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E.l.f. Acquisition Shows Clean Beauty May Be ‘Table Stakes’ — Even in the Mass Market

"We would strive to be as clean as we could, while maintaining our strong accessibility."

E.l.f. Beauty has made its first acquisition, and it underscores the continued spread of the clean beauty movement.

This week, E.l.f. inked a $27 million deal to buy one of the early movers in the clean makeup category — W3ll People. The brand launched in 2009 and has a cult following for its Expressionist Mascara. Today, W3ll People has 40 products that have been certified by the Environmental Working Group — the ultimate sign of a products’ clean-ness.

For E.l.f., the deal brings on more than a new brand — it brings three founders well versed in clean formulations at a time when E.l.f. has been taking a hard look at its own ingredient list, said Tarang Amin, E.l.f. chairman and chief executive officer.

E.l.f.'s Poreless Putty Primer.
E.l.f.’s Poreless Putty Primer.

“Over the last six years we’ve formulated away from parabens, phthalates and a number of other ingredients that consumers don’t want to see in their products. E.l.f. today, relative to Sephora’s Clean Beauty standard, we’re only a couple of ingredients away from meeting that standard,” Amin told WWD.

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While E.l.f. is clearly looking to Sephora’s standard, it does not sell with the retailer. “We certainly will benefit from what W3ll People can bring to E.l.f. in terms of us continuing on our own journey,” Amin added.

E.l.f. does not have a specific time frame related to formulation cleanliness, but it is looking to get there while maintaining low price points, Amin said. “We would strive to be as clean as we could, while maintaining our strong accessibility,” he said. “The expertise that W3ll People brings into this company dramatically accelerates our ability to do so.”

In terms of W3ll People, Amin said E.l.f. liked the idea of the acquisition not just because the products were clean, but also because they worked. “I think every woman in our office is wearing the mascara right now,” Amin said.

For a brand, having 40 EWG-Verified products is no small feat, Amin noted. “I saw a press release in January of one of the legacy beauty companies kind of bragging that they worked 18 months with the Environmental Working Group to get one primer verified,” he said. “In one fell swoop we picked up 40 EWG-Verified products.” He was coyly talking about Revlon, which released EWG Verified PhotoReady Prime Plus Perfecting Smoothing Primer, $13.99, earlier this year.

Clean beauty is not the norm in the mass market, where E.l.f. sells its products. But as the trend trickles down from prestige brands, it has the potential to become vital, according to a note from Piper Jaffray analyst Erinn Murphy.

“We believe clean beauty will eventually be table stakes for the industry,” Murphy wrote in a note after E.l.f. went public with the W3ll People deal. “Our Teen Survey project indicates the environment is the [number-one] important political/social issue for Gen Z. Further, 46 percent of teens have changed their behavior as a result of their concerns. As it relates to beauty, 47 percent of teens look at the ingredients in their beauty/personal-care products and 75 percent are willing to spend more for ‘clean’ or natural beauty.”

The influx of clean is visible at some retailers, including Target, which has merchandised W3ll People in about a third of its doors with brands like Pacifica and Burt’s Bees. Amin said there’s potential to broaden W3ll People with existing partners, including Target and Whole Foods, as well as grow the brand internationally. He also expects E.l.f.’s speed to market to help W3ll People move more quickly in terms of launches, he said.

E.l.f. has been weighing the possibility of M&A for a long time. The company bid on Nyx in 2014 but lost to L’Oréal, and has said to have looked at several other businesses since then.

Amin said the company is open to more acquisitions, as well as incubating its own brands. “The two key things here are, what can leverage the capabilities that we’ve built…and then conversely  what capabilities can that brand bring to our company,” he said.

W3ll People has been backed by NextWorld Evergreen, which also backs Credo, since 2018. William Hood advised W3ll People on the deal. E.l.f. did not use an adviser, Amin said.

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