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Has Deciem Sold Out To The Lauder Group?

Posted in Beauty, and Business and Law

The latest news to hit the beauty world is that the up and coming brand Deciem, (nicknamed the Abnormal Beauty Company) has sold a ‘minority’ share of the business to the Estée Lauder group of companies. A minority share could mean as little as 1% or as much as 49%, but as the parties are refusing to disclose that information or how much the deal cost (despite being a company owned by shareholders) I would think the latter is more likely.

So what is all the fuss about? For those who don’t know the history of buy outs in the cosmetics world, well nearly all end badly. There are good intentions on all sides at first, and then conflicts arise, and someone has to back down. First of all a bit of history on Deciem—it was founded in 2013, by Brandon Truaxe in Canada (although he was born in London, adopted in Canada) after he left Indeed Labs in 2011, which was another company he had founded. The split was acrimonious and came with a two year non-compete clause where Truaxe could not produce any anti-aging products. Prior to that, he had sold Euoko, a luxury skincare brand he had developed in 2008 for $72.1 million. Deciem, his latest project is so called because of the 10 brands that the company had. However, Grow Gorgeous was sold to The Hut Group in 2016 for an undisclosed sum (a private company at present) even though Deciem have creative control at present.

The brands are:

  • Hylamide
  • Niod
  • Chemistry
  • The Ordinary
  • Stemm
  • Fountain
  • Hif
  • Grow Gorgeous
  • White RX
  • AB Crew

The company has built up a reputation for vegan products that work as effectively as premium brands, but at a fraction of the price. Vitamin C serums start at £8.90 for 30 ml compared to most companies where the price is double if not triple the price. Many among the ethical communities, and those who are on a budget were thrilled to find such a brand and wait lists grew, as people tried to get hold of the products. News of new stores opening were welcomed, but I was slightly wary—where did this money come from because to buy and set up a shop in London takes time. The flagship store in Spitalfields had barely been open when they announced another shop in Covent Garden, which is an expensive area, so where were these funds coming from? I mean, they don’t really have a PR team because it took them two weeks to respond to a question I asked on social media, so if they don’t have a social media manager, how the heck can they afford two stores in one of the most expensive cities in the world?

The answer arrived on 15 June 2017, when the company announced they had sold a minority share of the company to the Lauder Group. I’m not sure why the company thought their customers would welcome the news, because people usually sell when either they have had enough of the business and sell it off, or they are financially struggling and have no choice. As the company was new, initial struggles were expected and customers accepted the wait lists, but why all the backlash? Lauder is a reputable company after all, and it’s not all about animal testing surely? For those who don’t know, cosmetics sold in China must be tested on animals hence why some companies choose not to sell there. It does boil down to ethics, and some people don’t wish to be associated with a company that does carry out animal testing, despite Deciem insisting that don’t and will never test on animals

I have been monitoring the feedback on social media, and while Deciem pride themselves on being transparent, one must consider whether that they have been duped, or have the loyal following of customers been taken in? Incidentally, a Deciem director Michael Dietrich Basler who was involved with Truaxe’s first venture Euoko, resigned from Deciem and Avestan (the scientific branch of the companies) in 2015, whether that was coincidental in the search for funding who knows?

The problem is Deciem tried to sell the idea of the sale to their customers by promising more outlets, more products, quicker orders, while promising to keep the prices low and never to test on animals. It didn’t work, despite the cozy phrases as people are more savvy that that. Within 24 hours Truaxe posted a personal letter to reassure all the customers nothing would change, accompanied by four consecutive Facebook posts which really said not much except that they loved their customers and to trust them. Perhaps it was to disguise and hide the feed on the announcement post where there was a barrage of negative comments? Many including myself are skeptical mainly due to experience of life, where many before Truaxe had the same ideals only to step down or sell off the remaining shares. What makes Truaxe any different given his track record of selling one company, and being forced out of another all within a decade?

Are Deciem being naïve or are they just using some PR spin to pacify their customers? A business can only survive with good products and loyal customers, and once betrayed, people are not very forgiving. Why would a company buy out another? Usually because they want to get rid of the competition or to make money from them, and in this case it maybe both. Deciem was becoming a threat to skincare houses, and they could in time have become as big as Lauder, but I feel they have sold themselves short. Why? Perhaps poor management, as it appears many in the company have little business or corporate experience. A millennial would jump at the chance of Lauder buying their company, but make no doubt about it, control will be lost, profits will become more important than than the products, and customer service will be for the purpose of PR damage limitation. That is the reality of business and life. Without seeing the contract, no one knows for sure. Perhaps Truaxe has a special buy back clause? If they needed backing, who is to say private investors were the poorer choice? Many like to be silent partners as long as the business is making money.

In previous buyouts, brands that were once respected and trendy lose control despite what the owners says about things staying the same. If you were born after 1978, you won’t remember M.A.C before Lauder. It was a great brand, unique, ethical, affordable, and when Lauder bought 51% everyone was assured all would remain the same. About four years later, Lauder acquired the rest of the shares, and now M.A.C is available everywhere, including the grey market (where third party distributors sell off old stock cheaply) which can damage and cheapens the image of a brand. Things did change, the prices, packaging and the formulas, and while it’s still a good brand, it’s not as coveted as it was. Back then, a lipstick was about £8 compared to a Lauder one which would be about £13;  a matte lipstick would stay put and not change color all day, and colors would sell out before they hit the counters. I recently tried a blusher, but the pigmentation was weak, and not what I expected from M.A.C at all.

The same happened to Bobbi Brown and Stila—they were the in makeup artists when they were acquired (like Charlotte Tilbury now) and everyone wanted a bit of their success. Stila lost its edge and struggled, and has been sold off twice, and Bobbie Brown has stepped down and moved onto writing books. Eventually one side has to relinquish control, or a party leaves; they sold their name which was their brand. People are currently wary with good cause, because customers buy into a brand and what they stand for as well as the products themselves. The question is, do the public trust Lauder or Truaxe? To many what products you use also defines you and your beliefs.

Having seen Hylamide on sale with 33% off I wondered what was going on, and snapped up a bargain Vitamin C serum for under a tenner. It appears new formulas and a rebranding may take place. I do use several of The Ordinary products as they are good basics, and affordable, but if things change I will look elsewhere. For many the question is do they want their money to fund and profit a company whose principles they do not agree with. It’s a similar argument when people accuse vegetarians of going to McDonalds. I am a vegetarian and do go there occasionally, but only to keep my father company. I know my choosing not to go there isn’t going to dent their profits and I also accept people have a choice if they wish to eat meat or not, but McDonalds is not a place I choose to go to. The choice will be a personal one, and as people stock up on pre-Lauder Deciem items, prices will go up at some point, but the general feeling is that people have been let down and lied to.

The vegan community is disappointed, especially as Truaxe has stated he didn’t care about money. All businesses need money, and maybe the original cash flow options had been taken off the table? Naturally the company has every right to choose their course of action and how to be funded, but perhaps Deciem misjudged who their core base of customers were? It’s a bit like the USA asking Russia for a loan to fund their army, where Russia says ‘yes’ and tells them to carry on and that they won’t interfere.

Well, money does seem to matter, and as for me, what shall I do? In my mother’s day there wasn’t much choice: Lauder, Arden, Charles of the Ritz, and Max Factor. Today there are hundreds of brands, some that use the same factories and formulas but charge different prices. I still buy the odd item from Origins, but I also used to work for the Lauder group, and when I left I was actually quite relieved. The corporate atmosphere was quite stifling, and they promoted within as long as you were a ‘yes’ person and your face fitted, but that can be said of many companies. What I can tell you is that they are ruthless and brands or people who don’t hit targets get culled. Several of my friends were counter managers and were always looking for other jobs in fear, and in other stores, the managers were replaced so often they were under pressure to hit the number one position in the department. It didn’t matter what skills you had and if you were talented as long as you hit your figures.

Deceim won’t be the same, and many have stated they would have paid more for the products and have waited longer for items to come back into stock instead of the company becoming part of Lauder. I don’t buy the line that Deciem have complete control and nothing will change, because there is no such thing as a deal without strings. If they wish to be transparent, then maybe they ought to declare the percentage holding and the figure it was sold for? Perhaps then people would have some faith when they see the truth in black and white? For now we can wait and see, and for those who think Truaxe can persuade Lauder to stop animal testing and pull out of China, they are deluded. The company is about money and profits, and there is no way they will stop selling in China because of Truaxe. I wouldn’t be surprised if some Deciem products ended up on the black market eventually, as that has happened with the majority of the Lauder brands.

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