L'Oreal to fuel Aesop expansion in China

The ascension of Aesop as a brand onto the international stage cemented its status as a crown jewel for its parent company, Natura & Co. Their global success will soon be tested in their new venture into the mainland Chinese market. By all accounts, the staggering growth of the brand was a vastly profitable deal for Natura when a 65% stake was acquired for US$68 million back in 2013. At that time, Aesop still had a relatively small presence, with around 60 retail locations. Fast forward to 2022, the brand boasts 287 retail stores and 107 counters in departmental stores. Their geographical expansion saw it grow from 11 countries to 29 countries within 10 years. For 2022, Aesop achieved revenue of US$537 million, a strong acceleration from about US$70 million in 2013.

Aesop first entered China in December 2022, opening its first store on Shanghai’s Dongping Road, followed by a second Xintiandi store in the same city. Under Natura, management has already earmarked China as the country to expand into. However, an agreement to acquire Aesop was announced by L’Oreal in April 2023, meaning that the French company has set its sight on Aesop’s growth blueprint.

With the acquisition valuing Aesop at an enterprise value of US$2.5 billion, this is one of the largest deals in the company history, a pivotal undertaking by its new CEO Nicolas Hieronimus. Sitting in L’Oreal Luxe portfolio, the brand positioning looks set to fuel the next phase of growth for Aesop into a billion-dollar-sales business. Entry into China and travel retail is likely going to be a cornerstone of the strategy.

With the increasing sophistication of Chinese consumers’ consumption of beauty products, body care is fast gaining traction under the new perspective that ‘Body is the new face’. Demand for body care in China is at its early stages of expanding beyond the realm of dermatological needs into wellness and therapy. With medical skincare champions like La Roche-Posay already conquering the dermatological beauty space for L’Oreal, the acquisition of Aesop strategically fills the blue ocean of premium sensorial body care for the beauty behemoth.

L’Oreal’s arsenal of success stories in courting Chinese consumers, its wealth of resources plus the Chinese consumers’ appetite for luxury beauty could just be the winning formula for Aesop to continue its growth trajectory. And for L'Oreal, executing neatly on this deal (that is priced almost to perfection) will help set the course for further acquisitions down the road.