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2021-01-27 16:54:32

Why Major CPGs Are Acquiring Black-Owned Beauty Brands

2021-01-27 16:54:32

In the past few years, we have seen multinational consumer packaged goods companies purchasing black-owned beauty brands such as Carol’s Daughter – now owned by L’Oréal and Sundial Brands, a portfolio of African American beauty brands including SheaMoisture, Nubian Heritage, Madam C.J. Walker and nyakio (shown above), that were acquired by Unilever.

There is a growing movement among companies that usually focus on general market consumers to further segment their audiences and offerings. 

Spending Power of African-American Consumers 

Let’s focus on the African American beauty consumer and why he/she/they are so attractive to general market beauty companies.

In 2017, African Americans spent 
$127 million on grooming aids and $465 million on skin care. The total buying power of African Americans is projected to rise from $1.3 trillion to $1.54 trillion in 2022. 

In 2018 the Black hair care segment took in an estimated $2.51 billion, as Black consumers have consciously made the change from general market products to those that are created specifically for them.

In 2017, African-Americans accounted for 86% of the ethnic beauty market, or $54 million of the $63 million spent, Nielsen reported 54% of the African American population has lived their entire life in the digital age with social media usage higher than any other group of people and a mobile usage rate of 81%. 

Further, 44% of African Americans are more likely to engage with brands online versus Caucasian Americans, creating substantial opportunities for beauty marketers in the digital space and causing some brands to question investing in brick-and-mortar at all.

Black women in America for decades had typically been 
ignored by mainstream media. Without images of African American actresses and models, there were generations of these women who had their beauty defined within their own social construct. 

In the past few decades however, the emergence of mainstream superstars such as Iman, Naomi Campbell, Tyra Banks, Beyoncé, Halle Berry, Viola Davis, Lupita Nyongo and our former First Lady, Michelle Obama, has helped to acknowledge these women as globally beautiful, not just beautiful within their own race.

Beauty For All Shades of Skin

That said, the parameters of African American beauty standards have broadened to encompass all shades of skin, facial features and hair types. African American women no longer have Caucasian beauty standards thrust upon them.

Research from 
Nielsen shows that the spending decisions of black consumers creates a halo effect that impacts the spending habits of other demographic groups. Consequently, the marketplace for beauty products is widening with appeal to the broader consumer market. Acquiring beauty companies that cater to African American women is a win/win for multinationals.

Black women are trend setters. They lead the way in beauty; their self-confidence allows them to experiment in ways that the rest of the female audience isn’t comfortable with until it’s an established trend.

So, buying 
these Black-owned beauty brands is a smart move for larger companies now and most certainly for the future as the population in North America becomes more ambicultural and less Caucasian.

According to Shawn Tollerson, former chief marketing and chief executive officer at leading beauty companies including L’Oréal, Revlon and Namaste Labs, Black Beauty Brands often build a very strong bond with and deep understanding of their consumer which can manifest in unique approaches. 

“In my experience, some large CPGs often seek to acquire Black-owned beauty brands primarily to grow and expand their total overall market and sales by capturing the consumer that these Black-owned brands cater to and have strong brand relationships. Black-owned beauty brands understand their end-consumers extremely well and tend to have a high level of marketing and packaging creativity.”

Tollerson, now the CEO/founder of 
Carolina Girl & Company which consults with companies and startups on beauty and multicultural marketing & brand building, also believes that these companies have more flexibility for innovation than their larger counterparts do, “They often have the freedom to innovate without the constraints of a larger corporation and may break the conventional rules of packaging structures, graphics and design. These "breaks" from tradition - to include packaging - create innovation and this, besides the obvious of expanding sales growth from this consumer market, is one of the reasons large CPGs often look at acquiring Black-owned beauty brands.” 

This trend is likely to continue into the future based on African American category spending, population trends and benefits to the larger CPG companies that can learn from the creativity and innovation that they admire in the Black-owned beauty brands.

It will be telling to see if they will emulate what has made these brands so successful with their loyal consumers or if they will try to have these acquired companies conform to their corporate way of doing things. and if African American consumers will remain loyal to these formerly Black-owned beauty brands.