NEW YORK — L’Oréal’s Professional Products Division has claimed a 30 percent stake in one of the nation’s leading distribution companies, Beauty Alliance International, as of July 14. The Tampa-based company services 115,000 salons nationwide.
According to David Craggs, president of the Professional Products Division, a unit of L’Oréal USA, the collaboration will allow both L’Oréal and BAI “to develop a very innovative partnership model for the future, dedicated to providing hairdressers with new, different and better experiences in areas such as education, merchandising and promotions and other salon services.”
One analyst sees the deal as insurance for L’Oréal, which may lose some of its muscle in Beauty Systems Group, the nation’s largest distributor, which recently sold 47.5 percent of its stake to a private investment firm. BSG is owned by Alberto-Culver Co.
The analyst added it was hard to speculate without knowing the terms of the BAI deal, but he added that L’Oréal may not be precluded from buying a stake in another distributor, or even a greater stake in BAI if the deal proves fruitful.
“They obviously think there is some synergy to grow in this industry, and the trends have been pretty darn weak from a scale perspective,” the analyst said.
In an industry where consolidation has cut the nationwide distributor count from 800 to 70, discovering new ways to go to business have been emerging in the past year.
Procter & Gamble has taken its Wella and Sebastian brands direct to salons, an approach the analyst said “they have had some struggles with.” L’Oréal, in turn, could follow in P&G’s footsteps or “try this approach,” he added.
According to Rick Goldberg, a salon industry veteran, L’Oréal’s move “puts out a warning shot” to the industry.
“L’Oréal’s [30 percent stake] isn’t great enough to be dominant, but it’s big enough to see how other manufacturers will respond. It’s a brilliant move, especially if BSG starts de-emphasizing L’Oréal.”