Jay Sammons is used to being on the prowl for big game.
But now, the buttoned-up, 41-year-old private equity executive with a Harvard Business School pedigree is leading the expedition, looking for consumer-focused companies that not only have scale, but the potential to flourish under the auspices of investing giant Carlyle.
Sammons was promoted to head of Carlyle’s global consumer and retail team last year, giving him the platform to marshal potentially billions of dollars ($150 million or so at the minimum) to buy into the next big consumer company.
Carlyle is working on its sixth U.S. buyout fund — a $13 billion pot of money that is being put to work across a number of sectors, including consumer.
Since joining the Washington-based fund in 2006, Sammons has helped lead its investments in skin-care brand Philosophy, which was acquired by Coty Inc. in 2010; Dr. Dre and Jimmy Iovine’s headphone standout Beats by Dre sold to Apple in 2014, and hair-care firm Vogue International, sold to Johnson & Johnson last year.
The trick is not to find a company that’s looking for some money, but to find the right kind of venture.
“We have generally a lot more opportunities to invest than we have time to spend on them, so we have to focus our time and resources,” Sammons said. “Every time I go to my investment committee, I’m asked ‘Why are we the right owners of this business?’…It can’t just be that I’m willing to pay more. It has to be that we have differentiated capabilities to create more value in this investment opportunity.”
Sammons has a team of 10 consumer-sector specialists combing over deals.
He also works with the top-shelf names Carlyle has recruited as operating executives, including Mike Duke, former Wal-Mart Stores Inc. chief executive officer, and Susan Arnold, who served as beauty guru at Procter & Gamble Co.
Big private equity players focused on growth companies, like Carlyle, are often thinking in decade blocks, with five years to help build up a business and five years to exit the investment.
“It’s less about what’s hot now or next year and more about what are the businesses or business models or brands that are going to endure for a very long period of time,” he said.
Sammons is looking to invest behind broader consumer themes, such as the move toward health and wellness brands, the impact of technology or changing demographics.
The consumer overall continues to be “very resilient,” supported by low unemployment, rising wages, a stock market near record highs and low interest rates, he said. There are still plenty of Americans looking for their economic footing, while others are seeing even more robust growth.
Sammons, who lives in Manhattan with his husband and their two sons, noted that much depends on where people live and where they work: “All of these [economic] indicators do seem pretty positive, but when we look at some of the data in the marketplace, everybody says retail is tough.”
And it looks like it will continue to stay tough this year, with many companies rejiggering in the face of slipping sales and softer foot traffic.
“There’s a big market-share shift away from what I would refer to as traditional retail into modern retail,” Sammons said. “Modern retail is going to be very important — and it can be brick-and-mortar and it can be e-commerce.
“I don’t think retail is dead,” he said. “Consumers still want to buy things, but have tastes and preferences that are evolving and changing. Companies are coming up with new and innovative ideas and products. I think great ideas can be built into big companies faster and with less capital than ever before….And I think traditional retail was not built to be nimble in that kind of environment. I think there’s a technology component to that, there’s an innovation component to that, there’s a generational component to that. That, to me, is the rub — and I think there will be winners and losers.”
The biggest winners, right now, at least, seem to be in the beauty world, where brands are being pumped up on social media, sold through Ulta and Sephora and acquired for big premiums by the established players, such as the Estée Lauder Cos. Inc. and L’Oréal.
“It is the ultimate accessible luxury,” Sammons said, noting that lower ticket prices on beauty products help build broader audiences. “It really democratizes the category a lot more than some other categories, like luxury; more people have access to it….”
Apparel is in a tougher spot. Sammons said there’s no one formula, but that the winners in the category would likely have geographic growth opportunities and different ways to get to the consumer.
“Both fashion and beauty generate a lot of emotional connectivity with consumers,” he said. “It can’t be just about the function of a product, the consumer has to feel connected to it. And the combination of emotional and functional connectivity to a brand or product is what, in our view, creates a lot of loyalty.”
And with customer loyalty comes growth and, hopefully, a good investment.