Clean skin care startup Drunk Elephant sells to Shiseido for $845m

By Deanna Utroske

- Last updated on GMT

photo courtesy of Shiseido
photo courtesy of Shiseido

Related tags Mergers and acquisitions Shiseido clean beauty start-ups

Shiseido set itself a 2020 sales goal of ¥1 trillion and surpassed that goal in 2017. The beauty maker’s new goal is to reach ¥1.2 trillion in sales by 2020 and to “be among the top three companies in the global prestige cosmetics market.” Shiseido’s acquisition of Drunk Elephant is means to that end.

Tiffany Masterson founded Drunk Elephant in 2013. In 2017 she accepted a minority investment from VMG, a signal that Masterson was indeed looking to scale and likely sell her clean beauty business. “VMG partners with entrepreneurs, founders and management teams, collaborating to build iconic consumer brands that leverage VMG’s experience, expertise, and network to promote growth in stakeholder value,” ​according to comments boutique investment bank Financo shared with Cosmetics Design. (Financo served as an advisor to Drunk Elephant on the Shiseido deal.)

Masterson, who is now founding partner and chief creative officer, will remain with the brand as it becomes part of Shiseido; she’ll serves as both chief creative officer and president (reporting to Marc Rey, CEO, Shiseido Americas).

Finding value in differentiated product and loyal consumers

With every acquisition of this size and scope, it’s more than a brand’s product portfolio that’s being bought. Shiseido is buying the Drunk Elephant brand and, in essence, the brand’s consumer following as well.

“Drunk Elephant’s approach strongly resonates with its highly engaged and loyal consumers, who value the integrity and effectiveness of Drunk Elephant’s formulations combined with a fun, curious approach,” ​Masahiko Uotani, president and CEO of Shiseido, says in a media release announcing the deal.

With this deal, Shiseido is also buying in to the prestige clean beauty category.  

Buying in to clean beauty

As dubious as the clean beauty trend seemed to many in the industry initially, it is now being embraced and defined by prominent multinational beauty makers and suppliers. For some time now, Shiseido has positioned its Bare Minerals makeup brand as “clean without compromise,”​ leaving plenty of room for safe synthetics and flexibility around green and natural as well.

Drunk Elephant, by contrast, has built its reputation on being a clean beauty  brand: “As a self-professed ‘clean beauty’ brand it, will be interesting to see how together Drunk Elephant and Shiseido navigate the stormy sea that is the ‘clean beauty’ debate as consumers turn their back on ‘cancel culture’ and begin to take a more targeted, considered and  educated approach to their skin care routines,”​ notes Hannah Symons, head of beauty and personal care at Euromonitor International, in comments to the press.

And Marc Rey, CEO, Shiseido Americas and chief growth officer of Shiseido points to the brand’s clean-beauty designation in his remarks about the Drunk Elephant deal, saying, “This new and incredibly exciting partnership builds on Shiseido’s significant momentum and successful track record of acquiring distinctive, best-in-class brands. Drunk Elephant is changing the way people understand and experience beauty by offering products that are effective and clean compatible,” ​says Rey.

Inflating the beauty bubble

“The run of M&A activity (with legacy companies buying beauty startups) in recent years has been described as a bubble,​ the sort of economic situation that is based on an unrealistic expectation about the future,” ​as Cosmetics Design reported just last month; but with this $845m deal, it seems clear that the bubble has yet to burst or even deflate. And reports that Masterson built the brand with just this sort eventuality in mind is only likely to buoy the hopes of beauty entrepreneurs with similar aspirations.  

In 2017, not long after the VMG Partners investment, Masterson told Forbes​ writer Chloe Sorvino that she hoped to eventually sell Drunk Elephant to a major beauty company. And this week Masterson affirmed as much, saying, “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 for Drunk Elephant.”

Reformulation is inevitable

While initially, acquired brands’ product formulations remain unchanged, evolving ingredient technologies, corporate interest in maximizing economies of scale, and fluctuating market trends make reformulation inevitable.

So while Masterson “chose a partner who will let the brand continue to be itself, with the same formulations and the same team,” ​as she states in the this week’s media release, in time, the brand’s product will be reformulated.  

To give a recent example: Shiseido acquired the Laura Mercier brand in 2016, and just this summer relaunched the brand’s very popular Tinted Moisturizer with an entirely new formula, new packaging, new shade range, etc. The new formulation left out parabens and D5; it added more vitamins, kukui seed oil, and macadamia seed oil; upped the SPF protection; as well as making use of Shiseido’s in-house technology to add a 24-hour moisturization claim, according to Kelley Giffin, director of global product innovation at Laura Mercier, who spoke with press this summer at a relaunch event in New York City.



Deanna Utroske, Editor, covers beauty business news in the Americas region and publishes the weekly Indie Beauty Profile column, showcasing the inspiring work of entrepreneurs and innovative brands.

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