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Unilever Makes Key Move in Dermalogica Deal

Dermalogica deal provides a cornerstone to Unilever's growing prestige beauty group.

Unilever now has the cornerstone in place for building a prestige beauty empire. The company has signed an agreement to acquire the professional skin care brand Dermalogica, which it will house in the Unilever Prestige personal-care portfolio alongside recently purchased Ren and Kate Somerville brands.

The deal puts the spotlight back on skin-care brands, after a spate of acquisitions in color cosmetics, the most recent one being Too Faced Cosmetics. And there’s more to come in skin care. Industry sources said the skin-care brand Murad has tapped Goldman Sachs & Co. to explore a sale, and is in close talks with Johnson & Johnson for a possible deal.

Terms of the Dermalogica agreement were not disclosed, but Unilever has acquired a majority stake with the Wurwands retaining a minority share of the business. Industry sources estimate that Dermalogica could have fetched close to $1 billion.

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Over the years, the brand has garnered lots of interest from investment bankers, but many have said it was untouchable and that the founders — husband and wife Raymond and Jane Wurwand — steadfastly refused to consider a sale.

Jane Wurwand told WWD they began considering a sale several years ago. “We had built the brand to the number-one position in spas and salons,” said Wurwand, adding that the pair began to map out where to take the brand next. A meeting with Paul Polman, Unilever’s chief executive officer, prompted Dermalogica to approach the company about a possible deal. “Once we met Paul Polman it was a game changer,” said Wurwand, noting that the trio connected on the importance of sustainability and the concept of “making profits with a purpose.” She added, “The cultural fit and chemistry has been so good.”

Vasiliki Petrou, senior vice president, prestige at Unilever Personal Care, said that together Unilever and Dermalogica — which has a strong service element to the brand — will “reinvent modern, selective retail and the also modern digital [experience].”

The addition of Dermalogica, which had wholesale sales of $240 million in 2014, cements Unilever’s positioning in the prestige channel, particularly at a time when one player, Procter & Gamble Co., is heading for the exit.

“We want to build a sizeable and very attractive prestige business,” declared Kees Kruythoff, the president of Unilever North America, at the WWD Beauty Summit on June 9. The company’s personal-care business is $21 billion in size.

“Unilever has been slowly and smartly building prestige — and in one fell swoop it now has a prestige business,” said one financial observer.

Dermalogica was launched in 1986 in Los Angeles by the Wurwands, following the earlier creation of The International Dermal Institute in 1983, a training center for licensed skin-care therapists. It is available at more than 20,000 skin-care centers, spas and salons, and the brand is sold in more than 80 countries, with international accounting for approximately 50 percent of sales. Approximately 80 percent of its business is in the professional salon and spa channel. In the national retail space, Ulta is its largest retailer.

Its mission has been to offer serious skin-care solutions sans frills. In an interview with WWD several years ago, Jane Wurwand said, “There needs to be a course correction in beauty, and a move away from the steaming and creaming approach, because that’s just not enough. If we are going to secure clients, we need to do more.” she said.

In a statement issued Wednesday, Polman said, “Dermalogica enjoys an outstanding reputation and incredible awareness among skin-care professionals and consumers alike, and has a clear positioning as a superior skin-health brand that perfectly complements the rest of our Prestige offering.”

Dermalogica will continue to operate out of Los Angeles. The company was advised by Moelis & Co.