male grooming brands compete in an oligopoly market – the three main players include Edgewell itself, Procter & Gamble (P&G), and new entrant to the market, Unilever. Earlier this year, the latter of the trio, in a bid to take on giant Gillette, completed the c. €1bn purchase of US-based Dollar Shave Club (DSC), whose subscription-based model has shaken up the industry. The five year old business has over 3 million members, who each receive razors through online monthly subscriptions for as little as $1. It’s thought that DSC now accounts for around 15% of all razor cartridges sold in the US – not bad after only 5 years!

The subscription market is increasingly active, with businesses experiencing incredibly high growth rates. Whether it’s for razors, beauty products, or even flowers, M&A interest in these businesses is likely to continue into 2017.

 

Selected UK consumer deals

Australia-based V.I.P. Petfoods, trading as Real Pet Food Company, purchased pet food brand, Billy + Margot, makers of nutritious and healthy treats for dogs. The deal is another in a long line of acquisitions in the space which highlights how attractive the UK pet food market is at the moment.

Wyndham Vacation Rentals (WVR) UK, subsidiary of US corporate Wyndham Worldwide, strengthened its portfolio with the purchase of luxury cottage and lodge agency Blue Chip Holidays (BCH). BCH, which offers more than 1,100 rental properties, extends WVR UK’s top-end self-catering offering, adding to its portfolio of more than 42,000 properties.

France-based private label snacks group, Europe Snacks, a portfolio company of private equity firm Apax Partners, acquired UK counterpart Kolak Food Snacks. Both companies are recognised as leading manufacturers of savoury snacks under private label brands in their respective home markets, and together move towards their goal of becoming the pan-European partner of choice for consumer brands.

UK home and furniture retailer, Dunelm Group, announced that it will acquire WS Group, the online retailer which includes the Worldstores, Kiddicare and Achica brands, for a total consideration of €10m. The deal strengthens Dunelm’s position in UK homeware and also online; Worldstores sells over 500,000 products in the home and garden category.

JD Sports, the LSE listed fashion retail company, acquired Go Outdoors, from private equity owners YFM and 3i Group, for over €130m. The 58 store chain provides a range of outdoor equipment and clothing, from tents to bicycles, and will add to JD’s existing stable of outdoor brands such as Blacks, Millets and Ultimate Outdoors.