As I read about yet more consolidation in the salon distribution world (with L’Oréal’s acquisition of the Raylon Corp.), I can’t help but wonder what happened to all the consolidation of the branded salon hair-care suppliers?
It’s been over 10 years since we saw deliberate, fast-paced acquisition activity by large, global branded salon hair-care players such as Shiseido, Kao, and Henkel—all in an attempt to build scale and tilt the balance of power against the distributors. In five years’ time, we saw the acquisitions of well-known brands Matrix, Bumble & Bumble, Joico, KMS, Wella, Graham Webb, and Nexxus—all sold to strategic buyers.
Since then, we have seen only six significant acquisitions by corporate acquirers with players such as Kao and Shiseido sitting on the sidelines. Meanwhile, L’Oréal’s Salon Centric and Sally Beauty’s BSG have acquired countless salon hair-care distributors in the process of building powerful national platforms. Today, BSG employs almost 1,000 sales consultants and owns over 1,250 stores, while Salon Centric employs 636 sales consultants and owns more than 800 stores.
The shift in power to the distributors has left smaller professional hair care brands with few choices—either try to build diversified distribution without the benefit of a national footprint and store base or partner with one of the two distributors, but face the consequences of extreme customer concentration and resulting lack of future liquidity alternatives.
Some suspect the power of these two distributors will ultimately subside, driven possibly by increased eCommerce distribution, the ability of select brands to go direct to the salon, the emergence of the next generation of distributors, or the resurgence of M&A activity among the large branded salon hair care suppliers.
As the sell-side banker that has represented many of the acquired salon beauty brands over the past decade, including Pureology, Alterna, Joico, L’ANZA, Chatters, and Product Club, my biased hope is for the latter. Only time will tell. But for now, Salon Centric and BSG continue to make acquisitions and increase their strongholds in the salon hair care sector.