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France: Sanoflore Snapped up by L'Oreal
Sanoflore, a leading French producer of organic cosmetics, has been bought by L’Oreal. Sanoflore’s acquisition is the latest move by large cosmetic companies muscling into the natural & organic sector.

Sanoflore is one of the pioneers in the French organic products market. Established in 1972 as a producer of organic herbs, it started production of organic essential oils in 1986. The company has grown to become a leading producer of organic oils and natural cosmetics. It currently has 147 employees and is expecting 60% sales growth to EUR 15 million this year. Like most French companies, it is reporting high growth since media reports elevated consumer awareness of natural cosmetics last year.

L’Oreal is acquiring Sanoflore to get a foothold in the organic & natural products sector, the fastest growing in the cosmetics industry. Natural & organic cosmetic sales are increasing by over 20% a year whereas the conventional cosmetics industry is stagnating. Unlike The Body Shop, which was acquired 6 months ago and remains a stand-alone business, Sanoflore will become part of L’Oreal’s Active Cosmetics division. L’Oreal plans to leverage its international presence to make Sanoflore a global brand. It is also likely to use Sanoflore’s expertise to launch natural cosmetics under its other brand names.

Organic Monitor sees the acquisition as an important development that is likely to shake up the natural cosmetics industry. The European market is highly fragmented with the presence of a large number of small-medium size enterprises. Few brands have a strong presence outside their home markets. With capital injection from L’Oreal, Sanoflore is likely to build a pan-European presence and challenge the leading brands.

L’Oreal’s market entry is also envisaged to trigger industry consolidation similar to what has occurred in North America. Tom’s of Maine, a leading producer of natural oral care products, was purchased by Colgate in March. Hain Celestial, the largest American natural & organic products company, has acquired a number of natural cosmetic companies in recent years. Large companies now characterise the American natural cosmetics market, a development which is almost certain to occur in Europe.

Large cosmetic companies are attracted to the natural & organic sector because of the high growth potential. Some have launched certified organic products, like L’Occitaine which introduced a range of organic skin care products in the summer. Others will follow L’Oreal and favour the acquisition route. Finding a suitable partner will prove difficult however since established brands like Weleda are not for sale.

Large cosmetic companies maybe forced to buy small brands and build them up. Clarins has adopted such a strategy with its EUR 3 million investment in French company Kibio earlier this month. Kibio is a small producer of organic cosmetics that mainly sells its products via the internet.

Industry consolidation is inevitable as investment comes in from the large cosmetic companies. As large companies muscle into this dynamic sector, dedicated natural & organic companies that remain successful will be those that adjust to the changing market conditions.

Related Reports: #1001-60 The  European Market for Natural Cosmetics
                      
#1301-60 The French Market for Natural Cosmetics
Posted: October 24th 2006

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