More consumer investors are looking to increase their investments in the beauty space.
Some of the most compelling consumer company exits in recent years have been in the beauty space. Hair care brand Olaplex went public in 2021, securing a valuation of approximately $14 billion on annual revenue of $282.5 million. And earlier this year, acne brand Hero Cosmetics was sold to Church & Dwight for $630 million with annual revenue of $110 million. Encouraged by these attractive valuations, and the fact that beauty has a reputation for being recession-proof, more investors are now on the hunt to find the next breakout skincare, makeup, or hair color brand.
Cavu Consumer Partners is one such example. Founded in 2015 by Rohan Oza, Clayton Christopher, and Brett Thomas, Cavu initially focused primarily on the food and beverage space, as part of their quest to “democratize healthy living for all.” Some of his more notable portfolio companies include Bai Brands, which he sold to Dr. Pepper for $1.7 billion, and Beyond Meat, which had a valuation of $1.46 billion at the time of its 2019 initial public offering. Over the years, Cavu has also played a larger helping role in helping its portfolio companies with branding and marketing, through its own in-house agency called Uncommon.
Cavu made her first foray into beauty when she invested in clean beauty brand Osea in 2021, most recently leading Topicals’ $10 million Series A in November.
Cavu’s director, Jenna Jackson, is spearheading the firm’s expansion into beauty and spoke to Modern Retail about the similarities Cavu sees between beauty, food and beverage. This conversation has been edited for clarity and length.
What similarities do you see between food, drink and beauty?
Our North Star has always been to democratize a healthy life for all the people in their families. That definition has changed since we started: the founders were investing in food and drink. If you [think back to] 2016, 2017 and people trying to live a healthier life, focused on what you put into your body, what you ate and drank. And that has evolved throughout 2020 and the pandemic.
The consumer has really evolved [in] thinking about how to live a healthier life, and that has evolved to what you put into your body. The vast majority of consumer spending is led by women: She was reading food labels, and all of a sudden she was looking around and saying, ‘Wait, what’s in my beauty and personal care, what’s in my pet food, what’s in my kids’ food, what’s in my cleaning products?’ So it was a very natural leap for us into beauty and self-care.
How do you think brands have to approach distribution differently in beauty versus food and beverage? Are there certain growth tactics that work on beauty that might not work on food and drink and vice versa?
One of the main differences in beauty is the strength of the two major retailers: Sephora and Ultra. I love Nordstrom, I love Kohl’s, I love Credo – there are so many great tactics to break into big box retailers, but really selling is dominated by those two guys.
That’s an interesting thing you have to navigate as a beauty founder; if you want to hit that scale, it sounds like you really need to pick one of these two retailers to get into. That feels different than food and drink where there are many more supermarket chains and other outlets,
Glossier simply chose to go to Sephora after three years of DTC only. The power of those two retailers is something you will always have to face as a beauty founder.
So what kind of beauty brands are you looking to invest in right now?
We love category builders. When we were looking at Osea, which is the first business we ever did, it’s a really amazing green clean beauty brand that was founded in 1996. If you think about the people who were doing clean beauty in 1996…they were really spearheading that area. . They had that authenticity from so many years of staying true to their values and their mission.
With Necessaire, much of the focus in clean, effective skincare had been on the face, and nothing from the neck down. We loved that Necessaire took those principles and disrupted the body category and created this idea that you have to use clean, highly effective skincare ingredients that we’re using here under the neck.
And then topicals: They’re doing the same thing for chronic skin conditions.
And are there areas within beauty that you feel like people are really gravitating towards right now?
Covid restrictions are out: people are wearing makeup, they are wearing fragrance. That seems to be really like the flavor of the month right now.
We haven’t seen a lot of fragrance deals before, and I’m seeing a ton on my desk right now.
There’s been a lot of fusion with this idea of feeling the food, looking good, wearing things that make me feel good about the environment, about the community.
I think hair has become quite popular as a category to invest in, and for the consumer to think, ‘okay, I’ve done the face, I’ve done the body, now let’s focus on what’s on my head.’ Scalp care is really attractive. We are seeing a lot more pampering.
How do you think the first quarter of next year is looking for beauty brands, especially if a recession hits? Are there certain brands that you think will work better?
I think everyone is holding their ground and trying to track how Black Friday was, how Cyber Monday was, how we think Q4 will end, what the holiday shopping period is going to be like. And that will largely inform the first quarter of next year.
There are a lot of people saying, ‘I think we’re going to have a better-than-expected fourth quarter, and that’s going to be fine and things will be fine.’ And then there are other people who say, ‘it’s going to be a worse fourth quarter than expected and it’s going to be a really tough year next year.’
These are pretty unprecedented times, right? We’ve been through other recessions, but not really on the back of a two-year global pandemic.
I think we won’t know until after this recession. Because there’s been a lot of historical data that beauty is a resilient category in a downturn.
I think brands that have a strong reason to exist on their consumer’s shelf will do better during this time.
Take Topicals – If you have a chronic skin condition and you have a brand you are using that works for your chronic skin condition but also makes you feel good because the brand is great and the community is strong and the message makes you you feel good about yourself, you will have a harder time changing something like that.
This story was updated to correct spelling for Cavu Consumer Partners.
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