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Procter & Gamble Buys Farmacy Beauty

The CPG giant is strengthening its presence in the specialty retail channel with the "farm-to-face" skin care brand.

Riding high on the continued gains of its beauty business, Procter & Gamble is doubling down on skin care with the acquisition of Farmacy Beauty.

Founded six years ago by serial entrepreneur David Chung, Farmacy bills itself as “farm-to-face skin care.” Bestsellers include Green Clean cleansing balm, Honeymoon Glow Serum and Filling Good hyaluronic acid serum.

“We’ve had our eyes on the brand for quite a while,” said Markus Strobel, president of skin and personal care at P&G Beauty. “It’s an attractive brand with amazing potential and an unusual positioning — deeply rooted in science combined with natural ‘farm-to-face’ ingredient sourcing. This combination is super attractive and fills a space in our portfolio that we don’t have.”

Terms of the deal, which is pending regulatory approval, were not disclosed. Industry sources estimate Farmacy will close out the year with net sales approaching the $80 million mark. Both Chung and P&G declined to comment on the numbers.

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Farmacy, which is d-to-c and exclusive to Sephora in North America, enables P&G to reach a younger consumer, while also reflecting the core values of its Responsible Beauty platform. Currently, P&G’s skin care roster consists of Olay, SKII and First Aid Beauty.

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“Our portfolio is small but powerful,” said Alex Keith, chief executive officer of P&G Beauty. “Farmacy is a unique addition, appealing to the Gen Z consumer as a conscious brand and strengthening our presence in the specialty beauty channel.”

For Chung, the deal will enable Farmacy to scale exponentially. “I’m very good at incubating and building brands, taking them from zero to $100 million,” he said. “After that, I’m not as good. This brands needs to grow to the next level, and needs a company like P&G with their tremendous resources, especially globally.”

Chung, who sold a majority stake in his previous business, Englewood Lab, to Cosmecca Korea in 2018 for $57 million and more recently launched iLabs, which develops Indie brands, will remain as an adviser to Farmacy for a year. Mina Chae, Farmacy’s vice president of global marketing, will become the president and CEO.

David Chung
David Chung

In terms of the integration, P&G will be relatively hands-off, a lesson it has learned from the successful acquisition of Native, Walker Brands and First Aid Beauty over the last five years. “We don’t know everything so there’s a lot we can learn,” said Strobel. “In the past, it was more like, ‘This is what you should do.’ Now, it’s ‘you know what you’re doing and you tell us how we can help you take it to the next level.’ This is a new muscle we have built.”

That was one of the things that appealed to Chung as he shopped around for a buyer, as did P&G’s Responsible Beauty platform, which launched last year and encompasses a 360-degree approach to sustainability, equity and inclusivity, environmental impact and more. “Sustainability has been a key part of our philosophy from the beginning” said Chung, “and P&G can take that to the next level by integrating it into Responsible Beauty.”

While there are no immediate plans to significantly increase distribution in North America, international expansion is top of mind. “Farmacy is still at the beginning of its trajectory, and we’ve learned a lot with First Aid Beauty,” said Strobel, noting that the brand’s business has doubled since P&G bought it three years ago. “Strategy is the ability to say no, and we want to be very selective about expansion plans, and consciously develop the brands and their potential.”

Overall, P&G remains extremely bullish on skin care. Strobel said that North America and Europe are both growing, that APAC is slowly coming out of the COVID-19 crisis and that, while growth has slowed somewhat in China, it is still the highest in the world.

The company has been aggressively courting growth — both with its legacy brands and via incubation and acquisition.  For the most recent quarter ended Sept. 30, P&G’s beauty sales totaled nearly $4 billion, up five percent from the previous year. Strobel didn’t rule out more acquisitions in the short term.

“You have seen that under Alex’s leadership, P&G Beauty got its mojo back,” he said. “We are growing and always on the lookout to complement our portfolio with interesting brands and propositions. We are looking and looking and looking a bit more.”

For his part, Chung continues to see significant opportunity in the Indie brand space. “I always look at supply and demand and there is a tremendous demand for Indie brands. There are influencers, celebrities, housewives who want to sell brands, but there are limited manufacturers who can support this demand,” he said. The vision for iLabs is to be a one-stop shop for such founders, and Chung said business is booming, noting they’ve created “a lot” of brands this year.

While he’s not actively working on any brands outside of iLabs at the moment, he believes the next big area of opportunity for beauty will be in personalization. “I believe the future will be creating a brand that is really catering to individuals — one-on-one customization,” he said. “That is where the whole world is heading as we all go to Amazon and they know exactly what we like. We are moving in that direction.”

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