Welcome to Glossy’s Beauty and Wellness Briefing. This exclusive and inside look at the beauty and wellness industries is meant to dig into the topics that really matter and shed light on the elephants in the room. Sign up here to get the briefing delivered to your inbox every Wednesday.

When Unilever acquired Schmidt’s Naturals in December 2017, the body-care brand seemed to have all the characteristics a CPG conglomerate would be interested in. Schmidt’s offered a natural proposition that spoke to burgeoning customer values, legs beyond its core deodorant product (it had already ventured into toothpaste and bar soap by the time of purchase), learnings to be passed along to other brands within the Unilever portfolio (including Dove and Degree), and untapped retail potential, including international stores. (In 2017, it was only sold in two retailers.)

“Unilever has allowed us to become a hybrid. We’ve branched out and have been able to broach international and other categories in a matter of months, not years,” said Michael Cammarata, co-founder and CEO of Schmidt’s Naturals. “I was dead set on an IPO, and we were even talking to strategic investors as a second option, but we see this partnership now as a collaboration between two companies. We lean on them, but also stand on our own.”

While businesses like Unilever and Procter & Gamble — with its December 2018 purchase of Walker & Company’s brands — have largely turned to acquisitions to modernize or tap into growing consumer trends, vertically integrated Maesa has instead incubated its own exclusive brands that then find their footing in select retail doors. Both approaches, while different, posit that the role of the CPG company is rapidly changing and needs newness to survive and succeed.

For Schmidt’s Naturals, the scale opportunities seem endless, said Cammarata. Since joining Unilever, the brand has expanded its retail footprint in the U.S. beyond its previous partners, like Target and Kroger, to include Walmart, CVS, Urban Outfitters and even Macy’s. The brand can also now be found outside the U.S. in over 20 countries, with a heavy presence in the U.K. through Ocado and ASOS, the Netherlands via Holland & Barrett, and Canada in Shoppers Drug Mart and Loblaws. Body wash and kids, which launched in July 2018 and January 2019, respectively, are new categories of focus.

In first-quarter 2019 results, Unilever called out Schmidt’s Naturals’ expansion into other categories for driving an over 3% increase in turnover year over year within the beauty and personal-care category (which hit approximately $5.8 billion). Newly acquired Dollar Shave Club was also highlighted for its expansion into fragrance and deodorant, and for flexing its new full-service model allowing customers to sample a bevy of products outside of its core razors. Category expansion appears to be a winning formula for Unilever’s portfolio of brands.

To further that point, Cammarata said that while Schmidt’s Naturals’ first growth approach was through “owning the bathroom,” the brand has ambitions to venture into the home category. Gabriella Metraux, head of product development at Schmidt’s Naturals, said the brand’s stretchiness starts with its core positioning. “We exemplify that archetype of a brand that grew from a kitchen,” she said. “Our science-based approach to naturals is indicative of where the category has evolved to, as we see new competitors appearing all the time. We’re obsessed with seeking the unique.”

For its part, Maesa sees itself as a more modern-day version of a CPG company. “The large CPG brands have a specific and rigid approach to launching and incubating brands, or even maintaining their own brands,” said Scott Oshry, Maesa chief marketing officer. Maesa has the ability to launch brands in eight to 12 months, and is fully encapsulated in the brands it develops or co-owns: It creates weekly sales reports, manages retail partnerships and even level-sets digital and social media strategies.

Its “Exclusive Brands” sector, made up of its in-house brands, like Dollar General’s Believe Beauty, Drew Barrymore’s Flower Beauty and Kristin Ess Hair Care, accounts for 47% of its business, and this segment is outpacing prior private-label retail brands the company produces but doesn’t own — Maesa hit $280 million in annual sales in 2018. While smaller than Unilever’s 2018 beauty and personal-care business of $23 billion, Maesa will debut three more exclusive brands in 2019 and is on track to deliver eight brands in 2020.

“Our founders are the CEOs of their own companies, but we bring the core competencies of manufacturing and packaging design, the concept of luxury-at-mass and brands’ value proposition to life,” said Oshry. “We are always responding to what is now.” An example of this is that Maesa’s Exclusive Brands will be rolling out packaging sans plastic later this year.

Understanding the in-house brand proposition within a CPG conglomerate and even treating acquired brands as such is becoming more important than ever, said Kathryn Lang, Shopify Plus CPG merchant engagement manager. “Companies that have priorities in modernizing their direction in in-house brands with dedicated teams are able to quickly learn from their findings and adjust their course of action,” she said.

Aside from its recent acquisitions, Unilever has tried to create its own in-house brands, too. Both its Love Beauty and Planet and Love Home and Planet lines were incubated in less than a year. What’s more, Johnson & Johnson debuted its C&C by Clean & Clear line in June 2018, though it read like a Gen-Z version of its 63-year-old Clean & Clear brand. All of these incubated brands, however, relied on major retail support for launch, such as Target for Love Beauty and Planet and Love Home and Planet and Ulta and Amazon for C&C by Clean & Clear.

DTC-first is an expanding focus for Maesa and may be a key takeaway for all CPG companies looking to respond to evolving customer trends and shopping habits in the next year.

“Some CPG companies still see DTC as a ‘project’ or ‘trail,’ and don’t give the necessary commitment to this area,” said Lang. “Because online retail moves quickly, the parent companies that have a strong focus on DTC and have a culture that allows their DTC brand teams to move faster have more insights in customer data and market their brand to specific customers. In today’s world, the businesses that can be agile and move quickly are the ones that are gaining more market share.” — Priya Rao, beauty editor

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3 questions with Greta Fitz, Ascention Beauty founder and CEO 

As eager buyers continue to drive up the valuations of beauty and personal-care brands — think Glossier, Kylie Cosmetics and Anastasia Beverly Hills — it seems out of place that 20-year beauty executive Greta Fitz, who has had stints at Clean Beauty Collective and Coty, would go the alternative funding route via Indiegogo. The launch of her self-care fragrance line Ascention Beauty, which incorporates crystals into personalized scents, kicked off in mid-April, and her first collection of products will be available in fall 2019. Fitz has already put over $100,000 of her own funds into her business and hopes to generate $100,000 via Indiegogo. Interestingly, her self-funded brand was accepted into Sephora’s 2019 Accelerate Cohort, proving her business proposition is enticing for prospective retailers. What’s more, Ascention Beauty is the only female-founded brand out of 14 in Sephora’s program that is pre-revenue. Below, Fitz explains why she is betting on crowdsourcing to build community.

Given your experience, why did you think using Indiegogo versus funding via venture capital investors, private equity or angel investors was the right move for Ascention Beauty to start?
The old ways of launching a product, whether that means long-lead production times or making product in a silo, are over. Like with social media, crowdsourcing gets a community of people invested in your brand and talking about your brand before even launching. It also lets us respond to what real people like or dislike, rather than launching a line and seeing it fall flat. A product is only as good as those who use it, so I see this as market research.

Do you think investors too early can muddle the product offering, especially when you are dealing with a nascent brand?
Even when you work at a startup company that is small, there are usually higher-ups that make you follow a hierarchy of rules. Investors at the right time makes sense, but I want to be able to launch a brand with agility and adaptability for now. When the right investor does come around, they could look at our crowdsourcing the way they would look at Instagram. It proves engagement and an audience.

You’re the only brand within Sephora’s 2019 Accelerate Cohort that is pre-revenue. What are you hoping to understand, when your line hasn’t come to market yet?
We’ve had over 1,000 visits to the Indiegogo already, and the biggest learning has been that 83 people have continued to come back. To me, that’s money on the table. I want to know how to re-target and re-engage with those people. With Sephora Accelerate, we will have meetings with Sephora’s digital teams, Facebook and Instagram, and be able to ask those questions. Understanding the direct portion of the business is so key to any brand right now, as much as getting the product right. — Priya Rao

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By the numbers: Influencer marketing in beauty 

In its annual State of Influencer Marketing report, Launchmetrics finds:

Despite all of the talk about engaging with younger customers, Gen-Z only represents 1.6% of the target audience among cosmetic brands, making millennials their core demographic.

Product placement and product launches continue to be the primary lever used by beauty brands within the collaboration space, accounting for about 33% each. Meanwhile, events only account for about about 13% of influencer partnerships in beauty.

Only 4.2% of beauty brands are looking at an influencer’s niche expertise or audience when partnering, whereas luxury brands across the board focus on this over 27% of the time. Clearly, beauty brands have something to learn here as authenticity and real engagement become more important within the influencer marketing space.

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Inside our coverage

Erno Lazslo chairman and CEO Charles Denton discusses why China is the fastest-growing opportunity for his 92-year-old heritage brand on The Glossy Beauty Podcast.

Thanks to the emphasis on customer data and increased investment opportunities, the private-label beauty segment is booming.

Avon Products, Inc. is getting in on the beauty accelerator game.

Beauty brands are tapping the ASMR YouTube community.

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On our reading list

With new category expansions and the growth of her brand incubator, HB Investments, Huda Kattan is on track to become the next Estée Lauder.

As the ingestible beauty space becomes more crowded, Hum Nutrition raises $15 million in funding.

Givaudan acquires the cosmetics business of AMSilk, a biotech company that uses genetic engineering to produce spider silk proteins.