Is Drunk Elephant the next acquisition in the beauty world?
The skin-care brand has achieved cult status in the two years since it was launched. A spokeswoman for Sephora confirmed that the line is one of the fastest-growing skin-care companies in the history of the retailer’s business, and an industry source said it’s Sephora’s top growth skin-care brand for 2016. The 10-product range, highly identifiable by white, airless pumps with poppy colored toppers, is carried in all of the retailer’s 360 U.S. doors and on sephora.com.
And since these days, any hot beauty brand attracts potential investors like blood in the water attracts sharks, firms from private equity players to industry giants like The Estée Lauder Cos. Inc. are scrambling to snap up Drunk Elephant.
A source told WWD that Jane Hudis, group president at Estée Lauder Cos. — responsible for hits such as Victoria Beckham Estée Lauder collection — has already met with Drunk Elephant founder Tiffany Masterson on Masterson’s home turf in Texas. A source in the financial sector said Fabrizio Freda, Lauder’s chief executive officer, is set to meet with Masterson this week.
While sales volume is still small by industry standards — projections for 2016 are $20 million, Masterson told WWD in May, a 400 percent increase in retail sales from 2015’s nearly $4 million — growth is exponential. Industry sources say this number is now likely to be higher.
That — and its skyrocketing growth — make Drunk Elephant a perfect target for Lauder, or even a private equity player, to acquire. When Lauder bought By Kilian in February the fragrance brand was said to have net sales of about $25 million. Similarly, Editions de Parfums Frédéric Malle’s business was estimated at about $35 million and Le Labo’s somewhere between $20 million and $30 million when Lauder purchased the two in November 2014.
A spokeswoman for Lauder said, “We don’t comment on rumors.”
“We’ve been in talks with private equity and strategic partners, and we’re assessing that need right now. We’re coming close to a conclusion. We’ll possibly bring in some sort of investment partner simply because we need help handling the intense growth,” Masterson said during an interview Friday, listing areas such as infrastructure build out, hiring key employees, inventory forecasting and expansion of distribution channels as key areas of focus going forward. The team has gone from two employees in early 2015 to 25 and the brand was launched with just $300,000, according to Masterson. The company was profitable in 2015 and will be profitable again this year.
Masterson declined to comment on the identities of the potential investors she was meeting with, or to confirm speculation that Lauder was among them.
She was able to disclose that her line will see the addition of six products, the first of which will roll out in early 2017. The current collection, which includes 10 products that range from $18 to $90, include the T.L.C. Framboos Glycolic Night Serum, the brand’s best-selling item, as well as the C-Firma Day Serum, “a close second.”
Distribution is growing, too. In addition to Sephora and an e-commerce site at drunkelephant.com, about 90 independent boutiques will carry the line by the end of the year, up from about 30 in the spring. On a global scale, Masterson said Drunk Elephant will enter all Sephora doors in Canada early next year, following the brand’s introduction into Australia in September.
“I spent months studying ingredients, I examine every single ingredient. I knew I didn’t really believe in skin types,” Masterson said, noting that pH level comes first when formulating all products, which is supported by actives and antioxidants at percentage levels that are scientifically proven to work. “A lot of the stuff we deal with, we create [the issue ourselves] when we use insensitive ingredients. It’s not so much that we are sensitive, it’s that we have become sensitized.”
Her skin care, packed with actives and reparative ingredients, has a clear point of view.
Drunk Elephant is not a natural line, and Masterson isn’t afraid to say it. For her, natural ingredients can often yield irritation, inflammation and increased skin sensitivity, and she believes high-quality synthetics often yield more effective results. She maintained that all of her products score a zero on Environmental Working Group, or EWG’s, hazard score.
“It’s controversial, but it’s one of many tool I look at. If they list something as hazardous, I use it as a metric,” Masterson said of EWG’s rankings.
Masterson is opposed to essential oils, for example. She considers them toxic due to the risk of irritation and sensitization they could cause — pointing out that some of them rate as high as an eight of 10 on EWG’s hazard score. Other ingredients you won’t find in the range are silicones, fragrance, dyes and chemical sunscreens. She even has a “blacklist” on her web site of ingredients she refused to include in any of her formulas.
What one will find throughout the range, though, is plenty of antioxidants.
“You don’t just want to use one,” Masterson said of loading her products with antioxidants. “One is good; five is better. They support each other and make each other better.”
She added: “We need to let skin do what it’s supposed to do. Let’s not focus on ingredients to treat [issues], let’s just treat all skin like it’s functioning equally and feed it vitamins and antioxidants and nourish it so it can function. It’s a different stance on skin care.”