Why Shiseido Acquired Drunk Elephant

In late 2019, the global beauty brand Shiseido finally acquired Drunk Elephant, the female-founded ‘clean’ beauty brand that is one of the fastest-growing prestigious skin-care companies in recent history, for a whopping A$845 million.

Shiseido reportedly beat out The Estée Lauder Companies in the final round of bidding to win an acquisition that marked one of the largest skin-care deals of 2019, next to L’Occitane’s A$900 million purchase of Elemis in January. This acquisition was part of Shiseido’s push to expand its global presence and reach customers of a wide range of demographics, especially Millennial and Gen Z.

Founded in 1872 in the heart of Tokyo by Yushin Fukuhara, Shiseido boasts of a rich history of using innovative cosmetic technology and a strong commitment to high-quality ingredients. It is these values and virtues that made Shiseido the perfect brand to acquire Drunk Elephant, a company that was founded in 2012 by a stay at home mam of four, Masterson, in an effort to develop serums and creams formulated without the 6 ‘suspicious ingredients’ that she felt were problematic to the skin: essential oils, drying alcohols, silicones, chemical sunscreens, fragrances, and sodium lauryl sulfate.

Photo: Shiseido Store, Hong Kong

Her timing couldn’t have been better. At the time there was a gap in the market for what has now come to be referred to as “clean” beauty, a category that can loosely be defined as products that are consciously created, developed and produced without any suspected harmful ingredients. According to Masterson, formulas for her products are, “clean and clinical”, and backed heavily by scientific research.

This, coupled with alluring packaging, brilliant marketing and a huge presence on social media, has resulted in a massive popularity of these products and a profit boom over the last 5 years. The Chief Executive Tim Warner was quoted in an interview last year saying that Drunk Elephant had quadrupled its sales between 2016 and 2018, and it was well on track to do “an excess of A$100 million” in net sales for the year.

The similarities between Shiseido and Drunk Elephant don’t stop at both using innovating cosmetic technology, but they both also go above and beyond to educate, engage and involve their consumers in their marketing efforts. About 50 years before home computers, internet, and social media existed, Shiseido had the genius idea that beauty tutorials could also double as entertainment.

The company held a campaign where they called upon “women from respectable families” from whom they eventually chose nine young women to receive a rigorous education not only in make-up application, beauty and skincare routines, but also in fine art, literature, music, nutrition, and even theater.

The 9 Miss Shiseido became beauty and fashion icons coveted by women around the country, with fans flocking to their appearances to get a first-hand glimpse at their beauty in hopes that some of the glamour and finesse would rub off on them. This campaign ultimately gave birth to brands using iconic brand ambassadors and even the modern-day beauty pageantry.

Drunk Elephant also has a disruptive marketing strategy where they are using their social media prowess and engaging with their consumers on a much more personal level, a move that has helped build brand awareness while creating an open dialogue with customers.

As she made the acquisition announcement on her Instagram page, Masterson said, “I started this business as an industry outsider, and from the beginning, I did things a little differently. To join with a powerhouse beauty company such as Shiseido that leads the industry in innovation and global excellence is a dream come true for me and Drunk Elephant. We share similar values, most importantly an unwavering commitment to the consumer. I chose a partner who will let the brand continue to be itself, with the same formulations and the same team.”

Once a niche category in the beauty industry, the demand for clean beauty products is growing rapidly not only in North America and Europe but also in Asia, particularly in China where Drunk Elephant noted a high-acceptance of the clean beauty movement. After the acquisition, Drunk Elephant will now be able to leverage Shiseido’s global platform and resources to expand into new and existing global markets. Shiseido’s Global Innovation Center platform will provide a wealth of expertise and offer a unique network support, maximizing Drunk Elephant’s growth trajectory across all markets.

Though Drunk Elephant has no plans to open independent stores – the brand has been exclusive at Sephora from the get-go – it is investigating new markets, including Asia. Drunk Elephant is also planning on launching new products and categories as part of their vision to position the company as a lifestyle brand.

Masterson initially launched Drunk Elephant with six products including vitamin C serum and virgin marula oil. The latter inspired the brand’s name: according to a myth that elephants become “drunk” after eating the marula fruit (scientists disapprove). The brand’s best sellers now include Drunk Elephant Virgin Marula Luxury Facial Oil, Drunk Elephant T.L.C. Sukari Baby Facial, Drunk Elephant T.L.C. Framboos Glycolic Night Serum, Drunk Elephant Lala Retro Whipped Cream and Drunk Elephant B Hydra Intensive Hydration Gel.

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