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More Acquisitions Likely
as Salon Hair Care Sales Continue to Slip

In recent years, disappointing sales growth in the salon hair care market has impelled product suppliers to expand their businesses through a spate of acquisitions. Initial results compiled by Kline & Company for a new market study indicate that U.S. sales growth in this sector dipped even lower in 2003, and that the trend toward supplier consolidation is likely to continue.

"With all the M&A activity in the salon segment over the last five years or so, there aren't that many companies still up for grabs," says Lenka Contreras, vice president of Kline's Consumer Products Practice. "Still, we can expect the larger companies to continue to acquire smaller niche marketers and brands to keep their product lines fresh and trendy."

L'Oreal and Procter & Gamble stand out in front of the leading marketers that have been swallowing up salon hair care companies and brands to bolster revenues in the face of flagging category sales. L'Oreal has bought Redken (1993), Matrix (2000), Soft Sheen (1998), Carson (2000), and most recently, Artec (2002). These purchases give the French beauty products giant an even stronger and more diversified position in the U.S. salon products market.

P&G has also expanded its hair care portfolio with two substantial moves. It bought Clairol from Bristol-Myers Squibb in May 2001 and then acquired Wella in a multibillion-dollar deal that closed in September 2003.

With the addition of German-based Wella, P&G not only gains a foothold in the European salon hair care market, it also adds the product lines from Graham Webb and Sebastian, both of which Wella previously acquired.

Japanese marketers have also sought to strengthen their positions in international markets. Zotos, which is owned by Shiseido, acquired U.S.-based Joico in 2001, and Goldwell, the German company owned by Kao, bought U.S. niche marketer KMS Labs in 2002.

"The salon market continues to consolidate, but at the same time, it's becoming even more of a global market," says Contreras. "Companies are looking for growth, and since the U.S. market is stagnant, many of them are turning to other countries and regions to grow their business."

Preliminary estimates from Kline's study, SALON HAIR CARE 2003, indicate that sales growth in the U.S. salon hair care market, which was only 3.2% in 2001, may have slipped as much as 1% further in 2003. These less-than- inspiring numbers make it easy to see why marketers are focusing less on developing new brands and more on acquiring existing ones, according to Contreras.

"(Marketers) know it's much easier to acquire a brand with an already established customer base than to start from scratch," she says. "It's often less expensive, too. Trying to convince salons to use and distribute brand new products doesn't come cheap."

SALON HAIR CARE 2003, the seventh edition of Kline's study on the professional hair care products industry, will examine category size and growth for the U.S. market, market share of the leading companies and brands, and sales by segment for in-salon use and salon retail purchases, with forecasts to 2008. A series of regional reports covering other key countries is also under consideration.

PR Newswire 03-03-2004
SOURCE Kline & Company


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