Some of America’s biggest beauty brands have new owners and their futures are uncertain.
On Monday, consumer goods giant Kimberly-Clark announced it would acquire Kenvue, the parent company of painkiller brand Tylenol, and beauty brands such as Neutrogena, Ogx and Aveeno for $48.7 billion.
The acquisition comes three years after Kenvue was spun off from Johnson & Johnson. Since then, the stock has lagged its peers as activist investors have singled out the beauty division as an underperformer. Last September, the company was rocked by claims from President Donald Trump and Health Secretary Robert F. Kennedy Jr. that Tylenol could be linked to autism. (RFK Jr. said there was not enough evidence to prove the connection, and the company is contesting the claim.)
Kenvue’s medical brands like Listerine, Benadryl, and Band-Aid are suitable, along with Kimberly-Clark, which is similar to Huggies diapers. In a presentation released Monday, Kimberly-Clark said the acquisition will transform the company into a “global health and wellness leader” and allow Kenvue to expand in countries such as China, Mexico, South Korea and Indonesia.
It’s less clear how Neutrogena and other beauty brands fit into the combined company. Kimberly-Clark, based in Irving, Texas, doesn’t have a beauty division or much experience in the category.
And while Kenvue’s beauty brand has a strong presence among consumers, it has a problem that needs to be addressed quickly.
mass appeal
Products such as Neutrogena, Aveeno and Clean + Clear are sold in numerous pharmacies and supermarkets and generated a total of $4.2 billion in sales last year. However, over time they failed to keep pace with their competitors and conceded relevance and market share to more nimble rivals such as Cerave and The Ordinary. The company said Monday that Beauty Group’s third-quarter sales fell 3%.
Last October, Reuters reported that Kenvue was considering selling its beauty division at a valuation of about $6 billion to $9 billion, but had no intention of parting ways with core brands such as Aveeno and Neutrogena. Despite the decline in revenue, management felt the division still had the potential to turn around.
Under the leadership of beauty veteran Andrew Stanleick, the unit has made positive progress. Neutrogena has launched a vigorous campaign with stars including wrestler John Cena, singer Tate McRae and actress Hailee Steinfeld, and is beginning to re-strengthen its dermatology credentials. Hair brand Ogx has signed actress and influencer Shay Mitchell as its ambassador. In its most recent earnings, the company said distribution of both brands had stabilized after years of decline, indicating greater retailer confidence, Neutrogena’s unit sales had increased for two consecutive quarters and the decline in net sales was slowing.
But regaining lost momentum is difficult.
Slow progress in rehabilitating the Kenvue brand could mean Kimberly-Clark decides to cut its losses and sell the division.
Beauty brands require professional management, marketing, and innovation. Both luxury fashion houses and consumer goods conglomerates have repeatedly tried to achieve sustained success while managing their own beauty divisions. Without a dedicated team that understands the nuances of the industry and can deliver true innovation in marketing and product development, beauty brands can stagnate.
new beginning
There is also a big difference between selling painkillers and shampoos and moisturizers. Activist investor Starboard said in a presentation distributed in 2024 that Kenvue’s beauty brand was weakened by a lack of a strong marketing and innovation culture when it was owned by Johnson & Johnson.
It’s unclear what value Kimberly-Clark places on beauty. Under the new combined company, Barclays estimates that only about 14% of sales will come from the skin and beauty segment. Growing these brands requires ongoing and costly investment and innovation.
If Kimberly-Clark is willing to step up, carve out resources for beauty, and take a short-term hit to margins and revenue, it could start growing meaningfully again. Popular brands can be cool. Cerave and Aquaphor frequently go viral, hand sanitizer maker Touchland has become a Gen-Alpha favorite, and fresh indie brands like Starface have become integrated into youth culture. Marissa Lepor, an investment banker at Los Angeles-based The Sage Group, said even the less tumultuous beauty business is profitable for Kimberly-Clark. You can now reach customers already in the feminine care category in other areas, such as skin and hair care. She said Kenvue’s brand has proven scale and not all shoppers are looking for what’s trendy or new.
But given how competitive and crowded beauty is, that department likely needs painkillers. Your pain will likely get worse before it gets better.
accession Beauty Business NewsletterIt’s a must-read, free source of the day’s most important beauty and wellness news and analysis.
