The industry is seeing a lot of consolidation on the ingredient side—like Solabia acquiring Mibelle Biochemistry or Elementis buying Alchemy Ingredients. Is there any benefit (such as accelerating innovation) for brands? —I.M. Knotsure

Dear I.M., 

Acquisitions are exciting to read about in the industry news and are the pinnacle of success in any sector. It must be an incredible feeling as a shareholder to have built something that others want to claim as their own. 

It can also be a time of uncertainty for employees, assets, and technologies. Was the acquisition done to leverage a capability? Gain marketshare? Appease investors? Kill the competition?

As a chemist and purchaser of ingredients, I rarely benefit from supplier consolidation. Acquisition brings neither innovation nor convenience. In fact, I could argue from experience it often is detrimental to the customer experience. 

Upon acquisition, there is often a honeymoon phase where the acquiree is left alone to operate in their greatness. They essentially continue to operate in the same way that made them valuable [acquirable] to begin with. From the customer perspective, it’s business as usual. While the time period varies, the newly acquired business is not forever left alone in this state. 

Investors want a return on their investment and maximization of profits, so the acquirer starts to peek under the hood to understand how the acquiree can be more efficient. On the surface, this makes business sense. Every organization has an opportunity to run leaner and gain improvements, which ultimately benefit all in the organization. Additionally, a merger can lead to more resources and opportunities for the new member company. Changes begin, and they certainly can be for the better, but that’s not always the case.

I’m not opposed to efficiency; in fact, my mantra in the lab is “half done is twice begun.” But not every organization benefits from another’s fingerprint. 

In my experience, the acquirer’s perspective can skew a bit narcissistic. The peek under the hood is rarely done in the spirit of preserving what already makes the acquiree valuable in the first place, supporting it to operate independently with continued growth. It instead centers on how the acquired company can be folded into the parent company’s processes and systems for shareholder return. The company, once so great that it could be acquired, starts to operate as a conglomerate. Things are often worse if private equity is involved. 

One might think it’s more convenient to purchase from two companies instead of one. Who doesn’t love a one-stop shop? I guess, me! I find this problematic from both a technical and administrative view.

I like purchasing from experts and I like getting access to the experts. Depth of expertise is so valuable as a customer. I can make better decisions about raw materials to either find a solution or bring the most recent technology to my customers. This direct access diminishes after the post-honeymoon consolidation. 

Vendor meetings are totally transformed; portfolios are so broad and vast that the ability to engage deeply is gone. High-tech actives are discussed in the same breath as ethoxylated thickeners for surfactant free systems, and neither is getting the attention they deserve. Sales teams are thinned out. You move from two reps that have material, institutional knowledge on their respective portfolios, to one that only knows their original portfolio well.

While there may be one less sales rep to handle in the development phase, the ordering process often gets more red tape and generic distribution email addresses on carbon copy. There are so many people on the email chain, yet no clarity on who is accountable to move the order along. From experience, I can assure you this is the guise of efficiency and not a good customer experience.

Regarding innovation, acquisition doesn’t inherently foster it. Despite few things actually being innovative (a word that’s indiscriminately [mis]used by the industry to describe new or interesting things), acquisition often erodes processes that enable true innovation. 

It’s easier to purchase a technology already developed than to build it, which takes financial and time investment, as well as an increased risk tolerance. What results is a patchwork of technologies that get slotted into existing branding frameworks of the large parent company. 

I’m sorry for being so jaded on the topic of acquisition, but it’s my perspective and experience that while consolidation creates advantages at the corporate level, it doesn’t necessarily translate to benefiting the customer. 

Although I will admit, I often find that the regulatory documentation gets a little more buttoned up after acquisition, and I do appreciate thorough documentation.

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Valerie George

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Valerie George is a cosmetic chemist, science communicator, educator, leader, and avid proponent of transparency in the beauty industry. She works on the latest research in hair color and hair care at her company, Simply Formulas, and is the co-host of The Beauty Brains podcast. You can find her on Instagram at @cosmetic_chemist or showcasing her favorite ingredients to small brands and home formulators at simply-ingredients.com