Natural beauty companies are eyeing a lot more than their ingredient labels these days.
Green brands are looking to diversify retail opportunities beyond their natural grocery bases. It’s a complicated undertaking that requires retailers to step up their natural merchandising games and green brands to shell out the cash to scale up.
That dynamic is one of the factors behind the influx of natural brands wading around the capital markets in search of a buyer or investors — among them Andalou Naturals, Derma E, Kiss My Face, Mineral Fusion and MyChelle Dermaceuticals, which are all considering transactions, multiple financial sources have said.
“All these [natural] companies, to try and get scale, need a helping hand,” said Andrew Shore, managing director at Moelis & Co. “That helping hand can come in the form of a strategic buyer or private equity.”
“What happens with any niche brand is it reaches a point in its life cycle where it feels like it needs capital to grow, so it many cases, they put themselves on the market,” said Martin Okner, managing director at SHM Corporate Navigators.
Even though consumers are more aware of product ingredients than ever, there is still not necessarily a clear path for natural brands into the mainstream beauty consumer’s cabinet. Certain tactics — like packaging changes or big box distribution — can alienate a tree-hugging consumer base. But retaining positioning that focuses solely on “good-for-you” ingredients can prevent a more mainstream shopper from forming an emotional bond with the brand, industry experts noted.
That note of caution aside, natural beauty is seen as a fast-growing category, where more retailers are looking to play. Target, for example, already sells Beautycounter and is gearing up for Jessica Alba’s Honest Beauty to hit shelves. Bluemercury has launched a test program for green beauty, stocking Indie Lee, One Love Organics, Ilia Beauty and Tracie Martyn, and Nordstrom has rolled out natural outposts featuring Tata Harper, Youth to the People and RMS Beauty.
“Demand for natural products is going to remain high moving forward,” Okner said. “Natural and organic ingredient stories have become part of a mainstream consumer’s daily life.”
Here are five natural beauty brands industry sources say are seeking a sale or investor:
Andalou, founded by the same team that built Avalon Organics, Alba Botanica and other brands such as Stacey Kelly Egide and Mark Egide, is considering doing a deal, according to several industry sources, who estimated the growing brand has between $30 million and $40 million in sales. Andalou makes about 120 non-GMO Project-verified face, hair and body products with an ingredient focus on fruit stem cells. The company’s offerings span 1,000 Roses Rosewater Mask, $14.95, to Purple Carrot + C Luminous Night Cream, $24.95, to Argan Stem Cell Age Defying Thinning Hair System, $29.95, to Lavender Shea Firming Body Butter, $13.95. Andalou is sold primarily in the natural grocery channel, including at Whole Foods, and has launched at Target, and recently Ulta Beauty. The brand recently updated its packaging and debuted a new display at Expo West.
Derma E makes skin-care, hair-care and body-care products that are vegan, cruelty-free and free from parabens, sodium lauryl sulfates, petrolatum, mineral oil and artificial colors. The brand’s offering includes a Purifying Two-in-One Charcoal Mask, $19.50; Skin Hair and Nail Oil, $15.50, and Skinbiotics Treatment Cream, $21.95. Derma E’s products are sold through Whole Foods, Sprouts, Ulta Beauty, CVS and Walgreens, as well as its own web site. Financial sources indicated that the business hired Piper Jaffray to conduct the sale process, and that the business has around $30 million in net sales.
Kiss My Face
Kiss My Face, another mass-market naturals line, is said to have hired Intrepid Investment Bankers to consider a transaction. The business makes a full range of personal-care products from toothpaste, $5.95; facial care, $2.99 to $21, and sunscreen, $8.95 to$21.99. The company has a line of more than 100 products, sold in more than 19 countries, and in retailers such as Whole Foods, Walgreens, Bed Bath & Beyond and Kroger. The business also sells on Amazon. Kiss My Face has been backed by Caltius Equity Partners since 2010 — it was founded by Bob MacLeod and Steve Byckiewicz in 1981.
Mineral Fusion makes natural products that span the beauty spectrum — makeup, skin care, body care, hair care and even nail products. The brand’s products are paraben-, gluten-, artificial color- and phthalate-free. Industry sources indicated that Houlihan Lokey has been tapped to shop the business, which was founded in 2007. Historically, Mineral Fusion’s products have been sold in the natural grocery channel, but that brand recently branched into CVS. Products are priced between $7.99 and $32.99.
MyChelle makes a line of natural skin-care products formulated without sulfates, artificial fragrances, colors, genetically modified organisms, gluten or parabens. Some of the brand’s latest launches have an antipollution tilt, aiming to protect the skin from the elements. Recent product introductions include Quick Clean Micellar Water, Sun Shield Liquid Tint and Perfect C Pro Serum 25%. MyChelle is sold at Whole Foods, Ulta Beauty and online. The business launched in Canadian retailer Murale, owned by Shoppers Drug Mart, in September. At that point, the retailer touted green beauty as an “important and growing category.” MyChelle, founded in 2000, is backed by private equity firm Encore Consumer Capital and is said to have hired Threadstone Partners to sell the business. MyChelle has about $15 million in sales and is growing at about 15 percent, according to industry sources.
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