Dude, Where's My Billion-Dollar Brand? (w/ Daniela Morosini)

Divine Skintervention brings on our first Heavenly Thottie: Daniela Morosini from Business of Fashion! This episode tackles “How To Build A Forever Brand” as Daniela walks us through what successful, long-term success looks like in the current beauty landscape, examples of brands who’ve shown what this strategy looks like in various sectors of the industry, and discusses mistakes that brands make that leads to their closures.

Follow Daniela Morosini for the latest and greatest updates on beauty industry news: https://www.instagram.com/danielakmorosini

Case Study | How to Build a Forever Beauty Brand: https://www.businessoffashion.com/case-studies/beauty/case-study-how-to-build-a-forever-beauty-brand/

Ramón
https://www.instagram.com/glowbyramon/
https://www.tiktok.com/@glowbyramon
https://www.youtube.com/glowbyramon

Angelo
https://www.instagram.com/dermangelo
https://www.tiktok.com/@dermangelo
https://www.youtube.com/dermangelo

Transcript

SPEAKER_01 0:04

Hi Angelo. Hi Ramon. How are we doing today? Great spok brows, right? Oh my god.

SPEAKER_02 0:11

Lips tight. Never beating the allegations. Never. We just had the Sephora sale. And I find that when this sale comes along twice a year, people really have a lot to say about it. I've heard some people say, unless you have Rouge, it's not worth it, or this, that, and the third, or it promotes overconsumption. I do want to get your take on it, but you know, before we start, full disclosure, I'm on Sephora's Derm Board.

SPEAKER_01 0:43

Sephora Squad alumni. We work with the brand a lot.

SPEAKER_02 0:47

Yeah. So clearly, you know how we feel about it, but thinking about these sales more generally, like what's your take?

SPEAKER_01 0:54

Well, girl, a discount's a discount. I don't think anyone can be above a discount. But also, I feel like with the way we do content and product recommendations, people want recommendations on every price level in every retailer. So we never want to discount Sephora. I used to work at Sephora. I love going into Sephora, especially being able to go touch, feel, see, and having that sensory moment with a product before purchasing, getting a sample. So I think being able to still recognize the importance of a Sephora sale, the utility of that, because that's maybe the only time of year or the two times a year, people actually are able to go to Sephora and really ball out, get everything they need as opposed to uh a restock here and there on like one or two items the rest of the time of the year.

SPEAKER_02 1:35

Yeah, I mean, if you're also like very frugal, they run sales on stuff throughout the year too. So it's not the only time that stuff goes on sale, but it's the only time the entire store is on sale, which, you know, to your point about bawling out, there is something to be said about trying new things. Or in my case, I actually shop the Sephora sale. Like I don't get everything for free. So um I actually use it as a time to restock on things that I go through quite a bit. And for me, that tends to be hair products. I get plenty of skincare in PR, but it's like if I'm looking for new makeup or if I have hair stuff that I'm very loyal to that is sold at Sephora, that's my time to shop it. So, you know, there's a way to do it without overconsuming, I think. Um, and in addition to that, I think uh it does in a way support brands if you're shopping indie brands. I think the relationship between retailers and small brands is really interesting. Um, retail is kind of dying.

SPEAKER_01 2:44

And also the role of an indie brand in a retail space is very different than a conglomerate focused brand in a retail space. When you're going in indie, if you're not aware, they're taking 50% of your margins, which is a lot. If you don't have a lot of backing, and I mean we saw this year, not to like drop names or good examples, and different retailer, but good light, they had a close down. They were at Ulta. It was like a Korean-inspired focused brand. And David, the founder is basically like, unless you got 10 million in backing, surviving in a retail environment is not easy. And it you have to have people on the ground in store actively promoting and selling and marketing your product. You have to be able to have the money to fund where in the store you are for visibility. So the margins, the necessary funding to do well, and also just like having hopefully the viral success of people organically coming to the store, recognizing your brand and your product, it's really hard. I've heard that it takes five years to really be profitable in a retail space right now, which for an indie brand, that's a long time.

SPEAKER_02 3:46

Yeah, and I mean for people who may not understand why it costs so much money to go into a retailer like an Ulta, it's because partially what I've heard especially about Ulta, and they have, I think, the biggest footprint of any beauty retailer, is they want to launch a product in almost all of their stores immediately, or many of them. So it's not like they're testing out an indie brand in a hundred stores. They want to put you on track to get into all of them. And the cost associated with that includes things like trainings for the staff so that they know how to sell your product, the fixtures that everything goes in, and all of the signage that goes with it, the brand has to pay for that. So people may think, oh, well, they're buying all this product from you, like, isn't that just immediately making money? The margins are smaller, you do have kind of a big upfront investment, and you have to make sure that you have the cash flow to be able to provide product for all of those stores, not necessarily immediately, but quickly. Uh, because you know, if you end up selling out in an Ulta or a Sephora, they're gonna want to place another order. And if you're slow to fill those orders, they're gonna eventually drop you because they're giving you shelf space and they have nothing to sell there. So it is a very difficult landscape out there. And I think also because, as we alluded to before, the amount of retailers that there are out there is shrinking every year. Um, uh, this is something that we've seen hit the fashion industry really hard. And I think it's coming for the beauty industry too, even though there's been a boom, you know. Notice how we only mentioned two names so far. There are other smaller retailers that either have it in-person or online outposts.

SPEAKER_01 5:46

And truth be told, I don't know the full tea and the whole story behind like drugstore, a Target, or a Walmart, for example. My awareness is really the Sephora Ulta of it all. Yeah.

SPEAKER_02 5:56

Um, yeah, and a lot of people will say that if you want to support these brands more, buy from them directly because they get more of a margin. And that is true if you're aware of them. But for brands, being in these retailers can do so much for them as far as brand awareness and creating loyal customers and that regular stream of orders from these retailers. So if it works out, you know, you could really hit it big. And we have seen some brands that have had success after going into a Sephora or an Ulta that is long-lasting, even though, you know, we do see their assortment change quite a bit.

SPEAKER_01 6:41

I mean, to Angela's point, especially from the beauty perspective, there's the Ulta and the Sephora. They're very different environments, very different vibes. Kind of the overarching mentality is you go to Sephora for the prestige, you go to Ulta for the presence across the country. Sephora is a more urbanly located. Ultas are like in middle America. You get a lot more doors, a lot more visibility. And that's why you see a lot of brands do the exclusive as Sephora for like a year or two, and then they very quickly expand into Ulta because it's just more doorways, more visibility. But you kind of need that rise in notoriety and cultural awareness first. The retailers, a lot of times they're not giving you resources, so you really gotta hustle and figure out and make it work. And yeah, that's the big, the big thing when it comes to these brands. But speaking of, we're focused on skincare. Most of the PR we do get is skincare focused. So therefore, we are buying a lot of our makeup, a lot of our hair care. When you're at the Sephora sale, what do you usually buy? Or what was your big purchase this year?

SPEAKER_02 7:37

I did order um some new makeup to try out. I do go through and see what's popular to see what I can test out to talk about on my channel. Remembering off the top of my head, because my order hasn't arrived yet, I did get the Milk Makeup Hydro Grip Concealer that a lot of people were talking about. Haven't seen that. Uh, because I do love the skin tint. I did restock on my Oribe dry texturizing spray and grandiose hair mousse because those are things that I use consistently and I will always empty.

SPEAKER_01 8:12

Were you just using that one? The spray?

SPEAKER_02 8:14

No, that was something else. Um, and what else did I get? Yeah, it's it's things like that. It's either I'm trying out new stuff. I think I got a palette from Dior, which is supposed to be like highlight and blush and whatever in one. Um I'm not a makeup expert, as you may be able to tell. Uh, but you know, I'm playing. I'm playing a little bit more. What did you pick up?

SPEAKER_01 8:48

Um, I am really complexion forward. Right now, I'm really feeling. So if you're not aware, there's been a discontinuation of something called cyclopentasyl oxane in the EU. So as a result of that, a lot of the brands in the US are formulating without it. The big one to do it first was Armani with Illuminous Silk, which I'm wearing right now. Gorgeous finish, gorgeous undertones for all of skin. Um, so got a restock of that. I also love hair. Ceremonia is one of my favorite hair brands at Sephora just because it smells delicious. So their guava line is my favorite. I've talked about their like leave-in spray conditioner a lot, especially because my hair is getting longer now for summer. Fragrance is also a big one. Um, and just playing around, Fleur, love fleur a lot. Commodity. I feel like people don't talk about commodity enough. Their milk. If you like that milky marshmallowy cream scent, it's one of my favorites. And then Cyclar is Natsaphora. And I've only really explored a couple of the scent lines and a couple products from Cyclar, so it's really like expanding out into that.

SPEAKER_02 9:47

Favorite Cyclar scent to Vanilla Verb.

SPEAKER_01 9:50

But I've only tried the Santal, the Vanilla Verb, and the Bergamot. And I literally only got one product in each line. So it's both trying the scents and trying the products. Love the body oil, love the feel of the body wash, actually. If you like the Gleanser or the Nuterium hyaluronic acid body wash, very similar vibe and plus same umbrella company. But um, I hate the bergamot in that scent.

SPEAKER_02 10:13

So I was about to say, my favorite that I've tried so far is the bergamot bond.

SPEAKER_01 10:18

It's too bright, it's too, especially in the body wash. I know depending on the vehicle of the actual product, the scent does shift slightly in the body wash. It's just so like brassy, so bright to me.

SPEAKER_02 10:28

Well, I feel like their body wash is a little bit more drying for me than some of the other ones that come out of that incubator. But you know what? Different skin, different seasons, like I wouldn't personally use that on me during the winter, summertime, yeah.

SPEAKER_01 10:46

I will feel that. And my thing is it out of the three that I mentioned earlier, prequel, Deterium, and the cycler one, the cycler one is the lightest weight one, which is why I like it because the minute I feel like a slug, I want to like crawl out of my skin.

SPEAKER_02 10:58

The film?

SPEAKER_01 10:59

It just feels like slimy.

SPEAKER_02 11:01

Okay. You don't want to feel slimy like a slug? You don't want to be greased up.

SPEAKER_01 11:06

I don't want to be greased up because I want to be a glazed donut.

SPEAKER_02 11:11

I feel like we're appropriating glazed donut. Um, and you know what? Maybe we should be the rightful owners of that whole concept.

SPEAKER_01 11:21

Not too much, because there was a whole thing. I think technically the mother of Glazed Donut was Tara Willis to me.

SPEAKER_02 11:28

I love her.

SPEAKER_01 11:29

Exactly. And I think she was the first one to really do that. We give credit where it's due. Hi, Tiera. Um, but to me, she's like the founding mother of Glazed Donut Gang.

SPEAKER_02 11:37

She is. And we could be your children. We should we should have her on.

SPEAKER_01 11:40

We should. She's local.

SPEAKER_02 11:42

Yeah.

SPEAKER_01 11:42

Tiara Hollis. Tiara. So we're here today with a heavenly thoughty, a guest star. We're introducing Daniela Morosini from Business of Fashion.

SPEAKER_00 11:52

Yeah, you guys left the back door open and I just shimmied on it. I hope that's okay.

SPEAKER_01 11:56

It's Queens. You never know what to expect over here. But give us a little bit of background intel as to what you do, what you're about, your social security number.

SPEAKER_00 12:06

I have one of those now, which is great.

SPEAKER_01 12:08

Um You can't tell from the accent. She's foreign.

SPEAKER_00 12:11

Yeah, I'm I'm in Portuguese. I'm his male order bride. Um, so I work in the business of fashion. We have a team called the Business of Beauty, and we cover everything to do with the industry of beauty. So trends for sure, but also the biggest companies, what they're doing, why their stock prices are up, why they're down, how people are shopping, and why.

SPEAKER_01 12:27

So from the cold open, you've gathered. We're we're talking about business, the role of brands right now in the current landscape, and realistically, like what it looks like starting an indie brand, scaling up, growing, or just trying to survive right now. What's what's that landscape look like?

SPEAKER_00 12:45

It's quite tough. I think I was chatting with my editor earlier this week, and someone had said to her the same thing another person said to me, which is I feel like all I'm reading about right now is fire sales, closures, divestiges. It's a really hard landscape. I think the funding environment has changed a lot, the cost of growth is really high. And I think succeeding in retail is really difficult. I know you guys were talking about Sephora earlier.

SPEAKER_01 13:05

We were basically saying how, like, going into Sephora, especially as an indie brand, you're giving up 15% of your margins, 50% of your margins. And profitability in that landscape, to be profitable, is like five years minimum.

SPEAKER_00 13:20

I think what's really tough is when you get um a big retailer interest in you, it's so great and it's an opportunity to really scale up the brand. But sometimes they put in an order volume that is so big that you as a founder may not have the funds or the inventory to actually supply that. So then maybe you have to go out and get another line of credit or broker some kind of agreement. And then before you know it, even before you've launched in the retailer, you're now in a little bit more debt. Now, usually that kind of offsets over time and you're fine. But if you don't get the cutthrough, if you don't have the success you were hoping to have quickly enough, things can get a little dicey.

SPEAKER_02 13:52

Do you think uh that there has been some sort of a fallout from just saturation in the market? Because I feel like there were brands popping up left and right, especially around the pandemic era, and now we're almost seeing the pendulum swing back the other way. Like, how did that happen?

SPEAKER_00 14:12

Yeah, and this is very timely. We just published uh a case study at Business of Fashion called How to Build a Forever Brand, and we were looking at this because you're completely right. It felt like coming out of COVID, everyone and their mom was launching a brand, and now that seems to have slowed down and we hear more about the closures. I think that's just something to be said for when there's more competition, there's more competition and it's harder to grow. But I think a few other things have happened. So the first thing is the funding has changed. You know, after COVID, there was this sense that everyone should be investing in consumer brands, particularly beauty, even if they've never invested in them before. So a lot of tech investors got involved in beauty brands and they have a different kind of growth algorithm and expectations from the brands. Some of those investors were great, some of them didn't really know what they were doing, and they saddled the brands with really unfair expectations and they could never possibly live up to them. I think people have got a little more selective when they're spending. So this expression we use called premiumization, which is that a company can drive growth literally through making the products more expensive. They might make them a little better or a little fancier too. I mean, as a chemist, I know your definition of better is a little different. Um, but they kind of just reached a ceiling where people were like, oh, I'm actually not gonna pay anymore. Like you've pushed this price up. Like we've seen this happen in luxury, right? Like all the luxury brands put their prices up and up. People get to this ceiling where they're like, I'm not gonna pay any pay this anymore. And the retailers are saying that they won't pay this anymore. Like last year, ELF wanted to increase their prices literally by a dollar, right? Because of the tariffs. And they said on their earnings call that originally some of the retailers were really reticent to take on even a dollar price increase. So there's that as well. I think the other thing is the lack of differentiation, right? There's a lot of brands that kind of feel, or products I should say, that feel like also RAND. So, for example, in the case study, we talk about Summer Fridays and Road launched two really, really great lip products, right? Really glossy, gorgeous, balmy lip products. And Patrick Star's one size, his setting spray, huge breakout success, like absolutely revolutionized the category. In the years that have followed those brands launching those products, it's kind of unsurprising that a lot of other people have launched like a shiny, glossy lip balm or a setting spray. Did all of those brands have a need to launch that product? Is it truly differentiated? And they might be really good products, but when there's already so many things that look the same in the market, you kind of look like an also ran, you know?

SPEAKER_02 16:27

Yeah, I feel like every brand is coming out with a lip product now. Um, and I have this theory that, you know, since they're usually priced lower than most of their assortment, they think that that's going to be a gateway for the customer or an offering to somebody who can't afford something else. And it definitely makes me think of luxury fashion, where basically, if y'all don't know, part of the reason that small bags became so popular is because as prices went up and up and up on luxury goods, the only way to offer people something cheaper, since it would look bad to drop your prices, is to give them something smaller. So in this way, I feel like we're seeing it in beauty now too, where every brand has a lip oil, a lip balm, or something like that, even brands you wouldn't even expect it from.

SPEAKER_00 17:18

And also it's a way to attract a younger customer because Gen Alpha and like the Sephora tweens have been driving a lot of this spending. Um, but I think you just get to a point where there's a lack of differentiation and that people or the brands have kind of lost sight of who their original customer was. And this is something we did a big deep dive on in the case study because I think the brands that have stood the test of the time, and one that I spent a lot of time with is The Ordinary, which is a huge global brand now, they never lost sight of who their customer is. And their product offering is really disparate. Like they sell everything from like a lash hole serum to like conditioner and like serums and everything. When I spoke with their co-founder, she said to me that their customer, who they were targeting, it was someone who was interested in the science of skincare. And when you actually like sit with that, that cuts across a lot of different age demographics, income demographics. You know, like you could be someone who's interested in the science of skincare because you're really interested in beauty, or you could be someone who's interested in the science of skincare because you don't care about the smoke and mirrors of beauty and you just want stuff that works and you want to know why you're buying what you're buying.

SPEAKER_01 18:22

You mentioned that's like a big part of the case study or a big um point in the case study. What was like the biggest find or the biggest surprise in this case study when looking at forever brands?

SPEAKER_00 18:31

I think something that stuck out to me about both the ordinary and Harry's, which is like the shaving and kind of skincare brand for men that I spend a bit of time with as well, both of them, I believe, have about like 50% of their leadership today has been with the company since it's been founded, or a really, really high percentage. So like they have the staff tenure. And I think that's something that kind of gets glossed over. But you need those original like stewards of the brand, those people who were there when you created this idea to help see it into a new age. And I think some of the modern brands, they kind of have like a revolving door with their executives and their C-suite. So that really stuck out to me, like, oh, you guys have held on to your talent.

SPEAKER_01 19:08

But I say, do you see that as the brand does well because people have stayed on for so long, or people have stayed on because the brand's treating them really well and gives them the incentive to want to stay with the brand for long term?

SPEAKER_00 19:19

I mean, I haven't spoken to any of the employees. I don't know what the HR is like inside any of these companies, but I think there is something to be said that people do want to keep working there, but I also think that it behooves the brand to have people who were literally there on day one or before day one, like sketching it out, really knowing, like, for example, to use another um example from the ordinary, right? The co-founder Nicola told me that when they moved into retail, they got a lot of pressure from the retailers to simplify the range. Because it's kind of confusing, right? There's like a million different SKUs, they have kind of odd names, right? And retailers wanted them to kind of color code the line to make it easier to navigate. And they were like, we're not gonna do that. That is not us. I think having that original team who were there when you conceptualize the idea, I can imagine that that would make that conversation easier internally because it's like, no, we were all there when we designed this, we're not doing that.

SPEAKER_01 20:08

I mean, that kind of starts to get remember when Decium had like hilomide, and now they're launching what the chemistry brand, those are very color-coded. So maybe that was like a we already got that in other brands. We're not gonna do that for them to then get rid of those brands. Looking at though, like something like the ordinary, remember when the ordinary first launched, they were indie under Decium for so long, then they got acquired by Estate Lauder. Right now we're seeing these acquisitions make big news, make big headlines road with e.l.f. But is acquisition maybe the best possible thing for a brand right now? Or do you see brand individual or like indie growth being more successful in the moment? It's a very difficult question.

SPEAKER_00 20:47

It depends on the acquirer. I don't think there are many founders out there who are ready to sell their business who would say no to one of the big strategics. So the strategics would be like your L'Oreals or your Esteys or anything. I think there are founders who are a little bit more nervous about taking on another round of investment if they're not ready to sell yet because they're worried about overloading the company, making the valuation even even higher. But I can't imagine that if somebody got an offer from a L'Oreal, they would say no.

SPEAKER_01 21:11

So then going back to redundancy in the market and seeing a lot of brands launch things, how do we really look for differentiation? How are we trying to see brands stand out? Or what do you see as the best tactics for brands to do so right now?

SPEAKER_00 21:22

I think the answer that nobody wants to hear, and unfortunately it's the truth, is that it just takes a little bit of time, right? So with the brands that I studied, and there was lots that I looked at and didn't make it into the case study just like for length reasons, they didn't have this like rocket ship growth initially. Some of them did. Like I do think that when the ordinary launched, everybody was talking about it, right? But they had a little bit of a dip um coming out of COVID because everybody was getting so interested in skincare, they suddenly had way more competition than they ever had before. And rather than trying to like pacify everybody and like do all of the trends, do everything that everyone was doing, they just kind of stayed the course. And now the business has returned to like really steady growth. But they had a Of a dip. So I think A, it will take time to initially kind of get your footing, especially if you're targeting a customer group that maybe is not already in Sephora. You know, you're trying to go out and find people who are not super interested or super connected to beauty right now. So A, it's going to take some time. And B, you have to kind of weather the storm a little bit. Like when those kind of, you know, the fat years and the lean years, you know, when the lean years come in, you have to be willing to kind of like double down on your on your original proposition if you still believe in it and not just kind of react to every little thing that's happening.

SPEAKER_01 22:28

And you see that as like being like the brands who like see a trend happening and try to quickly jump on it?

SPEAKER_00 22:33

Yeah, trying to jump on every single trend or trying to do something as a business that might be like it might generate a lot of revenue in the short term, but in the long term, it's going to dilute the overall brand. So, like, okay, well, we have really good um authority in like, I don't know, body care. It's time for us to launch a fragrance, or vice versa. Sometimes it works, but oftentimes it really doesn't. And think about like under the hood from a financial point of view, the stress that that would put on a business from an RD perspective, from a marketing perspective, you know, entering new categories, you have to do that really intentionally. And I kind of hate using that word because it can mean basically nothing. But making sure that your customer is genuinely asking for this product from you rather than looking at a trend forecast and being like, okay, that one, you know?

SPEAKER_01 23:14

So it's interesting you say that, just because we were talking about, again, the two heavy hitters right now, retail-wise, are Sephora and Ulta. And we know that the retailers tend to have an influence as to what directions the brands tend to take with certain launches. Where do you see, A, with like the heavy hitters right now, like that influence, but also we're also saying that that's really all we know. Like, where do the drugstores and the more mass market, like Walmart and targets come into play when it comes to influencing the brands too?

SPEAKER_00 23:38

So the US is really different to pretty much any other market because drugstores are really suffering here, but they're not really suffering in Europe, right? Like you lived in London, you remember Boots. Boots. Boots is a lot of fun.

SPEAKER_03 23:51

House down boots.

SPEAKER_00 23:51

House down boots. Um here it's a different story, right? But I think let's not forget how powerful Amazon has become. You know, it's one of the biggest beauty retailers in the US. It may have already overtaken Walmart, I'm not sure. Like Amazon is a really big part of this conversation as well, and TikTok shop, right? People are starting to transact there as well. So the Sephora's and the Alta Beauties and like in other countries, Space NK, Mecca, they're definitely gonna have a hand in this. Like I've heard uh a creative director vent to me a frustration that he felt like a retailer was becoming the creative director of the brand that he worked for rather than him. But I think that, you know, there's other, there's kind of like other forks at the table, if that makes sense. It's it's definitely like Amazon really can't be understated in this. A lot of brands are on Amazon now that said they would never do it, or like um, even if they didn't say they would never do it, like internally, there was a sense they would never do it. They don't really have so much of a choice now because if you as a brand don't go out and own your Amazon space, someone can just list it and then there's like gray market product, right? So I think it's kind of like a defensive thing that brands need to get on there and do that. But I will say that like Estee Lauder companies, like as a company, have had a lot of issues, especially in the US. One of the best things they've done in the last 12 months or so is get onto Amazon. They have like slowly but surely launched a lot of their premium brands on there, and now they own that space, and that's just like easy revenue for them.

SPEAKER_02 25:09

Yeah, I think there are a lot of people that for better or worse, probably worse, the way that they shop for anything now is they just open up Amazon and search. So whether that be for personal care products or anything else. So I think, in a way, to your point, if you're not there, you're basically giving away the business either to one of your competitors or a reseller or a counterfeiter.

SPEAKER_01 25:32

Or you're just missing out on profit. I've heard a brand they had a big creator mention the product, and I don't know how they did this, they have software or something, but they saw that a lot of people were going from TikToks from that creator's video and trying to find the product on Amazon and they weren't actively on Amazon. They realized that is so much profit that we just missed out, missed out on.

SPEAKER_00 25:50

I think also people's shopping habits are no longer like I go to this one retailer. So you maybe you're going to Sephora and get shade matched because you want to figure out what shade you are, and you might even buy it for the first time in Sephora, but then when it's time to replen, maybe you're gonna go to Amazon, right? Because you know what you need, you don't need to go in store.

SPEAKER_01 26:05

I love convenience, girl. Yeah, I'm a primer.

SPEAKER_00 26:08

The convenience factor really gets people or like you might see it on TikTok, but you you don't trust TikTok shop or you're not ready to try it. So then you go in store and you look like the the retail journey and that kind of like funnel, as they call it, is very all over the place now.

SPEAKER_01 26:20

And I mean, to that, I feel like brands are kind of all over the place. They're trying to fumble and figure out how do we grow, how do we have a viral success right now. And obviously, in the last five years, six years, seven years, we've seen the skincare and beauty landscape shift a lot. Social media's been a big part of that, and then in the last couple years, it really has been TikTok. Even with that, brands are trying to grow. We're seeing a lot of brands launch right now. And where do you really see the market in terms of saturation, especially with all these brands still coming out and still trying to launch? I'm looking at you, Korea. The entire nation of Korea. You've just put them on a lot. South Korea. South Korea. South Korea.

SPEAKER_00 26:53

Okay, so something that came across or came up, I should say, when I was writing this case study was the difference between marketing and branding. And I do think that branding has become a little bit of a lost art in some ways. Okay. So a lot of brands have great marketing or they have competent marketing, I should say, but what they don't have is a really strong brand image underpinning that. So, like, let me give you an example. And I am gonna use the ordinary again just because I think there's a really clear example here. That's sponsored, by the way.

SPEAKER_01 27:20

No. It's just well known.

SPEAKER_00 27:22

Just well known. Um, okay, so their brand, as we said, it's for people who are interested in the science of skincare. It's about transparency, it's about community, learning and education, right? The marketing that they do, I actually really struggle to think of because they're not a brand that does marketing in a way like ELF, for example, who are like going out and doing Super Bowl spots or doing celebrity ads. The best ordinary campaign I can think of is do you remember last year, or maybe it was the year before, when eggs got really expensive here in New York?

SPEAKER_03 27:49

Last year.

SPEAKER_00 27:49

And they did that campaign, right? So that was a marketing campaign they did that underscored and reinforced the brand identity. Now, marketing and branding are very, very connected. Like the Venn diagram, there is some overlap, but some people see those two things as a complete circle. They don't that they have marketing claims that maybe speak to a current trend for a current ingredient or a current look or something like that, or they have a celebrity ambassador. Okay, so Road is a really good example of this. In all their adverts, they've had like a bunch of like hot celebrities. They had Tate McRae, they had Sarah Pigeon from Love Story, they had all these people, right? Love Pigeon. You know, so she was in I haven't seen I haven't seen Love Story.

SPEAKER_02 28:21

I have. What is Love Story? She was good in it. It's not great. What's Love Story? It's the CBK, JFK Jr.

SPEAKER_01 28:29

Oh, uh um we talked about this.

SPEAKER_02 28:32

We did.

SPEAKER_01 28:32

Carolyn Bissett? Yes.

SPEAKER_00 28:34

Yes. Headbands, yeah. Headband. So that's their marketing, right? I think people talk about Road and they're like, oh, their marketing is so good. Their marketing is so good. The brand is strong too. They also have a strong brand image and they have their ethos, and the marketing is used to amplify that. But they, I don't think they're reliant on those marketing campaigns to bring people in because there is a clear message with both the product, the formulation, and I think the visual identity of it is really strong. Right? You think of Road, you think of that um, the soft gray, right? That is there, but they also have, if you look at all their packaging, there's like this rounded element and they have like little thumb indentations on certain things. That has been like they've they call it the CMF, which I think is the colours, materials, and finishes. So in the case study, I spoke to a creative director called Helen Steed, who has worked with Rhode. She was the original creative director at Glossier, and she mentioned this. Like they've been so consistent in the way they visually executed the brand, that they've been able to do things like they had that whole range that was in like bright yellow packaging, and they still managed to make it make sense because every other touch point of the visuals came through really precisely.

SPEAKER_01 29:37

You mentioned like Rode, which Rhode to me is a very new brand. Even in the grand scheme of beauty, I feel like the ordinary, which has been around for like what, 10 years? Something like that, yeah. It's still a fairly not green, green brand, but it's a newer brand. Where do you really see like a legacy legacy brand that has been around for multi-generations at this point still stand the test of time and still succeeding and like pushing the boundaries and like competing with the new girls?

SPEAKER_00 29:59

Okay, how many generations back do I have to go? Like, do I have to pick like an old old brand or Why'd you look at Angela when you said that? I want to go home.

SPEAKER_01 30:10

Um Well, I think of like, for example, the the reference of going back to like 60s and 70s, you had Revlon, and right now Revlon's not doing great.

SPEAKER_02 30:20

Revlon's not doing well at all.

SPEAKER_01 30:21

And that's that's my mom's generation, or even beyond that, because my mom was like a baby. But like, even beyond that, what Elizabeth Arden, maybe? Which is a Revlon brand. Oh.

SPEAKER_03 30:31

Look at that.

SPEAKER_01 30:32

But like, yeah, that kind of like multi-generational, like early 20th century.

SPEAKER_00 30:35

It's really, really, really tough. I think there is a degree to which you have to make a choice, which is as a brand, like, are we going to try and iterate and continually recruit the younger generation, or are we gonna focus on one group as they age and be with them through stages of life? Like some people may have started buying Elizabeth Arden or Estee Lauder, whatever it may be when they were in their 20s and then they've grown up with that brand. I do think that it is really difficult. And that's why we see these brands having kind of pivots and refreshes, like Gold Bond, right? I know you love this brand. They've recently, like, they did those big ads with Chelsea Handler as well, and like Nivea, Vaseline, like these are really big legacy brands, and they have to kind of find ways to become fresh and talked about again. I will say I do think it's easier for like a Nivea or a Vaseline because nobody is looking to them to be current. Like they don't have a brand that can be diluted in the same way as like a Sephora brand, right? They do have more latitude to kind of like throw things at the wall and see what sticks.

SPEAKER_01 31:27

And I mean, to your point, we see like, do you want to stay with the same people as they grow and progress through life or try to find the newer, like what's the next audience with Estee Law, or there was the Estee Edit, which I know we have talked about before? Many times, yeah. Remember that? Kendall Jenner was the face behind that, right? She was, yeah. And like that is kind of like how do we do this like subline breathe new life? Is a strategy with that like get this audience and try to bring them over? Or can I mean Estee edit that didn't last long, let's be honest here. Like, where do you really see the strategy with that line?

SPEAKER_00 31:57

So you've mentioned the Estee Edit, so I'm just gonna stay on that for a beat because I love that line. One of the people who created that line, her name is Sarah Creel, she now has her own line called Sarah Creel Beauty, which we love. It feels like a cop-out answer. I think you have to kind of pick your batteries a little bit. So, for example, if it's a brand like Estee Lauder, which has had its struggles, the brand has lost a little bit of relevance and stickiness here in the US. But there are things they can still do. Like if you go out and you continue to win over makeup artists, you continue to stick with them, you continue to, again, not try and jump on the viral trend, but make sure you have something and you are in the right channel so people can discover you and you have something that is close enough, something that still feels current, you're not going to be getting double digit growth every single year, but you can still have some meaningful growth. It means the brand is not completely falling by the wayside.

SPEAKER_02 32:43

I'm thinking, yeah, right now something like I don't know why my mind goes to Maybelline and that the Great Lash mascara, it's like they probably have the same consumer for that for the last 30 years or something. And maybe it's attracting new consumers too, but it's like they're also coming out with new products all the time. So and I think that SKU is a little bit younger. So a lot of them are trying to like hit that balance, but it might be a little bit different when you're more upmarket versus downmarket because your younger consumers are going to be able to go into the drugstore and buy Maybelline mascara. They may not be able to afford Estee Lauder.

SPEAKER_00 33:22

And one of the brands that I looked at in the case study is Judy Doll, which is a Chinese cosmetics brand. Completely different approach to everything I've just said, and that's why they were so interesting to me. Um, in the last two years, they've launched about 400 new SKUs each year. So they launch a lot of products very quickly. Spoke to one of the leaders from the company, and he was like, look, our customer is a social young person. But social doesn't necessarily just mean on social media, it does, but it also means like they're going out to work, they're going out with their friends, they're going to out for drinks. They want makeup that makes them look and feel good. Our customer is interested in newness, so they have to consistently provide it, right? But one of the things that they do with their marketing is when they bring out a new product, they'll put it in like a collection. About 50% of what they market as that collection will be actually existing products. That's what he said. To kind of get people sold on both the hero products and show them how to use this new product in their existing routine. So their customer does want that newness and they have to keep iterating. Like, they have a mascara. It's one of like, have you seen the Hourglass Curator mascara with the thing? Like the metal thing. Yeah. They've like launched like three or four new versions of this now that are all angled slightly differently to get like a slightly different lash look. And they're like, this is what our customer wants. But they've had that in their DNA from the start, that they are a brand for social young people. And then they went on to open their own stores. They have like over a hundred boutiques in China. And this executive told me he was like, Well, now we have the boutiques, we have the younger girls coming in with their mums, and now they're recruiting their mom into their brand because their mom actually wants to shop in a brick and mortar environment.

SPEAKER_01 34:48

So usually you see it the other way around, where it's like, for example, question for you was there a beauty product that you saw your mom use that then you started using, and that was like your segue into that brand?

SPEAKER_00 34:57

My mom loves doubleware. She is the number one consumer of Estee Lauder Doubleware. When the reformulation came out, she was very concerned. I think, I think she is sold on it. I don't know that I've ever gone away and use it because my mom would always say to me, like, oh, it's really heavy, it's a lot of coverage, you don't need it. She does wear Chanel number five. And if I smell that, I do think of my mom, but I never was really stealing her products. I think she was stealing mine.

SPEAKER_01 35:17

Okay, so see, I feel like this is a very rarity. Because usually it's like you see your like the older people in your life who wear makeup or use products, you see them use it. That's kind of your your gateway to use that product.

SPEAKER_00 35:27

I will say my nonna Lnet hairspray in my hair right now. Lnet. Wait, same.

SPEAKER_01 35:32

I that that does, it's very nostalgic to my grandma's wow. Do we have the same grandma? Let's do a DNA test. Yes.

SPEAKER_02 35:39

That's a legendary product, though. Still around.

SPEAKER_01 35:41

It's multi-generational.

SPEAKER_02 35:42

I remember when they brought it to the US, it was like a huge deal because uh hairstylists used to like take suitcases of it back from Europe. Oh, really?

SPEAKER_00 35:51

Well, when did it come to the US?

SPEAKER_02 35:53

Uh it had to be like 2008, 2009. Seriously?

SPEAKER_00 35:56

It's new here. Oh wow, I didn't realize that. Yeah, because before you had like Aquinet, which was like rock solid, right? Like LNET is like the brushable hairspray.

SPEAKER_02 36:04

I don't know with how I use it, but so we've seen uh a big increase in influencer brands. We have opinions. We we've we've stated a lot of opinions about them. Do you think that this is just uh, you know, a lot of copycats trying to come for the success of something like uh Fenty Beauty or Rode, or is this just a feature of the market now where brands feel like they need to have this big face in order to be uh successful?

SPEAKER_01 36:34

Are we are we talking like influencers launching their own brands? Are we talking about these people wanting to start brands bringing influencers on?

SPEAKER_02 36:40

Well, you know, uh in some ways, a lot of these brands are that. It's either an influencer who goes to uh, you know, investors or, you know, an existing operator to try to launch their brand or an industry operator that puts together a brand and then just finds a celebrity to be co-founder with them.

SPEAKER_00 37:00

I think it really depends, right? So there are people, if you go on Reddit, everyone says we don't want any more influencer brands. We're fed up of them. But then that's not reflected in the sales figures, right? Like Alex L's line has had a really big launch.

SPEAKER_01 37:12

I'll show up, I say Redditors do not represent the full community. That is a sub-sub-subcommunity. It's a subset, yeah.

SPEAKER_00 37:19

Um, people say that they're fed up with them, but then the launches, a lot of them actually do really well. So, like real actives, from what I understand, had a huge launch. POV beauty, like these lines are performing, so there's not this sense, like people might be saying, I don't like this person, or I they don't speak to me. Well, there's someone that they do speak to. The question is always like, what is the longevity? So the issue with influencer brands or any kind of celebrity-fronted brand is you have what we call key man risk, which is that person who is the face of the brand or the leader of the brand, if they have some kind of scandal, and people in the public eye have scandals all the time, if they kind of fall out of favor for not like a controversy, but they have some kind of slippage in the way that people see them, or if they become unable to commit time to the brand, you know, sometimes people take on too many projects and they're like, well, I'm just kind of like spread between all these things. The overall identity of the brand can really suffer. And some of the best influencer brands or like celebrity-fronted brands, like let's look at Rare Beauty, for example, right? This is really associated with Selena Gomez. She's not an every single advert. She doesn't need to be. They created an idea for the brand and a world for the brand that she is absolutely a very key part of, but she doesn't need to be present in every single touch point for the brand to succeed and grow because the product is good. They have a lot of different options, they have a lot of innovative options. And again, they have retained a lot of their executive team that's worth noting, that's been with them. I mean, it's not as old of a brand. I think it's like founded in 2019, 2020. They've held on to a lot of their leadership and a lot of their leadership worked together before. So they know how to work with each other. They have a shared vision. So it's like how much of this brand is concentrated just in famous faces here, and how much of it is like leveraging their network, leveraging their insights and their audience, but it's not completely reliant on them.

SPEAKER_01 39:04

But then when you go to the influencers who, going back to branding and marketing, they build their platform, they build this brand around themselves, and then they launch a brand. And I mean, not to sugarcoat it, to tour around it. We're looking at lipstick lesbians right now with leaked labs and how that went, for example, or a Michaela with POV. Where do you really see an influencer who starts a brand who they themselves are kind of a brand? Um, and then how that launch and that growth, like how do you successfully do that? That's kind of going to be like an instructional how-to if you want to start your own brand.

SPEAKER_00 39:35

I think it really comes down to what is the intention behind starting this. Like, just because you're an influencer brand or like a celebrity-fronted brand, you don't get to shortcut all of the other stuff we spoke about. You still need to identify who your customer is, and it can't just be this is a person who follows me or subscribes to me or likes me or whatever. In the case study, we have this kind of like hierarchy of needs that we made in terms of like the foundational things that you need. And I think that we put celebrity ambassador or famous face, like literally right at the top, as in like the cherry on top, like the least important thing, quote unquote. Because you can't skimp on having a moat, having a differentiated product, having a product launch cadence that makes sense and doesn't completely overwhelm people. Like there's so much that you have to do before you even think about the marketing of it via the face. Like, you can't kind of start there and then work back. You have to do all the other things first. And I think like Rare Beauty is a really great example of that. They built out the core construction and the foundation of the brand. And then obviously having Selena as the co-founder, as the creative lead, like that brings it all together and makes it cohesive. But people would still buy that product even if they're not familiar with her work, I think. Like when you go into their displays, I don't believe that her face is on everything.

SPEAKER_02 40:42

Yeah, I think that is a brand that kind of stands on its own, too. They've they've created this brand identity that includes her, but I think is also separate from you know her as a personality, even though I feel like she's not like a huge personality. But maybe that makes her the perfect celebrity to do this because when you think about her, I don't think that you think about just one project or like one style or something like that. She's vague enough to make it work in a way.

SPEAKER_00 41:13

Yeah, and she's known for being, she's very beautiful, right? She's known for being very beautiful. She has great skin, she always looks really healthy. That's very inviting for a customer. You know, I mean, it's not going to attract somebody who wants like a euphoria style makeup, right? But the majority of people want to look fresh, healthy, put together. I mean, you have a friend who's getting married soon, and we've been going back and forth trying to do her bridal makeup. I would hazard a guess that's what she wants to look like, right? Fresh, healthy, put together.

SPEAKER_01 41:39

That's very fair. So know your customer, know a direction. Again, going back to the ordinary example, know your customer and always stay true to that. Be true to who you are. Um, but kind of going back to the Estee of it all and brand growth, I feel like, and I don't know if this is good or bad, a lot of brands start with the intention of an exit. And the timing of that can vary substantially. But we're also seeing these exits happen. We're seeing mergers and acquisitions happen, Estee and Puj. We can talk about that. Yeah. Potentially. It's in the works, yeah. Um, but in this current landscape, I saw a thing about this uh yesterday where it's kind of like these mergers and acquisitions, it's kind of reducing the amount of possible exit options for these brands nowadays.

SPEAKER_00 42:22

You mean because the companies are joining together?

SPEAKER_01 42:24

Correct. We're gonna have this like whole monopoly where it's gonna be like a Laura Una Proctor and Gamble in one.

SPEAKER_00 42:31

Exactly. And thank you to them for sponsoring this episode. Um, for the bigger companies, there is a lot of consolidation that's happening, and we might see more consolidation before we see more acquisitions. I think there's a lot of great brands that are in the market right now or have uh tried a process and they've had to put it on pause because they haven't quite gotten where they want to go. And I think that some of the bigger conglomerates are just sort of waiting. They can, it's it's a buyer's market. They can afford to take their time. But yeah, there's so much consolidation. I mean, L'Oreal took on all of Keering's beauty business. That was huge. That was more than a $4 billion deal. That um, you know, Estee and Pouge have confirmed that they are sort of like pondering a merger. Like, there's more and more of this that could be happening. So I think that we will continue to see more consolidation maybe before we start to see more exits. Now I've said this, of course, I'm gonna check my phone and there's gonna be some huge deal that's been announced.

SPEAKER_01 43:19

Stay tuned.

SPEAKER_02 43:20

By the time this comes out, I'm sure there'll be something.

SPEAKER_01 43:23

But I mean, like, yeah, the industry is like in a really weird spot because, from consumer perspective, we're seeing the tariffs and what was the recession, so not sure what's going on, affect the brands and pricing. But then we're still seeing these acquisitions happen. And I love seeing what brands are doing. That's one of the many things that me and Daniela talk about. It's who's trying to grow, who's trying to get acquired. Uh, an example I saw was actually comparing Road and Makeup by Mario, and how there are very big differences because Rode grew so much just being DTC, and then they got acquired, and then they got into Sephora. Whereas a Makeup by Mario, for example, they exist. They launched in Sephora globally, and people being like, no one wants to acquire them because they've done everything a brand can do. So what's what's beyond where they're at right now? So it's like there is an example of you can only grow so much. And we talk about Glossy as a really good example of this, right?

SPEAKER_00 44:14

I mean, I'm a big Mario stan. I would say I haven't seen the particular post that you're referencing. There's big differences between a skincare brand and a color cosmetics brand, right? Because cosmetics brands right now are generally having a hard time finding exits. Like, I'm trying to think of the last cosmetics deal that got done, and I feel like it was a while ago. And I think there's partly that the acquirers are more interested in skincare and hair care right now. But if we go back maybe five, seven, six, seven, eight years, there were some really big cosmetics deals done, like brands getting bought for more than a billion dollars, you know, or getting valued out there. So Glossier, Too Faced, uh, Anastasia Beverly Hills, it cosmetics. A lot of those companies did not live up to the potential of how high they were valued. Now the acquirers are starting to look at that a little more carefully because I do think when you're trying to make a forever brand, cosmetics is the hardest to do that in because the trends just move so quickly.

SPEAKER_02 45:05

Especially now, I feel like social media has accelerated it even more, whether it's like, oh, strawberry girl, tomato girl, mob wife, this, that, the third. So it's like you may not change you're not changing your skincare based on that, but you're going out and buying different makeup all the time. And maybe these brands, it's harder and harder to create a repeat customer.

SPEAKER_01 45:27

Or even just maintain brand loyalty at that point.

SPEAKER_00 45:29

Yeah, and it makes me so sad because like I love makeup. I think makeup really is the heart of the beauty industry, and I think people are a little afraid to take risks. You know, the clean girl aesthetic has become so dominant, and I say this sat here with a very minimal face of makeup. Like, I get it, I am part of the problem. But people don't really want to take risks anymore. There's a little bit less uh adventurousness, I think, in product. And I think we just kind of, you know, in the 2010s, the valuations just got so, so high that it's made people, it's made companies really reticent to take as big a bite again because it's just we don't have that proof yet that these brands can necessarily stay white hot for like 15, 20, 25 years.

SPEAKER_01 46:08

So, what are you really seeing as like the life cycle of a brand right now?

SPEAKER_00 46:10

I think that the brands that are slower to start often have a much better shot at longevity because they build a really loyal customer base. Um, Brandon Truax, who was the co-founder of uh Jesse M, who's no longer with us, he had this quote that we included in the case study. And it's something like before you make a million people like you, you have to make a thousand people love you. So they started like really small, building this intentional kind of community. And a lot of their recommendations, I think, were peer-to-peer. It was somebody being like, Oh, are you struggling with that with your skin? I have something for you. So I think sometimes the life cycle, I mean, it feels it feels really depressing. It feels like we're hearing about a lot of closures and a lot of people struggling for money. But sometimes they think going a little more slowly and surely is the key to success. However, if you've taken on a bunch of investment, you don't really have that option because your investors want to see red dance really quickly, right? So you are gonna move into retail, you're gonna expand into more product lines, you're gonna do anything you can to try and juice up the top line revenue so that you can still show that you're growing.

SPEAKER_01 47:04

Is there any indie brand you can think of in the last like five to ten years who just played a really unique like hand, did really, really cool stuff, and like had a really successful exit or like a notable exit?

SPEAKER_00 47:14

They were founded more than five years ago, but they blew up in the last five years. So I'm gonna twist the criteria and allow myself this one. Touchland. Oh differentiation.

SPEAKER_01 47:24

Differentiation.

SPEAKER_00 47:25

And I spoke to Andrea, the founder for May Case Studies, the co-founder, I think it's her and her husband together. They said they were trying to create uh something like this everyday essential, like on-the-go beauty. That's really, really broad. And they were like, well, we're gonna revolutionize the hand sanitizer category, we're gonna make it premium. I don't believe that hand sanitizers had been sold in Sephora or Ultra Beauty before, right? It was kind of a drugstore purchase. They teamed up with Java Dann, the fragrance house. They, it's ergonomic, it's cute, it's a mist, it's not sticky. Like they completely changed what a hand sanitizer can be. 700 million, Church and Dwight, you know, and now they're expanding into other categories using the authority they've built up by, you know, the visual codes of it, the product performance. Like that's probably the best one I can think of, right?

SPEAKER_01 48:07

That is, I that's actually very unique.

SPEAKER_02 48:08

That's very it's extremely unique, and I think in a way they almost like flew under the radar. I definitely feel like there was a point though where they were inescapable on social media, like it became part of the beauty routine because it was aesthetically pleasing. Sure. And it's definitely something that has purse appeal, which is something I thought. Yeah, and it's maybe like a little lift in your day when it's could be utilitarian otherwise.

SPEAKER_00 48:36

And I think another way that they've managed to provide newness, because they basically have just had hand and sanitizers, they have these like hair and body mist now as well, is they do limited editions. So they teamed up with Crocs, they did one, they done a couple with Disney. I believe that for their most recent one with Disney, they had a wait list of like almost 20,000 people. Like people really, really want these products.

SPEAKER_01 48:54

That's some Disney adults, yeah. Some Disney adults.

SPEAKER_00 48:57

Crocodults, is that a thing?

SPEAKER_01 48:58

Crocodults, my mom.

SPEAKER_00 48:59

Crocodults, yes.

SPEAKER_01 49:00

Do you see a really heavy hitter when it comes to building successful brands right now in the current landscape or multiple?

SPEAKER_00 49:06

I mean, I think the center are doing a great job. They have.

SPEAKER_01 49:08

And Bennett, shout out.

SPEAKER_00 49:10

Some of the best brands, you know, Nuterium that came from there, flares. Differentiation. The products look different, feel different. I think the price point of all of them is quite good. There's nothing in there that's really breaking the bank. There's a visual point of different, there's a product point of difference. Everything just feels really new and he knows when to exit, you know?

SPEAKER_01 49:31

Yeah. And the brands themselves have very individual identities.

SPEAKER_00 49:34

Very much. You wouldn't look at them and be like, oh yeah, you all came from the same place.

SPEAKER_01 49:38

What do you see as a somewhat untapped area of the beauty industry right now? Because we've talked a lot about makeup and skin, and then Touchland was very off-center. What do you see as an area where there's still a lot of differentiation potential, or people just aren't breaking into that part of the beauty industry?

SPEAKER_00 49:52

I will say that all investors want to talk to me about hair care brands right now. People are really interested in hair, and we are seeing movement in the hair industry. So Henkel just bought Not Your Mothers.

SPEAKER_01 50:03

Yeah, Henkel's done a couple of acquisitions recently.

SPEAKER_00 50:04

They just bought Olaplex as well. Um, the hair care industry, yeah.

SPEAKER_01 50:10

I didn't know that. I didn't know that.

unknown 50:11

Yeah.

SPEAKER_00 50:12

A couple weeks ago.

SPEAKER_01 50:13

Breaking news.

SPEAKER_00 50:14

Ding ding ding. The hair care industry doesn't really have like one definitive player. It's really fragmented. Like Henkel has a lot, Lauria has a fair amount. Well of course. PG. Like it's it's really fragmented. And um, what's interesting about the hair industry is okay, so I was speaking to Tev Finger, who he's an incredible guy. He was really early at Bumble, and then they sold Bumble to Estee Lauder. He also was instrumental in Orbay, which they sold to Cow. Um, he's built Becca, that was one of his as well. Under his portfolio, they have one size, and they also have IGK and they have R and Co, which are two hair care brands. So IGK is the Sephora brand, and R Co is in salons. And he was like running a salon hair care brand versus running a Sephora hair care brand. He was like, these two businesses are so different, they may as well not even both be hair because in one of them, I'm trying to drive customers to the retailer, and in the other one, I'm trying to drive customers to the salon and work on the education point. But there, my customer is actually the stylist in the salons, and there's so many salons, so it's like hand-to-hand combat, you know, it's not like having one big account. Like, hair is so, so complicated, but I do think there's a lot of white space still, especially in the affordable or the kind of mastige hair category.

SPEAKER_01 51:25

That's so interesting because to me, I'm like hair, not to say that it's saturated, but like so many hair brands exist. And I feel like especially getting into niches, and I remember working at Sephora even after that era of my life, that was where we saw there was that era of Sephora bringing in a lot of like POC-owned hair brands. Uh, Bread, Madam CJ Walker. Were they in Sephora? They were. Oh, cool. 2017 era. You have a lot of drugstore brands, talk about Pantene, Tresame, even like non-hair brands doing hair stuff. I always think of some of them. Oh, yeah.

SPEAKER_00 51:51

They're in hair.

SPEAKER_01 51:52

No, they have like hair protection because like UV and all that stuff. So it's like to me, I feel like hair has so many different categories, subcategories, brands dipping their toes in, but hair is.

SPEAKER_00 52:01

I think investors are still interested because there's so many areas within it. It's like, are you a lifestyle hair brand like way? Or are you a repair line like K-18? Are you a scalp care brand? You know, like there's so many, yeah, there's so many ways into it that it still feels quite open. I will say the difficult thing is that people don't seem super willing to buy expensive shampoo long term. They feel like they're kind of washing their money down the drain. You know, like if you look at a K-18, sh I I don't know for sure, but I would imagine that the actual treatment itself, like that's the North Star, like that's the gotta be like the lion's share of their revenues, right? It's hard to sell people on really, really premium shampoos in the long term unless you're offering like something really special on top of it. Styling products, so it's a little different.

SPEAKER_01 52:43

But going back to the Estee Pouge of it all, again, where does a merger really come into effect, especially with the two brands that are the the plethora of brands that they each own? Yeah. And how does a merger actually affect brand growth, strategy, feature uh acquisitions beyond that?

SPEAKER_00 52:57

I will say that when this news happened, that they both of them confirmed that there was a talk ongoing. This is probably one of the biggest moments in the newsroom that I've felt in a really long time, you know, within like at work, it was suddenly like everybody sits up straight and it's like we've got to get on this quickly. It's really interesting. I think that, you know, Pooch is essentially it's basically like mainly a fragrance company, right? About 70% of their revenues come from what they call their like fashion and fragrances division. Because, like, for example, with like Paco Ruban, they also own like the fashion side of it, but like most of the revenue is the fragrances. They have Charlotte Tilbury, they also have Dr. Barbara Sturm as well, but like predominantly it's a fragrance company. Whereas for Estee, only about 20% of their business is fragrance, but it's growing quite quickly. It's kind of reflected in the stock price, right? The stock price went really down when it was first uh confirmed that they were having some kind of talks because Essay's been on this transformation journey. They've done some really good work. Like we spoke about them moving on to Amazon, like Mac is in Sephora, like they've done a lot to modernize the brand, but they have also kind of like really asked investors to like join hands with them and believe in this transformation and turnaround. So if you're then saying, oh, and we're considering merging with this outside company, it's kind of well, why do you need to look outside if you're gonna transform things inside the business? So I think that's why some investors are not really so sure that they don't like the idea of it. I have no idea whether it will go ahead or not, but I will say that these mergers are really, really difficult. Like the last one I can think of was Coti took like 40 brands from PG back in the day, like a lot. And like with these mergers, there's always some like some rock star brands, and then there's some rounding errors, right? Like brands you kind of have to take because they're part of the deal. They ended up selling a lot of those brands off and formed like Weller Company. Like these merges take forever, they take years. The integration is really, really difficult. So I think that's the other reason the stock price is down is that people are like, oh, if this goes ahead, this is gonna be like management consultants around the world were like starting their engines when they heard this, you know? Um, but these things take a really long time.

SPEAKER_01 54:45

Objectively, do you feel like it's a uh positive thing, a good thing, or do you think it's like a I I have no dog in this fight.

SPEAKER_00 54:51

It's certainly big news, it's a big headline. Who knows if it will go through? But I do think the initial market reaction was really interesting because it kind of showed how you know investors felt about it.

SPEAKER_01 55:00

Um, final question. I don't know if you can answer this actually. Is there something you saw recently where you're like, that was a huge mistake? Why did they do that?

SPEAKER_00 55:07

Me recording this podcast.

SPEAKER_01 55:10

Dragons!

SPEAKER_00 55:13

No, I'm trying to think. What has been a big mistake? I don't have a big mistake, but I have a fun fact. Can we end on a fun fact?

SPEAKER_01 55:19

Fun facts?

SPEAKER_00 55:20

OPI, you know it. Yeah, nails. What do you know about the history of OPI?

SPEAKER_02 55:24

Nails. Well all I know is that Lincoln Park After Dark keeps changing.

SPEAKER_00 55:28

Why?

SPEAKER_02 55:29

And people are angry. Oh, that's true. It's not the same shade. It's like their star shade.

SPEAKER_00 55:33

Did you have that tinfoil hat on when I got here? What um not nails to start with. It was originally a dental products company.

SPEAKER_01 55:44

Oh.

SPEAKER_00 55:45

And they started to notice that nail technicians were buying some of their products because they were so good for nail art. The I can't remember the original name of the company. It's something like authos, something that's where OPI comes from, but they pivoted to be a nail company.

SPEAKER_01 55:56

Interesting. The more you differentiation.

SPEAKER_00 56:00

Differentiation.

SPEAKER_01 56:01

And with that, huge shout out and thank you to Danielle for being with us today. We'll have her socials down below in the description box.

SPEAKER_00 56:08

Please read my case study, How to Build a Forever Brand Available at the Business of Fashion.

SPEAKER_01 56:11

We'll probably have that link down below as well if we can figure that out. And thank you guys for listening.

unknown 56:16

Bye.