Kline has identified three indie beauty brands that could be tomorrow’s billion-dollar buyouts — just as we did in past reports where we accurately predicted M&As.
“Glow Recipe, Ilia Beauty, and Prose have landed squarely on our radar,” says Karen Doskow, Kline’s Director of Consumer Products, “They may be small in terms of sales value, but these brands have totally disrupted the industry.” According to Doskow, indies are currently the most sought-after brands by cosmetics marketers, retailers, and shoppers alike thanks to their compelling ingredient stories, creative consumer engagement, and first-rate digital marketing tactics.
In earlier studies, Kline flagged Drunk Elephant and The Ordinary as the most desirable acquisitions. Drunk Elephant was subsequently attained by Shiseido for $845 million, a valuation of 8.5 times sales. Similarly, Estée Lauder later closed a deal for a majority stake in Deciem, the parent company of The Ordinary. The transaction valued the company at $2.2 billion, making it the largest deal in Estée Lauder’s history. Also spotlighted by Kline prior to these transactions: Drybar (acquired by WellBiz Brands in February 2021), eSalon (Henkel acquired a 51% stake in the brand in 2019), Kylie Cosmetics (acquired by Coty in 2019), and Olaplex (acquired by Advent International).
So how have Glow Recipe, Ilia Beauty, and Prose caught Kline’s attention? In identifying M&A candidates, we look at brands that have registered strong increases from their date of launch, have outpaced beauty industry growth, and have found ways to innovate while maintaining brand premise and origin story. Here’s the lowdown on each:
Glow Recipe offers K-Beauty-inspired skin care products that are natural and infused with fruit-derived ingredients. The millennial favorite prioritizes unique textures, colorful “Instagrammable” packaging, and innovative ingredients that are centered around skin immunity; all products are packaged eco-consciously.
While the brand is present in the direct sales and specialty stores channels, the majority of sales come from the Internet. Glow Recipe had a strong presence in the e-commerce channel prior to the pandemic; thus, while its sales dipped at Sephora stores due to COVID-19 closures, its e-commerce sales skyrocketed approximately 200% in 2020. Marketing activities are primarily focused around social media content and strategic partnerships with brands and influencers.
UPDATE: In early October 2021, private equity firm North Castle Partners made a strategic investment in Glow Recipe.
Ilia Beauty’s sales, according to Kline data, are soaring; the brand is expected to register high double-digit growth for the year. Ilia Beauty is rumored to have hired Goldman Sachs to explore potential opportunities.
Ilia targets the “no-makeup makeup” consumer through its skin-focused beauty products. The brand’s products are promoted as botanical-infused, resonating with the growing demographic of consumers seeking safer, more natural, and environmentally conscious beauty products.
During the pandemic, Ilia Beauty shifted its marketing efforts to digital. It partners with influencers and models, and has also built a platform on TikTok. The leading distribution channel for Ilia Beauty is direct sales, with specialty stores also key.
Prose, founded by former L’Oréal executives, is a personalized hair-care brand that utilizes detailed questionnaires to match consumers to their ideal products; it also invites consumers to participate in digital consultations.
Prose emphasizes natural ingredients in its formulations, its sustainability initiatives, and its innovative product portfolios. Its primary method of marketing is through social media, with much of its content centering around authentic consumer reviews that the brand reshares. The brand, which competes in the luxury hair care market, only sells its products through its website due to the nature of its customized questionnaires and its personalization. Activism is a core aspect of its promotional activities.
For additional insights and information — including the names of more brands that could be M&A superstars — look for Kline’s soon-to-be-published report, Beauty Indies: U.S. Analysis of Booming Independent Brands.
About this blog:
These 3 Indie Beauty Brands Could Be the Next Billion-Dollar Buyouts features insights from Karen Doskow, director for the Beauty & Personal Care practice of Kline & Company.
Doskow has more than 30 years of experience in the beauty, home care, and related markets. She oversees global and domestic research teams on several flagship reports including Beauty Devices, Cosmetics & Toiletries, Professional Skin Care, and Beauty Retailing.
Doskow has achieved industry recognition as a marketing expert in beauty and related markets; she is frequently quoted as an industry expert in various publications and presents at major conferences. She holds a B.S. in public relations from the S.I. Newhouse School of Public Communications at Syracuse University.
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