Why food giants are pivoting to beauty

Why food giants are pivoting to beauty summary

• Food companies shift to beauty seeking higher margins and stability
• Beauty markets offer pricing power and stronger consumer loyalty advantages
• Ingredients suppliers leverage fragrance expertise to access defensible premium categories
• Food businesses face commodity volatility and heavy retailer bargaining pressure
• Companies invest in bioactives and wellness to enhance portfolio resilience

Late last year, Unilever divested its ice cream brands. The vast spin-off became the Magnum Ice Cream Company, and from one moment to the next, the world’s biggest ice-cream company was born.

Unilever’s strategy has been, if not explicitly to move away from food, at least to put greater emphasis on other areas, such as personal care, wellbeing, and beauty. CEO Fernando Fernandez even repeated this as something of a mantra: “more beauty, more wellbeing, more personal care”. Food is curiously absent from this list.

Meanwhile, ingredients supplier DSM-Firmenich recently divested its animal nutrition division, in an effort to move the company closer to nutrition, health and beauty.

Another ingredients company, IFF, even has plans to shed its entire food portfolio. Despite food bringing strong sales, it remains the company’s lowest margin business.

Many other ingredients suppliers, such as Givaudan, Roquette and Symrise, have portfolios involving both food and beauty.

Why are companies working in food – both FMCG giants and ingredients suppliers – also attracted to beauty? And why are some pivoting?

What explains the shift?

For both Unilever and DSM-Firmenich, the shift to beauty is about “profit pools and strategic focus”, says Nandini Roy Choudhury, principal consultant for food and beverage at analytics group Future Market Insights.

For Unilever, the shift has clear advantages. “Food is a scale game with thin margins and intense retailer pressure”, explains Choudhury, while beauty offers pricing power, stronger brand loyalty, and faster innovation cycles.

“Consumers are willing to trade up for perceived performance – whether anti-aging serums or premium haircare – in a way they rarely do for packaged food."

For DSM-Firmenich, the company’s merger (the 2023 merger of DSM and Firmenich which gave birth to the ingredients supplier in is current form) was what put beauty to the forefront of its mind, Choudhury suggests.

After the merger, the company’s strongest competitive advantage sits in frangrance, sensory science, and high-value bioactives.

“Divesting animal nutrition simplifies the portfolio and doubles down on areas where intellectual property, formulation expertise, and regulatory know-how create defensible margins.”

For IFF, it’s simply that beauty offers better margins than food, despite the latter’s continually strong sales.

The strategic advantage of beauty

It is, however, a broader trend beyond these two companies, with ingredients suppliers in particular seeing beauty as an attractive market.

Flavour and fragrance companies like IFF are putting the emphasis on fragrance, which has higher margins than food flavours.

Agricultural and food science companies, meanwhile, are “leveraging their expertise to supply beauty ingredients“, says Choudhury.

The advantages that beauty presents, especially over food, are many. Food is exposed to commodity volatility, competition from private label, and retailer bargaining power, Choudhury says.

Beauty, on the other hand, can often provide premium pricing coupled with consumer willingness to pay; it can have lower raw material cost sensitivity compared to retail price; faster trend and innovation cycles; and even better brand storytelling.

“You can sell hope and performance at a premium; calories are harder to upscale.”

What does a beauty pivot mean for food?

The trend is likely to continue, suggests Choudhury.

“We may see more food brands spun off or consolidated under specialists and private equity, leading to a more fragmented ownership landscape.”

Even in food itself, companies will shift towards health, function and wellness – something we’ve already seen with the substantial success of the functional food market. Pricing power is stronger here as well, she says.

Investments will increasingly go towards bioactives, fermentation-derived ingredients, and delivery tech that can serve both nutrition and personal care.

But this doesn’t mean the “wholesale abandonment of food”, she stresses.

“Food remains essential, recession-resilient, and scale-driven – so it will be optimized rather than abandoned.

“The real shift is philosophical: companies are moving from feeding consumers to optimising how they look, feel, and age."