Beauty Brands Go Vertical With Supplier Acquisitions: Smart Strategy Or Dangerous Distraction?

Although exuberance about ingredient and manufacturing mergers and acquisitions hasn’t quite matched reality, for the last few years, big beauty companies have been investing in biotechnology-driven ingredient suppliers to access ingredient innovations early and gain insight into the pipeline of inputs driving the industry’s future. L’Oréal, for example, has been a backer of biotech mover-and-shaker Debut, while Kao and Unilever have helped power Geno, a supplier of lab-produced alternatives to palm oil and petroleum.

Earlier this month, there was a new wrinkle in the relationship between supply chain actors and beauty companies as publicly traded haircare brand Olaplex, in its first acquisition, took over Purvala Bioscience, a biotech company at the forefront of the bond-building revolution in haircare, and Magic Molecule, a much smaller, but skyrocketing brand, assumed control over its hypochlorous acid manufacturer Simple Science. These deals follow David Protein acquiring Epogee, maker of EPG, the fat substitute it puts in its bars.

For the latest edition of our ongoing series posing questions relevant to indie beauty, we are diving into the inclination toward vertical integration. We asked 17 beauty entrepreneurs, manufacturers, biotechnology-fueled ingredient startups, investment bankers, investors and consultants the following: Will these deals continue? How else do you see them manifesting? What are the opportunities and possible risks for a brand purchasing a supply chain partner?

Paul Ginzburg Founder, Sleek Flow Labs

I expect to see significantly more material innovations come to market and more brands looking to acquire raw material IP, especially the bigger players, but I don’t believe we’ll broadly see vertical integration between brands and their supply chain. These deals are less about bringing supply chains in-house and more about finding differentiators.

If it’s a mature supplier with a portfolio for sale, the acquiring brand now needs to learn to operate a whole new business under its leadership team. This could scare off competitors currently sourcing from that same vendor, forcing them to make up the lost volume elsewhere.

On top of that, the acquirer will also be bidding against other material vendors pursuing horizontal integration. I’m not convinced quality, margin or supply constraints get resolved through vertical integration, and it could easily slip in the other direction.

Far more often, I expect to see acquisitions continue within existing specialties (CMs buying CMs, brands buying brands, suppliers buying suppliers, etc.).

What excites me most is that these acquisitions have sent a strong signal to R&D houses that there is significant interest in material innovation and the market is willing to pay big for it. Between the increased demand and AI unlocking new concepts faster, I expect more VC money to flow into the material development space. I also predict we’ll see brands launching VC arms to fund raw material innovation, not just formulas.

So, yes, I see more material IP coming down the pipeline and many more acquisitions alongside it, but I believe this round of acquisitions will have little to do with quality, cost, speed or supply constraints and everything to do with acquiring truly innovative, science backed IP.

Nadia Pelaez Managing Director, Ardea Partners

We’ve definitely seen a rise in the pace of partnerships and investments (e.g., L’Oreal/Debut and Abolis, Shiseido/Phyla), as well as outright acquisitions (e.g., Olaplex Purvala, Beiersdorf/S-Biomedic) in supply chain by both large multi-brand strategics and independent brands. I think we are likely to see more partnerships and investments as companies seek to protect their brands and formulations more aggressively.

The Why: The beauty industry has been in transition away from ingredients deemed problematic (“clean,” however one defines it, is pretty much table stakes now), towards bioengineered ingredients with proven, tangible benefits. New products drive growth in the beauty industry and innovative ingredients provide a competitive edge. Ingredients and efficacy claims are often prominently highlighted on packaging, a trend consistent with consumers’ enhanced focus on proven benefits.

The need for innovation and speed to market plus the industry’s reliance on inputs to which brands do not necessarily have rights, creates vulnerability to copycats, dupes and competition. Investing in or acquiring to secure IP behind successful new products can effectively create a competitive moat.

What’s Next: Larger, deep pocketed strategics will likely continue to partner with and invest in a range of emerging ingredients companies to drive their innovation in return for exclusivity options on new technologies without the need to acquire the IP. Given their resources, they are able to offer less well-capitalized ingredients innovators guaranteed volumes with which to secure funding. They are also able to do this across a number of ingredients suppliers.

Smaller, independent brands may be less able to secure exclusivity to the IP given limited resources and find themselves pursuing business combinations to underwrite their brands’ value in a potential sale.

Christine Staples CEO, Cohere Beauty

Beauty is paralleling the chemical industry, where I’ve spent 30 years watching vertical integration rise and fall with market cycles. Today, brands are vertically integrating not into commodity production, but into novel and innovative ingredients, often biotechnology-based, to secure differentiation, supply assurance and margin.

I do think this trend will continue in the mid-term, but, when brands vertically integrate, they step into inherently capital-intensive businesses, which creates a unique leadership balance. And from my seat leading a CDMO, the scaling and manufacturing of end products adds yet another opportunity for integration, placing us squarely in the middle of the value chain where innovation, supply security, and execution all converge.

In my spare time, as a former scientist with two science degrees and now a CEO, I’m studying the rise of biotechnology in beauty care, particularly skincare. I could see multinationals investing in third-party, peer-reviewed research to fill the innovation gap, especially as Mintel’s Global New Product Database reports that only 35% of global CPG launches in early 2024 were truly new products, the lowest level since tracking began in 1996, with the majority being simple renovations like line extensions or reformulations. In North America, the number was even lower at just 29%.

In my view, real, peer-reviewed science-backed breakthroughs such as mRNA applied to anti-aging could be the next frontier. This points to a growing nexus where beauty and pharmaceuticals may converge as clinical science and consumer products increasingly intersect and where brands may backward integrate more aggressively into ingredients and manufacturing. At the same time, many are already bringing production in-house for supply security and margin reasons, adding another dimension to this shift toward vertical integration.

For a brand, purchasing a supply chain partner can unlock opportunities in innovation, margin and speed, giving direct access to proprietary technologies, eliminating supplier markups and accelerating concept-to-shelf cycles. The risks, however, are significant.

These businesses are capital intensive, requiring heavy ongoing investment in equipment, compliance and modernization. They also add major operational complexity. Running a manufacturing or ingredient company demands very different leadership, systems and cultural capabilities compared with running a brand.

Steven Mason VP of Sales, Trademark Cosmetics

Vertical integration in the beauty industry is not happening by accident, it is happening out of necessity, and it will continue. Over the last five years, the industry has faced a series of disruptions: a global pandemic, shipping delays, port protests, and unprecedented tariffs. These events created repeated uncertainty in business operations.

As a result, brands and manufacturers alike have experienced ingredient shortages, major delivery delays and extreme cost pressures from suppliers, all while customers continue to demand speed, transparency, and uncompromising quality.

The most effective way to meet those customers’ expectations is to take greater control of the supply chain. Vertical integration offers exactly that. By bringing more stages of production and logistics in-house, companies can increase resilience, improve transparency and reduce dependency on outside partners who may be vulnerable to disruption.

I truly believe that advances in technology, particularly AI, are accelerating this trend. Supply chains can now be connected, monitored and optimized in real time. With the touch of a button, a contract manufacturer can track the origin of a plant-based extract grown in the Alps all the way to its arrival at their facility for compounding and filling. That level of transparency to our brand partners is increasingly not just a competitive advantage but an expectation.

For a contract manufacturer, vertical integration may manifest through acquisitions of ingredient suppliers, other facilities with dual and alternative services, technologies or logistics providers. Owning more of the supply chain, combined with AI-driven capabilities, allows companies to shorten lead times, manage costs more effectively and ensure quality from source to brand partner.

There are clear opportunities from vertical integration—improved margins, stronger brand trust, enhanced speed to market and greater innovation agility. At the same time, there are risks. Acquiring and managing supply chain partners requires significant capital investment, operational expertise and ongoing integration. If not executed carefully, vertical integration can create rigidity, limit flexibility with external partners, and expose companies to greater operational risk if one link in the chain falters.

But what it still offers above all is the ability to be extremely transparent with the brands we serve. If there is a delay, we will know it and be able to notify the brands we serve immediately. This cannot always be stated when working with outside vendors.

Ultimately, vertical integration is likely to continue shaping the beauty industry. The pressures of the last five years have underscored the need for greater control, and the tools now exist to make it achievable in ways that were not possible before. For many contract manufacturers, the question is not whether to integrate, but where to integrate.

Luc-Henry Rousselle Managing Director, DC Advisory

Large strategic players are always on the lookout for potential partnerships with ingredient suppliers, and this is usually the world of their R&D departments. Clinically backed efficacy and respect of the environment have become crucial to differentiate and attract consumers which puts more emphasis on controlling access to such technologies, especially if they can be leveraged across a portfolio of brands.

In those select instances where they see large opportunities or a dependency (e.g., prominent product is beholden to one supplier with no alternatives), there is the possibility that long-term agreements are put in place or an investment is carried out. However, these ingredient/supply chain deals remain exceptional as Wall Street investors tend to favor beauty and personal care companies that focus on brand building and maintain the flexibility to work with a variety of suppliers.

One key risk is that consumer preferences change, diminishing the value of such investments. Another way for strategics to access formulas or intellectual property that consumer love is via a more traditional brand acquisition. Unilever’s acquisition of K-18 or L'Oréal’s acquisition of SkinBetter Science are examples of this strategy. We expect that strategics will continue to be highly interested in brands with differentiated technologies that have already proven success with consumers.

Rose Fernandez Beauty Executive and Strategic Consultant, Cosmo Innovation Group

The beauty industry's evolution from partnership to acquisition of biotech ingredient suppliers represents a fundamental strategic shift toward brands controlling the innovation pipeline. This vertical integration trend signals recognition that ingredient innovation may become as critical as brand equity in determining market success, with the added potential of generating new revenue streams by serving other customers or licensing technologies to non-competing brands. Here are a few benefits to this shift and not in any particular order.

Innovation Control and Competitive Moats: The transition from L'Oréal backing Debut to Olaplex acquiring Purvala Bioscience demonstrates a strategic evolution toward ownership rather than partnership. Direct acquisition eliminates the risk that breakthrough technologies like Purvala's bond-building chemistry or Simple Science's hypochlorous acid manufacturing become available to competitors, while enabling brands to control when, where, and in which categories these innovations are deployed.

This creates sustainable competitive advantages that are difficult for rivals to replicate through traditional sourcing relationships, while potentially creating new B2B revenue streams from licensing or selling to non-competing brands.

Accelerated Time-to-Market: Internal control over both ingredient development and product formulation compresses innovation cycles dramatically, provided companies have sufficient capital to support integrated R&D operations. Vertically integrated companies can develop ingredients with targeted responses using pharmaceutical-grade discovery technologies, reducing typical development timelines from several years to launching multiple new ingredients annually.

This acceleration provides significant first-mover advantages in emerging categories, allowing brands to introduce breakthrough formulations while competitors are still waiting for third-party suppliers to make similar innovations available.

Supply Chain Resilience and Margin Expansion: Direct ownership significantly reduces exposure to the supply disruptions and price volatility that have plagued beauty companies dependent on third-party biotech suppliers. Eliminating supplier markups while ensuring consistent quality standards creates both operational security and financial benefits through improved margins.

Multi-Industry Platform Leverage: The most sophisticated players recognize that biotech platforms can serve multiple industries simultaneously. An example, Cambrium demonstrates this well as their AI-powered molecular design platform creates ingredients for personal care, polymers and future innovations with active development in haircare, fashion/textile coatings and nutraceuticals. One platform, multiple markets. This diversification reduces sector-specific risks while expanding total addressable markets.

Managing biotech operations requires fundamentally different capabilities than traditional beauty marketing and manufacturing. While these operational differences can be successfully managed with appropriate strategy and investment, several cautions warrant consideration:

• Resource allocation risk: Companies may spread resources too thin across the value chain, potentially weakening core brand-building competencies
• Technical complexity: Biotech processes like microalgae cultivation require simultaneous management of multiple interdependent variables including strain selection, growth media composition and environmental conditions, where changes to any single factor can significantly impact overall performance and output quality.
• Talent retention challenges: Specialized scientific personnel have different motivations and career expectations than traditional beauty professionals
• Regulatory burden: Ongoing compliance with biotech manufacturing standards requires infrastructure and expertise that beauty companies may lack.
• Technology obsolescence risk: Heavy investments in specific biotech platforms could become stranded assets if alternative technologies leapfrog current innovations, given the rapid pace of scientific advancement in areas like AI-powered molecular discovery and automated bioengineering platforms.
• Capital intensity and scale requirements: Biotech facilities require significant ongoing capital investment for equipment maintenance and technology upgrades, while many beauty brands may lack the volume requirements to efficiently utilize biotech manufacturing capacity. This often necessitates serving external customers to achieve economic scale, which may conflict with strategic exclusivity objectives and create potential competitive risks.

The takeaway is that, while these challenges are manageable, they require beauty companies to develop genuine operational capabilities in biotech, not just financial ownership of the assets.

Mark Wuttke CEO Peer Advisor and Fractional C-Suite Partner to Growth Brands

I think this trend is real, and it’s not slowing down, but I don’t think every brand should suddenly go buy their supplier. What we’re really seeing is smart companies asking, “What do we absolutely need to control to stay in the lead?”

For Olaplex, it was the science behind bond-building. For Magic Molecule, it was owning their HOCl production to keep quality tight. Makes sense.

That said, full-on ownership isn’t always the answer. L’Oréal just put more money into Debut, not to take it over, but to stay close to next-gen ingredients and move faster. That’s a different kind of play that’s more about access than assets.

I think we’ll see more of these in-between moves, including investing, partnering and locking up supply, especially in biotech, peptides and clean alternatives.

Done right, this provides brands with speed, better margins and real product differentiation. Done wrong? It’s a distraction, a cash drain or a supplier conflict waiting to happen.

In my opinion, you don’t need to control the whole supply chain to stay in control, you just need to know which parts give you leverage.

Alexander Lorestani Co-Founder and CEO, Geltor

I'm bullish on vertical integration accelerating dramatically over the next decade, but not for the traditional reasons people think about integration. The real story is that beauty's growth engines are evolving. For scaled brands today, it's all about premiumization and emerging market penetration. The next frontier? Expansion into adjacencies like medical aesthetics and ingestible beauty. And what’s hiding in plain sight is that biotech platforms are fundamental to all three strategies.

Here’s my thinking. Premiumization is ultimately about performance, and nothing elevates performance like biotech. For emerging markets, biotech provides globally distributed manufacturing with perfect traceability and sustainability credentials. And for the adjacency play, today's med aesthetics core tech— Botox, hyaluronic acid—is already like 100% biotech. Tomorrow's breakthrough ingredients will be biotech collagen, elastin and biotech fat. Plus, the whole ingestible peptides space where beauty benefits are delivered orally. We’re in the early days of these markets.

As a biotech platform ourselves at Geltor, we're seeing this convergence firsthand. Our biodesigned collagen and elastin are already bridging traditional beauty applications with medical aesthetics and nutraceuticals. We're watching beauty, wellness, and longevity merge into a single uber-category, and biotech is the connective tissue.

Companies are already making these bets. Beyond the deals you mentioned, I'd highlight Oddity's acquisition of Revela. That was a god-tier move. They're essentially refounding how beauty brands operate, transitioning from a chemistry-driven world to an AI plus biotech world. Companies that don't make this transition risk getting Kodak’d.

The playbook isn't new, actually. Nivea, Unilever, Coty, these are all classic vertical integration case studies from the late 1800s/early 1900s when the founders were still building these brands that we should be studying. But what's changed is that running a biotech platform has become dramatically cheaper and supportive of faster paced innovation over the past decade. I could see these brands creating internal incubators powered by rapid biotech prototyping labs and manufacturing resources.

The opportunities create multiple defensive moats. The most compelling is cornered resources—scaled biotech platforms that actually work are extraordinarily rare. You can literally count them on one hand globally. Once you control one, competitors can't easily replicate your innovation pipeline or ingredient access.

From our experience building one of these rare platforms, there's also a process power play here, the operational excellence of integrating biotech R&D with consumer product development creates compounding advantages over time. The cultural alignment between ambitious cosmetics companies and biotech platforms is beautiful. You're bringing together the industry's defining technology with world-class product development and marketing capabilities.

Network effects emerge, too, especially in the ingredient discovery process where each new formulation creates data that improves the next generation of ingredients. Plus, you get scale economies in both R&D amortization and manufacturing efficiency. Then, there are the cost and margin opportunities, plus the traceability and ESG benefits that are becoming table stakes.

But the risks are real. The biggest one? Killing the innovation flame that makes biotech platforms valuable in the first place. If you're just treating this as a supply chain solution rather than building genuine counter-positioning against traditional beauty companies, you've missed the point entirely. The power comes from doing things incumbents can't or won't do because it would cannibalize their existing business models.

Claire Chang Founding Partner, IgniteXL Ventures

I expect the trend toward vertical integration in beauty to accelerate as brands seek to differentiate and fully own their unique value propositions. Biotech-led players like K18 and OneSkin have shown that science-driven innovation can win, while others are acquiring suppliers to control costs and secure inputs.

Looking ahead, this will evolve beyond acquisitions into partnerships and co-development. AI-driven platforms like MetaNovas, which design novel ingredients and materials, make it possible for brands to build proprietary IP quickly and cost-effectively, lowering the barriers to innovation and allowing even smaller players to compete.

For large incumbents, the benefits are clear: supply chain security, faster innovation cycles, differentiated IP and stronger margins. But this shift can also empower early-stage brands, whose agility allows them to adopt emerging tools first, experiment creatively, and carve out entirely new white spaces. The brands that embrace these opportunities will shape the next wave of beauty innovation.

Brian Oleniczak Managing Director, North Point

Over the past few years, we have seen larger beauty players attempt to differentiate their products via unique formulations and ingredients, which has manifested itself in some instances through partnerships with biotechnology-driven ingredient innovators that are pushing the boundaries of beauty and science.

More recently, we have seen emerging and upstart brands follow this trend of partnering and/or acquiring ingredient suppliers in an effort to keep pace with evolving industry trends. The opportunity to leverage proprietary and potentially patented technologies is highly appealing to beauty brands as they look to establish deeper connectivity with consumers, expand wallet share and develop more efficacious products.

Additionally, controlling these unique ingredients through an acquisition of a supply chain partner can create a competitive moat, making it more difficult for competing brands to replicate these products/formulations.

On the other hand, purchasing a supply chain partner may increase operational complexity for a brand, particularly those that have less sophistication and expertise in supply chain dynamics. Furthermore, there may be a conflict of interest, whether perceived or real, if a supply chain partner that is acquired by a brand continues supplying its ingredients/technology to other brands.

This conflict-of-interest dynamic may become more acute for a brand looking to acquire a contract manufacturing and development organization (CDMO) as there is a strong likelihood that the CDMO is manufacturing / developing similar products for competing brands. Once a brand acquires a supply chain partner they may cease doing business with competing brands, though this may diminish the value of the acquired company (e.g., reduction of scale, less purchasing power, lower operating leverage, reduced efficiency, etc.).

Samantha Burd Co-Owner, Lady Burd

I do believe vertical integration will continue in the beauty industry, mostly because I see it continuing to happen every day, and I continue to see the way private equity is impacting every industry, not just the beauty industry.

From purely a monetary standpoint, it makes a lot of sense. Why farm out work to partners and other vendors when you can do it all yourself and own every part of the supply chain? Clients love turnkey, and being able to own every step of that turnkey process makes you the most competitive actor.

Hypothetically, in my industry, contract manufacturing, vertical integration looks something like this:

• Contract manufacturer (CM) buys packaging company so it can offer custom packaging to go with custom products
• CM buys raw material company so it can supply itself with raws
• CM buys 3PL company so it can offer fulfillment and drop shipping to clients
• CM buys marketing/PR company so it can oversee/handle marketing and PR for its clients, fuels their growth and then in turn produces more products for said client as the scale

The opportunities of owning every part of the supply chain are pretty endless. You can price really competitively if you actually own every part of the process instead of having to add a markup on white-labeled services.

However, owning multiple businesses and vertically integrating is risky as well because there’s obviously more to manage, more puzzle pieces and more steps that can fall through cracks. It takes some seriously impressive project management to juggle it all and to juggle it all well.

Isabel Álvarez-Martos Co-Founder and CEO, Cellugy

I think the bigger story at play here is that biotech has proven itself as a necessary engine and a fixture for continued innovation in the beauty industry, whether that takes the form of vertical integration and acquisitions of small companies with great technologies or an overall increase in partnerships, strategic investments and significant transactions involving biotechs. I see all of these on the rise as biotech-derived ingredients and technologies continue to scale.

Though being acquired may not be the goal for many startups, it’s a move that does make sense for the companies that are in a position to make acquisitions of suppliers or platforms that give them an edge. Ownership of the right platform—one that can continue to deliver unique, effective products over the long term—could pay significant dividends for companies that have the distribution channels, relationships and resources that startups today have to work much harder to build from scratch.

The downside is the possibility that the acquisition route could actually result in stifled innovation more broadly, with some of these technologies not being utilized to their fullest potential by not being accessible to a wider range of brands and formulators.

Barbara Paldus Founder and CEO, Codex Labs

Vertically integrating by buying key ingredient manufacturers can give stronger supply security, especially if your revenue is largely skewed to products using this ingredient, lower unit costs, better quality control, faster innovation and higher margins, but it also brings big upfront costs (cost of acquisition can be highly dilutionary), operational and integration complexity, regulatory and antitrust exposure (in the case of large CPGs), and reduced flexibility (if you take a primary supplier out of the market).

With biotech, if companies are dependent on a manufacturer's active or pipeline and the cost of this active is a significant component of their cost of goods as well as the IP of this active is a key component of their differentiation, then acquisition can make sense if market dominance is the key goal, but its long-term success depends on margins, supply risk, capabilities and long‑term strategy.

Alec Batis Co-Founder and Chemist, Sweet Chemistry

Vertical integration will be one of the only ways a brand will be perceived as owning their IP in the eyes of the end consumer. Savvy influencers and consumers will be able to easily find out if a company is using “marketing complexes” of existing ingredients or are simply purchasing technology from a supplier.

Vertical integration could manifest in different ways. One will be to purchase or create your own manufacturing facility. This is a wonderful thing because you can control your product development, manufacturing, quality, etc., but that requires a significant investment that can take away from being able to use marketing levers and slow growth.

Vertical integration of skincare brands with some kind of true R&D will also continue and could manifest in the form of the façade of vertical integration—purchasing “technology” from random popup tech companies selling libraries of technologies.

They will make variations on a theme that can easily be manipulated and become “proprietary” (the new “complex”). Pay your money and get your own peptide so to speak or reach out to a local stem cell bank and buy some stem cell conditioned media to call your own and get the halo of vertical integration.

Buying a supply chain partner allows brands to have control over formulation and production. Prioritization allows for more exploration of development modifications that you don't get at a contract manufacturer unless you can pay more.  Purchasing a supply chain partner that also has the "R" in "R&D" in terms of biotechnology and allows for the ability to own proprietary IP.

The risks that come along with buying a supply chain partner are first, the obvious extra expense. That goes for either manufacturing and biotech R&D. Also, there are not that many to purchase in the first place compared to the number of brands in the market. And there is a lot that can go wrong when merging companies that could greatly affect production and product quality of course.

Lastly, just because you purchase a manufacturer or a biotech doesn't guarantee innovation that will stand out from the crowd or resonate with the end consumer. So, it's a significant investment without a guaranteed return. Plus, you will still be competing against well-established contract manufacturers with decades of SOPs and experience behind them and suppliers/technology companies that have long histories of innovation.

Coming up with technologies that are truly innovative and marketing them effectively has always been an incredibly difficult task. AI’s now promised “new” technologies based on churn/burn variations on a theme will easily be found out and ridiculed in this new age because that isn’t real or defendable point-of-difference IP.

Lindy Firstenberg SVP, Beauty and Luxury, AlixPartners

Beauty was long primed for a shake-up as stale historical differentiators met a brand boom from the last decade of capital influx: goodbye to mono-brand routines and ads with unattainable glitz. Historically, beauty brands primarily differentiated via claims, packaging and marketing. With the rise of the (self-ordained) consumer PhD, ingredient-based claims are being replaced with product-based clinicals, beautiful jars and bottles are being replaced with technology delivery systems, and the eternal youth promised in marketing is being replaced with more realistic (yet, stunning!) possibilities.

These consumer PhDs are asking more than ever of beauty, with heightened demands of efficaciousness and an integrated beauty x health x wellness protocol: hello, hard science. The level of science we have historically seen dedicated to pharmacologicals or medical-grade products is being brought to the land of consumer. Us masses are now seeing molecular mechanisms—exosomes, peptides, growth factors—that have profound cell signaling effects. This is very new and requires a different modus operandi.

For companies to shift their M.O.—owning ground-breaking proprietary differentiation, securing a pipeline to additional profound innovation and ensuring their lab knows how to deliver rigorous science safely—welcome vertical integration. The last several years have shown a rise of vertical integration across the value chain, but it’s not vertical integration for the sake of control. It’s to deliver growth, leveraging the company’s strengths to create an intellectual capital engine and moat. It’s no longer a surprise, but rather a flag in the ground. So, yes, this will continue.

Between consumer PhD demands and companies taking up the sword, there is definitionally true new white space. Consumers are demanding to look holistically at their beauty, health and wellness, and, therefore, their solutions incorporate the spectrum of delivery methods: infusions, injectables, ingestibles, topicals, tools and therapies.

Companies are taking up the sword and testing their consumers’ trust by extending across delivery methods. Just imagine a hair brand that injected growth factors, supplemented ingestible peptides and treated topical bonding molecules. The battle is differentiating with hard science. The war is revolutionarily supporting customers across the delivery methodology spectrum.

More complex operations beget more complex challenges. The biggest ones we see are an aligned, agile operating model and a strong integration of business units post-acquisition. But these are hurdles, not barriers, and ones we overcome with our clients every day. Our world doesn’t have a dearth of dreamers, but the operationalization of new strategies and integration of new businesses is what will deliver the seismic shift to beauty we see coming.

Conrad Debaillon Director of Product Development and Marketing, Cosmetic Solutions

Acquisition of supply chain partners is always inevitable. It happens.  However, while this activity has been given greater visibility as of late, I do not anticipate this trend to increase at a rapid pace.

Here are two factors for a brand to think about:

Strategic fit—I may be asking a very obvious question to consider, but very fundamental: How does the vertical integration of a supply chain partner (supplier, CDMO, etc.) become a strategic differentiator for the brand both short term and long term?

The cost benefits and exclusive access to portfolio, pipeline and capabilities are strong reasons to be excited, but how long are these benefits sustainable? It is crucial to evaluate the long-term benefits and how this potential acquisition strengthens company strategy.

Acquire and nurture versus set it and forget it—Reinvestment in an acquisition is inevitable and necessary. Therefore, it’s crucial to determine if the level of continuous investment post-acquisition is achievable and worth it.

Remember, the strengths of an acquired supply chain partner did not occur overnight, but as a result of years and possibly decades of internal investment. If the acquisition was worth spending the money at the beginning, it should still be worth putting in money long after the sale and integration.

Amrita Bhasin CEO, Sotira

I think this is a trend that will continue for a few reasons. There is substantial competition in the beauty market currently, and transparency in supply chain and environmentally friendly ingredient sourcing is an advantage for beauty companies.

Gen Z is growing their purchasing power and has proven to be a generation that cares a lot about climate, environment and clean ingredients/clean beauty. Apps like Yuka are trending in grocery and beauty stores and consumers are starting to ask more questions about the ingredients of the products they buy, especially for consumables.

When beauty companies integrate, they have significantly more control over their supply chain. If they want to make an ingredient substitution (ex: replacing emulsifiers), a beauty company can do this much easier if they have a direct link or relationship with a manufacturer or maker. The industry is prioritizing clean beauty, and the more beauty brands outsource, the less control they hold and the less transparent they are able to be with consumers as a result.

We are seeing a similar trend in the food and beverage space, where brands are prioritizing supply chain transparency partly due to regulation and partly due to pressure from health-conscious consumers who are criticizing the usage of endocrine disruptors in consumable products.

The risks of purchasing a supply chain partner are around cost and compliance. A beauty brand needs substantial upfront capital to invest into in-house supply chain partners, and by operating such an organization, the brand is on the hook for following compliance within that facility. It is an investment of new hires, people management and supply chain optimization. Not every beauty brand is ready for this or can justify the ROI.

If you have a question you’d like Beauty Independent to ask beauty entrepreneurs, biotech startups, manufacturers, investors, investment bankers and consultants, please send it to editor@beautyindependent.com.