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Kao Corp. Snares John Frieda Hair Care Brand for $450 Million

NEW YORK — Another independent brand is being snapped up — Kao plans to buy John Frieda Professional Hair Care for $450 million. <br><br>The deal was signed off Wednesday night here through the Japanese company’s wholly owned U.S....

John Frieda’s Beach Blonde line is just one of the company’s successful niche brands.

John Frieda’s Beach Blonde line is just one of the company’s successful niche brands.

WWD Staff

NEW YORK — Another independent brand is being snapped up — Kao plans to buy John Frieda Professional Hair Care for $450 million.

This story first appeared in the August 2, 2002 issue of WWD.  Subscribe Today.

The deal was signed off Wednesday night here through the Japanese company’s wholly owned U.S. subsidiary, The Andrew Jergens Co. The acquisition is expected to be complete in early September, pending regulatory approval. The deal does not include Frieda’s six hair care salons in the U.S. and U.K., which he continues to own. Kao has been looking to become a player in the $4 billion U.S. mass hair care market for several years, as evidenced by its losing bid for Clairol to Procter & Gamble last spring. The purchase of John Frieda Professional, a $160 million company, immediately ranks Kao as a top-10 U.S. hair care manufacturer, most notably with the Frizz-Ease, Sheer Blonde and Beach Blonde brands. Kao’s presence in U.S. hair care has up to now been limited to the salon market with the Goldwell and KMS brands.

More than 30 percent, or $2.37 billion, of Kao’s $6.3 billion in sales are generated by beauty. The company makes and markets more than 15 hair care brands, ranging from premium-priced mass retail brands to mass hair color brands to salon brands. Its international stable of hair care, hair color and cosmetics brands are distributed through its subsidiaries, such as Germany-based Goldwell GmbH and Guhl Ikebana GmbH, which makes premium hair care and hair color products for mass retailers in Europe under the Guhl brand. In the U.S., the company owns California-based KMS Research Inc. and Andrew Jergens, which makes Jergens, Bioré, Curel and Ban deodorant. The company’s beauty sales grew 5 percent for the fiscal year. The company also makes feminine hygiene products, diapers and snacks.

According to Brad Kirk, vice president of marketing and strategic planning for Cincinnati-based Andrew Jergens, the most exciting aspect of the acquisition is the technology Kao can bring to the John Frieda brand. Kao’s most notable innovations include the Bioré pore strip, a product that created a new segment in facial cleansing in 1999, and Naturally Smooth Shave Minimizing Moisturizer, a lotion launched last year designed to help women shave less often while moisturizing at the same time.

Kao can also boost distribution of John Frieda brands, especially in the mass and food channels, where the company clearly has room to grow. Drugstores comprise roughly 50 percent of John Frieda Professional, while mass and food stores register 30 percent and 20 percent of sales, respectively. Jergens’ presence in these channels could pave the way for more shelf space in stores like Wal-Mart, where value-priced products take center stage. While John Frieda products currently are in Wal-Mart, they are premium priced between $6 and $10.

The lack of penetration in mass merchandisers isn’t the only challenge Kao faces in the highly competitive hair care category, however. It also must maintain Frieda’s reputation for innovation in hair trends. Much of this innovation stems from Frieda’s stylists, who have been instrumental in communicating key trends to company executives, who in turn make and market John Frieda branded products for the mass market. Celebrity stylist Sally Hershberger, for example, was key in launching Beach Blonde and Sheer Blonde, two of the line’s most successful hair care launches in 2000 and 1998, respectively. Combined, both brands generated $80 million in sales for 2001, in food, drug and mass stores, excluding Wal-Mart, according to Information Resources Inc.

It’s also unclear what role John Frieda, co-founder of the company, and Gail Federici, president of John Frieda Professional, will play in the company’s long-term future. Both were unavailable for comment, but a company spokesperson said Federici, who owns 50 percent of the company, will stay on board for at least six months. Frieda, who owns the other 50 percent of the company, will stay on board for at least 18 months. “It’s business as usual here,” the spokesperson added from the company’s Wilton, Conn-based headquarters.

Federici has been described by Frieda as “the key” to the business’ success. Federici points to Frieda as the company’s “secret weapon.”

Federici and Frieda met at a trade show in 1988 and a year later went into business together, forming John Frieda Professional. The company’s first success was Frizz-Ease, which launched initially in the U.K. at Boots the Chemist and then in the U.S. mass market in 1990. After 11 years on shelves, Frizz-Ease continues to rank as one of the top-10 hair care products sold in drug stores. The single stockkeeping unit generates $40 million in U.S. retail sales. But not all of Frieda’s brands have been a hit. His Ready-to-Wear and John Frieda Signature lines never caught on in the U.S. and it really wasn’t until the 1998 launch of Sheer Blonde that the company caught fire.

Frieda’s celebrity as an English hairdresser remains key in selling the products to consumers. To compensate for a small advertising budget in the company’s early years, Frieda used his celebrity status to peddle his wares on talk shows — long before product demonstrations were a hip marketing tool. Federici was key in pushing Frieda in front of crowds. “My friends and others were telling me that it wouldn’t be good for my image,” Frieda said in an interview last year. To this day, Frieda appears in the company’s television ads, as do Federici’s twin daughter’s Alex and Brit.

Kao will also have to learn how to market to John Frieda consumers, a fashion-conscious set who likely won’t be easily wooed by Jergens’ apple-pie image. The company, however, has made some strides recently in targeting a younger, more savvy shopper. Advertisements for Jergens Skin Firming Lotion, a lotion designed to minimize cellulite, feature a close up shot of very well-toned naked buttocks.