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november 19, 2018

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NOVEMBER 19, 2018 CUSTOM CONTENT – LOS ANGELES BUSINESS JOURNAL 55

JESSICA ALBAHonest Beauty

DIANA BRICENONo B.S. Skin Care

JEN ATKINOUAI Haircare

TE-SEE BENDERBeauty Style Watch

LAUREN BERKOVITZLauren B. Beauty

MURPHY BISHOPThe Better Skin Co.

KARISSA BODNARThrive Causemetics Inc

ANGELA CAGLIAAngela Caglia Skincare

JOE CLOYES & GREG GONZALEZ

Youth To The People

SAMANTHA CUTLERPetite ‘n Pretty

JANKI LALANI GANDHI Lincoln International

MELISSA HALOOSSIMSkin Thesis

KINYA CLAIBORNESTYLE & SOCIETY MAGAZINE

APRIL CHANEYEffleurage Studio

TAMMY CHATKIN-NEWMAN

24 Seven

RON CHAVERSCosmetix West

CAT CHENSkylar

FREY CHUTastemaker Supply

VLADY CORNATEANUAddiction

KECIA COBYLola Getts Active

JANA COKEJana Coke Style

KRISTINA COLEDollar Shave Club

LISA COLLIERNYDJ Apparel

SHANNON & GLENN DELLIMORE

GLAMGLOW

ANNA MARIE DOBBINSOffero Handbags

FEAR OF GODHELGA DOUGLASSvala

SHARLEEN ERNSTERWe Are HAH

EMMA GREDEGood American

MICHAEL GARCIADeloitte

GARY GARFIELDCalifornia Label Products

BILL GEORGEFreeman Beauty

ANGELO GHAILIANAstrologie California/AJG, Inc.

FRANCISCO GIMENEZeSalon

ED HANDLERCohn Handler Sturm

CHEWY JANGKid’s Dream

STEVEN HIRSHCooper Design Space

EMILIE HOYTLATHER

JULIA T. HUNTER M.D. Wholistic Dermatology

DEREK HYDONMaCher

JULIA JOLIEJulia Jolie Beverly Hills

ADRIANO GOLDSCHMIED AG Jeans

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56 LOS ANGELES BUSINESS JOURNAL – CUSTOM CONTENT NOVEMBER 19, 2018

KATIE ECHEVARRIA ROSEN KITCHENS

FabFitFun

JACLYN JONESJaclyn Jones USA

MANNA KADARManna Kadar Beauty Inc

CRYSTAL KEYCkey Beauty

HARLAN KIRSCHNERThe Kirschner Group

ADRIENNE KRAMERProBeauty Partners

JADE MARLINJade Marlin Collection LLC

MAILE PACHECObeGlammed

MICHELLE RANAVATRanavat Botanics

JAY MANGELCrowe Horwath LLP

JESSE KREIDERRoss Organic

TARYN SAGE LAROCKSAGE LAROCK

CHARLES LEEeTruism.org

NICCI LEVYAlchemy 43

M. FREDRIC

MOTHER

STEPHI MARONBlushington

ANNE MAZAOlivia Garden

DECHEL MCKILLIANGALERIE.LA

TAMARA MELLONTamara Mellon

ALLISON MOSStype:A brands

OSHER NETKINArtNaturals

RAE NICOLETTIHOZEN

RUSMIR NIKSICClariant

MOTOO NODA & RAMA MCCABE

BANKS JOURNAL

DAVID OLSENCos Bar

PHILIP NULUDBuchalter

SHUBHANGINI PRAKASHFeather & Bone

STACY PANAGAKISLime Crime

ANNA PETROSIANDose of Colors

DIONNE D. PHILLIPSD’Lashes by Dionne Phillips

SASHA PLAVSICEILIA Beauty

JEN PODANYBluestone Sun Shields

MIA CHAE REDDYCHAE Skincare

GREGG RENFREWBeautycounter

EMMANUEL REY & SUZANNE DAWSON

YUNI BEAUTY

MARK C. RIEDELConkle, Kremer & Engel, PLC

JESSICA RICHJessica Rich Collection

RICHARD SAGHIANFashion Nova

JACQUELINE SCHAFFERSchique Skincare

FRED SEGAL TODD SHEAAware Products | LA

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NOVEMBER 19, 2018 CUSTOM CONTENT - LOS ANGELES BUSINESS JOURNAL 57

Select Intrepid team members pictured here.

intrepidib.com | Mergers & Acquisitions | Capital Markets | Strategic Advisory

11755 Wilshire Blvd., 22nd Floor, Los Angeles, CA 90025 T 310.478.9000 F 310.478.9004 Member FINRA/SIPC

Win Big, That’s What We Do for Our Branded Consumer Clients!Our bankers help companies and entrepreneurs realize their dreams. That’s what we do. We deliver the value of an enterprise that refl ects its true potential. Staying ahead of the latest market trends requires an in-depth understanding of brands and products, and personal connections with emerging and key players. Intrepid provides dedicated expert merger and acquisition advisory and capital raising services across the Consumer Products & Services industry. You were unstoppable in your quest to build your business. You are not about to settle now. We get it. We get it big!

Select Recent Transactions

Advisor to Blue Microphones Advisor to Native Advisor to Too Faced Cosmetics Advisor to DayMen Acquisition S.A.

Advisor to Loungefl y, Inc. Advisor to Lifted Research Group

has been acquired by

a portfolio company of

Advisor to HUF Distribution Corp. Advisor to Marc Anthony

has received an investment from

Beauty & Personal Care | Steve Davis | Managing Director | sdavis@intrepidib.com

Apparel & Retail | Marvin Padilla | Managing Director | mpadilla@intrepidib.com

Commercial & Consumer Technology | Gary Rabishaw | Managing Director | grabishaw@intrepidib.com

Toys & Giftware | Brian Levin | Senior Vice President | blevin@intrepidib.com

has been acquired by

a portfolio company of

has sold a majority stake to

in conjunction with Too Faced founders and senior management

has been acquired by

a portfolio company of

(NASDAQ: LOGI)

has been acquired by

assets of

have been sold to

(LSE:VTC)

has received an investment from

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58 LOS ANGELES BUSINESS JOURNAL – CUSTOM CONTENT NOVEMBER 19, 2018

SONIA SMITH-KANGMixed Up Clothing, Inc

STEPHANIE SHERIDANSteptoe & Johnson LLP

TADASHI SHOJITadashi Shoji & Associates

SITA THOMPSONSITA Couture

TOMS ANNA TRANREVOLVE

TANYA VINERBuchalter

JANE WURWANDDermalogica

ELYSE WALKERtowne by elysewalker

SHARON WANGProfusion Cosmetics Corp.

Congratulations

Tanya Viner & Philip NuludLos Angeles Business Journal 2018 Nominees

Fashion & Beauty AwardsThe Fashion & Beauty Awards recognizes top apparel and beauty companies and related professional service providers that drive tremendous economic growth in our region and make Southern California a major force in the business of fashion and beauty. The event recognizes leading brands and individuals in the industry and

their accomplishments.

EVE YENDiamond Wipes International

JACKIE YUHouse of European Hair

ANEELA ZAMANZaman Skincare

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NOVEMBER 19, 2018 LOS ANGELES BUSINESS JOURNAL 59

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60 LOS ANGELES BUSINESS JOURNAL – CUSTOM CONTENT NOVEMBER 19, 2018

By STEVE DAVIS

The Beauty & Personal Care M&A market finished 2017 on a high note with over 100 transactions for the second straight

year and is on track to hit the century mark again in 2018 with M&A activity up 9% over last year. Not only is volume strong, but the past two years witnessed increasingly outsized valuations for fast-growing, high-margin beauty care brands. In fact, there were more beauty care M&A transactions at valuations over four times revenue in the last 18 months than in the previous 15 years combined.

To build a successful beauty care brand, product quality and an authentic brand message that resonates with the consumer have always been and will always be “must haves.” However, with digital marketing, a category-wide shift to eCommerce, the power of social media, and a growing set of outsourced business solutions, successful beauty care businesses are now able to scale faster and more efficiently than ever before—and in turn attract private equity capital and interest from large, global strategic acquirers earlier and earlier in their brand lifecycle. So, what are some of the keys that have driven this better, bigger, faster phenomenon among beauty care brands?

THE POWER OF ECOMMERCE—SELL ON YOUR OWN TERMS

Independent brands historically struggled to gain access to the retailer shelf, having to compete against the clout and resources of large, global, and diversified corporate mainstays such as Procter & Gamble and L’Oréal. eCommerce, and in particular direct-to-consumer (D2C) channels, now provide unlimited shelf space for new entrants, disintermediating the retail buyer and allowing beauty brands to control the brand message and pitch, directly to the consumer. While global eCommerce sales of beauty care products are expanding at a 16.7% rate (source: Technavio Global Online Beauty and Personal Care Sales Compound Annual Growth Rate 2016 to 2020), we are still in the early innings—as evidence, industry sources estimate only 10% eCommerce penetration in the Beauty & Personal Care sector, compared to 18% in Apparel & Footwear and 44% in Consumer Electronics. As Millennials and subsequent ‘digitally native’ generations account for a greater share of income and expenditures, the shift to online distribution in beauty care will only accelerate.

DIRECT TO CONSUMER—THE COVETED CONNECTION TO CONSUMERS

The biggest advantage that a new beauty brand maintains over larger, established companies is the ability to be a pure D2C brand, free from channel conflicts. A pure, ‘digitally native’ D2C brand benefits from:

1. Brand Control—Ability to tightly control brand messaging and develop a direct customer relationship that transcends

traditional retail.

2. Customer Communication—Ability to have a direct conversation with the customer to drive repeat orders, establish a bond, upsell, receive feedback, resolve problems or simply say thank you.

3. Customer Intelligence—Ability to collect detailed data about individual customers, from purchase rates to product preferences to consumer demographics.

4. Consumer Insights—Ability to test anything and everything to a subset of consumers before rolling out to the entire customer base, from new products to new marketing campaigns to packaging changes.

Furthermore, once established, D2C brands can then leverage their direct consumer connection and loyal customer following to expand faster and with more certainty into additional distribution channels, including traditional retail. The market is rewarding early D2C movers, such as Dollar Shave Club, which employs a subscription-based distribution model for men’s grooming and lifestyle products. In 2017, Dollar Shave Club was acquired by Unilever for $1 billion, reflecting a five times multiple of revenue, after only five years of operation.

SOCIAL MEDIA—LEVELING THE PLAYING FIELD

Social media has shifted the power and influence of how beauty brands and products are perceived, away from the multi-million advertising budgets of global consumer conglomerates, and into the hands of consumers, influencers, and beauty brands that are adept at effectively integrating and managing social platforms. Previously, brick and mortar retailers served as the primary brand curators and high-priced Madison Avenue advertising campaigns served as the mechanism to deliver brand messaging and awareness. Today, positive online customer reviews, authentic Instagram followers, loyal Facebook fans and social influencers have supplanted shelf space and advertising as the primary source of verification and acceptance for brand credibility, product efficacy, and quality. Furthermore, successful social media strategies can create authentic bonds with consumers who truly want to be a part of the brand, all at a fraction of the cost of a traditional branded consumer advertising campaign.

The impact of social media is most readily observed in the color cosmetics category, where online influencers have built social empires with tens of millions of followers. With 29 million followers, Huda Kattan ranks as one of the top beauty influencers in the world, having been named one of Forbes’ “Top 2017 Influencers in Beauty” and TIME’s “Most Influential People on the Internet.” Huda Beauty, launched in 2013, is one of the fastest growing influencer-driven color cosmetics brands, with an estimated $200 million in sales, and recently received a minority investment from TSG Consumer Partners. As a reference point, Huda’s 29 million followers is 9 million more than

MAC Cosmetics and 20 million more than Maybelline. Too Faced Cosmetics, another social media darling with more than 11 million Instagram followers, sold to Estée Lauder for a reported $1.45 billion, representing a multiple of over five times revenue and the largest acquisition in Estée Lauder’s history.

INGREDIENT TRANSPARENCY—TELL IT HOW IT IS

The Beauty & Personal Care industry is undergoing a long-term societal shift to natural and better-for-you brands as consumers become increasingly conscious about the role of beauty and personal care products in health and wellness. Following in the footsteps of the food industry and empowered by the internet and social media, consumers are demanding simpler, transparent, and “less-processed” beauty and personal care products, with comprehensible ingredients, free of chemicals and synthetics. As a result, the natural personal care market is growing 2.5 times faster than the overall Beauty & Personal Care industry.

As a consequence, natural and better-for-you brands such as Native deodorant have expanded rapidly, in part on the tailwinds of the natural and product transparency trends, in turn attracting early and aggressive interest from both private equity groups and strategic acquirers. Native, a recent client of Intrepid, which was acquired by Procter & Gamble in 2017, joined a long list of recently acquired natural beauty and personal care brands, including Schmidt’s, Snowberry, MyChelle, Andalou Naturals, Mineral Fusion, and Indie Lee.

BUILDING IT FAST—2 IS THE NEW 20The combination of many of these

technology and consumer-driven market forces at work in the beauty care industry has allowed entrepreneurs to build large, successful brands in a matter of a couple of years—not a couple of decades. These brands, in turn, are attracting investor capital and strategic buyer interest in many cases before their third birthday. Recent early-stage beauty care private equity investments include L Catterton’s investments in Kopari Beauty and TULA, Main Post Partners’ investment in Milk Makeup, and VMG’s investment in Drunk Elephant. Each of these deals involved top-tier branded consumer private equity groups investing in beauty brands founded less

than three years ago.

Perhaps even more notable, Moiz Ali, Founder of Native, successfully capitalized on many of the trends highlighted in this article—a 100% D2C eCommerce brand, a successful social media and digital-driven customer acquisition strategy, and a powerful brand story based on product quality and

ingredient transparency. As a result, Native built one of the fastest growing brands in the deodorant industry, a powerful data-driven D2C distribution platform, and most importantly, a rapidly expanding base of passionate and loyal users—culminating in a highly successful sale to Procter & Gamble—all in less than two years.

Steve Davis is Managing Director and Head of the Beauty & Personal Care Practice at Intrepid.

Sources: Euromonitor (eCommerce penetration); Pew Research; Marketplace Pulse; Instagram; Intrepid Proprietary Beauty & Personal Care Transaction Database; Persistence Market Research (expected natural personal care growth 2016 to 2024); Technavio: Global Online Beauty and Personal Care Market 2016 to 2020 Report.

Building the Next Big Beauty Care Brand... FastCapitalizing on Shifting Consumer Behaviors and Technological Advancements to Scale Faster, Bigger and Better

The combination of many of these technology and consumer-driven market forces at work in the

Beauty Care industry has allowed entrepreneurs to build large, successful brands in a matter of a

couple of years—not a couple of decades.

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NOVEMBER 19, 2018 LOS ANGELES BUSINESS JOURNAL 61

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62 LOS ANGELES BUSINESS JOURNAL – CUSTOM CONTENT NOVEMBER 19, 2018

By MARTIN HUGHES

In an ever-changing, high-demand marketplace, the apparel industry, once driven by the speed of the catwalk, is now driven by a

digital age with more data at its fingertips than fabric.

Given the rate of change in the industry, apparel companies must respond to consumer demands and spending patterns. To remain top-of-market competitive and fiscally prosperous while continuing to grow against a forecasted economic downturn in the coming years, apparel companies must diligently use technology while continuing to steer business to the direct-to-consumer model.

FOCUSING THE LENS ON RETAIL TRENDSIndustry trends beyond apparel can affect

how you conduct business. As you plan for 2019, consider the following retail trends for consumers, business models, and tax and compliance.

CONSUMERSInfluencersSocial media is as important to your business

model as inventory, location, and customer service. Social media has its place in business, and the power of celebrity will impact your

bottom line. Influencers–whether Hollywood-elite or the girl next door–create global fashion and consumer interest because more than 50% of brands are on Instagram.

MillennialsThis generation will have the most spending

power of any with an estimated $3.39 trillion, according to a survey report from Oracle Financial Services. Millennials expect the convenience of mobile devices, self-checkout kiosks, and advanced digital payment such as Apple Pay. They also seek a brand experience in which they feel wanted and valued.

BUSINESS MODELDirect to Consumer (DTC)Customers looking for an experience and

faster delivery and inventory options closer to home must be the center of your business model. We’ve already seen hundreds of store closures, including Lord & Taylor and J. Crew, and assets liquidated from bankruptcy—Sears and Kmart, for example.

Brick and MortarWith the DTC model taking the lead with

customer transactions, brick and mortar stores will need to implement same-day initiatives or provide location-based incentives to add value to the customer experience and keep doors

open. While brick and mortar stores aren’t dead, companies need to consider the right size, regional footprint, and inventory, or expect to close doors.

The next phase will be the WeWork model of department stores. This is a start-up office-sharing model that’s helping to reinvent the concept of work space with retail holding two levels and work space above, like Lord & Taylor in New York City.

TAX AND COMPLIANCEWayfairIn June 2018, the South Dakota v. Wayfair,

Inc. ruling overturned the physical presence standard and determined interstate vendors are subject to tax laws in each state where they sell goods or services. This means vendors must consider sales tax compliance requirements as soon as they begin making significant sales in another state, which could present significant tax and logistical challenges. States can charge tax on purchases from out-of-state sellers, even if the seller doesn’t have a physical presence in the taxing state.

New Proposition 65 RegulationsNew warnings for consumer products say a

product “can expose you to” a Proposition 65 chemical rather than “contains” it. Customers

will know you’re in compliance by the triangular yellow warning symbol. This content must be provided on your website for products purchased online.

Lease Accounting UpdateBe prepared to invest time and resources to

navigate reporting requirements, which will become effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Lease accounting is applicable to public companies after that date and private companies after December 15, 2019.

Martin Hughes is Partner and Apparel National Practice Leader with Moss Adams. Hughes has practiced public accounting since 1982. He serves as the national practice leader for the Apparel Practice at Moss Adams and provides assurance and consulting services to privately held and public middle-market clients in the apparel, retail and manufacturing and distribution industries. He can be reached at (310) 295-3816 or martin.hughes@mossadams.com.

Assurance, tax, and consulting is offered through Moss Adams LLP. Wealth management is offered through Moss Adams Wealth Advisors LLC. Investment banking is offered through Moss Adams Capital LLC.

Retail Trends Impacting Apparel Companies

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NOVEMBER 19, 2018 LOS ANGELES BUSINESS JOURNAL 63

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64 LOS ANGELES BUSINESS JOURNAL – CUSTOM CONTENT NOVEMBER 19, 2018

By FRANCES MAZUR

Legacy beauty brands — Covergirl, L’Oréal, Lancôme, to name a few — have long ruled when it comes to market share and

prestige. But today’s digital landscape has created fertile ground for challenger brands that know how to maximize social media to resonate with and build invested communities. At the October 30th Beauty Biz Roundtable, Facilitators discussed how new brands are created at the speed of light and how their digital agility has forced industry giants to shift to keep up. Naturally, these changes affect the way companies think about talent. Here are three key ways the digital beauty revolution is impacting recruiting across consumer-focused industries:

1. CALLING ALL SOCIAL MEDIA SPECIALISTSJust four or five years ago, an established

beauty brand might have employed a Social Media Manager to handle all of its social needs. This kind of candidate was presumably a recent college grad, solely tasked with posting content. Today, this same company likely has an entire department dedicated to the practice, overseen by a leader with senior-level experience. Not only have these teams grown, the roles within them are becoming more differentiated — think specialized positions for paid social, digital acquisition, email marketing, community management, and beyond.

As customers continue to interact with and relate to brands on social, positions dedicated

to digital interactions will not only continue to grow but become increasingly specialized. The net effect has been a significant shortage of talent capable of doing the work that brands are seeking and thus inflated salaries for the talent who can deliver. Our guess is that as Beauty continues to grow here in Southern California, other categories like Fashion, Lifestyle, and Design Goods will likely see an increase in salaries for these positions as competition for this talent increases across all categories.

2. ALL EYES ON PRODUCT DEVELOPMENTBeauty brands have exploded in Southern California over the last few years and new brands seem to pop up on a weekly basis. Think Lime Crime, Dollar Shave Club, and Colour Pop to name a few. Coupling the growth of the category along with the digital first nature of many Beauty brands, means we see an incredible increase in the amount of trend-driven product created to meet the demands of savvy digital customers who have many options from which to choose. Once a brand wins a customer, they want to continue seeding that acquisition with more and more product. The effect has been a talent grab for Product Developers with specialties in Skincare, Haircare, Color Cosmetics, Bath and Body, even Nailcare. With so much demand for Product Development talent, salaries continue to increase and only the companies who are willing to up the stakes are winning. Otherwise, we see many of these roles staying vacant. Although Beauty Product Development is rather insular, our guess is that

other categories of fast consumer products are seeing the same strain with recruiting for these roles.

3. COVETING CUSTOMER INSIGHTSIt’s no surprise “data” has become a

buzzword in recent years; understanding customer demographics, shopping patterns, and habits is invaluable for every company. But as digital has evolved, so have the many ways a brand can learn about its shoppers. More and more organizations are investing in understanding their communities, reflected in an uptick in market research roles dedicated exclusively to data and consumer insights. And, while these positions previously required IT and programming skills, consumer data can now be gathered automatically, making the job

more about interpreting data and generating strategic recommendations rather than collecting it.

As new technologies and data providers like Dash Hudson, Tribe Dynanmics, Optimove, and Sprout Social continue to bring us stronger analytical tools and more efficient customer feedback loops, we will continue to see companies seeking savvy and strategic data analysts with an eye for insight generation.

Frances Mazur is President and CEO of Mazur Group. For more information on Beauty recruiting or Mazur Group, please visit: MAZURGROUPLA.com or call (424) 280-4390.

The Digital Beauty Revolution: Three Key Implications for Recruiting Across Consumer Industries

top row (l to r) Kristi Bergeron (BrainTrust - CAA), George Fox (Global Cosmetics Industry), Gina Kohler (FabFitFun) Rina Yashayeva (Women’s Marketing), Taylor Babaian (KRE-AT Studios), Deborah Regosin (KORA Organics), Michaela Atkinson (Dash Hudson), Thomas Rankin (Dash Hudson), Jeb Gleason-Allured (Global Cosmetics Industry) and Frances Mazur (Mazur Group)front row (L to R) Amy Denoon (Beach House PR), Kevin Cureton (Solesence), Sharon Osen (Brandifference), Chris Johnson (Kinetic Technologies), Hannah Beals (Ouai), and Murphy Bishop(The Better Skin Co.)

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