P&G Buys Luxury Hair-Care Brand

P&G Buys Luxury Hair-Care Brand

Expanding its reach into high-end beauty products, Procter & Gamble Co. signed an agreement to purchase the luxury hair-care brand Frédéric Fekkai & Co. from the private-equity firm Catterton Partners.

Terms weren't announced, but the deal was valued at slightly more than $400 million, according to people familiar with the matter.

For P&G, the Cincinnati-based maker of leading household brands such as Tide detergent, Crest toothpaste and Gillette razors, the acquisition marks its latest foray into the luxury sphere.

The consumer-products giant has taken steps to expand in the broader beauty market because it sees more opportunities for growth than in its traditional businesses of household staples.

Fekkai will join P&G's other high-end beauty brands such as the skin-care line SK-II and its growing cadre of fine fragrances, including licensing relationships with the Hugo Boss, Valentino and Lacoste brands.

The Fekkai purchase includes the brand's six luxury salons in the U.S. Founder and celebrity hairstylist Frédéric Fekkai is expected to remain involved in the business and in product development. Catterton invested in the business in 2005.

Hair-care products are among the fastest-growing segment of the high-end beauty market. Mr. Fekkai is widely credited as a pioneer of the category, and his shampoos, conditioners and styling products remain leading sellers. And, unlike high-end makeup, skin care or fine fragrances -- which typically require a staff of consultants at retail counters to help shoppers select the right products -- hair care is usually self-service.

"What's beautiful is that you don't need to pay for help behind the counter to push it," says Joyce Greenberg, managing director of Financo Inc. "You get the traditionally high beauty margins without [the] operating expenses of payroll."

For a luxury product -- a seven-ounce bottle of Fekkai shampoo can fetch $35 -- the brand has relatively wide distribution. In addition to tony retailers such as Saks Inc.'s Saks Fifth Avenue and Neiman Marcus Inc., Fekkai is also available in specialty chains, such as Sephora, owned by LVMH Moët Hennessy SA, and Limited Inc.'s Bath and Body Works.

"We see an opportunity to learn from and build this unique business model," Craig Bahner, P&G's vice president and general manager for North America hair care, said in a statement.

Hair care is one of P&G's biggest businesses in mass-market stores, including megabrands such as Head & Shoulders and Pantene as well as Herbal Essences and Aussie. So far, P&G has been mum on whether it will consider introducing Fekkai in discount retailers such as Target Corp. or Wal-Mart Stores Inc. "Right now, we're building our presence in prestige -- it's an important channel for us," says P&G spokeswoman Francine Gingras.

Despite P&G Chief Executive A.G. Lafley's emphasis on building the company's beauty-products business, the $23 billion division so far hasn't met many analysts' expectations. Its sales growth has often been outpaced by P&G's other business divisions, such as fabric and home care.

That a beauty acquisition got done despite the weakening credit markets doesn't surprise some, since consumers usually continue to buy grooming products while tightening budgets. "We're all vain -- that doesn't change," says Bob Phillips, a senior adviser with investment firm Peter J. Solomon Co. in New York.