E.l.f. Cosmetics announced its acquisition of clean beauty brand W3ll People in a $27 million cash deal.

The acquisition is a play for E.l.f. to grasp a piece of the growing clean beauty market, said E.l.f. Chairman and CEO Tarang Amin.  E.l.f.’s purchase of W3ll People fits in line with other much bigger conglomerates leaning on indie brands for clean knowhow. Take for instance, Shiseido’s acquisition of Drunk Elephant for $845 million and Unilever’s purchase of Tatcha for a reported $500 million. E.l.f. expects W3ll People to contribute approximately $7 million in net sales to its bottom line.

“We have thought about M&A and strategic initiatives for a while,” said Amin. “In fact, in 2014, we came pretty close to buying NYX because there were many things we liked about that business, but we were not going to outbid L’Oréal. Since that time, we’ve had our eyes open to other things that have come on the market and and the theme and the strategies have always been, ‘Is there something we can bring into the company that can take advantage of the significant investments we’ve made in our team and capabilities?’ We have a combination of cost, quality and speed in our industry. We know how to engage consumers, and our distribution is significant.”

Since closing its 22 standalone stores last February, E.l.f. has spent the last year altering its business. This included the company’s “Project Unicorn” initiative that highlighted E.l.f’s “best of beauty” assortment in Walmart and Ulta, amplifying its relationships with influencers and raising prices on key products to correspond to Chinese tariffs. In the most recent quarter, E.l.f. saw net sales increase by 3%, or 8% year-over-year, excluding the contribution from E.l.f. retail stores. Gross margin also increased to 65% from 60% year-over-year.

Amin hopes to make W3ll People the clean brand of choice, when compared to prestige competitors.  Products from other clean color companies like Lawless and Ilia are much more expensive. For instance, their complexion products are $46, whereas W3ll People’s foundation stick is $28.99. To further signify the growing power of clean color brands, Lawless, Ilia and Kosas all recently secured investment. W3ll People previously received a minority investment from private equity group NextWorld Evergreen in early 2018.

“More consumers are increasingly knowledgeable about the ingredients that are in their products, but when we looked at the space, many of the clean beauty brands are super premium priced,” said Amin.

W3ll People’s three founders, James Walker, Shirley Pinkson and Dr. Renee Synder, who started the company in 2009, are staying on. Amin would not comment on if there are existing redundancies within W3ll People’s 30-some employee workforce.

Walker added, “W3ll People has a remarkable history of breaking beauty boundaries, and the acquisition is an incredible milestone in our effort to make clean beauty accessible.”

While Amin stated E.l.f. and W3ll People do not have much crossover among customers, especially since many of E.l.f.’s products are less than $5, there are distribution synergies — especially among both brands largest accounts. W3ll People largest wholesale relationships are with Target and Credo, and it recently made its way onto Ulta.com. E.l.f., meanwhile has perfected its positioning in Target, Ulta and Walmart, the latter of which is also trying to increase its own presence in clean beauty.

“W3ll People had its own boutique in Austin, and has seen success within the natural and specialty channel,” said Amin. “Our primary and first priority is Target. Target has made clean a priority. As it makes its own statement in clean, we believe there’s a lot more room for W3ll People to grow.”