Let the building begin.
Beauty executives are trickling out of the traditional brands they’ve called home — in some cases for decades — and into start-ups, driven by the desire to make their respective marks in smaller environments to build the next generation of companies likely to be sold back to the giant beauty players they came from.
Examples include former Urban Decay chief executive officer Tim Warner, who joined Drunk Elephant; Lucia Perdomo-Ruehlemann, who was chief brand officer for Fresh and also joined Drunk Elephant; Scott Friedman, who is now ceo at hair extension business Bellami after six years at NYX, which L’Oréal bought in 2014; Nicole Frusci, who left Benefit to join Milk Makeup as chief marketing officer, and Kelly St. John, who is leaving Neiman Marcus after 22 years to join Beauty Bioscience.
“[If] you spent time at these big beauty houses you gain a lot of expertise and exposure as to how you scale a business,” said Lindsay Stevens, vice president at Kirk Palmer Associates, the boutique executive search firm that works with retail and beauty clients. “By going to a smaller brand, it allows people to really get hands on and scale something quickly, with the end goal of [it] being scooped up by one of the bigger brands.
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“They know how it’s done,” Stevens continued. “They know how to scale, they know how to build a distribution channel, they know how to work with contract manufacturers….you take that to something small that has a really good concept…and you can be part of the financial upside that comes with building something and then having an event of some sort…that’s really attractive.”
For Friedman, who served as ceo of NYX before and after L’Oréal bought it, joining Bellami marked an opportunity to grow another brand, but also a shot to learn a new type of business.
“One of the things I liked about it is they weren’t about beating their chests and saying, ‘Oh, we’re great.’ They are just executing really well,” Friedman said. “The beauty influencers that really know the product know them. And we’re going to explode when it comes to people’s awareness in the coming year.
“I like the process of building a brand,” she continued. “You can be selective in terms of how you go to market, you’re not everywhere already, so you can navigate and choose the right partners at the beginning.”
At Bellami, which started as a direct-to-consumer business, new partners include hair salons, he noted. The company is still founder owned and may eventually branch into other hair and extension-related categories, as well as new geographies, according to Friedman.
Beyond the brand-building part, Friedman went back to a small company to add to his knowledge base, he said. “Every time I go to a new role, I’m learning about a new product category or new channel of distribution. I want to make sure I have the confidence and experience to help, [but] I want to have 30 percent new[ness] so every time I move somewhere, I’m gaining a new skill set.”
Friedman is also interested in building company culture. “I like to create the work environment, I like to bring on the team members that I think fit well together,” he said. “I have a certain style, I want a certain type of collaboration effort and I want to create an environment where a lot of people work really well together and everyone knows what’s happening in the whole company.”
Running a large organization requires more structure — not necessarily a bad thing, he noted, but definitely markedly different from the small-business life. “For me, I like the speed and the nimbleness of the small company, and I like being involved in all aspects of the business,” he said.
“You learn new things at every little company, but you also learn new things when you’re acquired,” Friedman said. “I enjoyed learning about L’Oréal’s processes and meeting their people because they’re really good marketers. They particularly do things well globally, so I learned a lot about how to help us when we’re going to grow internationally.”
Following a cash infusion from San Francisco-based private equity firm VMG Partners, Drunk Elephant brought on two seasoned beauty veterans this year to help scale the three-year-old company — Warner, the former Urban Decay ceo who left his post at the L’Oréal-owned company in April, and Perdomo-Ruehlemann, who was previously chief brand officer at LVMH Moët Hennessy Louis Vuitton-owned Fresh. Warner and Perdomo-Ruehlemann are now Drunk Elephant’s ceo and cmo, respectively.
When the investment was made public in March, Drunk Elephant founder Tiffany Masterson told WWD that building infrastructure was the first item on her agenda and that, first and foremost, included adding executives from established beauty brands to lead future growth. International expansion was next on Masterson’s list.
Perdomo-Ruehlemann, who started her tenure at Drunk Elephant in August, said what initially attracted her was the “indie spirit” the brand has. She described a “modern setup,” which has her based in New York and Warner working out of Newport Beach, Calif.
“I actually had a trajectory of being at indie small brands,” said Perdomo-Ruehlemann of her time at Fresh and, before that, Jo Malone London. “They’ve been under the umbrella of a big company, but Jo Malone [London] was very small when I started at the beginning stages of the acquisition [by the Estée Lauder Cos. Inc.]. The fun part that attracted me [to Fresh] was the indie spirit — the no rules, the dreaming big with no parameters. Fast forward, that brand matured and it was in more of an adulthood phase….I enjoy nurturing indie incubator brands and helping them reach their potential.”
Perdomo-Ruehlemann called indie brands the future of the beauty industry, acknowledging that jumping ship from established brand to start-up might not be for everyone.
When asked what she plans to tackle in her new role, the executive said she’s taking a step back to listen and learn.
“They are doing so many things right so I just want to see where I can bring value and optimize. There is nothing broken. I am just observing right now,” she said, noting that bolstering brand awareness is a priority. “That’s really the first thing: having more people fall in love with Drunk Elephant. We just need more of them. There’s no hurry to shake anything up because the brand is extremely solid. It’s got a great point of view, [Masterson is] really authentic and people really respond to that.”
For Frusci, who just joined Milk Makeup from Benefit Cosmetics, it was time to try something small. Frusci had spent the better part of her career with larger companies — Gap, Sephora, Benefit (which is part of LVMH) — and was ready for a new project, she said.
“I really felt that it was time in my career to round out my professional skills,” Frusci said. “This was a new challenge — it excited me, and I’m hoping I’m able to take my learnings from these large companies and apply them to a small business.”
Milk Makeup is just under two years old. There, Frusci is the chief marketing officer. At Benefit, she was vice president of U.S. brand and digital marketing.
“I really like to set the strategy, but I also really love being part of the execution,” Frusci said. “I want to see something from inception to delivery and putting it on the shelves. Seeing something come to life — that’s what inspires me and excites me — you get to get your hands dirty…you’re going to make mistakes, but you’re going to learn from those mistakes and take those learnings and try something at a quicker pace to make it even better.”
St. John, who is becoming president of Beauty Bioscience, maintained that while the decision to leave Neiman Marcus for the parent company of the cult microneedling device Glopro was difficult, the timing was right. Most recently, St. John held the role as vice president, divisional merchandise manager for beauty, at the Dallas-based department store.
She credited an ever-evolving beauty landscape — heavily influenced by social media, bloggers and a more educated consumer — as instrumental in her decision to join an indie brand.
“It’s so crazy to me the number of people who don’t know about Beauty Bioscience. Oh my gosh, [what an] opportunity for brand awareness,” said St. John, who starts her new role Dec. 5.
She met Jamie O’Banion, ceo and cofounder of Beauty Bioscience, because Neiman Marcus was one of the first retailers to carry Glopro. The device’s success at retail, coupled with several initiatives that put indie beauty brands front and center, proved that consumers had a thirst for smaller brands where they could connect with the founders. (ShopTheExpo brought 15 new vendors to the retailer in October, for example.)
“There’s a big opportunity for brands like that to really resonate with the customer today. It doesn’t mean that the brands that are more traditional aren’t performing well, too,” St. John said, adding: “Being with a large company affords you the opportunity to see how things move — and they move slower sometimes. [But] being able to take that knowledge and that skill set and be able to navigate more quickly [within an indie brand] — I think it’s an upside opportunity.”
There is a link between the retail climate and directors heading to smaller companies, asserts Les Berglass, founder and chairman of Berglass Associates, an executive search firm with a deep footprint in beauty and fashion. “What happens usually in a downturn is the small brands get hurt because they cut the buys and the retailer keeps the big brands,” Berglass said, talking about the department store climate. “When you have a downturn like this, it’s the big brands that get hurt.
“Everybody thinks that the weaker people leave companies when they’re having problems — that’s not what happens. It’s the good people who see a problem and don’t see their company having a solution — they’re the first people to leave,” Berglass said.
Bryan Zaslow, founder and ceo of JBCStyle and Janou Pakter, which focuses exclusively on the executive search arm, said the beauty industry is experiencing hiring trends similar to those in the tech start-up and fashion incubator spaces.
Executives from large beauty firms head to start-ups “for the risk,” as well as an opportunity to demonstrate the aptitude to be a “leader of an organization versus just a component,” he said.
It’s definitely not for the money. Those who take on management roles at smaller beauty brands, Zaslow pointed out, are taking “very small up-front packages,” which don’t include the generous base salaries and bonus structures provided by previous employers.
“The upside is equity in the play and you find that in eight to 10x multiples when Lauder buys you. It’s a home run and you wind up finding legs. If I’m placing the ceo of some start-up brand, they are equity heavy in terms of their compensation package,” Zaslow said.
But, ultimately, he believes that the move from megabrand to newbie comes full circle.
Once the start-up has seasoned executives and the infrastructure to scale in place, it’s only a matter of time before it gets acquired by one of the beauty behemoths. This is what Zaslow called “striking gold twice,” meaning that the employee — who will surely help with the “integration” into the new parent company — gets a salary bump in addition to their existing equity.
“You have the big behemoths — Unilevers, the Estée Lauder Cos. and the [Procter & Gambles] of the world — and there is less opportunity for these small start-ups to survive. It’s such a smaller, tighter playing field [in beauty]. It’s so challenging to build a framework and get distribution and challenge any of their [larger] brands,” Zaslow said. “But when you do, you don’t even need [earnings before interest, taxes, depreciation or amortization] or to be profitable — you just have to take some market share. The big players aren’t going to buy you up as a start-up with no revenue or market share, but as soon as you infringe on their space [that changes]. It costs nothing to buy you and they use their leverage to scale you. It’s an easy monetization play [for the parent company] and that’s how these executives get rich.”