French cosmetics maker L’Oreal is eyeing local beauty firm, Interconsumer Products for a possible buyout as it positions itself for the East African market. The provider of SoftSheen-Carson, Dark and Lovely and Blue Ice Deodorant brands opened a Nairobi office towards the end of last year to serve Uganda, Tanzania, Rwanda, Burundi and Ethiopia.

According to reports, the world’s biggest cosmetics group is upping its game by placing a bid for a local rival for distribution and geographic expansion, giving it access to the specialist channels and a platform to enter into countries with underdeveloped retail markets.

L’Oreal, whose annual revenues are in excess of €20 billion (Sh2.4 trillion), has retained top tier corporate law firm Kaplan & Stratton to advise it on the deal that will highlight the growing interest of French firms in the region.

“We are acting for L’Oreal in its establishment in Kenya and potential acquisition of a large health and beauty products manufacturer,” Kaplan &Stratton told Chambers and Partners, a global legal ranking services, in its 2012 report.

Sources at the law firm say that the French giant has been keen on Interconsumer Products, which manufactures Nice & Lovely and Bouncy brands. This is the first official report of L’Oreal’s pursuit of a local firm as its managers have remained tight-lipped on its deals in East African.

“I cannot comment on that,” said Patricia Ithau, L’Oreal East Africa managing director. “In the short-term the company will continue importing products into this market and will evaluate if there will be need a factory locally in the future.”

If the deal goes through, it will be major coup to Paul Kinuthia, who built Interconsumer Products from scratch in the backstreet of Nairobi into a major player in the beauty market against rival giants like Unilever Kenya Ltd, Beiersdorf East Africa Ltd, Haco Tiger Brands and PZ Cussons East Africa Ltd. L’Oreal is known to acquire local firms in new markets to gain distribution networks and strong brands.

It has bought out eight firms since 2004 including YSL Beaute, Beauty Alliance in a buying spree that focused on smaller firms with strategic market positions. It is looking at cutting its reliance on the European and North American markets—which generate about 70 per cent of its sales and are gripped by intense competition and economic slowdown.

L’Oreal has rolled out an expansion plan in emerging markets, especially Africa where it is looking to tap the large number of new consumers. Nestle owns 29.7 per cent of the firm, Bettencourt family (30.9 per cent) and 36.8 per cent is held by the public. In September it opened a subsidiary in Nigeria.

It already has a presence in Ghana, South Africa, Morocco and Egypt. In pursuing Interconsumer Products, the New York Stock Exchange listed L’Oreal could be looking at getting a larger share of the lucrative low-end of the market and distribution channels and a plant to manufacture its products that target middle-to-high income earners.

The firm has been feeding its Kenyan market through traders, but it’s now eager to establish a distribution network backed by a marketing team. Its pursuit of buyout deals in Kenya highlights the growing interest of French firms in East African market manifested in mega deals involving oil giant Total Kenya and caterer Servair in recent months.

Servair bought 59 per cent stake in Nairobi Airport Services (NAS) from Kenyan investors led by the family of former Central Bank governor Philip Ndegwa in a deal estimated at Sh2.2 billion. Formation of a common market in East Africa has acted as the main catalysts for fresh investments in the region.

This has seen foreign investors chasing a piece of the multi-billion shilling natural resource projects (oil in Uganda and Sudan), setting up operational hubs in Nairobi, close buy-outs in the common market or getting involved in the multi-billion infrastructure deals, especially in power and mining.

The growing middle class who have spare income to spend on foreign brands for facial make-up, hair care and even sunscreen have caught the eye of large cosmetics companies such as L’Oreal.

A beauty and personal care report on Kenya by Euromonitor International says international companies Unilever Kenya Ltd, Beiersdorf East Africa Ltd and PZ Cussons East Africa Ltd are the market leaders due to their network in distribution and product brands.

These companies have been strengthening their distributorship and re-launching some of their flagship brands to increase visibility. While Unilever leads with low-priced products for the masses, Beiersdorf has been the biggest entrant into the regional market.

Today, it spends heavily on advertising to promote its up-market brand, Nivea. L’Oreal is entering a crowded field even in categories where it has competitive products.


Please enter your comment!
Please enter your name here