Trendy skin-care startups like Tatcha and Dermalogica have been eagerly snapped up by struggling household-goods makers in a bid to revive growth
Long the domain of beauty companies, household-goods makers such as Procter & Gamble Co. PG -0.37% , Colgate-Palmolive Co. CL -1.60% and Unilever UL -1.50% PLC have begun snapping up skin-care startups selling pricey creams, serums and lotions while relying on Instagram and Sephora, a U.S. beauty chain, to drive sales instead of drugstores and shopping malls.
Drunk Elephant LLC, a popular skin-care startup that touts limited ingredients, is considering a sale and has drawn interest mostly from consumer-products companies, said people familiar with the matter. In contrast, skin-care products represent a lucrative and fast-growing global market, attractive to more millennials and men while still holding appeal for aging baby boomers. Sales are growing in overseas markets as well, particularly in Asia, where the expanding middle classes are willing to spend big on better skin.
Skin care is a $135 billion global industry, more than cosmetics and fragrances combined, according to Euromonitor. Sales of skin-care products have grown more than 30% since 2013. Skin-care product makers tend to be a better fit for big consumer companies than makeup or fragrance brands, Mr. Stibel said, because they are more reliant on efficacy and less style-driven. While the brands strategically make sense, companies are overpaying in a rush to drive sales growth, he said.
P&G historically has focused on skin-care products with broad appeal, such as Olay, a mainstay of drugstores, grocery stores and big-box retailers. The company sees rising demand among younger women who, in addition to investing in skin-care as early as their 20s, are building regimens involving an array of products. A woman in her 20s or 30s who buys skin-care products on average uses six products daily and spends about $260 a year, a company spokeswoman said.
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