Natural personal care brand Hugo Naturals has gone from vending handmade soaps at local farmers’ markets to presenting a broad product assortment at stores across the country in the last four years.
This story first appeared in the May 21, 2010 issue of WWD. Subscribe Today.
Over the next four years, a new owner, Manhattan Growth Partners, and chief executive officer, Steve Dickstein, will play large roles in fueling Chatsworth, Calif.-based Hugo Naturals’ expansion. They aspire for the brand to have a global reach and be recognized by consumers for its obsessively natural approach.
“We see $50 million to $100 million as clearly within the realm of this business,” said Dickstein, who was most recently president of Freeman Beauty Labs. “Our largest opportunity here at Hugo is to increase awareness within the [natural] segment that already exists. It is not about getting consumers introduced to natural and organic brands, but telling them we are the better one.”
Dickstein said Hugo Naturals has averaged 50 percent annual growth since its inception in 2006, and anticipated that rate will continue in the near term. The brand is carried in some 1,100 doors, most notably Whole Foods, Henry’s Farmers Market and Sprouts Farmers Market, and has roughly 150 soap, lotion, scrub, baby and related personal care products ranging from $4.99 to $12.99. About 40 percent of sales are from soaps, including bar soaps and handmade bulk soaps.
Dickstein expects the brand’s domestic future growth to be driven by further penetration in its distribution network, where Hugo Naturals’ offerings are largely limited to 30 to 40 items, and by entering additional stores in the natural retail channel. Abroad, he noted the brand is only found in Canada, but could spread to Germany, France, England, Asia and the Middle East via distributors. The brand is moving manufacturing to a new facility soon to support a tenfold jump in production to meet expanded distribution demands.
Dickstein and Patrick McBride, a managing partner at Manhattan Growth Partners, would not discuss the exact amount of investment by Hugo Naturals’ majority owner, Manhattan Growth Partners, and the Matthew Pritzker Co., a private equity and venture firm whose namesake famously disputed with family members over the Hyatt hotel fortune. Dickstein did confirm that Hugo Naturals’ annual revenues are less than $10 million.
Generally, McBride said of Manhattan Growth Partners, “We are looking to make $5 million to $25 million growth equity investments in companies that we can get passionate about, where we can see not just a good investment, but a big idea that we can get excited about.” Hugo Naturals is the first of what is expected to be several investments by Manhattan Growth Partners in the consumer sector.
McBride said Dickstein was chosen as ceo because of his faith in Hugo Naturals’ adherence to the natural channel, and his understanding of the brand’s culture fostered by husband-and-wife founders Hugo and Debra Saavedra. He stressed the founders are staying with the company as chairman and chief innovation officer, and president and chief creative officer, respectively, and maintain a “meaningful ownership stake.”
“It was so much about them, their characters, their personalities and the stories they have built around themselves,“ said McBride of the Saavedras, who farmed herbs, lettuces and flowers sold to Los Angeles area restaurants before turning their attention to Hugo Naturals. “We had a great product line and they built a really good brand, but we also had the charisma of these people to tell a story that doesn’t exist in the marketplace.”
Dickstein explained that Hugo Naturals avoids green certifications because those certifications are often used inappropriately and confuse consumers. To demonstrate Hugo Naturals’ purity and safety, Hugo Saavedra is fond of getting consumers to eat the brand’s products. And Dickstein emphasized Saavedra goes beyond eliminating nonnatural ingredients to ridding products of ingredients that are associated with broader social ills.
Hugo Naturals is planning to enhance its packaging to clearly highlight its commitment to natural ingredients and begin advertising in publications aimed at natural consumers later this year to amplify its message. Dickstein said, “We are an infant in the marketplace, so we are going to be evolving and changing our packaging to improve the communication of what makes us different, better and special.”