Beauty in 2018: Activist investors and shareholder pressure – the power struggle is real

Beauty in 2018: Activist investors and shareholder pressure – the power struggle is real

According to a report by the Telegraph last year, there has been a “spectacular growth of activist campaigns in recent years”, with journalist Sam Dean stating that some can find them to be “corporate raiders intervening in companies, ruffling feathers, in the hope of a quick return.” And that has been never more apparent then in the beauty industry over the past year.

Indeed, an increasing amount of cosmetic and personal care companies are a) being bought out by investors and b) finding themselves at their mercy when it comes to business development and strategic decisions. Likewise it seems shareholder pressure in general has upped its ante this year.

Right at the start of the year, a group of Avon shareholders, led by Shah Capital, were said to be calling for the company to sell up – a pretty big demand no? Of course, holding so many shares, companies have to be strategic in their handling of said demands. An Avon representative told Reuters, “The board values the input of all shareholders and is executing against its roadmap to deliver profitable growth.” Now that’s how to play nice. However, was this shareholder influence the reason Natura denied any possible takeover bid of Avon? Who’s to say.

Another vocal investor this year was Dan Loeb, who owns a $3 billion stake in Nestle. Loeb called for equally strong action from the company. The demands? A three-way split with the sale of non-core sales. Loeb, secure in his stronghold, wrote a no-holds-barred email to the board, with the scathing comment, “Nestle’s insular, complacent and bureaucratic organization is overly complex, lethargic, and misses too many trends.” Ouch. Was it a coincidence Nestle began looking at a possible sale of its skincare unit following these ultimatums? Probably not. Indeed Loeb wasn’t finished there, just this month it was reported he was piling on the pressure for the company to sell its stake in L’Oréal.

E.L.F Cosmetics was a beauty brand that recently fell prey to its investor demands, with Marathon Partners Equity Management urging either the sale of the business or a refocus on core operations and cost cutting (which are clearly out of control). And there is speculation this prompted some strategic acquisitions from the company.

Most recently, the Estee Lauder Companies, minority investor in troubled beauty company Deciem, successfully used its power to oust rogue CEO Brandon Truxae, with a judge approving the company’s petition to have him removed. Talking of removals, was the departure of Coty’s Camillo Pane in late November due to shareholder pressure as its share price tumbled following its second quarter consecutive loss? This of course was due to the company’s struggles to merge P&G brands into its portfolio. Paul Polman could have also felt the power struggle following his misguided strategy to relocate Unilever headquarters to the Netherlands. Was the opposition from UK investors the catalyst for his speedy resignation?

With a tumultuous end to a rocky year, how will this trend of strong activist investors and demanding shareholders dictate the market going forward? How will companies within the personal care, beauty and cosmetic markets evolve under investor pressure, will they buckle or stand firm against the push for action. Is their influence making it harder for long term strategies to take place?

Will 2019 bring about more change in the beauty world due to money-driven investors and forceful shareholders looking for a quick buck? You’ll be the first to know…

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