Four years after it was officially founded as a private-label product development arm of Sephora, Kendo is stepping out.
Kendo is asserting its independence from the global beauty retailer — both are owned by LVMH Moët Hennessy Louis Vuitton — with a mandate to expand global distribution and continue to develop and acquire new brands with long-term potential.
As part of that mandate, it made its second acquisition this week: Bite Beauty. The three-year-old Canadian color cosmetics firm, founded by Susanne Langmuir, specializes in natural lip products. It also runs a custom-blending lipstick operation, Lip Lab, with stores in New York’s SoHo district and Toronto.
Terms of the deal were not disclosed. Industry sources estimated that Bite Beauty does about $30 million in retail sales annually.
Bite Beauty joins four Kendo-created brands — Marc Jacobs Beauty, Kat Von D Beauty, Formula X and Elizabeth and James fragrances — and one other acquisition, Ole Henriksen, which was purchased in 2011.
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Langmuir will report to David Suliteanu, chief executive officer of Kendo. Bite Beauty will continue to be based in Toronto. “She has a fanatical attention to every detail of her products,” said Suliteanu. “For instance, with the Lip Lab, the consumer can customize formula, shade, texture and flavor while you wait. I’m really excited about the possibilities of doing some more Lip Labs. It’s the ultimate in customization.” In fact, Suliteanu noted that the concept could be adapted to pop-up shops and events. “When you really break it down,” he said of the production process, “it’s a couple of pieces of equipment and raw materials. It is absolutely a travel-able experience, which, ultimately, of course, is about the brand. It’s a great way to introduce people to Bite.” The brand’s overseas distribution is virtually a blank slate, said Suliteanu, opening the door for a global Bite push.
Suliteanu said he set his sights on Bite Beauty while still at Sephora. “The brand launched exclusively at Sephora and I met Susanne,” he said. “In the beauty business, there are very few legitimate creative powerhouses, and she’s one. Second, it was hard not to like the idea of a brand that was built around the idea of edgy, edible, innovative products for lips. And the brand has flourished. When I took over this role full-time, the conversations got serious.”
“We get to be future-focused now, which is a luxury,” said Langmuir. “The brand, in its early stages, was based on customers discovering us, and we haven’t really had a digital presence. This is a very strategic, creative partnership. Entrepreneurs struggle to get even really great ideas off the ground financially. I’m pinching myself that we’re doing it with LVMH backing.”
The next order of business will be a Bite Beauty Web site. “Bite Beauty has virtually no online presence,” said Suliteanu. “It’s a big opportunity. That’ll be one of the early priorities.”
Developing and acquiring brands is nothing new to Suliteanu. Prior to assuming his current role, he served as president and ceo of Sephora Americas. “The idea for Kendo came about a number of years ago, driven by Sephora’s appetite for new products and new brands,” said Suliteanu. “So we started playing around with the idea of creating our own brands. The initial iteration of Kendo was more about collaborations — Tokidoki and Hello Kitty are examples. We’d find a fun idea and we’d work with it with the intent that it would have a defined lifespan, and then we’d move on to something else. And then that evolved into a much more permanent approach to building beauty brands. And we definitely have our global hat on.”
Suliteanu has focused on building and acquiring unique, scalable brands with no defined expiration date once he made the decision to transition to Kendo full-time. “Once that change occurred, the whole focus of the company changed,” he said. “When I left Sephora, Kendo left with me.” Suliteanu officially made the switch to Kendo at the beginning of this year. He noted that future offerings could include Kendo brands developed specifically for markets outside North America in addition to growing existing brands in global doors.
Although they are now two separate entities, Suliteanu noted that Sephora and Kendo are still strong partners. Industry sources estimated Sephora’s current U.S. volume at more than $2 billion in North America. “Having a good relationship with a retailer is a ticket to play,” he said. “Ultimately, what happens to any of our brands is contingent upon our ability to create something compelling and get the retailer, and ultimately the consumer, excited. That is the challenge every single day, to replicate it over and over again. We have the independence to do the right thing for each brand, and we’re also able to take advantage of Sephora’s global reach — they are in dozens of markets. It’s a huge distribution network. Everything we are working on has global reach. One of the early decisions that we made was that we would be, in addition to bricks-and-mortar-focused, digitally focused.” Kat Von D, Marc Jacobs Beauty, Formula X and Ole Henriksen have Web sites; others will follow, he said. “We are very plugged into social media, and part of the reason for that is in today’s world, it’s the most effective form of global marketing that there is.”
In fact, Kat Von D was built at least in part on social media strength. “Kat was technically our first Kendo brand, before Kendo was Kendo, and now, in 2014, she is the fastest-growing makeup brand at Sephora in North America,” said Suliteanu. “Why? Two reasons. First, because the product is amazing — the formulas and packaging are innovative — and second, not a small part of the story is Kat’s unprecedented strength in social media. The two combined make for a gigantic commercial success.” He cited the brand’s recent lipstick launch — with 30 sku’s — as an example: “It was the fastest-selling lipstick in the history of Sephora, and a lot of lipsticks have been launched at Sephora.”
Marc Jacobs Beauty has been another big win for Kendo, said Suliteanu. “That brand has exceeded all expectations,” he said. “It’s the biggest single brand launched in the history of Sephora North America in its first year. Its global success is something we’re incredibly proud of. The top stores for Marc are all over the planet — they’re in Europe, the Middle East, Asia and obviously here in North America.” Marc Jacobs Beauty launched with more than 100 sku’s, which Suliteanu noted was a hefty investment. “We’re venture capitalists, but our owner is LVMH,” he said. “That’s a wonderful combination. One of the things that we’re really happy about with this brand is accessible luxury,” Suliteanu continued, praising Jacobs’ strong involvement with the development process. “In [color cosmetics], it’s very difficult to achieve balance across product categories. We’ve got, right out of the gate, balanced strength in foundation and eye, we’ve got strength in nail. We’ve got strength in lip. So across the important categories in makeup, we have success in all of them. That’s unusual. We can choose which of the franchises to invest in over time, and having that choice is a terrific asset.”
Kendo’s ramp-up of brands has been quite fast, Suliteanu pointed out. “In the summer of 2013, Kendo was two brands in North America — Kat Von D and Ole Henriksen,” said Suliteanu. “In the span of less than 18 months, we’ve created and launched Marc Jacobs Beauty, Formula X and Elizabeth and James. And now we’re finalizing the acquisition of Bite. We’ve gone from two brands to six (including Ole Henriksen), all North America-centric that are expanding globally.” By year-end 2014, Kendo will be distributed in 24 countries, said Suliteanu, and for the next year, Kendo will likely focus on making each of these brands the best they can be, he said.
Suliteanu insists he doesn’t have “a magic number” of brands for the long-term in mind. “We’ll emphasize quality over quantity,” he said. “Our self-involved charter is anything we do needs to be significant on a global scale. No one takes that lightly. The challenge of taking any of these brands to a significant level of critical mass globally is not a challenge for the faint of heart. There’s plenty to be done on all of these [existing] brands.”
For instance, since acquiring Ole Henriksen in 2011, Kendo has doubled the size of the business, said Suliteanu. “We strengthened infrastructure, built the team, strengthened the educational aspects,” he said. “This brand is now ready to be updated relative to the products and branding. Next year — maybe — there will be a pretty significant change in the way that brand is presented. And there are many global distribution opportunities. To be a successful global skin-care brand, you have to play in Asia, so I think there are tremendous long-term opportunities for the brand.” The line is one of Sephora’s top five skin-care brands, he added.
“Kat Von D is going to surprise everyone with its global reach, and we’re taking it global next year,” said Suliteanu. “We have commitments in the Middle East, Australia, Spain and South America. There’s no better example of the success of social media. She’s tailor-made for Instagram. Her YouTube following is gigantic. Her educational videos have a viewing that is multiple times that of other makeup artists. Social media has no land boundaries, so her business can only grow. Linking all of her social media back to the beauty line is one reason we’re so optimistic about the global potential. There will definitely be more markets to come.” The U.K. is on the list, but as the country doesn’t yet have Sephora, it will be in different distribution there, he said.