Last year, a highly anticipated wave of beauty merger and acquisitions did not materialise, prompting questions around the industry’s traditional growth strategies. Major beauty conglomerates like L’Oréal and Estée Lauder Companies are reporting their share of challenges, with Estée Lauder Group reporting a 10 percent drop in its third quarter-earnings. The company forecasts an even steeper decline in annual sales for the fiscal year. Now, a growing number of brands seeking acquisition are vying for fewer acquisition opportunities.
An industry once thought impervious to wider economic downturns is feeling the impact of cash-strapped customers responding to today’s market realities. Geopolitical trade pressures and supply chain reconfigurations have introduced unprecedented complexity to beauty operations. For beauty brands navigating these macro pressures, strategic financial relationships will become increasingly important.
Citi Commercial Bank positions itself as a strategic financial advisor by helping beauty and wellness companies navigate sustainable growth paths. These services are targeted at mid-sized corporates with a revenue scale of $100 million and above — where beauty brands typically face critical decisions about scaling internationally or preparing for strategic events, such as a potential acquisition.
Drawing from customer insights and proprietary research, Citi Commercial Bank’s understanding of global markets can be leveraged by beauty brands to navigate market upheaval. The bank provides strategic guidance at every stage — from acquisitions and complex supply chain financing to treasury services and liquidity optimization — while offering access to Citi’s global insights, which includes proprietary credit card spending analytics on discretionary goods.
Now, BoF sits down with Timicka Anderson, Citi Commercial Bank’s Global Head of Consumer and Retail, to discuss what sustainable business growth can look like for beauty businesses in 2025 and how the commercial bank views long-term success in today’s market.
How does Citi Commercial Bank view and support mid-sized companies in the beauty sector?
As a global financial institution, Citi Commercial Bank focuses on supporting industries with strong international growth potential — the beauty industry exemplifies this. The sector demonstrates tremendous growth and resilience through various economic cycles and is expected to grow at about five to six percent over the next few years — driven by demand for colour cosmetics, luxury beauty and skincare.
This growth is fuelled by the expanding middle class and increasing disposable income globally, creating cross-border expansion opportunities that align perfectly with Citi’s extensive experience supporting companies as they scale internationally.
The industry is also highly fragmented, creating opportunities for consolidation. At Citi, we can support companies throughout their lifecycle — from start-up to emerging business to scalable enterprise seeking strategic alternatives.
How has the beauty industry’s growth playbook evolved over the past five years?
The Covid-19 pandemic changed everything about how we operate and many companies in the beauty industry saw an explosion of growth. Particularly because we were all on video calls looking at ourselves day in, day out — so consumers were seeking more beauty solutions.
The playbook has evolved from having brick-and-mortar strategies or digital-first brands, to companies now going omnichannel from day one. There is an understanding that companies need a digital presence but also connections with major players like Sephora or Ulta in North America to get products on shelves immediately. We have also seen the rise of influencer marketing and inclusivity as a core part of brand strategy.
From an operational perspective, there is a keen focus on profitability and efficiency. Previously, brands might have focused solely on growth and expansion without tracking how that translated into profitability. Now, companies are more focused on positive customer acquisition costs and reducing them over time.
Moreover, macroeconomic pressures have made the world more uncertain, requiring stable business models where you understand which levers you can adjust — whether switching to another market or diversifying supply chains when disruptions occur.
How is Citi using its analytics capabilities to forecast beauty industry trends?
We track spending data across the beauty sector, and we have observed through Citi Global data insights that overall consumer spending in beauty has increased approximately 50 percent since 2017, showing remarkable, steady growth even through economic fluctuations. There has been a dramatic shift in the online versus in-store spending ratio — with e-commerce capturing a significantly larger share of beauty purchases compared to pre-pandemic levels.
We have also gained insights into global market transitions. The Asia Pacific region has been a beauty growth leader and we are seeing exceptional momentum in markets like India, which shows double-digit growth potential compared to more mature North American markets, according to a broker report from Alpha Sense. The Middle East is emerging as another significant growth opportunity with considerable space for beauty expansion.
How does Citi empower sustainable growth and global expansion for beauty brands?
Our conversations often begin with helping brands understand broader market dynamics — whether they will import products or manufacture locally. For beauty brands, importation is common since many ingredients are specific and sourced from places like South Korea and France.
We work with them to develop supply chain solutions that minimise cash use such as using instruments like import and export letters of credit. We also provide local working capital lines for operational needs like rent payments or employee salaries in new markets.
Previously, brands might have focused solely on growth and expansion without tracking how that translated into profitability. Now, companies are more focused on positive customer acquisition costs and reducing them over time.
For companies generating cash flow in different currencies, we offer foreign exchange support to help them hedge cash flow and minimise risk — particularly in markets with inherent foreign exchange volatility. We’re also evolving our payment and collection mechanisms to support how beauty brands pay influencers. For example, we are integrating directly with e-commerce platforms through products like Spring by Citi, which streamlines the customer collection process.
These are essential services that establish companies for long-term profitability. As a full-service global financial institution, we also offer investment banking capabilities — providing advisory and execution services for capital markets and M&A, connecting brands with strategic investors, and presenting both organic and inorganic growth opportunities.
What financial fundamentals should beauty brands prioritise for sustainable long-term growth?
Most importantly, managing margins is critical. Beauty is traditionally a high-margin business with significant profit potential if managed smartly. This means examining your supply chain, understanding sourcing costs and negotiating effectively as you scale.
The playbook has evolved from having brick-and-mortar strategies or digital-first brands, to companies now going omnichannel from day one.
The second piece is managing marketing expenses, which are often the largest cost for beauty brands. Independent companies sometimes spend as much on marketing as larger brands do while trying to build their customer base and brand loyalty. We are seeing shifts in how brands approach influencer partnerships — moving from longer contracts to shorter three-month engagements to evaluate effectiveness before renewing.
Managing these contractual obligations gives brands financial levers to help maintain margins. This approach is particularly important in today’s market, where brands need the ability to quickly adjust to disruptions or sudden market shifts.
How should beauty brands approach mergers and acquisitions in today’s market?
Having a clear brand identity, a distinctive product offering, and a loyal and engaged customer base are vital foundations for a beauty business. However, sustainability of growth and profitability have become the ultimate differentiators.
Five years ago, companies could appeal to strategic and financial sponsor buyers with just a “path to profitability” narrative. Today, buyers demand established profitability.
Potential buyers also need to believe your growth story and understand the key levers that will propel growth going forward. A well-thought-out growth plan is essential to maximizing value as part of a sale or capital raise process.
Ultimately, it comes down to knowing your ‘why’ — understanding whether you’re seeking a partner to scale, capital for organic or inorganic growth, or a complete exit. This understanding is essential for crafting a compelling ‘investment thesis’ for potential buyers. Your equity story must be clear, credible, and well-articulated to maximize your outcome.
Disclaimer from Citi: Any views, unless reflected in Citi’s Research Reports, are those of the individuals and may not necessarily reflect the views of Citi or any of its affiliates.
This is a sponsored feature paid for by Citi Commercial Bank as part of a BoF partnership.
