France skincare brand L'Occitane has always been popular in the Chinese market, especially for its high-end hand creams. Since its listing in Hong Kong in 2010, L'Occitane has successfully occupied high-end shopping malls in China and penetrated the market into a wider lower-tier market. However, in September 2024, L'Occitane officially announced its privatization, ending its 14-year career in Hong Kong stock listing. The delisting has attracted widespread attention, and there are deep-seated strategic considerations behind it.
01
L'Occitane's path to growth: from Provence to the global market
Founded in 1976 in France Provence, the L'Occitane brand was originally started by founder Olivier ·Baussan by distilling rosemary essential oil. As the brand expanded, L'Occitane gradually launched a series of classic products, among which shea butter hand cream became a bestseller worldwide. In the 90s, L'Occitane began to expand the global market, entering Hong Kong in 1995 and Chinese mainland in 2005.
In 2010, L'Occitane was listed in Hong Kong, becoming the first France company to be listed on the Hong Kong Stock Exchange. At that time, L'Occitane had a market capitalization of more than HK$20 billion. For L'Occitane, the IPO is not only to raise funds, but also to raise brand awareness in the Asian market and further expand the Asia-Pacific market by leveraging Hong Kong's advantages as a financial center. After the listing, L'Occitane did usher in revenue growth, more than tripling from 612 million euros in 2010 to 2.542 billion euros in 2024.
目前,欧舒丹形成了包括普罗旺斯欧舒丹L'Occitane en Provence、蜜葳特Melvita、艾丽美ELEMIS、Sol de Janeiro、Dr. Vranjes Firenze、L'Occitane au Brésil、LimeLife by Alcone、Erborain这8大品牌在内的全新品牌矩阵。
02
Why privatization?
Despite L'Occitane's success in global expansion, the brand's growth has encountered some challenges in recent years in the face of fierce market competition and a complex external environment. In particular, the pandemic and the volatile global economic environment have affected the entire luxury and skincare industry.
1. Constraints on the capital market
Listed companies must face short-term pressures in the capital market, especially in terms of stock price volatility, investor sentiment, regulatory costs, etc. Although L'Occitane has increased the brand's exposure through listing, its performance in the capital market has not been satisfactory. In 2010, the stock price was HK$15.08 per share, and in 2020, it fell below HK$10, and its market value shrank to HK$14 billion. Although the share price has since recovered as the privatization process has unfolded, on the whole, the listing has not given L'Occitane sufficient capital advantage, but has constrained the company's strategic decision-making.
2. Enhance investment flexibility
In recent years, L'Occitane has pursued a multi-brand strategy globally, acquiring several high-end skincare brands such as United Kingdom's Elemis and United States's Sol de Janeiro. These acquisitions require a large amount of capital, and in the case of a listed state, L'Occitane has certain restrictions on capital operation. Through the privatization, L'Occitane was able to invest more flexibly, no longer constrained by market sentiment and short-term profits, and focus on long-term brand layout and global expansion strategies.
3. Blackstone and Goldman Sachs support
L'Occitane's privatization process has not been easy. As early as 2018, there were rumors in the market that L'Occitane might be acquired by private equity funds, but it did not happen. It wasn't until 2024 that L'Occitane officially pushed ahead with the privatization, this time with financial backing from world-renowned private equity funds Blackstone and Goldman Sachs. The funding requirements for the privatisation amounted to HK$14 billion, including the acquisition of the remaining shares and the arrangement of liquidity. This strong capital support provides a solid foundation for L'Occitane to successfully complete its privatization.
03
From Asia to the Americas: A shift in market focus
L'Occitane's Hong Kong IPO was based on the huge potential of the Asia-Pacific market, especially China. In 2010, the Asia-Pacific market accounted for the largest proportion of L'Occitane's stores worldwide, and the Chinese market is at the heart of the brand's future growth. However, in recent years, with the changes in the global market landscape, L'Occitane's focus has gradually shifted to the American market.
1. The growth of the Asia-Pacific market has slowed down
According to L'Occitane's FY2024 report, the share of revenue in the Asia-Pacific market fell to 34.8% from 42% in 2010. Although China remains one of the most important markets for brands, overall growth has slowed. Especially after the epidemic, the performance of the Chinese market did not meet expectations, and sales declined in fiscal 2023, and only barely recovered to previous levels in fiscal 2024.
2. The rise of the American market
In contrast, the Americas market became a major growth driver for L'Occitane. In fiscal 2024, sales in the Americas increased by 63% year-on-year, surpassing Asia-Pacific to become the brand's largest market. This shows that L'Occitane is realigning its global market layout and devoting more resources to the Americas in response to changes in market demand.
04
Challenges and Opportunities: Sinking Markets and Multi-Brand Strategies
Despite L'Occitane's success in the global market, the Chinese market remains challenging. As the market in first-tier cities becomes saturated, L'Occitane has turned its attention to the lower-tier markets, that is, high-end consumer groups in third- and fourth-tier cities.
1. "County lady" became a new target
L'Occitane's high-end image in the Chinese market has long been deeply rooted in the hearts of the people, especially in high-end shopping malls in first-tier cities. However, in order to seek new growth points, brands have begun to open stores in third- and fourth-tier cities to attract those who have a certain amount of spending power but the market has not yet been fully developed. This sinking strategy has helped L'Occitane gradually recover sales in the Chinese market after the epidemic.
2. Multi-brand expansion
L'Occitane has expanded its multi-brand strategy through acquisitions in recent years, which offers it the possibility to capture a larger share of the global beauty market. The successful integration of brands such as Elemis and Sol de Janeiro is a testament to L'Occitane's potential for multi-branding. In fiscal 2024, the combined sales share of these two brands has reached 37%, showing their contribution to L'Occitane's overall performance.
The privatization of L'Occitane marks a new stage of development for the brand. By exiting the capital market, L'Occitane is free from the pressure of stock price fluctuations and can focus more on the brand's global expansion and strategic investments. With the rise of the American market, the promotion of the multi-brand strategy and the development of China's sinking market, L'Occitane still has a broad space for development.
In the future, it remains to be seen whether L'Occitane will be able to remain competitive in the fierce beauty market. However, by privatizing, L'Occitane has clearly gained itself more flexibility and room to grow.
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