Hidden within combined sales of more than $25 billion at industrial-gas suppliers Air Liquide SA (AI) and Air Products & Chemicals Inc. (APD:US) are small cosmetic-ingredient units prized by the parent companies for their glowing growth.
For Air Liquide’s Seppic business, whose offerings include algae-based additives for skin and hair products, being part of its parent’s health-care division brings benefits, Seppic management board President Armelle Levieux said in an interview. There’s some overlap in the client base, and as a medium-sized business in a big company, Seppic can remain agile. Air Products of the U.S. is taking a similar approach with its unit, said Solomon Lemma, global business manager for specialty additives.
Ingredients for personal-care products have attracted companies including BASF SE (BAS) and Cargill Inc. that want to diversify and get closer to consumers. While demand for personal-care products has made potential acquisition targets of units that could be prised from larger groups, Air Products and Air Liquide are nurturing the businesses rather than offloading them. Levieux and Lemma were both scouting for innovations at the In-Cosmetics fair in Hamburg this month.
“Air Liquide wants us to grow,” said Levieux. “While we are not industrially integrated, we are fully supported.”
Among the larger transactions in the personal-care industry was BASF’s $3.8 billion acquisition in 2010 of Cognis, which was folded into its care-chemicals division and yielded disappointing results until management changes and cost cuts were made, and the company took a deeper look into how to compete better in individual markets.
“You’ve seen it with several specialty chemical acquisitions,” Air Products’ Lemma said, without giving examples. “The business acquired gets lost in the mix and you lose that flexibility. That’s a story that has been repeated. You need critical mass but in the right space.”
Air Products’ personal-care unit is a sub-$100 million operation in the performance-materials division and specializes in delivery systems needed for the active ingredients in skin-care, sun block and cosmetics. The other three business units in the division have been built up through acquisitions and Lemma said his unit is poised to follow suit.
“We started from zero as a business startup six or seven years ago, now we’re looking to establish critical mass,” Lemma said. “There are certain gaps in the supplier space.”
Air Liquide’s Seppic has opened offices in Brazil, Colombia, Singapore and Dubai in the past five years to broaden its customer base for ingredients for pharmaceuticals and vaccines as well as personal-care goods.
To complement manufacturing sites in Asia and Europe, the company is considering adding a plant in Latin America when the business there grows to a sufficient size, Levieux said. It’s following the international expansion of key household and consumer goods suppliers such as Procter & Gamble Co. (PG:US) and carving out a local client base increasingly focused on the top end of the market.
While cosmetics account for more than half of Seppic’s sales, and will remain the core of business, its scientists have been working on new formulas of polymers and emulsifiers for hair products. That strategy is backed by Air Liquide’s management.
“I don’t feel like I have to fight my corner,” said Levieux. “I’m presenting my roadmap to the general management like any other.”
Seppic could make acquisitions, and the In-Cosmetics fair was an opportunity to window-shop for new technologies, Levieux said. Lemma was also scouting the stands of additives, pigments, oils and glitters.
“We look at what is new out there in market trends and who are the key players and who are the potential targets,” he said.
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