Over the last decade London has become a key hub on the world fashion scene – indeed, fashion is now so important to “brand UK” that even the Queen made a highly publicised visit to London Fashion Week just last month. Much more under the radar, however, has been the UK’s recent elevation as a global centre for Beauty and Fragrance – now placing the UK, and in particular London, alongside Paris, New York and Geneva as central focus points of the global beauty sector. Not only have a number of multi-national beauty companies relocated their global headquarters to the UK, but we also have a bumper-crop of exciting challenger brands founded in Britain, that are now rapidly extending their reach abroad.
Take Coty and Avon for instance. Coty’s corporate headquarters, newly energised under Camillo Pane, is based in London while Avon’s new CEO Jan Zijderveld and his leadership team operate from the UK. That these companies have decided to locate their executive functions here is all the more impressive noting that neither brand was established in Britain, and they have been managed from the US for most of their histories – and indeed, both brands have kept their NYC listings and corporate governance in the US.
Avon’s migration from America is a special case, following as it did the sale of its North American business to private equity house Cerberus. But, that they chose the UK over other core European or Asian markets is surely evidence of the strong leverage the British market has in enticing the giants of the beauty industry to locate here.
Moreover, it’s not just businesses choosing to move here. Alongside Unilever’s much anticipated announcement earlier this week that they would be moving to become a single legal entity in the Netherlands, they also confirmed that their Beauty & Personal Care division (now the single largest division of Unilever – with a turnover of over €20bn) will stay headquarted in the UK. Likewise, Alliance Boots although now owned by a largely US focused company has continued to produce and manage its own-brand labels from the UK – and indeed, much of the innovation in product globally still comes from its UK headquarters.
Alongside these corporate giants, we of course can’t talk about British beauty in recent years without mentioning two names – Marcia Kilgore and Charlotte Tilbury. Both their stories are by now well-known, and they represent the cutting edge of a larger entrepreneurial beauty movement sweeping across Britain. As my colleague Maria has written, the industry is currently seeing the march of the challenger brands led by digitally savvy and inspirational leaders, many of whom hail from the UK. They’re walking a well-trodden path, following in the footsteps of UK businesses such as Jo Malone, Molton Brown, Elemis and Ren who represent an earlier generation of up-and-coming challenger brands in Beauty.
So, why is the UK becoming such a global hub for beauty and fragrance? Why, despite all the political and economic uncertainty created by Brexit, has the UK continued to be such an attractive destination and incubator for innovation for the beauty industry?
Firstly, the UK remains a phenomenal training ground for talent in FMCG. Companies from Diageo to Unilever, GlaxoSmithKline to Reckitt Benckiser train and attract some of the best minds in the consumer goods sector – and, of course, these talents are then available for future leadership roles in Beauty. These FMCG giants have worked as effective schools for generations of leaders, producing operationally savvy and well-rounded executives. Take Jan Zijderveld, who brings 30 years of experience at Unilever to his role as CEO of Avon, from heavy lift operational positions to brand management and marketing. Similarly, Camillo Pane spent two decades at Reckitt Benckiser prior to joining Coty.
The effect FMCG companies have on talent isn’t just limited to board level functions. The UK remains a market leader in the all-important research and development function, a must in the beauty industry where the pace of innovation has picked up in recent years as both challenger brands and established businesses adapt to new technologies and product categories. Indeed, the UK’s university system, with its focus on science and engineering, provides a constant stream of R&D into the sector.
Secondly, the UK in recent years has been supported by a robust private equity and finance ecosystem. Manzanita Capital for instance, which counts Space NK, Byredo and diptyque among its portfolio, has played a critical role in identifying and supporting some of the most exciting challenger brands in the market. Likewise, funds like Lion Capital have enabled businesses such as ghd to scale, eventually enabling their sale to a mainstream consumer goods company. Additionally, international PE firms continue to invest in UK businesses, as we can see in Sequoia Capital’s injection of funds into Charlotte Tilbury last year.
Thirdly, the UK is a global leader in being able to showcase beauty and fragrance brands to consumers through all channels. At the premium end, beauty-focused boutique retailers such as Space NK regularly offer space to new brands in addition to stocking the established names, providing a route-to-market for young challenger businesses. Additionally, our department stores – most notably Harrods and Selfridges – have some of the best beauty halls in the world, and continually showcase UK brands to consumers visiting globally; Charlotte Tilbury famously had Selfridge’s biggest ever beauty launch there in 2013.
It is not just physical retail, however, where these brands are being showcased. Beauty brands here have access to market-leading etailers in addition to the surfeit of physical retail options. Palamon Capital-backed FeelUnique, for instance, was founded in 2005 as an etailer in Jersey in the Channel Islands and has since grown rapidly, becoming the largest online beauty retailer in Europe, operating in over 120 countries. Likewise, when singer Rihanna launched her new cosmetics brand Fenty Beauty last year at the Knightsbridge Harvey Nichols, 8,500 customers were being held in a queue on the retailer’s website pre-launch!
As Joel Palix, CEO of FeelUnique said recently: ‘British beauty brands offer both high product performance and strong storytelling with a rich entrepreneurial spirit, which resonates with the international consumer.’ We need look no further than the success of brands such as Charlotte Tilbury and Yardley London to see this in practice.
Of course, we shouldn’t dismiss the impact of the simple facts of geography and economics on the UK’s success. The sheer size of the UK market itself matters – in 2016 cosmetics sales topped £4bn for the first time, making it twice the size of the Spanish and Italian markets and second only in Europe to Germany. And of, course, Britain’s proximity to Europe and cultural similarities with the US have in years past made it an effective staging-ground and halfway house between the two.
The full impact of Britain’s vote to leave the European Union won’t be fully understood for many years to come. However, the decisions of Unilever Personal Care, Coty and Avon to base their headquarters here, and the sustained success of UK-based challenger brands suggest that the UK is set to remain a world leading and truly international hub for the beauty industry for many years to come.