Beauty School Buyout

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Parent Companies and their Branches Source

Shiseido. L’Oreal. Estee Lauder. When you think of the billion-dollar makeup industry, those big-name cosmetic companies surely come to mind. But those companies have a larger influence than you might realize-and the truth isn’t pretty.

L’Oreal, Shiseido, and Estee Lauder are all parent companies to smaller cosmetic brands. Parent companies buy smaller companies, promising a successful business and guidance. In return, the smaller brand gives up some of their profits to the parent company. A parent company normally receives between 3 and 50 percent of a company’s earnings according to Leslie Stair and Lila B Stair in “Careers in Marketing”. Seems like a fair deal, right?

Not exactly. If a smaller company is bought out by a larger company, the smaller company must abide by the larger company’s rules. The smaller company must uphold the parent company’s image and follow their standards. This might mean that the independent company has to change around the procedures that goes in to making the goods and acquire supplies from specific vendors. (Source )

In terms of cosmetic brands, the idea of having a parent company is nothing new. Many of the popular brands sold at Sephora, Ulta, and drugstores are owned by big-name cosmetic brands. For example, NYX is owned by L’Oreal and M.A.C is owned by Estee Lauder. Parent companies continue to buy small companies in order to increase their own profits. However, sometimes parent companies put money over mind.

In November 2016, Estee Lauder bought the popular Sephora brand Too Faced for $1.45 billion. While this might’ve been beneficial for both companies, the affects were less than ideal for fans of the brand.

Too Faced has had a definite decline in the quality of their makeup. Makeup fans have been less than pleased by new releases, such as the Glitter Bomb eyeshadow palette and the upcoming Unicorn collection. Looking at Sephora.com, the newer releases are the products rated poorly. The Glitter Bomb palette, for example, recieved 3.6/5 stars on Sephora’s website with buyers complaining about the shadow quality and the misleading product name (its’s more of a shimmer than true glitter)

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The Glitter Bomb Palette from Too Faced (Source)

This can be attributed towards formula changes. The newer holiday palettes are notorious for being awful quality as well as the limited-edition Natural Love palette released for spring. Both of those products were released after Estee Lauder acquired the brand. Consumers who have reviewed Too Faced products have said that they certainly notice a change in formula. The formula changes are most likely due to Estee Lauder wanting to increase their profits by using cheaper ingredients for the eyeshadows.

To understand how makeup is priced, you have to take a look at the big picture. Ingredients are surprisingly the cheapest part of makeup (unless a brand is using extremely rare ingredients) which is why drugstore makeup is the price it is. Most high-end makeup puts the money towards elaborate packaging which can cost up to 3 times the amount spent on ingredients (Source: Daily Mail UK) . So by purchasing cheaper ingredients, makeup brands can hike up the prices of their products and increase their own profits.

So are parent companies to blame? In a way, yes. The main reason a large companies would look into purchasing a smaller brand is to increase profits. In the industry, most companies are looking to make big money and aren’t afraid to do what it takes to make it. Some companies might have the right intentions, but in the end, business is business. Parent companies should put more time investing in the customers of their smaller branches rather than focusing on making as much money as possible. Because if the smaller company goes under, they are the ones suffering, not the parent companies.

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