Elf is accelerating its ambitions to become the next big beauty conglomerate.
On Tuesday, the digital disruptor company announced a definitive agreement to acquire indie skincare brand Natrium in a $355 million cash-and-stock transaction. Founded in 2019 by beauty brand incubator The Center and influencer Susan Yara, Naturium is a self-proclaimed “performance” skin care brand that focuses on ingredients and product efficacy. The Vitamin C Complex Serum is a bestseller. This product is on his TikTok where he has been viewed 7.8 million times.
“Nathurium is one of the fastest growing brands in the skin care space, growing at an 80% CAGR (compound annual growth rate) over the past two years,” said Elf Beauty Chairman and CEO. One Taran Amin said: beauty business. “This is one of those rare assets that is not only growing extremely fast, but growing both in terms of revenue and revenue. It had very limited distribution and was number one. [retail] Partners are targets, products are superstars. “
Earlier this month, Elf reported its 18th consecutive quarter of sales growth and raised its sales guidance for the fiscal year. Naturium is expected to reach $90 million in net sales and $17 million in adjusted earnings excluding interest, taxes and depreciation in 2023. Yara and the remaining 25-person team for the Los Angeles-based brand will remain with the acquisition. Amin added that he plans to add more staff to Naturium in the coming months.
With this acquisition, Elf will further focus on the skincare segment, doubling its presence in this segment to 18% of sales. Elf started selling skin care products in 2015, and last year the company wanted to turn makeup enthusiasts into skin care enthusiasts, establishing Elf Skin as his fourth portfolio brand. Just as Elf relied on his last acquisition, W3ll People, to cleanly rebuild his core makeup portfolio, learnings from Naturium’s skin care products will be integrated across the company’s operations. It will be.
From digital disruptor to multi-brand conglomerate
Elf’s last (and first) acquisition was before the 2020 pandemic. Acquired clean beauty brand W3ll People in a $27 million cash transaction. That same year, Elf launched her first own brand, Keys SoulCare, with musician Alicia Keys, consolidating her shift from a mono-brand to a multi-brand company.
Both W3ll People and Keys Soulcare follow a model that relies on Target and Ulta Beauty’s top retail partnerships and their own e-commerce sites to connect with shoppers. Naturium is very mass stage, but it’s also being sold at Target and Amazon, but it’s making inroads into the premium beauty realm. In the UK, the brand is sold by Space NK. This acquisition enhances Elf’s overall portfolio position. Naturium averages $18, while Elf averages around $9.
“Elves are more Gen Z and value driven, but Naturium’s authority is on skincare and millennials,” said Amin, noting that 40 percent of Naturium’s customers are men.
He pointed out that Naturium contributed to an increase in awareness of about 5%, which could greatly improve Elf’s marketing know-how. He also plans to integrate some of Elf’s technology capabilities into his Naturium.com. Amin added that the company has spent time finding worthy acquisition targets but remains “open” to other deals.
Winning influencer (and incubator) brands
Despite the plethora of influencer (and celebrity) brands in the beauty industry, and an equally prolific incubator popping up to keep budding founders happy, few have made it to the breakout. The last incubator to make a sale of any size is Luxury Brand Partners, which sold Becca Cosmetics to Estée Lauder and hair care brand Oribe to Kao Corporation in 2016 and 2017, respectively. (ELC only five years later he closed Becca.)
The deal with Elf makes Yara one of the few influencers and celebrities to successfully sell a beauty line to a strategic acquirer. Although many are for sale. The line was developed four years ago by The Center, a beauty brand incubator founded by Ben Bennett. Yara joined the company the following year.
“In less than four years, we have built an incredible brand with dozens of superstar formulas, a dedicated community and a world-class team,” Yara said in a statement.
Amin argued that Yara’s skincare expertise and the brand’s association with dermatologists, skin influencers and cosmetic chemists were victorious, but in the end, smart economics came to a consensus. .
“this [brand] It was the first product that demonstrated the alignment of our values and mission, from product strength to team strength.“ Amin said. “We’ve seen a lot of brands growing quickly without making a profit, or we weren’t confident there was that much white space left in the brand. I have.”