Ulta Beauty Eyes Attractive Growth Opportunity in Mexico

After Abandoning its Northward Expansion Plans, Ulta Beauty will Partner with Grupo Axo to Enter Mexico in 2025

What’s in it for Ulta Beauty and Grupo Axo?

On the heels of another strong year, Ulta announced last week that it will expand into Mexico in 2025 via a joint venture with global brands operator, Grupo Axo. This represents a fairly new niche for Grupo Axo, which mainly provides apparel and footwear franchising and speaks to how strong both corporations consider this opportunity. Ulta CEO Dave Kimbell has said, “The Mexican beauty market is sizable, growing and has significant beauty opportunity… Our research suggests there is a healthy awareness of the Ulta Beauty brand with local beauty enthusiasts, and we also see strong engagement in stores located in geographically adjacent markets.” (Retail Dive).

Our Take on Ulta’s Move into Mexico

From our perspective, expansion into Mexico presents a promising opportunity for Ulta due to favorable economic conditions and Ulta’s ability to uniquely serve the Mexican market and consumer. From a macro perspective, Mexico has recently seen: 8 consecutive quarters of GDP growth, remittances from the US approaching all time highs, an appreciating peso, inflation stabilizing, a strong labor market, moderate, continued population growth with a large population size. Furthermore, looking directly at the Mexican retail industry, we’ve seen sales continue to show strong growth.

Delving into Ulta’s specific advantages, we see several. To begin with, Mexico has a very young population with nearly 50% of the population being under the age of 29 years old.  Secondly, the middle class continues to show strong growth as Mexico develops as a nation. This is advantageous for Ulta not only because they boast an assortment that spans the full range of price points (from mass to prestige) but also because there are not as many strong beauty competitors catering to the masstige price points in MX.  The main international competitors in Mexico are Sephora and Sally Beauty.  Lastly, Mexico is an incredibly social country with 70% of the population using social media and 62% using social media for brand research compared to just 34% in the US. This bodes well for retailers like Ulta, which have already established a strong and active social media presence with millions of followers on their Instagram, TikTok, and Facebook accounts.

Taking Stock of Market Potential South of the Border

Back in 2020 Ulta had planned to expand into Canada before backing out of the initiative to “prioritize growth of its U.S. operations.” Now four years later, with organic growth in the US expected to moderate, the beauty giant is turning to Mexico as its next major growth vehicle. All in all, Ulta has a tremendous opportunity in front of them, and we will have to wait and see if they are able to execute and capitalize on it through their strategic partnership with a global brands operator that knows the Mexican market.

Is your company considering international expansion or strategic growth plans within Mexico?  McMillanDoolittle has advised retailers, brands, and solution providers on growth strategies in the Mexican market for over a decade. Please contact us for a complimentary consultation or to schedule an immersive presentation covering retail trends and innovations dominating the Mexican marketplace.