Such pairings are becoming increasingly common as consumer-product giants like Nestle, Unilever , L’Oreal SA and Diageo Plc seek growth beyond the stagnating megabrands that underpinned their strategies for decades.
Doubters can point to The Body Shop , the self-styled maker of ethical cosmetics that L’Oreal acquired in 2006 and sold this year to Natura Cosmeticos SA of Brazil after it languished under the French company’s ownership.
The challenge for the new owners of niche brands is to strike the right balance between milking the acquisitions for growth and keeping them separate to avoid alienating customers who balk at corporate control.
After Diageo Plc spent as much as much as $1 billion on Casamigos, a tequila whose backers include the actor George Clooney, analysts questioned the valuation of a brand created only four years ago.
Nestle has been adapting the subscription strategy to its bigger brands, as it’s recently added such a service in France and the U.K. for Nespresso to try to keep customers loyal amid a rising number of knockoffs.
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