Key Takeaways:
Lipsticks, serums, sunscreens, and every other beauty product are a result of a cohesive and intricate global supply chain. Most beauty products rely on specialty chemicals and advanced materials sourced from every corner of the world. However, especially in 2025, that system is under pressure, if not under siege. The global chemical industry, which has long been a backbone for beauty innovation, is experiencing its weakest M&A activity in years. Coupled with sweeping tariffs and geopolitical uncertainty, this slowdown is reshaping how beauty brands think about sourcing, innovation, and long-term resilience.
According to Young & Partners, just $19.8 billion in chemical deals closed in the first half of 2025, a sharp drop from the $45.3 billion completed in 2024. For context, 2023 saw 75 major transactions, but by mid-2025, that figure had decreased to 32. This matters for beauty because M&A is often how ingredient suppliers acquire cutting-edge technologies, expand into new regions, or streamline portfolios to focus on high-growth categories like personal care.
The Tariff Squeeze
Tariffs have become the single biggest disruptor in the beauty supply chain. In April, the US imposed sweeping duties: 15% on imports from the EU, Japan, and South Korea; 20% on Southeast Asia; and 10% on smaller markets. In August, President Trump’s newest tariffs took effect against dozens of countries. For beauty brands, this translates into higher costs for actives, emulsifiers, packaging resins, and even fragrance ingredients.
“Ingredients will simply be more expensive,” Joe Chang, Global Editor of ICIS Chemical Business, told BeautyMatter. “Some of the higher costs will be absorbed by exporters but also by companies importing these materials and ultimately the end consumer,” he noted.
Some relief exists, however. Titanium dioxide, the white pigment essential to sunscreens and complexion products, was exempted from tariffs earlier this year; however, most other specialty materials, such as silicones for texture, polymers for haircare hold, and peptides for skincare, remain exposed. For mass-market beauty brands that compete aggressively on price, the pressure is especially acute. Even prestige players must weigh whether passing on higher costs risks alienating consumers already sensitive to inflation.
Beauty Ingredients: Resilient, but Not Immune
While the broader chemical industry’s M&A activity has stalled, the personal care ingredient sector remains a relatively bright spot, especially because demand for personal care is more stable. For example, consumers might delay buying a new car, but they rarely abandon their skincare routines.
This resilience has shaped corporate strategy. DSM-Firmenich, for instance, after reporting a very strong H1 for 2025, has doubled down on nutrition, fragrance, and beauty actives, and is divesting commodity chemicals to sharpen focus on resilient, higher-margin categories. Similarly, Solvay separated its specialty businesses, including personal care under Syensqo, from its commodity operations. Moves like these underline the premium that beauty still commands within the chemical sector.
However, valuations have cooled from their peaks in the early 2020s. Analysts point out that even beauty ingredient deals are closing at lower multiples, reflecting a very cautious investor mood. For buyers, this presents opportunities. For sellers, it means carefully timing exits to avoid fire-sale optics. “Personal care ingredients are a much steadier business than commodity chemicals, so these assets tend to command higher demand and valuations in M&A. Transactions in beauty and food ingredients are much more resilient,” said Chang.
Another clear trend is geographic diversification. Global suppliers are now investing more in regional hubs to serve local markets directly. For beauty, this represents both a challenge and an opportunity. On the one hand, global formulation consistency becomes more challenging when inputs vary by region. On the other hand, local sourcing can speed up innovation tailored to specific cultural preferences. For example, a US sunscreen brand might benefit from a more secure domestic supply of UV filters, while a Latin American haircare company could gain quicker access to regional botanicals without tariff penalties.
“Brand owners should increasingly look to diversify their sourcing, given tariffs and geopolitical risks,” Chang advised. In practice, this means building multiregional supplier networks rather than relying on a single global hub. Beauty’s growing fascination with indigenous and natural ingredients may segue neatly with this shift, marrying risk mitigation with marketing appeal.
Private Equity: Patience in Beauty’s Favor
Private equity firms, which once churned chemical assets within three to five years, are now holding onto them longer. Uncertain valuations and higher financing costs have slowed exits across the sector. For beauty, however, this is less of a red flag. Specialty personal care ingredients are attractive growth businesses, and PE owners tend to invest in expansion and innovation rather than cost-cutting. As Chang puts it, “Private equity owners of these businesses will want to grow them [chemical assets], rather than just cut costs.”
That’s particularly relevant in fast-evolving categories like biotech-derived actives, microbiome-based skincare, and clean-label polymers. These are the spaces where PE-backed ingredient players are likely to double down, anticipating strong long-term demand from both beauty brands and consumers. The biotech beauty company, Debut, raising $20 million is a prime example.
Unlike commodity sectors, personal care rarely produces distressed assets. In Europe, where high energy costs and structural challenges have pressured chemical companies, large players like BASF, SABIC, and Dow are shedding assets. While most of these sales involve commodities, carve-outs occasionally include businesses with crossover relevance to the personal care sector. For savvy investors or suppliers, this could be a chance to acquire niche capabilities at adjusted valuations.
Most analysts see 2025 as a transitional year, with a potential rebound in 2026. If tariffs stabilize and interest rates ease, the backlog of delayed deals could finally clear, releasing capital into specialty segments like beauty.
For beauty brands, the takeaway is clear: resilience and adaptability are paramount. Those that invest in diversified supply chains, nurture regional partnerships, and stay alert to carve-out opportunities will be best positioned to thrive when the market rebounds. After all, beauty is one of the few consumer sectors that consistently weathers economic downturns. The challenge now is to ensure that the behind-the-scenes supply chain remains as resilient as consumer demand.
