The move by the global consumer and cosmetics products giant Colgate-Palmolive to acquire miniority statke in Bombay Shaving Company has led to some serious doubts and criticism due to the nature of transaction that the duo has engaged into. A report.
The recent investment made by the global consumer products giant, Colgate-Palmolive into the men’s grooming products start-up, Bombay Shaving Company, has caused some stir in the market with industry observers speculating about the possible reasons behind such move. The investment in the range of Rs 18 crore amounts to the acquisition of a minority stake of 14 per cent in Bombay Shaving Company by Colgate-Pamolive along with a few other investors.
Expansion of men’s grooming portfolio
With this acquisition, the market leader Colgate-Palmolive has effectively expanded its product basket in the men’s grooming segment. Considered by many as a promising startup, Bombay Shaving Company has entered one of the fastest growing niches—men’s grooming products segment—in India. Its product portfolio covers categories such as shaving razors, shaving brushes, shaving creams, shaving blades, beard serums, beard butter, beard growth oils, moustache wax, beard care and moustache care kits, beard shampoo and conditioners, beard brushes and combs, bath soaps and accessories, and skin care solutions such as face cleansers and moisturisers.
On the other hand, Colgate-Palmolive is in to a wide range of products such as Thermal Spa., Liquid Hand Washes, Surface Care products, Toothbrushes, Shower Gels, Tooth powder, Shower Crème, Shave Preps, Skin Care products, Toothpastes, Whitening Products, Mouth Ulcer Treatment, Sensitivity Treatment, Specialty Cleaning, Gingivitis Treatment, Tooth Whitening, and Fluoride Therapy range, to name a few. Bombay Shaving Company’s stake can augment to the company’s existing product line-up, at best.
A promising start-up?
Founded in October 2015 by Shantanu Deshpande along with a core team of experts from diverse domains including social strategy, FMCG, channel alliances, and global consultancy, Bombay Shaving Company raised Rs 4 crore in funding from angel investors in August 2016. In one year, it raised another Rs 14 crore capital from Fireside ventures and angel investors in August 2017. And now, in exactly one year’s timeframe again, the company has managed to secure a fresh round of funding of Rs 18 crore from Colgate-Palmolive, Fireside Ventures, and angel investors in exchange of a minority stake of 14 per cent.
The men’s grooming space has been in the limelight for quite some time now. The consumer and personal care products heavyweights have been looking to expand their presence in this niche segment and augment to their existing product lines and customer-bases. In the past, there have been two such big-ticket acquisitions in this category. In March this year, Marico acquired 45 per cent stake in men’s grooming brand, Beardo for Rs 50 crore. Emami acquired 30 per cent stake in men’s grooming brand, The Man Company (TMC), through Helios Lifestyle Pvt Ltd (HLPL), a transaction that is slated to be complted by December this year.
Doubts and critism
While there are no doubts raised about the selection of target by the global consumer products, cosmetics and personal care giant, the speculation is rife about the manner in which the acquisition of minority stake has been carried out. Colgate-Palmolive has an established presence as well as a strong brand recall in the Indian market.
However, surprisingly, despite its arm in India having a deeper understanding of the domestic market, Colgate-Palmolive, USA has routed its investment in another very Indian cosmetics and personal care company (i.e. Bombay Shaving Company) through its Hong Kong-based subsidiary, Colgate-Palmolive Asia Pacific.
What’s more, Colgate-Palmolive is listed on India’s stock exchanges—on both, NSE as well as BSE (Stock symbol on both exchanges: COLPAL). However, the Hong Kong subsidiary of the global consumer products behemoth is an unlisted company in India. The global brokerage firm, CLSA has expressed its concerns over the manner in which the global cosmetics and consumer product company has carried out the transaction.
“On the face of it, the acquisition is small but raises concerns on governance due to category overlap. Given Colgate India’s local understanding and strong distribution muscle, acquisition by the listed co would have made more sense, in our view,” mentioned CLSA in a note it made public.