Body Shop owner Aurea Group PE says plans to invest $3-5 billion in beauty brands

“India is at the forefront of our global growth strategy. We hope that in the coming years, India will be among our top three markets,” Jataniya, a Gujarati businessman of Indian origin, told us. Mint The company is launching a new product line in India and plans to export it to other parts of the world soon. “We’re also excited about the rapid trade here because that’s delivering very good results for us,” he added.

The private equity firm also owns botanical cosmetics company Herbivore Botanicals, natural hair care company Scandinavian Biolabs and Decypher, a company that makes and sells foundation cosmetics.

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Jatania’s vision for the future of The Body Shop is to maintain the brand’s iconic image while adapting to a rapidly changing retail environment. “We live in a very dynamic environment where you have to invest in social engagement, digital channels and store models. It takes a lot of capital, but we are committed to keeping the beauty business relevant for the next 50 years, as it has always been “In the past,” he said.

The acquisition of Body Shop is the company’s largest investment in the industry to date (for an undisclosed amount), and Jatania calls it a rare opportunity. “It’s not every day that you buy an iconic brand that is sold in 70 countries around the world and accounts for such a large share of global sales. This is a once-in-a-lifetime opportunity,” he said.

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The acquisition was complicated because The Body Shop had gone into administration or bankruptcy under UK rules, but the PE’s previous experience reviving beauty brands such as Yardley of London piqued his interest in the business. “It took us 11 weeks to complete the transaction and it will be completed by the end of August or early September 2024.”

Lornamead, a company that manufactures and sells hair care, skin, oral care and bath products, was previously owned by investment firm Auréa Group and was sold in 2013 to various strategic investors in the United States, India and China, including India’s Wipro. Some other brands owned by Lornamead are Lypsyl, Woods of Windsor and Harmony.

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However, the private equity firm’s investment strategy is highly focused, and Jataniya said the company plans to remain focused on the beauty and wellness sectors rather than diversify into other industries such as food and beverages.

“Our goal is to become the largest private equity firm in the space within the next five years. We want to be a force in private equity, but with a sharp focus. Beauty and wellness require very different operating capabilities than other sectors. We believe this Attention adds value,” he explains.

“Be wary of influencer-driven brands”

He said he would only be keen to invest in local brands in India and elsewhere that are highly differentiated and have strong long-term brand positioning. However, he is careful not to focus on influencer-driven or celebrity-endorsed brands, as these tend to be short-lived.

“In beauty, the key to success is building lasting relationships with consumers by engaging with them at different stages of their lives. Achieving lifetime value for consumers through ongoing relevance is more profitable than temporary interactions, ” he added.

India’s growing beauty market is a core component of this strategy. The Body Shop currently operates around 200 stores nationwide, but its local franchise partner Quest Retail plans to double its store footprint over the next three to five years, focusing on major cities and smaller towns.

“We have been involved in second- and third-tier cities since 2007, and consumer demand in these areas is growing rapidly,” Jataniya said. “We aim to open more stores in the next few years, not only in big cities but also in small towns, as about 50% of our business, including e-commerce sales, comes from small towns.”

India is expected to play a central role in The Body Shop’s global expansion strategy, along with other key markets such as the US, UK and Australia. It will also review its China strategy. “India is a focus market for us. It is part of our global growth strategy and we believe it will continue to grow into the top three markets in the coming years as it accelerates growth,” he added.

Fragrance and skincare will remain areas of focus, and these segments will continue to grow. In addition to physical stores, the beauty company has been focusing on increasing its digital presence, especially through express commerce channels in India.

“We are seeing incredible growth in fast commerce in India. It drives convenience and impulse buying, and we are at the forefront of this trend,” Jataniya said. “Quick Commerce has given us very good results. Currently our online rate in India is about 30% and our goal is to push that number closer to 50%.”

McKinsey predicts that the Asia-Pacific region (excluding China and Australia) will continue to remain the largest market for beauty retail sales in 2023, growing by 10% from the previous year. India stood out in the region, also posting 10% growth, driven by volume growth of 4% and price growth of 6%.

McKinsey’s regional survey data shows that India will have the highest proportion of consumers willing to spend more on beauty products in 2023 and 2024, across all income levels. Notably, India’s lower-income consumers have a unique willingness to increase spending on beauty products, marking a notable trend in the second quarter of 2024.