Hindustan Unilever In Talks To Buy Skincare Firm Minimalist In Rs 3,000 Crore Deal

Hindustan Unilever Ltd. is in advanced talks to acquire skincare brand Minimalist in a deal that could value the startup at about Rs 3,000 crore, according to people familiar with the matter. The owner of Lakmé is expected to ink the deal within the current financial year, the people said.

While discussions are underway for a majority control, HUL intends to buy a 100% stake in the company over a period of two-to-three years, said one of the people on condition of anonymity, citing the talks are private. Currently, Minimalist counts Peak XV Partners as investors, who own a 27% stake, while the remaining stake is owned by founder brothers Rahul and Mohit Yadav.

"In line with our business strategy, on an ongoing basis, we evaluate various strategic opportunities for growth and expansion of our business," an HUL spokesperson told NDTV Profit in an emailed response. "We will make appropriate disclosures whenever there is any material development that requires disclosure under applicable laws."

The deal, if it materialises, will rank among the largest deals in the skincare industry in recent years. Besides, it underscores the trend of consolidation among new-age brands—which often encounter difficulties in scaling beyond a certain point—being acquired by legacy FMCG companies.

Minimalist, however, stands out as a rare outlier. Founded in 2020, Minimalist sells a range of ingredient-based products, including sunscreen and serum. The Jaipur-based direct-to-consumer brand generated a revenue of Rs 350 crore in the financial year-ending March 2024, an 86% jump over last year, according to Tracxn.

Data showed that Minimalist has remained consistently profitable since fiscal 2021 amid competition from similar brands such as Dr. Sheth's, The Derma Co., Dot & Key, and WOW Skin Science. Many Gen Zs would agree that Minimalist popularised cheaper alternatives to the much-hyped super serums in India, often inspired by Canadian skincare brand The Ordinary.

In 2019, Minimalist raised its maiden funding of $2 million from Peak XV (erstwhile Sequoia Capital India). Two years later, it raised another $15 million (Rs 110 crore) led by Peak XV with participation from Unilever Ventures, the investment arm of HUL's British parent Unilever Plc. The company was valued at $75-80 million in its last funding round, and a potential deal is expected to result in a valuation increase of 3.6 times. Peak XV and Minimalist couldn't be reached for comments.

The latest deal reflects HUL's focus on high-margin and low-penetrated categories.

To strengthen its play in the beauty and personal care market, HUL split its beauty and personal care business into two new divisions: beauty and well-being and personal care in April 2024. "It will help seed new brands as well as rapidly scale digital-first innovations," it had said. The beauty & wellbeing category currently comprises 21% of HUL's overall sales and contributes about a third of its profits.

The company has been expanding its portfolio of new-age brands through investments and acquisitions to enter new spaces like health and well-being and has been capitalising on the growing premiumisation trend that contributed to the rise of D2C brands in India.

Premium beauty is a key area of "exciting growth," HUL Chief Executive Officer Rohit Jawa said during an analysts' call in October last year. The consumer goods company recently identified six focus areas, including face cleansing, sun care, light moisture, serums, weatherproof body care, and masstige skincare, and Jawa expects "disproportionate growth" to occur in these categories in the coming months.

"We already have a robust Rs 2,000 crore portfolio across face cleansing, post-wash hair treatment, light moisturisers, serums, sun care, and masstige, and this portfolio continues to grow fast, ahead of the rest of the portfolio," according to him.

A joint report by Redseer Strategy Consultants and Peak XV Partners estimates pure-play beauty brands like L'Oréal, Mamaearth, Nivea, and Nykaa will contribute 42% of the domestic market in the next five years, up from 33% in 2022. In contrast, established companies like HUL and Procter & Gamble, accounting for two-thirds of the market, are projected to lose share by 900 basis points to 58% by 2027.

Recently, FMCG giants, including ITC and Marico, have also bought new-age brands either completely or partially. Marico's D2C portfolio includes Beardo and Plix, while ITC owns Yogabar and has a stake in Mother Sparsh.

Sugar Cosmetics, Plum and Bombay Shaving Company are among other new-age brands in this space. While HUL controls more than 50% of the beauty and personal care space in the country, its portfolio is dominated by mass brands such as Sunsilk, Lakmé, Dove, Clinic Plus, and Lux. It, however, recently introduced digital-first masstige brands such as Love Beauty and Planet, Simple, and Dermalogica to reach new-age consumers.

With changing lifestyles, increasing disposable income, and higher exposure to global trends, India's $19-billion beauty and personal care market is expected to see a dramatic increase in per capita consumption of beauty products. "Like China, Indonesia, Philippines, we expect to see a similar trend of a multi-fold increase in beauty consumption once the per capita income of the country crosses an inflection point," according to HUL.