Armed with its new owner's resources, Colorescience is aiming to solidify its position as doctors' top choice for mineral makeup.
Private equity firm VMG Partners bought a majority share of the Dana Point, Calif.-based brand late last year for an undisclosed sum. Colorescience founder Diane Ranger remains chief executive officer, and Curtis Cluff, formerly Obagi's chief financial officer and senior vice president of operations, has been named president. Industry sources estimate Colorescience's annual revenues have been in the $30 million to $40 million range.
Ranger, who said she retains "a substantial stake" in the company she started in 2000, didn't take the sale lightly. The now familiar mineral makeup giant Bare Escentuals was her brainchild more than 30 years ago, but a partnership with venture capitalists netted unsuccessful expansion efforts and eventually bankrupted the company. John Hansen then bought Bare Escentuals out of foreclosure in 1990 for less than $200,000, and Ranger exited long before it went public in 2006.
"There was a lot of fear on my part, having lost everything with Bare Escentuals. I did not really want to bring anybody else into the business," said Ranger, who added that investors began courting her seriously upon Bare Escentuals' IPO. "When I was with Bare Escentuals, my choices were slim to none. This time, great people were talking to us. They had our same vision."
Ranger's and VMG's plan for Colorescience is to principally build the brand in the venues where it is currently stocked: doctors' offices, most notably dermatologists and plastic surgeons, and day, resort and medi-spas. Demand for mineral makeup in the spa and medical segment has spurred a 50 percent annual growth rate at Colorescience since 2001, according to Ranger. She expects similar growth this year at Colorescience, which is presently in 3,000 doors.
"In terms of sales, we think this year we can be the number-one leading [mineral makeup] brand in that channel," said VMG co-founder David Baram. "There is an enormous amount of potential to penetrate that market more. That market is explosive....It is amazing to see the number of doctors month to month going online with retail."Irvine, Calif.-based VMG, which launched last year with a $325 million fund to put toward consumer goods companies with annual revenues from $10 million to $150 million, is drawing upon its branding and marketing expertise to help fuel Colorescience's growth. Baram, a director at and previously chief operating officer of The Firm, a Hollywood talent and brand development agency that has a financial relationship with VMG, indicated celebrity involvement with Colorescience is on the horizon. Ranger is also writing a book to publicize mineral makeup's benefits.
Baram sits on Colorescience's board along with VMG colleagues Robert Schult, whose former posts include president of Nestle USA and ceo of The Shansby Group's food products division, and Kara Cissell-Roell, who was previously a vice president at The Shansby Group. (The Shansby Group has changed its name to TSG Consumer Partners.) Other companies in VMG's portfolio are tea specialist Might Leaf, accessories manufacturer Timbuk2 and pet treat marketer Waggin' Train.
With VMG's guidance, Baram suggested that Colorescience could either take Bare Escentual's route to the public markets or sell to a strategic buyer. "The larger cosmetics companies have expressed a strong desire to get into this category," Baram said, referring to the medical and spa segment. He pointed to L'Oréal's 2005 acquisition of professional skin care brand SkinCeuticals as an example.
Colorescience's 300 stockkeeping units run from $12.50 to $225, and Ranger said a typical user is a woman between 24 and 48 years old. Sunforgettable SPF 30 products, including a $50 brush, a $50 shaker can and a $65 roller ball, are among the brand's best-selling items. In May, Colorescience will add an SPF 30 powder puff Sunforgettable Orb available in six shades.
"Every line now thinks they have to have a mineral makeup, but the ones who think of it as just a marketing ploy and [customers] don't see the results, part of it will just go away," said Ranger. "It is a new category, and it is probably going to be the strongest category of color."
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