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Elf Beauty has signed a definitive agreement to acquire Naturium, the science-backed clean skincare and bodycare line, for $355 million. It marks Elf Beauty’s biggest deal yet as beauty groups continue to make strategic plays in M&A.
Created by brand incubator The Center in 2019, and with expert influencer Susan Yara serving as founder, Naturium expects to reach $90 million in net sales and over $17 million in adjusted EBITDA this year. Elf Beauty CEO Tarang Amin describes this as an “unusual profile”. “Often, the fastest-growing assets aren’t profitable, but Naturium is.” The acquisition is expected to double Elf Beauty’s presence in skincare to represent approximately 18 per cent of retail sales.
“We really like Naturium’s growth. Very few brands have been able to scale up as rapidly as they have,” says Amin. “Naturium previously told Vogue Business that 2023 forecasted sales were up 70 per cent year-on-year. Francois Bonin, a beauty veteran with experience at LVMH’s Fresh and Unilever-owned Tatcha, joined in March 2022 as chief executive. Past investors in the company include Prelude Growth Partners.
Amin also notes that Naturium achieved this profitability profile with limited distribution and marketing, benchmarking awareness at around 5 per cent versus legacy skincare brands at around 60 per cent. Naturium’s expert formulations and popularity with dermatologists and other science communicators was another draw, says Amin: “We really liked the skincare expertise that they have, and we saw it as additive and complementary.”
Also appealing is Naturium’s strengths in bodycare, which Elf Beauty — comprising Elf Cosmetics, Elf Skin, Keys Soulcare and W3ll People — has very limited exposure to. Sol de Janeiro, acquired by Groupe L’Occitane in 2021, has been a breakout success, shaking up the bodycare category and creating a Gen Z frenzy for their Brazilian-inspired and distinctly scented products. Is Elf Beauty hoping for a Rio effect? “We really admire what the Sol de Janeiro team have done, but we think Naturium is different,” says Amin, pointing to Naturium’s lower price point at around $18 versus $30 or so for Sol de Janeiro, and their distribution in Target. Amin says that Naturium’s customer base is around 40 per cent male, another unique boon.
What’s first on the agenda? Distribution and awareness. “Given the strength of our relationships and capabilities, we believe we can help Naturium increase their retail presence, and we’re also growing extremely fast on Amazon,” says Amin. “We’ve made a number of investments in our own e-commerce business in terms of our tech stack and our loyalty programme that we can use to help them maximise their potential.” Amin notes that Elf can also lean on its marketing capabilities to increase the aperture to new consumers and new markets for Naturium.
As for timing, Amin says the best time to make an acquisition is when a company is strong, and after 18 consecutive quarters of growth, Elf Beauty is strong enough. The deal will be financed through cash on hand, borrowings under existing credit facilities and approximately $70 million in shares issued to founders and key management. Amin says Naturium’s staff will be retained, and the brand will run independently from their Los Angeles headquarters. Shares in Elf jumped around 7.4 per cent following the announcement.
Could more acquisitions be on the cards soon? It’s not impossible, but Amin was circumspect about specifics. “We certainly have potential to do other things,” said Amin, indicating the strength of their balance sheet and low debt to EBIT ratio. “If something hits the sweet spot in the way Naturium did, we’d be open to that, but we have plenty of growth to pursue in the interim.”
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