International consumer goods maker Sara Lee has confirmed that it is selling its direct sales cosmetics business to Tupperware for $577 million. The move forms part of the company's bid to redefine its over-stretched product portfolio and turn around its financial fortunes.
The division, which had total sales of $470 million in 2004, markets cosmetics, skin care products, fragrances, toiletries and clothing in 18 countries. Brands such as Avroy Shlain, Naturcare, Nutrimetics and Nuvo Cosmetics, form some of the most popular cosmetics direct sales business in markets such as South Africa and Mexico as well as a number of markets in South America.
The transaction has been approved by the executive boards of both companies and is due to close in the second quarter of 2006, providing the deal meets with international regulatory approval.
"This divesture is another key step in simplifying our organization and concentrating on driving growth in our core food, beverage and household products business," said Brenda Barnes Sara Lee CEO. Barnes went on to say that the sale represented a milestone in the company's Transformation Plan, a bold measures which entails completely realigning the company's current operations.
Throughout the 1980s and 1990s the company diversified widely, resulting in a business portfolio that strayed a long way from its core cake-making activity. As well as cosmetics and toiletries, underwear, shoe polish and air freshner products have resulted in operations that many industry experts say provide no or very little room for all-important synergies.
The sale of the cosmetics business is part of a company overhaul that will see it sell off businesses that currently account for around 40 per cent of total earnings. However, the company still believes that it will be able to increase sales from a current $1.2 billion to $1.8 billion by 2010 - an ambition that many experts believe will be difficult to achieve.
Now it is another struggling company that is picking up the reins. Florida-based Tupperware, the name that became synonymous with plastic kitchenware from the 1950s onwards, is now looking for new ways to grow its business after its famous housewife parties became de rigueur.
Tupperware says that it sees a greater future in the direct sale of beauty products, and in particular it is aiming to latch on to strong beauty sales growth in the developing markets of South America and Asia.
The deal is expected to boost the current share of the company's cosmetics revenue from 12 per cent to 35 per cent of its total $1.2 billion sales last year. The company's beauty division trades under the name Beauty Control, selling skin care, beauty, wellness, sun care and men's cosmetics through its international team of direct sales representatives.
Based in Dallas, Texas, the division has concentrated its recent expansion on the South American market, where it is aiming to become a top three player.