In recent years, shoppers have embarked on a mad dash to discover emerging beauty brands, as they look beyond department stores to specialty shops, TV and the Internet for new lines.
Too often, what these niche brands lack is the financing needed to power their retail expansion. Demeter Group, a San Francisco-based boutique investment banking firm with expertise in the luxury wine business, has broadened its focus to beauty in a bid to court emerging players in the space. The firm has recruited former Sephora executive Jani Friedman, a principal at Demeter, for the purpose.
Prior to joining Demeter in March, Friedman was vice president and divisional merchandise manager of skin care at Sephora, where she oversaw more than 60 brands. Her past experience also includes posts at Anne Klein and Victoria's Secret Catalogue, and the creation of her former namesake ready-to-wear line.
Her role now is to spot beauty brands with revenue in the range of $15 million, and give them a boost by helping them raise capital.
Demeter's managing partner, Jeff Menashe, said, "In the beauty industry, there seems to be a congregation of brands that are between $5 million and $30 million, and that is the market we are addressing. Companies in that size range tend to be at a point where they are looking for growth capital."
He added that Demeter, which in addition to wine and beauty specializes in food and beverage and fashion, aims to take on five to seven beauty clients a year, and raise anywhere from $3 million to $10 million each in financing. Sources could include high-net-worth family offices, institutional investors and, in some cases, corporate entities.
Through its work with vineyards, including Robert Mondavi and Francis Ford Coppola, Demeter became interested in beauty after finding that many of its wine clients saw the segment as part of a strategy to position themselves as lifestyle brands. Friedman pointed to Caudalie, a French wine brand that has a skin care line sold in Sephora, as a possible model for these firms to emulate.
As for the types of beauty companies she's targeting, Friedman said she is looking for firms that are innovators in their sector and that have a distribution partner that is willing to help them grow the business. Her clients include Dr. Susan Taylor, chief executive officer of Rx for Brown Skin, which recently launched at Sephora, and the namesake hair care line of celebrity hairstylist Ted Gibson.Gibson — who sells his hair care products at Saks Fifth Avenue, in about 50 Sephora doors and on Sephora.com — said he began working with the boutique investment bank two months ago. In between filming makeover segments for "The Oprah Winfrey Show" on Wednesday, Gibson said it's time to secure financing to grow the business now that his New York salon is four years old and his product line is about two years old.
"Our vision is to develop more product, open more salons and develop Ted Gibson into a global brand," said Gibson, who currently distributes his brand in Canada and has plans to enter the U.K., Russia and Japan. He also plans to plant salons in bustling urban hubs, such as Las Vegas, Miami, Los Angeles, Dallas and a second in Manhattan.
"I'm very much hands-on. I really like doing the day-to-day responsibilities," said Gibson, adding that Demeter provides his business with expertise on raising capital and mapping out a distribution strategy.
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