Beauty brands looking for a quick zillion-dollar exit may have a rude awakening in 2023, with a panel of experts stressing at the WWD Beauty CEO Summit that the key to success is longevity.
“You see a lot out there about this company grew so much or it grew so fast but the reality is what people are looking for at the end of the day is brands that will be around for a lifetime,” said Vennette Ho, managing director and global head of beauty and personal care at investment bank Financo Raymond James.
“I think there’s a little bit of this idea that if you grow really fast, you can get really big really fast and that you can exit really soon and get a zillion dollars,” she continued. “It doesn’t work that way.”
She highlighted the fact that some of the biggest deals over the past few years were for brands that have been around for a long time. Paula’s Choice, acquired by Unilever in 2021, has been around for 25 years, while Byredo, which last year sold a majority stake to Puig, began in 2006. Most recently, L’Oréal signed an agreement to acquire Aesop, the Australian luxury personal care company that launched in the ’80s, from Natura & Co. in a deal valuing it at more than $2.5 billion.
“Some of the biggest exits that you see are brands that went through a lot,” continued Ho. “They went through a hard time, they have some fits and starts. We’re always really mindful of that and we want to make sure that brands understand that it’s not just about being a rocket ship and selling real fast, it’s about longevity and being around for a lifetime.”
Artemis Patrick, Sephora’s executive vice president and global chief merchandising officer, who was moderating that panel, chimed in, “That’s definitely what we look forward to.”
One brand that is focusing on longevity through steady growth is Dr. Dennis Gross Skincare, which launched at Sephora 22 years ago with the Alpha Beta Daily Peel, around the same time that Kim Cattrall’s character in “Sex and the City” Samantha Jones had a chemical peel, leaving her face red and blotchy in one episode. Despite this, the brand flourished through efficacy and building loyalty for the long term.
“It was disruptive at the time hence ‘Sex and the City,’ which was real life and it sort of set the bar for our standards of delivering efficacy,” said Carrie Gross, cofounder and chief executive officer of Dr. Dennis Gross Skincare. “Our consumers have high expectations of all of our products. So the Alpha Beta set the bar for us and we continue to innovate year after year, but we never stepped away from our core. It’s a wonderful thing to see the loyalty and experience the journey that we’re on with our clients. She might find us when she’s 15 and started to have some breakouts and then pretty soon she’s entering the job market. And then she’s getting married and then she’s having a baby and then all of a sudden she’s going through menopause, maybe not that fast, but in any case we’re in it with her for the journey.”
As for clinical skin care, it has come a long way since that ‘Sex and the City’ episode, with Patrick pointing out that it is now the fastest-growing segment in facial skin care at Sephora and industry wide.
Sheena Zadeh-Daly, whose company Kosas Cosmetics is nine years old, discussed some of the difficult decisions a founder has to make to achieve that longevity. For her, one of those decisions was to bring on a chief executive officer, a role she previously held.
“When we got to about 40 people is when I realized, I don’t know how to do this. What I do know how to do is build a brand. I’m an artist,” she said. “I’m probably not the right person to go to to ask questions about supply chains. I can say that very easily now because it’s been a couple of years, but in the early days extracting myself out of that role I had a lot of confusion, I had a lot of feelings of not really knowing what my role will be.”
After meeting more than 30 candidates, only two felt like they could be a good fit and she eventually hired Jean-Marc Plisson in 2021.
“There were just a couple people — literally two — who not only were CEOS of brands where the founder was still in the picture, but I did not get any sense that there would be any sense of competition here or that they need me out of the way so that they can do their job — it was the exact opposite,” she said.
“When I finally had that feeling I had the sense of relief and the evolution that’s happened since,” she continued. “I will happily follow this man off a cliff at this point. It’s such a loving partnership…and it really gives me that space to be able to be emotional and be vulnerable and tell stories and connect with people and know that you know that finance, ops, and supply chain are in a great place.”
For Zadeh-Daly, telling those stories about the brand in a way that makes consumers feel something is vital. “Those are all moments that really result in a deeper connection, a deeper truth about what it is that makes you feel pulled toward it. And those are the things that make you fall in love. It’s really the brand is very much built in the heart.”
Patrick added that finding the right CEO is something she often sees in her role.
“I love that you actually address the psychological toll that it takes as a founder,” she told Zadeh-Daly. “Finding that exact perfect, ying-yang balance is critical and sometimes you have to go through a couple of CEOs to get there and it’s such an important decision.”